The Supervision Research Of Our Securities Credit Rating Agency’s Legal Issues

The credit rating was originally produced in the capital market of United States,and it solves the information asymmetry between investors and issuers in the capitalmarket at that time. The securities rating agencies are always pursue the fair, objective,professional, independently principle. But after a long development, the principle havebeen challenged in the model of issuer pays, our country’s rating agencies havehappened the problems of ratings inflation and lack of rating credibility. So taking moreregulation of rating agencies has become the inevitable.Currently in our country’s capital market, the China’s Securities RegulatoryCommission is the securities rating agencies’ regulatory body, but the securitiesindustry association’s self-regulation and rating agencies’ internal controls are also theimportant part of the supervision of rating agencies. However, the all three differentways of supervision still imperfections. First of all, the market access rules of thesecurities rating agencies are not comprehensive, the agency access is lack of definiteevidence of law, and the business access don’t have perfect conditions and procedure,this is unable to verify the operational capacity of the rating agencies. Secondly,business rules of rating agencies is not fine-grained, especially in the practice of thebenefit conflicts and information disclosure rules, this also highlights the lack of themanagement of internal control mechanism of rating agencies. Finally, rating agencies’exit mechanism is not comprehensive, in this the institution exit is short of regulation,and business exit is also lack of necessary conditions and procedure. In addition, ratingagencies is short of civil legal liability, contributing in part to the act of reckless rating.In the United States, U.S. Securities and Exchange Commission (SEC) announcedlaws to tighten supervision of securities rating agencies, SEC advocate to reinforce theuse of information disclosure to reduce benefit conflicts, and to distinction degrees ofseverity of benefit conflicts. These regulations are useful reference to improve oursecurities credit rating agencies. For establishing more independent and objectiverating agencies, firstly, we should definite the coordination mechanisms between thedifferent regulatory body of rating agencies, that is because the mixed operation ofstock market has become more common, and the multiple supervision can not cover allrating actions, this makes the supervision less efficient. Secondly, in order to promotemarket effectively compete, the market access and exit mechanism of rating agencies should put forward complete measures about agency and business. At the same timeregulator should also examine the business capability of rating agencies, providingsmooth passage for becoming healthy competition and survival of the fittest on ratingmarket. Lastly, the civil legal liability on rating agencies, there is commission contractof credit rating between the rating agency and client, so people can settle disputes ascontracted; and there are only rating reports between rating agencies and the majorityof market investors, which is lack of the basis to investigate contractual liability, butrating agencies should also take responsibility, it can seek basis from tort law.About supervision problems of securities credit rating agencies in capital market,regulators should improve the coordinating mechanism, the market access mechanism,rating business rules, exit mechanism, and civil liability of rating agencies. They shouldmake comprehensive planning on rating agencies, to ensure the orderly operation of thesecurities rating market, and to make it play the role of capital market gatekeeper.