US watchdog the Securities and Exchange Commission (SEC) is planning to sideline ratings agencies that have come under fire for failing to predict the subprime crisis and subsequent credit crunch.

New rules being considered by the SEC are said to allow money-market funds to invest in short-term debt without regard to ratings by the likes of Moody's and Standard & Poor's, according to the Wall Street Journal.

Current SEC rules require that money-market funds buy only short-term debt with high investment-grade ratings, and the new rule would put more discretion in the hands of money managers.

The SEC is completing a wide-ranging review of the ratings agencies' activities, with the results due tomorrow.

Regulators believe many investors have been lulled into a false feeling of safety by investing in high-rated securities. They hope the new regime will force money managers to make their own risk assessments.

As part of the SEC's investigation, it has written to the agencies demanding details of how they set ratings.