285 7.3 Contribution and Recommendations 7.3.1 Prevention is better than cure: Opportunities for regulators, policymakers, and supervisors Fr ei rgsut l aatni odnf ot or ecmh aons gt ,e bt ahseei rd coonr eobuur s fi ni neds isnmg so, dwe el brye cmo omvmi negnfdr oemn ftohrec i‘ ni sgs uCeRr Apsa ybsy’ business model towards the ‘investor pays’ business model. The latter refers to ainbstuesaidneosfstmo oisdseulewrsh. ere CRAs generate revenue by selling ratings to investors, 88 This would end the conflict of interest between the CRA aa nn dd rt ahtei ni gs scuaet re rai nn dg bt he he raevbi oyr se loi mn itnhaet iqnuga ltiht ye onfergaattiinvges e. If ff et chtes i onfv er as tt oi nr gwsehroeptpo i nb ge the key client of the CRA, one might assume that the CRA assigns a rating that solely reflects the underlying credit quality of a security, to align with the wishes of its client. While currently, the CRA acts in the interest of the issuer who might pthreefiesrsutheer’hsiogwhensftirnaatnincgia,legvaeinnisf.this rating is inflated, as this will be beneficial for Sr ee gc uo lnadt ol yr, s b, up to loi cnyl ym iaf k tehr es aa nb do vseu po pe rt ivoi sno irss nf oort wc ohnast iedveerre rde at os obne, wr eea lries ct iocmbmy et nh de sharpening the disclosure requirements of CRAs and issuers, in particular for complex securities. Specifically, requiring CRAs to publish (preliminary) contacts bd ei stcwl oeseunr et hwe iml l sheel lvpe bs oatnhdi sissus euresr sa nadn idn vt oe sct oo rms mt oemn ta ko en beeatct eh r o- itnhf eorr’ms er adt di negc .i sSi uo cnhs af onrdeixnacml updlee trheevseea cl ownhs ei dt he er ar t ti ho ne sCaRsAt sh eayr ed ient ce lrimn ei nd et oy ime l ad t rcehqeuai rc ehmoet hn et sr.’ sI trma tiignhgts, 88 Back in the days, CRAs made use of the ‘investor pays’ business model. In the late1960s and early 1970s, however, tphheoyt occhoapnygi endg mt h ai sc ht oi n tehi en it shseu 1e 9r 6p0asy st hbaut sc irneeast se dmf eo adre la. mT oh ne gcsht aCnRgAe s wt haas t di tume itgoh tt hnee gi na tt ri voedl uy catfi foenc t ot fh tehi re bhui sgihn-es spse, eads it allowed investors to easily replicate documents from one another (White, 2019). Chapter 7 - General Discussion and Conclusion
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