SEC: Removing credit ratings references

The Securities and Exchange Commission proposed removing all references to credit ratings in the so-called net capital rule that requires broker dealers to maintain certain asset levels. Under the proposal, an SEC summary states, a broker-dealer would be required to take a 15% haircut on its proprietary positions in commercial paper, non-convertible debt and preferred stock unless the broker-dealer has a process for determining creditworthiness that satisfies the criteria outlined in the rule. In assessing credit risk, a broker-dealer can consider credit spreads, securities-related research, default statistics, price, yield and/or volume or asset class-specific factors, among other criteria. Comments are due 60 days after the rule is published in the Federal Register. For more details, click here.

Related Topics: Regulatory Moves