IOSCO Publishes Consultation Report on Good Practices for Reducing Reliance by Investment Advisers on Credit Rating Agencies

IOSCO published a draft consultation report on practices that might reduce reliance by investment advisers on credit rating agencies ("CRAs"); the Commission also requested the views of investment managers, institutional investors and other interested parties as to best practices.

IOSCO noted that the role of CRAs has come under regulatory scrutiny as a result of the over-reliance upon them by market participants. IOSCO's report includes a list of good practices to reduce this reliance, including:

• that investment managers make their own determinations as to the credit quality of a financial instrument before investing and throughout the holding period;
• an internal assessment process that is commensurate with the type and proportion of debt instruments that the investment manager may invest in, and a brief summary description of which is made available to investors; and
• that regulators encourage investment managers to review disclosures describing alternative sources of credit information in addition to external credit ratings.

Comments on the consultation report are due by September 5, 2014.

See: Good Practices for Reducing Reliance on CRAs in Asset Management Consultation Report; IOSCO Press Release.