Legal Supervision On The Conflicts Of Interest Of Credit Rating Agencies In Securities Market Of China

Thomas Friedman,who won the Pulitzer Prize,emphasized the influence of credit rating agencies.He said Moody and the United States were the two superpowers of the world,because "the United States can use bombs to destroy you,and Moody can lower you by lowering bond ratings.It is not clear who is stronger." In recent years,the default of corporate bond is serious,it's related to the inaccurate ratings and tracking rating.This also indicates that regulation of credit rating agencies is insufficient.The conflict of interest of the credit rating agencies is the key factors that influence the independence of credit rating agencies.In order to improve the regulatory system of credit rating agencies,the most important thing is to improve the regulation of conflicts of interest.I use the literature research method in this article.I collect the literature as much as possible to understands the evolution and the present situation of the interest conflict supervision of the credit rating agencies,and analyze the causes of conflicts of interest.I also use the method of comparison in this article.I research and analyze the acts and legislations of the United States,especially the 'Dodd-Frank Act',to compare the regulation of conflicts of interest in China.Then I put forward some suggestions.At present,majority of researches on credit rating agencies are in the perspective of financial and economic.A few of the researches are in the perspective of legal,and research on the conflict of interest of rating agency is not enough.The credit rating agency is the product of market economy,reputation mechanism is the most effective incentive mechanism of rating agencies,and legal supervision is the remedial measure when market fails.Most scholars think that conflicts of interest should be regulated tightly,but in my opinion,legal regulation should help the reputation mechanism working,using the market supervision to improve the credit rating agency conflict of interest,and to regulate the behavior of rating agencies.Most credit rating agencies are paid by issuers,which is the main reason of the conflicts of interest of rating agencies.I analyze the advantages and disadvantages of several alternative payment model,such as investors pay mode,government pay mode,public utilities mode,and central clearing model.Since the disadvantages is inevitable of every mode,it is the most practical to adopt the issuer pay mode at present.So,how to minimize the influence of the result of rating in the issuer pay mode is the key factor of the regulation of rating agencies'interest conflicts.I think,the regulator should cancel the regulation reliance on ratings,improve the information disclosure system of conflicts of interest,establish the public supervision and feedback platform,increase the civil liability of the rating agencies.This paper mainly studies on how to improve the legal regulation of credit rating agency on conflict of interest,in order to help regulate the behavior of the credit rating agencies in China,and make effort to develop the financial market in China.