Minister for superannuation and corporate law, Senator Nick Sherry, has announced ASIC and the Treasury, with the input of the Australian Prudential Regulation Authority (APRA), would review the regulation of CRAs and research houses.
"There have been some very serious concerns voiced to me about the role CRAs may have played in some aspects of recent financial market problems, including the US sub prime mortgage situation, so we need to make sure the system is up to date," said Sherry.
"In relation to research houses, I've requested a review of the appropriateness of the current regulatory framework and whether it might also require updating.
"To ensure we get the full picture, the review will also look at how ratings advice is used by retail and wholesale investors."
The review follows widespread losses for many investors, both private and institutional, who assumed that if a product was endorsed by a major research house it was "safe". AFM also believes that many ratings were slow to be reviewed in the light of the impending problems in the US housing market which should have been evident to professional ratings agencies.
