SEC to keep an eye on Big Five
US Securities and Exchange Commission chairman Christopher Cox said the agency has detected no signs that the global market turmoil is undermining the financial soundness of the five biggest US securities firms.
By Agencies |
WASHINGTON: US Securities and Exchange Commission chairman Christopher Cox said the agency has detected no signs that the global market turmoil is undermining the financial soundness of the five biggest US securities firms.
Cox said the agency is monitoring Goldman Sachs Group, Morgan Stanley, Lehman Brothers Holdings, Merrill Lynch and Bear Stearns in response to the credit crunch. The SEC’s market regulation division is responsible for policing the companies, he said.
“We are throughout the day in contact with those firms,” Cox said. “We are focused, among other things, on their liquidity at the parent level.”
Last month, the subprime-mortgage rout triggered the collapse of two Bear Stearns hedge funds. The SEC is scrutinising whether the brokerages concealed the extent of their losses on subprime investments, two people with direct knowledge said. The regulator is examining how the firms accounted for mortgage-backed securities as they plummeted, said the people. Cox said the SEC will also probe credit-rating companies. The rating firms have been criticised for waiting until July to cut their rankings on bonds backed by mortgages.
The SEC in May adopted rules aimed at fostering competition for Moody’s, Standard & Poor’s and Fitch Ratings that also gave the agency the authority to conduct routine inspections of rating companies for the first time. The authority is “new and essentially forward looking,” Cox said. “Only to the extent that there were anything worthy of SEC enforcement would we be looking back.”The agency could bring lawsuits for past behaviour if it finds “violations of securities laws,” he said. S&P is eager to explain the role of rating agencies in promoting “investor confidence and healthy capital markets,” spokesman Christopher Atkins said.
European Union financial services commissioner Charlie McCreevy said last week he would also review the management, conflicts of interest and resources at rating companies. The firms help borrowers structure debt securities in a way that will get the highest possible credit rankings while allowing managers of the securities the most profit, said Charles Calomiris, a professor at Columbia University’s business school.
Cox said the agency is monitoring Goldman Sachs Group, Morgan Stanley, Lehman Brothers Holdings, Merrill Lynch and Bear Stearns in response to the credit crunch. The SEC’s market regulation division is responsible for policing the companies, he said.
“We are throughout the day in contact with those firms,” Cox said. “We are focused, among other things, on their liquidity at the parent level.”
Last month, the subprime-mortgage rout triggered the collapse of two Bear Stearns hedge funds. The SEC is scrutinising whether the brokerages concealed the extent of their losses on subprime investments, two people with direct knowledge said. The regulator is examining how the firms accounted for mortgage-backed securities as they plummeted, said the people. Cox said the SEC will also probe credit-rating companies. The rating firms have been criticised for waiting until July to cut their rankings on bonds backed by mortgages.
The SEC in May adopted rules aimed at fostering competition for Moody’s, Standard & Poor’s and Fitch Ratings that also gave the agency the authority to conduct routine inspections of rating companies for the first time. The authority is “new and essentially forward looking,” Cox said. “Only to the extent that there were anything worthy of SEC enforcement would we be looking back.”The agency could bring lawsuits for past behaviour if it finds “violations of securities laws,” he said. S&P is eager to explain the role of rating agencies in promoting “investor confidence and healthy capital markets,” spokesman Christopher Atkins said.
European Union financial services commissioner Charlie McCreevy said last week he would also review the management, conflicts of interest and resources at rating companies. The firms help borrowers structure debt securities in a way that will get the highest possible credit rankings while allowing managers of the securities the most profit, said Charles Calomiris, a professor at Columbia University’s business school.
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