The Canadian Securities Administrators (CSA) today released revised proposals to impose regulatory oversight for designated credit rating agencies and organizations. As we discussed in our post of July 16, 2010, the CSA released its original proposals last July.

The revised proposals include a number of key changes to the CSA's July proposals, namely: (i) designated rating organizations would no longer be permitted to deviate from the included code of conduct based substantially on the IOSCO Code of Conduct Fundamentals for Credit Rating Agencies unless exemptive relief was obtained; (ii) additional provisions beyond those mandated in the IOSCO Code, regarding such issues as governance and ratings reports, would be required of credit rating organizations; (iii) compliance officers would now be prohibited from participating in the development of credit ratings, methodologies and models and the establishment of compensation for most employees of designated rating organizations; and (iv) the requirement that directors and officers of a designated rating organization or a credit rating organization applying to be designated submit personal information forms has been eliminated.

Further, all jurisdictions except Ontario published for comment proposed amendments to Multilateral Instrument 11-102 Passport System to permit the passport system to be used for applications for designations by credit rating organizations and exemptive relief applications by designated rating organizations. Proposed NP 11-205, to which Ontario is a party, would be the equivalent policy that sets out how the process would work for filing and the review of an application to become a designated rating organization in Ontario and the passport jurisdictions. The revised proposals also note the trend in other jurisdictions towards the imposition of civil liability on credit rating organizations and state that, while the CSA has not included similar proposals at this time, the CSA will continue to monitor such developments.

Various Canadian jurisdictions have also proposed or implemented amendments in their securities legislation to give effect to recognition of credit rating organizations. In Ontario, a new Part IX was added to the Securities Act under Bill 135. The applicable provisions came into force on December 8, 2010.

The CSA will be accepting comments on the revised proposals until May 17, 2011. For more information, see proposed National Instrument 25-101 Designated Rating Organizations.