They have become big businesses, moving into ever more exotic financial instruments, offering to pre-rate securities planned by an issuer, and selling advisory services.
The report recommended that the S.E.C. impose further restrictions on the consulting and advisory services that rating agencies provide to issuers of rated debt, to avoid conflicts of interest.
A similar regime would apply for non-exempt secondary offerings, while for securities placed by banks to their own clients, a similar regime would be made available, with due adaptations, for offerings exclusively targeted at clients of their asset management and advisory services, for which the suitability rule applies and provides better protection than issuer disclosures.
An advisory last month reminded firms that they must tell clients of recent material changes in an issuer's financial situation when they sell them a bond.
Andrew Kalotay, founder of Andrew Kalotay Associates, a debt management advisory firm, said a deal like Denver's would be highly unusual among private sector issuers like corporations because they recognized the pitfalls of locking themselves into an arrangement for 30 years.
Whether issuers are being given an appropriate opportunity to raise concerns if they disagree with a proxy advisory firm's recommendations, including, in particular, if the recommendation is based on erroneous, materially incomplete, or outdated information.
Legislation introduced in December 2017 would require proxy advisory firms to register with the SEC and to (1) disclose and manage their conflicts of interest, (2) provide issuers with reasonable time to respond to errors or flaws in advisory voting recommendations, and (3) demonstrate that they have the proper expertise to make accurate and objective recommendations.
Issuer or domestic concern.
Credit Card Issuer Practices.
The Egan-Jones and ISS letters described the circumstances under which a proxy advisory firm could be an independent third party for purposes of making proxy recommendations to an investment adviser even though the proxy advisory firm receives compensation from an issuer for providing advice on corporate governance issues.
