The staff of the Office of Credit Ratings of the SEC has submitted a study under Section 939C of the Dodd-Frank Wall Street Reform and Consumer Protection Act to the Committee on Banking, Housing, and Urban Affairs of the U.S. Senate and the Committee on Financial Services of the U.S. House of Representatives.
The report is divided into Part One and Part Two. Part One, including Sections I through V, describes the study required by Section 939C on the independence of nationally recognized statistical rating organizations, or NRSROs, and how such independence affects ratings issued by the NRSROs; describes the annual examinations of NRSROs; identifies the current NRSROs; and reviews the U.S. and foreign regulatory backdrop for the provision of ancillary services by the credit rating industry and conflicts of interest with respect thereto.
Part Two of the report, including Sections VI through X, includes an overview of the ancillary services provided by the NRSROs and the potential conflicts of interest involved; reviews, on an entity-by-entity basis, the details of the ancillary services provided by the NRSROs and the applicable policies and procedures which have been publicly disclosed by the NRSROs; describes certain self-enforcement measures taken by NRSROs with respect to such policies and procedures; describes the results of relevant essential findings from recent annual NRSRO examinations; considers comparable conflicts of interest; and offers related conclusions and recommendations.
The report concludes by noting the essential findings (which are limited in number) in the NRSRO exam reports relating to certain NRSROs’ management of conflicts of interest involving ancillary services do not suggest that NRSROs generally have been unable to manage such conflicts of interest through their existing policies and procedures. Accordingly, at this time, the SEC staff does not believe that it is warranted to recommend to the SEC changes to the rules on an NRSRO’s providing ancillary services to issuers for which it also provides a rating.