In light of the subprime mortgage meltdown, the Securities and Exchange Commission (SEC) has said that it wants to see more transparency on Wall Street, and that includes more financial information and more disclosures. Chairman Christopher Cox told the Senate Banking Committee that the SEC is not yet sure if any securities laws were broken during the mortgage downturn, but that they are investigating.
The SEC is looking at how companies treat securitized subprime loans on their financial statements, and they’re examining the quality of the disclosures that issuers have made. Even money market funds, which are typically considered very safe and stable investments, have become a concern. It is unclear how deeply the subprime mortgage crisis will affect the valuation of the money markets, although regulators say they’re not yet aware of any significant problems.
In an effort to make a wide examination of many factors involved in the subprime mortgage problem, the SEC is also looking at credit rating agencies. These agencies have been accused of giving top ratings without doing proper due diligence.
The SEC is trying to determine whether the credit raters’
role in bringing residential mortgage-backed securities and
collateralized debt obligations to market impaired their
ability to be impartial in their ratings.
While these issues may not directly affect your business today, it is wise to keep an eye on them. Certainly additional regulations may add costs to doing business, and small businesses may have a harder time securing debt in light of the mortgage meltdown.