On May 23, the Securities and Exchange Commission adopted final rules implementing provisions of the Credit Rating Agency Reform Act of 2006, which gave the SEC authority to implement registration, recordkeeping, financial reporting and oversight rules with respect to nationally recognized statistical rating organizations (NRSROs) intended to foster competition, accountability and transparency in the credit rating industry currently dominated by only a few agencies. The rules, among other things: 

  • Require a credit rating agency to apply to the SEC for registration as an NRSRO and, if approved, to provide the SEC with information including the classes of credit ratings for which it is applying to be registered, credit ratings performance statistics, a general description of its methodologies for determining credit ratings, procedures for managing conflicts of interest, and qualifications of credit analysts; 
  • Require NRSROs to make and retain records relating to its business as a credit rating agency; 
  • Require NRSROs to furnish financial information to the SEC, on a confidential basis, including audited financial information; 
  • Require written policies reasonably designed to prevent inappropriate dissemination of material nonpublic information obtained in connection with the performance of credit rating services, trading by NRSRO personnel on the basis of material nonpublic information and the inappropriate dissemination of a pending credit rating prior to its issuance; 
  • Require disclosure and management of conflicts of interest; and 
  • Prohibit NRSROs from engaging in certain unfair, abusive, or coercive practices.