May 28 (Bloomberg) -- Moody's Investors Service and Standard & Poor's will have to differentiate between ratings of asset- backed securities and those of other debt under a code of conduct set out by regulators today.

Ratings companies face rules including one prohibiting them making recommendations on the way products they grade are structured, the Madrid-based International Organization of Securities Commissions said today. IOSCO, the main forum for more than 100 securities regulators worldwide, said there should also be independent reviews of the way firms assign ratings.

Regulators including Michel Prada, France's chief securities official and outgoing chairman of IOSCO's Technical Committee, have rebuked ratings companies for giving top ratings to mortgage securities responsible for at least $383 billion of writedowns and losses triggered by the subprime slump.

Ratings companies will have to ``differentiate ratings of structured finance products from other ratings, preferably through different rating symbols,'' the regulators said in an e- mailed summary of the code.

New York-based Moody's, S&P and Fitch Ratings are the three biggest companies that grade debt.

Moody's shares gained as much as 2.1 percent to $35.59 and were at $35.45 as of 10 a.m. in New York. The stock has lost 4.1 percent this month.

Paris Conference

IOSCO said it expected ratings companies to ``give full effect'' to the code of conduct, published today at the organization's annual conference in Paris.

As a forum, IOSCO has no direct regulatory role, working instead through its members, which include the U.S. Securities and Exchange Commission and the U.K.'s Financial Services Authority.

``We're going to be writing rules this summer,'' SEC Chairman Christopher Cox said in an interview at the Paris conference. ``They will be sturdy rules based on the lessons learned in the subprime experience.''

The SEC's rules, to be published June 11, will require greater disclosure so that regulators can ``test the quality of the analysis,'' Cox said.

The group first drafted the code in 2004 in response to the bankruptcies of formerly investment-grade companies such as Enron Corp.

Fitch will shortly issue a consultation paper seeking comment on ``potential additional and complementary rating scales for structured finance securities,'' Fitch Ratings President Stephen W. Joynt said in an e-mailed statement.

Fitch said April 29 it received ``limited interest'' from market participants in adopting a different rating scale.

New Grades

Tony Mirenda, a spokesman for Moody's, and Chris Atkins at S&P didn't have an immediate comment.

Moody's in February asked investors for comments on five options it was considering to improve ratings, including substituting the letter grades created by founder John Moody about a century ago with a designation of ``.sf'' to set apart a structured finance ranking from a corporate credit rating.

Market participants who responded, including investors together holding more than $9 trillion in fixed income securities, ``overwhelmingly'' rejected the idea of a separate rating scale for asset-backed securities, Moody's said May 14.

Moody's said it planned to add new rankings for asset-backed securities to show their ``sensitivity'' to changes in expected losses. The ratings company also said it plans to signal any uncertainty it has about the assumptions used to rate the securities.

To contact the reporter on this story: John Glover in London at johnglover@bloomberg.net; Neil Unmack in London nunmack@bloomberg.net

Last Updated: May 28, 2008 10:13 EDT