A Chairmen’s Task Force of the Technical Committee of the International Organization of Securities Commissions (IOSCO) completed deliberations on a code of conduct for credit rating agencies today in Berlin.

Called the “Fundamentals of a Code of Conduct for Credit Rating Agencies,” the IOSCO document describes provisions that rating agencies should incorporate into their own codes of conduct to deal with issues such as how rating agencies should avoid or mitigate potential conflicts of interest, improve the transparency of the ratings process, and protect their integrity and independence while dealing fairly with issuers, investors and other market participants.

The CRA Code Fundamentals are designed to be used by rating agencies of all sizes and business models, operating in all jurisdictions. The Task Force believes that the Code Fundamentals offer a global, converged approach to addressing a range of issues of concern to investors, issuers, governments and rating agencies alike.

At the heart of the Code Fundamentals is a disclosure mechanism to monitor compliance. Rating agencies must disclose how they implement the various provisions of the Code Fundamentals.

The Task Force expects CRAs to give full effect to the Code Fundamentals. At the same time, investors, issuers, regulators and other market participants will be able to assess in each case whether a given rating agency has implemented the Code Fundamentals to their satisfaction, and react accordingly.

The IOSCO Technical Committee plans to publish the Code Fundamentals within approximately three weeks, once its constituent members formally approve the document.

On October 6, the Task Force published a consultation paper which sought comment from the public on an earlier draft of the Code Fundamentals. IOSCO received 39 comment letters from issuers, rating agencies, industry associations, financial institutions and individual investors from around the world.

The CRA Code Fundamentals were developed out of IOSCO’s Principles Regarding the Activities of Credit Rating Agencies that the organization published in October 2003. The Code Fundamentals offer specific measures that credit rating agencies should adopt to achieve the objectives laid out in the CRA Principles.