8/14/2019 May 2007 Credit Ratings Letter to SEC Chairman Cox

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United state^ SenateWASHINGTON, DC 20510

May 3,2007

The Hon orable Christopher CoxChairmanSecurities and Exchange Com mission10 0 F Street, NEWashington, DC 20549-1090Dear Chairman Cox:

We commend you and your staff for your careful consideration of important issueswhile drafting proposed rules to the Credit Rating Agency R eform Act of 20 06 ("ReformAct"), the objectives of which are to improve ratings quality by increasing competition,transparency an d accountability in the credit rating agency industry. We are writing toexpress our concern; however, about one of the proposed rules (Rule 17g-6(a)(4)) that maymand ate that a nationally recognized statistical rating organization (NRS RO ) use the ratingsof other current and future credit rating agencies interchangeably w ith its own .As you know, credit rating agencies play an important role in the global debt capitalmarltet by providing objective and independent opinions on the creditworthiness of securitiesand issuers. A s we crafted the Re form Act last year, we w ere careful to ensu re that ratingagencies reta in their integrity and o bjectivity, and to encou rage competition b ased on thequality and usefulness of their opinio ns. In particular, the Reform Act preserv es theindependence of rating agency opinions by prohibiting the SEC from regulating "thesubstance of credit ratings or the procedures and methodologies by which any nationally

recognized statistical rating organization ["NRSR O"] determines credit ratings".We are therefore concerned that one of the proposed rules (Rule 1 7g-6(a)(4)) might beinterpreted as mandating an N RSR O to use the ratings of other current and future credit

rating agencies interchangeably with its own. Any interpretation by the SEC -- or any thirdparty -- along these lines would contravene our intentions as em bodied in the Reform Act. Asyou know, we directed the SEC to promulgate rules in this area only if the Commission firstdetermines that a particular practice was "unfair, coercive or abusive." If the S EC makessuch a determination, we then specified that its rules be "narrowly tailored" to only prohibitthose practices w hich are intended to be anticompetitive.

One of the goals of the Reform Act was to ensure on-going investor confidence in theratings proce ss. Investors must b e able to rely on those ratings and requiring a cre dit ratingagency to rel y on the rating of anoth er does not serve that goal. We also believe that, aspresently drafte d, the proposed rule is overly broad and could unintentionally prohibitlegitimate NR SR O practices. Accordingly, we would strongly encourage you a nd theCom mission to consider using an "intent-based" test and prohibit only practices m otivated byunfair, coercive or abusive intent as envisioned by the Act. We believe that an "inte nt-b ase dapproach will allow rating agencies to independently f9- their credit opinions whileprotecting the marketplace from abusive practices.

8/14/2019 May 2007 Credit Ratings Letter to SEC Chairman Cox

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We appreciate your consideration of our views on this im portant issue and lookforward to seeing the rules in final form. Please do not hesitate to contact our offices if youhave any questions or concerns.

United States Senator United States Senator

Mike EnziUnited States Senator United States Senator

cc: Commissioners