UPDATE 2-U.S. SEC sees more credit rating rules soon-Cox

(Adds further comment from lawmakers, Cox)

By Rachelle Younglai

WASHINGTON, April 16 (Reuters) - The U.S. Securities and Exchange Commission will soon propose more rules to police credit rating agencies, possibly including better disclosure of past ratings and limiting conflicts of interest, SEC Chairman Christopher Cox said on Wednesday.

Credit raters have been criticized by investors, regulators and lawmakers in recent months for contributing to the U.S. subprime mortgage meltdown by issuing inaccurate ratings on products backed by subprime mortgages, and for lowering ratings too slowly after the products performed poorly.

The SEC's additional rules may include requiring better disclosure of past ratings and regulating and limiting conflicts of interest, Cox said in prepared testimony for a congressional hearing on the SEC's annual budget request.

"We will shortly propose additional rules building on the lessons learned from the subprime market turmoil," Cox said. New rules would affect rating companies such as Moody's Corp (MCO.N: Quote, Profile, Research) and McGraw-Hill Cos Inc's (MHP.N: Quote, Profile, Research) Standard & Poor's.

In order to have new rules in place this year, Cox told reporters that the agency would have to propose rules within the next month or two.

Cox said the proposal may also include "reducing reliance on ratings per se, as opposed to the underlying criteria that ratings are thought to represent," and disclosing the role of third-party due diligence in assigning ratings.

He called the agency's oversight of credit raters "vitally important" because of the credit market turmoil unleashed by subprime-linked securities.