Subsequent to the 2007–2008 subprime crisis, the SEC and the US Senate discovered that it was common practice for major credit rating agencies (CRAs) to produce inflated and inaccurate structured finance ratings. A host of explanations were posited on how this was able to happen from the “issuer pays” model of CRAs and conflicts of interest to underscoring the CRA’s regulatory license and their ensuing insulation from legal liability. Historically, credit ratings were akin to opinions. However, when courts started to consider structured finance ratings as commercial speech in the 2000s, CRAs became more vulnerable to litigation. This article studies the evolution of the status and the liability regime of CRAs and further argues that they lost their regulatory and judicial “quasi-immunity” over the last decade.
Norbert Gaillard, et al., The Icarus Syndrome: How Credit Rating Agencies Lost Their Quasi Immunity,
SMU L. Rev.