The Dodd-Frank Act's call for the creation a self-regulatory organization (SRO) or other entity to assign new ratings was mostly panned by structured-finance industry participants, but relying on existing Rule 17g-5 - the industry's preferred alternative - may have a fatal flaw.

Rule 17g-5's amendment requiring nationally recognized statistical rating organizations (NRSROs) to freely share the underlying data of deals they're paid to rate with competitors was adopted in November 2009 and became effective the following June. Since then, however, there have been no unsolicited ratings - anticipated to ferret out conflicts - and just a handful of less rigorous ratings commentaries.

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