"The way it works now, issuers of securities are paying for their credit ratings.
How can we take seriously a rating agency that is compensated by the issuers of securities?
It is customary for rating agencies to accept the information they are provided by issuers of securities.
Decades later, the Securities Act of 1933 required issuers of securities to disclose information that potential investors might need as they decided whether to invest.
The rating firms are paid mainly by issuers of securities, and receive a relatively small percentage of their revenue from investors.
At the heart of the problem is that it is legal for companies and other issuers of securities to give confidential information to rating agencies.
Chris Atkins, a spokesman for Standard & Poor's, said the firm was not responsible for verifying information provided to it by the issuers of securities.
The investigation is likely to hinge on whether the reports produced by Clayton included material information, which the issuers of securities must provide to investors under law.
In 1996, Congress passed the National Securities Markets Improvement Act, which realigned regulatory responsibilities so that larger national issuers of securities would receive federal oversight while smaller local issuers would continue to be under the watch of state regulators.
A major focus is on the claim that the banks colluded to artificially depress Libor, costing investors in swaps and issuers of securities billions of dollars because interest rates tied to the benchmark did not reflect the true market.
The two provisions were intended to ensure that issuers of securities, and those responsible for drafting the documents filed as part of the process, would be careful that all the information disclosed to investors was correct.
