Credit Rating Agencies: SEC Proposes a Broad Range of Amendments to Implement Dodd-Frank Act Provisions

Sullivan & Cromwell LLP - July 8, 2011
Download

The SEC has proposed a number of rules with respect to its oversight of registered credit rating agencies (nationally recognized statistical rating organizations, or “NRSROs”) to implement certain provisions of Title IX of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). While most of the requirements contemplated by these proposals would apply directly to NRSROs, certain requirements would apply to issuers and underwriters of rated asset-backed securities who use third-party due diligence services, and other requirements would apply to the providers of those services.

The SEC’s proposals address, among other things:

  • disclosures made by NRSROs, including disclosures required for each credit rating action, disclosures regarding ratings performance and the use of rating symbols, and the electronic submission of certain forms and reports on EDGAR;
  • disclosures required of issuers and underwriters of rated asset-backed securities who use third-party due diligence services, and certifications required from the providers of such services;
  • the separation of NRSRO sales and marketing activities from rating activities;
  • NRSRO “look-back” review and disclosure requirements;
  • an expansion of the SEC’s enforcement powers with respect to NRSROs;
  • the consistent use and disclosure of appropriate rating methodologies by NRSROs;
  • standards of training, experience and competence for NRSRO rating analysts; and
  • NRSRO internal control structures.

Comments on the SEC’s proposals are due by August 8, 2011.