Federal review of rating houses

Australian financial services rating houses are to be the subject of an investigation by the Federal Treasury and the Australian Securities and Investments Commission (ASIC).

The investigation has been commissioned by the Minister for Superannuation and Corporate Law, Senator Nick Sherry, who said he has asked Treasury to work closely with ASIC to review the regulation of credit rating agencies and research houses in Australia.

“There have been some very serious concerns voiced to me about the role credit rating agencies may have played in some aspects of recent financial market problems, including the US sub-prime mortgage situation, so we need to make sure the system is up to date,” Sherry said.

“I have asked Treasury and ASIC to immediately review the regulation of credit rating agencies and to seek input from the Australian Prudential Regulation Authority and other relevant agencies, together with stakeholders from the investor, shareholder and superannuation communities,” he said.

Sherry said that in addition to credit rating agencies, the review would examine financial product research houses, particularly the role they played in the provision of advice to investors in several major corporate collapses recently, such as Westpoint.