Securities regulators had recognized some time ago that credit-rating agencies play an important part in the capital markets. It took the global financial crisis for regulators to decide the agencies’ role requires regulation.

The primary policy-making body of the umbrella group of securities regulators, the technical committee of the International Organization of Securities Commissions, first published a set of principles regarding the agencies in 2003. And, in 2004, IOSCO developed a related code of conduct.

In May 2008, IOSCO updated that code to reflect issues that had arisen during the crisis — particularly, the rating of structured products backed by U.S. subprime mortgages.

The code primarily aims to promote investor protection by ensuring that ratings are reliable and independent.

It sets out measures designed to: improve the quality and integrity of the ratings process; defend the independence of the agencies from the issuers they rate, including avoiding conflicts of interest; and enumerate an agency’s responsibilities to issuers and investors, including the timeliness and transparency of ratings disclosure and obligations to protect confidential information. The code also calls on the agencies to disclose their own codes of conduct and explain how they follow the IOSCO guidelines.

— JAMES LANGTON