SEC Report on Examination of Ratings Agencies

The SEC has issued its 2012 Summary Report of Commission Staff’s Examinations of Each Nationally Recognized Statistical Rating Organization.  (SEC)  This is more of what is coming out of Dodd-Frank.  In particular:

In July 2010, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), which, among other things, amended Section 15E to enhance the regulation and oversight of NRSROs by imposing new reporting, disclosure, and examination requirements.4 The Dodd-Frank Act directs the Commission to adopt rules to implement a number of provisions related to NRSROs. In January 2011, the Commission adopted new Rule 17g-7.5 In addition, the Commission has proposed new rules to implement certain provisions of the Dodd-Frank Act concerning the following areas:

  • Filing annual reports on internal controls;6
  • Addressing conflicts of interest with respect to sales and marketing concerns;7
  • Conducting “look back” reviews of ratings in which former NRSRO employeesparticipated to determine whether employment opportunities with a rated entity,issuer, underwriter, or sponsor influenced the rating;8
  • Disclosing information relating to initial credit ratings and subsequent changes tocredit ratings to track the performance of an NRSRO’s credit ratings;9
  • Requiring an NRSRO to have certain policies and procedures governing the wayan NRSRO determines credit ratings;10
  • Publishing a standard form with each credit rating disclosing, among other things,the assumptions underlying the methodology used to determine the credit rating;11
  • Disclosing information concerning third-party due diligence reports for asset-backed securities;12
  • Establishing professional standards for training credit rating analysts;13 and
  • Requiring the consistent application of rating symbols and definitions.14

Most of this seems very obvious to me and it makes you wonder why these weren’t in place before.

See our previous coverage of the Dodd-Frank Act here.

Posted on November 16, 2012 in Compliance, Dodd-Frank Act, SEC

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