Reflection And Construction Of Civil Liability Of Credit Rating Agencies In Bond Market

As one of the gatekeepers of the bond market,the credit rating agencies’ main function is to predict the future solvency and credit risk of the evaluated enterprise.Bond market investors are concerned about the issuers’ redemption capacity at maturity,which makes credit ratings as indicators of bond investment.Therefore,bond market investors are highly dependent on credit rating,which is the basis for the construction of expert liability of credit rating agencies.Expert liability arises from the third party’s high trust in experts in the field of professional practice,and takes professional negligence as a typical tort.According to the two categories of obligations of experts,namely,duty of care and professional skills,and in combination with the credit rating workflow of credit rating agencies,this paper holds that the obligations of credit rating agencies can be divided into: data verification obligations,procedural obligations and professional skills implementation obligations(obligations to adopt appropriate rating methods and models for rating analysis).Compared with the violation of data verification obligations,the violation of professional skills implementation obligations and procedural obligations by a credit rating agency is a separate violation by itself.If the causation between the illegal act and the loss is established,the credit rating agency shall bear the civil liability for compensation.Generally,there is no direct causation between the violation of procedural obligations and the loss of investors,unless the rating agency has material procedural violations which affects the objective neutrality of the rating results.Professional implementation obligation is the core process that directly determines the rating result.If the professional skills implementation obligation does not reach the industry average level,the causation between the professional skills implementation obligation and investors’ loss should be established,and the rules here apply the presumption of causation.Violations of data verification obligations by rating agencies are more complex,as they often constitute joint infringements of misrepresentation with issuers and other intermediary agencies.Misrepresentation in the securities market is typical joint tort of several parties.The information disclosure behaviors of issuers and intermediary agencies are objectively related to each other.Intermediary service agencies that fail to fulfill their duty of care are subject to joint torts with negligence.It shall be noted that although the accountability of rating agencies is based on joint tort,the predictive and observational nature of the credit rating report should not be deemed as infringement of misrepresentation,but rather the liability arising from the violation of its expert obligations.Meanwhile,the determination of causation under the obligation of data verification by rating institutions cannot be presumed based on the market fraud theory under the effective market,and specific analysis shall be made in combination with specific issuance and trading methods and in light of the information dominant position of experts,the ability of the counterpart to master information.The expert liability is based on the existence of its obligation,and the selection and verification of the rating data is directly related to the result of the rating,in which the financial data of the relevant enterprise is particularly important.Therefore,the credit rating agencies must check and verify the authenticity,accuracy and completeness of the selected data with special duty of care.The "proportional joint liability" arising in practice is a more fair and reasonable way for intermediary agencies to assume liability,and its legitimacy can also be supported by the legal interpretation.If a credit rating agency fails to fulfill the verification obligation,it shall also bear the proportional joint liability with other agencies according to the extent of its fault and causation.