After the financial crisis, Washington focused on the credit-ratings firms and the conflict of interest that made them “essential cogs in the wheel of financial destruction,” according to the federal government’s report on the crisis. But the government didn’t eliminate the conflict, where the firms are paid by the entities whose bonds they rate, the Wall Street Journal reported. Instead, the Securities and Exchange Commission decided that enabling ratings firms to publish unsolicited ratings on securities they weren’t hired to analyze would be the best solution. The agency crafted a rule to give them access to deal data to publish such ratings. A decade later, the verdict on that plan is in: The program was a failure. Since the plan’s enactment in 2010, there is little evidence of any unsolicited ratings being published under the program, according to the ratings firms, a trade association, the SEC and a committee of bond investors advising the agency. The SEC declined to answer questions about the program, but said in response to a public records request that, after a “thorough search” of its records, it “did not locate or identify” any examples of unsolicited ratings published by ratings firms under the program. Moody’s Corp., S&P Global Inc., Fitch Ratings Inc., and Kroll Bond Rating Agency Inc. all said their respective firms haven’t produced any unsolicited ratings under the SEC’s rule. DBRS Inc. and Morningstar Inc., which recently merged, said that they didn’t produce any unsolicited ratings in 2019 and aren’t expecting to do so in the future.
