Non-bank deposit takers (NBDTs) should display information about their credit rating in all advertisements, the Securities Commission has recommended.
The commission today issued interim guidance for NBDTs on disclosure of credit ratings under mandatory credit rating requirements that come into effect next Monday.
The guidance will apply until the regulations for disclosure of credit ratings, which are being worked on by the Ministry of Economic Development, take effect.
It warns that advertisements must not “deceive, mislead or confuse” investors.
“The commission encourages NBDTs to display information about their credit rating in all advertisements.”
And when advertisements display promised rates of return the commission expects they will also contain “prominent” information about an NBDT’s credit rating, “to ensure that investors are not misled or confused by the apparent risk associated with the rate of return offered.”
The commission has said that advertisements for securities that are offered to the public for subscription should include three key features.
Firstly they should have the current credit rating of the NBDT (including any qualifiers/modifiers to the rating and the rating outlook).
They should also include the name of the approved rating agency that has provided the credit rating and have a statement referring to the investment statement and the NBDT’s website (if any) for further information about the rating.
However, credit ratings from un-approved agencies are a big no-no.
“The commission strongly recommends that NBDTs do not disclose… an assessment of its creditworthiness that is in substance a credit rating… issued by an agency that is not approved by the Reserve Bank” under the relevant part of the Reserve Bank Act.
“Credit ratings are important to help investors to assess the risks of an investment,” commission chairman Jane Diplock said.
“Deposit takers must ensure that they give investors clear information about their credit ratings and what those ratings mean, and that references to credit ratings are not likely to mislead or confuse.”
Niko Kloeten
Fri, 26 Feb 2010
