The bill introduced by Senator Jack Reed, the chairman of the Senate Banking subcommittee on securities, aims to hold rating agencies liable when it can be proven that the firms knowingly failed to review data for determining a rating based on their methodology or failed to reasonably verify data. The SEC is also looking at creating a “roadmap” to lessen reliance on credit ratings and has assigned a special squad of examiners to inspect rating agencies.

The SEC has already adopted some rules that would require more disclosures about the assets underlying mortgage-backed securities.

And the agency has proposed removing references to credit ratings in most of its rules, but the idea is strongly opposed by Wall Street.

Federal securities laws are intertwined with the credit rating agencies, with references to ratings in dozens of SEC rules.
Incidentally,
Schapiro has also directed SEC staff to consider new rules to prevent companies from shopping around for favorable ratings.
It is also learnt that SEC staff are exploring requiring banks and other bond issuers to disclose the preliminary ratings obtained from credit rating agencies before they select the credit agency to publicly rate their product.

The SEC is also mulling requiring credit agencies to privately disclose the underlying data of structured products so that other rating agencies could provide an unsolicited rating on the product.