In this edition of the AMG Weekly Report, read about two recent SEC initiatives that may have a bearing on the business activities of asset management firms.

SEC Approves New Sarbanes-Oxley Guidance

On Wednesday, May 23, 2007, the Securities and Exchange Commission unanimously approved interpretive guidance to help public companies strengthen their internal control over financial reporting under Section 404 of Sarbanes-Oxley. According to an SEC press release, "the new guidance will enhance compliance under Section 404 of the Sarbanes-Oxley Act of 2002 by focusing company management on the internal controls that best protect against the risk of a material financial misstatement." In the press release, the SEC's Chief Accountant, Conrad Hewitt explained that the Commission's guidance "enables companies of all sizes to focus on what truly matters to the integrity of the financial statements - risk and materiality."

Click here to read May 23 SEC Press Release on new Sarbanes-Oxley

SEC Votes to Adopt Rules on Credit Rating Agency Reform

On Wednesday, May 23, 2007, the Securities and Exchange Commission voted to adopt final rules to implement provisions of the Credit Rating Agency Reform Act of 2006. The Credit Rating Agency Reform Act, which was enacted on Sept. 29, 2006, defines the term "nationally recognized statistical rating organization" (NRSRO), provides authority for the Commission to implement registration, recordkeeping, financial reporting, and oversight rules with respect to registered credit rating agencies, and directs the Commission to issue final rules by June 26, 2007.

The Commission is particularly concerned about "notching" practices, that is, when a rating agency lowers ratings on asset-backed securities because the agency does not rate a substantial portion of the underlying assets of the security. According to press reports covering this SEC matter, the SEC will counter any possible increase in notching by calling greater attention to the issue.

Click here to read May 23 SEC Press Release on Credit Rating Agency Reform rules

Important Publications:
SIFMA Update
Washington Weekly
Legal, Regulatory and Market Practices Action Line
Weekly Report of the American Securitization Forum
SIFMA SmartBrief (past five issues)