According to Marketwatch, as observers call for a probe of insider trading from Standard & Poor’s decision to downgrade the U.S. credit rating, a little-known law from five years ago gives the Securities and Exchange Commission authority to do so.
Regulatory observers are focusing, partly, on a heavy trading volume and a major sell off of equity securities at one point on Friday, responding to speculation rampant in the markets that S&P was going to downgrade the U.S. debt later that day. S&P did, in fact, lower the U.S. government’s top-tier credit rating late that day a notch to AA+
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At issue, in part, is a 2006 statute — the Credit Rating Agency Reform Act — that says a credit rating agency could have its licence registration revoked if it leaked information about its pending downgrade decision before making that information publicly available. It also said that the rater must have policies and procedures to prevent such a disclosure.
“If it is true that they told hedge funds and briefed banks and told a few people ahead of everyone else that would appear to be a clear violation 2006 Act,” said Consumer Federation of America director Barbara Roper. “Credit rating agencies have to have polices to prevent the dissemination of pending rating action on the Internet.”
Find out more at http://www.marketwatch.com/story/law-from-2006-gives-sec-scope-to-probe-sp-2011-08-09
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