Study About Legal Supervision On Credit Rating Agencies

Since the financial crisis in2007, credit rating agencies have been blamed for theproblems in legal supervision. Credit rating agencies make mistakes again and again,which illustrate the problems in conflicts of interest, information disclosure and legalliability. By strengthening the legal supervision of credit rating agencies, credit ratingagencies can do better in protecting investors, perfecting the financial supervision anddeveloping the market of the rating object.The credit rating agencies have some problems in legal supervision: There arelittle legal provisions about interest conflicts. The regulatory way is humble. Theinternal control system is not sound. The information disclosure is little and theinformation disclosure way is scattered. It lacks the supervisions about nonpublicinformation. Legislative level is low. The forms of responsibility centralize inadministrative responsibility, and regulations about civil responsibility and criminalresponsibility is little. The investors lack security in civil compensation. In order tosolve the problems of credit rating agencies, we can through the following method tosolve them. We should perfect the regulation about interest conflict, which is causedby stake and the issuer-pays model. What’s more, it’s important to improve theexisting regulatory approach and strengthen the internal control system. All of thiscan mitigate the problems of interest conflicts. We should also have special legislationand increase the content of mandatory information disclosure. Information disclosureway should be provided and it’s important to supervise nonpublic information. Thesemethods can enhance transparency of credit rating. By increasing the regulationswhich are provided from banks and other financial institutions’ angle can perfect theadministrative responsibility. Clearing authority between regulators also benefitsadministrative responsibility. In the determination of tort liability, the credit agencyshould satisfy the conditions including misrepresentation. As to the liability principle,it is suitable for fault-presuming principle. Moreover, it should have damage fact andthe causation. By solve the problems of interest conflicts, information disclosure andlegal liability, the legal supervision system of credit rating agencies will be moreperfect.