Disclosure, Bond Ratings, and Competition

Larkin, Richard
May 2003
Bond Buyer;5/19/2003, Vol. 344 Issue 31638, p33
Trade Publication
The article analyzes the effectiveness of secondary market disclosure advocated by rating agency Fitch Ratings Inc. According to observations largest and most damaging defaults and near-defaults that led to insolvency has been poor management and disclosure practices. As for disclosure, many complain that the repository system is working poorly. On the matter of cost, technology and the Internet are bringing down expenses of publishing financial report or budget. Most rating agencies have policies that threaten withdrawal of ratings if an issuer sells parity debt and does not agree to pay a fee for a new rating. On the subject of improving the public finance market, there is a great deal of scrutiny being brought to bear on the rating agencies by the U.S. Securities and Exchange Commission and the Congress. Most rating agencies have policies that threaten withdrawal of ratings if an issuer sells parity debt and does not agree to pay a fee for a new rating. The policy of unsolicited ratings, however, has also provento be a controversial issue for the bond raters. Bond-insurance ratings are another area where some creative problem solving would help competition.


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