Bond rating agencies have invested significant sums of money in an effort to determine which quantitative and nonquantitative factors best predict bond defaults. Furthermore, some of the raters invest time and money to meet privately with corporate personnel to get nonpublic information that is used in assigning the issues bond rating. To recoup those costs, some bond rating agencies have tied their ratings to the purchase of additional services. Do you believe that this is an acceptable practice? Defend your position. Your initial posting should be 250-500 words and must be submitted by Thursday, midnight, of this week.
Answer
In my opinion, this practice is not acceptable because the bonds are rated at the time they are issues
Credit agencies or Bond rating agencies should be impartial and
have absolutely no links with the company. The question of
investing time and money does't arise to get the non-public
information. In order to get their costs back many agencies have
tied up with corporates to get their additional costs back by
giving them a fair rating. Degradinng Bond Rating is not an
acceptable practice: 1. Bond raters or credit agencies meet top
corporate personnel and ideally they should have absolutely no
links with the company.
Rating agency who have access to Confidential Information are not
permitted to use or share that information for
purposes of trading securities (such as Moody’s stock) or for any
other purpose except the conduct of rating business.
Insider trading (or dealing) laws and regulations globally prohibit
buying or selling a company’s securities while in
possession of Material Non-Public Information about that
company.
Material Non-Public Information to another person if, as a result,
that person – or any other person – buys or sells a
security while aware of that information.
Information about a future rating action may be material, as may be
the information disclosed to ratings teams by third parties during
the course of the ratings process.
Questions regarding whether information is “Confidential,”
“Material” or what restrictions exist on the use or distribution of
such information should be directed to the Legal or Compliance
Departments.
More detailed guidance regarding Material Non-Public and
Confidential Information may be found in the during personal
meeting
“Confidential Information” means any Non-Public Information .
Non-Public Information used for, or obtained from, a Rated Entity
or its Agent for the purpose of determining
a Rating;
Bond rating agencies have invested significant sums of money in an effort to determine which quantitative...
Bond rating agencies have invested significant sums of money in an effort to determine which quantitative and nonquantitative factors best predict bond defaults. Furthermore, some of the raters invest time and money to meet privately with corporate personnel to get nonpublic information that is used in assigning the issues bond rating. To recoup those costs, some bond rating agencies have tied their ratings to the purchase of additional services. Do you believe that this is an acceptable practice? Defend your...