The SEC's proposed rule amendments also would remove credit ratings in two other areas:

  • Certain business and industrial development company (BIDCO) investments. Specifically, BIDCOs are limited to purchasing debt securities issued by investment companies and private funds that are rated “investment grade” by at least one credit rating agency. Under the proposed amendments, instead of limiting BIDCOs to purchasing debt securities issued by investment companies and private funds that are rated “investment grade,” a BIDCO's board (or its delegate) would be required to determine that the debt security is (1) subject to no greater than moderate credit risk and (2) sufficiently liquid that the security can be sold at or near its carrying value within a reasonably short period of time.
  • Shareholder reports. Investment companies are required to include in their shareholder reports a table, chart, or graph depicting portfolio holdings by reasonably identifiable categories (i.e., type of security, industry sector, geographic region, credit quality, or maturity). If credit quality is used to present portfolio holdings, credit quality must be depicted using the credit ratings assigned by a credit rating agency. The proposed amendments would eliminate the required use of credit ratings by funds that choose to use credit quality categorizations in the required table, chart, or graph of portfolio holdings.