There have been a number of developments recently with regards to the Securities and Exchange Commission receiving advice on how best to regulate the credit rating industry. Last month, a panel was convened so that the Investor Advisory Committee could hear from a number of experts on some of the issues facing the industry, and some potential solutions. Then, at the beginning of this month, the Credit Ratings Subcommittee of the Fixed Income Market Structure Advisory Committee (FIMSAC) produced a recommendation outlining three key areas for regulatory development. In light of this, this post will review the developments, and also examine whether the calls are realistic, or whether they may spurn the SEC into more action in this area.   The meeting of the SEC’s Investor Advisory Committee took place on the 21 st May, virtually – recording available here . In the afternoon, a panel was convened that was made up of: Professor Frank Partnoy of the University of California, Berkel...

The giant Japanese conglomerate SoftBank, a holding company that holds shares in Sprint, Alibaba, Uber, and many others, was recently downgraded by Moody’s dragging it further into ‘junk’ status. However, it has decided to take aim at this decision and has suggested that Moody’s has ‘ biased and mistaken views ’. Is this retaliation to Moody’s justified, or is it a company, and a CEO, under increasing pressure as its debts continue to build? SoftBank, founded in 1981 by Masayoshi Son (now CEO), went public in 1994 and was valued at $3 billion. Since then, it has gone on to become one of the world’s largest public companies, and Japan’s second largest behind Toyota. However, recently there have been concerns from the market that the company was exposing itself to too much debt, with the Financial Times reporting that SoftBank currently has $55 billion in net debt. It was on this basis, supposedly, that Moody’s took its recent decision to downgrade SoftBank’s credit rating by two...

We know here in Financial Regulation Matters that the audit industry is currently reeling from a number of high profile scandals regarding their involvement in corporate collapses. KPMG’s role in the collapse of both Carillion and BHS, alongside the involvement of their Big Four counterparts in the same, and in different scandals has led to calls to break up the ‘Big Four’ auditors . Whilst we have discussed this issue before , the Big Four (at least members of the Oligopoly) have now proposed a different solution, and have taken strides to enforce their will by taking action. However, there are a number of vital questions that stem from their decision. KPMG, announcing the move on Thursday, stated that they are to drop the availability of consultancy, or ‘non-audit’ services to clients they are simultaneously auditing , focusing on FTSE 350 clients specifically. Whilst a date for the policy change has not been confirmed, the Chair of the firm’s UK division stated that the move...

As part of this author’s research on the Principles for Responsible Investment , the concept of ESG consideration has been analysed in relation to its importance to development of more forward-looking and sustainable investment practices. In this post, we will look at whether Environmental, Social, and Governance’ (ESG) principles are followed in full, or whether there is still some resistance to incorporating all of the concept. There is a suggestion that only certain elements are ‘material’, but recent news suggests that it is sometimes, or even often, unwise to separate the three components. In reviewing the two particular reports generated by the PRI concerning the impact of ESG on credit analysis (the first one is available here , and the second here ), it quickly becomes apparent that, for the Credit rating agencies (CRAs), the concept of ‘G’overnance is the most material aspect. Yet, the CRAs make a point of the Volkswagen emissions scandal to demonstrate where the diff...