The Treasury Associations broadly welcome the draft Code of Conduct Fundamentals. In a competitive market, the market is seen as the ultimate and best regulator of CRAs and the Treasury Associations would regret the extension of regulatory oversight to jurisdictions where it does not currently exist. A Code is potentially especially useful in such markets
The Treasury Associations firmly believe that issuers should abide by disclosure rules applicable to them. However, the policing role envisaged for CRAs by Code item 3.11 (publication of disclosable unpublished information about a listed issuer which comes to their attention) is wholly inappropriate. It would totally the change the relationship of trust needed for issuers to make full and proper disclosure to a CRA, to the detriment of issuers and investors generally. 3.11 should be deleted from the draft Code.
The concept of requiring use by a CRA of all available information (1.1) is not consistent with the idea that CRAs can offer their own (published) methodology. That methodology may indeed be comprehensive in its consideration of available information, or it may be highly selective, as with a purely statistical analysis of selected elements of published financial data. Accordingly, the Treasury Associations suggest modifications to 1.1 and 1.4
The Treasury Associations agree that a CRA and its employees should comply with all applicable laws, rules and regulations governing its activities in each jurisdiction in which it operates. However, exemptions may be needed in securities regulations regarding disclosure requirements on listed entities for disclosures to CRAs and the addition of a note to this effect is suggested in comments on 1.11.
The Treasury Associations believe that, within a CRA, analysts and others involved in rating an issuer should be independent of any connection with direct competitors, customers or suppliers of the rated entity and an amendment to 2.13 is proposed accordingly.
The Treasury Associations believe that some extension to restrictions on trading for those in possession of confidential, non-published information provided by rated issuers is required. See the Treasury Associations’ comments on 2.14.
