Hey, Credit Rating Agencies: Expect More Scrutiny

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Credit rating agencies take note: there’s a new regulator in town, and the SEC has chosen a leader for it.

Thomas Butler was named Director of the Office of Credit Ratings this week, a byproduct of the Dodd-Frank Act that will bring more scrutiny to the methods ratings agencies use for analyzing credit. In particular, the law requires that the Office of Credit Ratings conduct an annual examination of each agency’s practices, and provide an annual report to the public on its findings.

At the outset of his new position, Butler is deciding whether the SEC’s newest arm needs its own rule writing and enforcement staff. The Wall Street Journal’s Jeannette Neumann estimates that roughly 20 employees throughout the SEC are currently assigned to credit rating agency analysis, while the OCR’s budget allows for roughly 30 employees.

Butler is a veteran of several major U.S. financial institutions, including Morgan Stanley Smith Barney, where he spent 14 years.