A bill to strengthen regulation of credit rating agencies (HR 3890) took a step toward passage yesterday as the House Financial Services committee voted 49-14 to approve the Accountability and Transparency in Rating Agencies Act.

Credit rating agencies were at the center of last year's financial meltdown, and the measure would increase scrutiny of their practices and decrease their roles as government-sanctioned entities gatekeepers in financial products purchasing .

The underlying bill would require, at minimum, yearly reviews by the SEC of the firms’ practices and internal functions and would allow the SEC to impose fines on those that fail to meet acceptable internal risk controls.

The bill also would require the SEC to write rules to increase the disclosure of information on both initial ratings and subsequent comparable ratings.

The administration sent draft legislation on rating firms to Congress in July. Several aspects of that proposal are in the House draft, including provisions designed to reduce conflicts of interest at rating companies by barring the firms from selling consulting services to companies whose debt or creditworthiness they are already rating.