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SEC Issues Regulations for NRSROs: Governance

This is part 2 of a two-part executive summary on the SEC issuance of amendments, new rules, and new forms affecting nationally recognized statistical rating organizations (“NRSROs”) On August 27,…

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SEC Issues Regulations for NRSROs: Governance (Abstract)

This is part 2 of a two-part executive summary on the SEC issuance of amendments, new rules, and new forms affecting nationally recognized statistical rating organizations (“NRSROs”)

On August 27, 2014, the SEC in accordance with the Dodd-Frank Act and to enhance their oversight:  (i) issued amendments to existing rules and new rules that apply to credit rating agencies registered with them as NRSROs; (ii) adopted a new rule and form that apply to providers of third-party due diligence services for asset-backed securities; and (iii) adopted amendments to existing rules and a new rule that implement a requirement added by the Dodd-Frank Act that issuers and underwriters of asset-backed securities make publicly available the findings and conclusions of any third-party due diligence report obtained by the issuer or underwriter.

For purposes of this write-up, the intent of the amendments and new rules is to enhance the integrity of how NRSROs determine credit ratings by improving internal governance of NRSROs managing potential principal-agent problems and conflicts of interest in the credit rating process and promoting adherence to the procedures and methodologies for determining credit ratings and compliance with laws and regulations.

The relevant new provisions in the amendments and new rules require a NRSRO among other things to: (1) assess and report on the effectiveness of internal controls; (2) address conflicts of interest relating to sales and marketing activities and employment of former analysts; (3) have policies and procedures relating to their procedures and methodologies for determining credit ratings; (4) have standards of training experience and competence for their credit analysts; and (5) have policies and procedures to promote the consistent use of credit rating symbols.

 

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SEC Issues Regulations for NRSROs: Disclosure

This is part 1 of a two-part executive summary on the SEC issuance of amendments, new rules, and new forms affecting nationally recognized statistical rating organizations (“NRSROs”) On August 27,…

This content is for Members, Trial Membership and The Volcker Rule Membership members only.
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