SEC Issues Annual Staff Reports on Credit Rating Agencies
The SEC's annual report found no fraud or misconduct among credit rating agencies, instead highlighting improved compliance, enhanced governance, and increased competition among NRSROs following regulatory reforms, with no fines or enforcement actions taken.
The SEC issued its annual reports on Nationally Recognized Statistical Rating Organizations (NRSROs), confirming that all prior regulatory findings had been addressed and no fraud or misconduct was identified. NRSROs strengthened compliance through improved IT systems, increased personnel, more frequent audits, and better separation of analytical functions from sales and marketing, in line with the 2014 Commission reforms. The reports also noted growing market competition, including two new NRSROs registering in additional categories and smaller firms expanding into esoteric asset-backed securities.
The SEC released its annual staff reports on Nationally Recognized Statistical Rating Organizations (NRSROs), affirming that all prior examination findings had been fully addressed and no fraud, misconduct, or unresolved violations were found. NRSROs have made significant progress in enhancing internal controls, including upgrading IT systems, expanding compliance personnel, and increasing the frequency of internal audits to meet obligations under the Dodd-Frank Act and the 2006 Credit Rating Agency Reform Act. The agencies improved transparency by better documenting methodologies, separating analytical functions from sales and marketing, and strengthening governance and risk management. Market competition has intensified, with two new NRSROs registering in additional rating categories and smaller firms increasingly active in niche markets such as esoteric asset-backed securities. SEC Chair Mary Jo White and Office of Credit Ratings Director Thomas J. Butler praised the firms’ commitment to reform and compliance. The reports underscore the SEC’s ongoing oversight role but contain no enforcement actions, penalties, or allegations of wrongdoing. The findings reflect a regulatory success story of institutional improvement rather than a case of financial fraud.
Exhibits & Attached Documents (2)
Extracted insights
- person additional ratings categories
- person annual examination report
- person credit rating agencies
- agency dedicated oversight of credit rating agencies is critical to sec's mission
- agency director of sec's office of credit ratings
- agency sec chair mary jo white
- agency Securities and Exchange Commission
- person smaller nrsros
- person thomas j. butler
- SEC issued Two Annual Staff Reports On Credit Rating Agencies
- SEC Chair Mary Jo White said Dedicated Oversight Of Credit Rating Agencies Is Critical To SEC's Mission
- Credit Rating Agencies advancing Initiatives To Address Staff Recommendations Including Comprehensive Credit Rating Reforms
- SEC adopted Comprehensive Credit Rating Reforms In August 2014
- 2010 Dodd-Frank Act required Annual Examination Report
- NRSROs integrating Internal Systems And Processes To Comply With Regulated Entity Obligations
- NRSROs implementing IT Systems To Increase Efficiency, Capacity, And Accuracy Of Compliance Tasks
- Thomas J. Butler is Director Of SEC's Office Of Credit Ratings
- Thomas J. Butler said NRSROs Are Redoubling Focus On Policy And Procedure Adherence
- 2006 Credit Rating Agency Reform Act mandated Annual Report On Competition, Transparency, And Conflicts Of Interest
- Two NRSROs became registered Additional Ratings Categories
- Smaller NRSROs competing With Established Rating Agencies In Asset-Backed Securities Rating Category
The Securities and Exchange Commission today issued two annual staff reports that demonstrate compliance and competition continue to increase among the credit rating agencies under SEC oversight as nationally recognized statistical rating organizations (NRSROs). “Dedicated oversight of credit rating agencies is a critical part of the SEC’s mission,” said SEC Chair Mary Jo White. “I am pleased that the firms are advancing initiatives to address the staff’s recommendations, including responses to the comprehensive credit rating reforms adopted by the Commission in August 2014.” The annual examination report, required by the 2010 Dodd-Frank Act, summarizes the staff’s findings from the most recently completed examinations of each NRSRO, including: Policies and procedures for determining, surveilling, or withdrawing ratings. Separation of analytical activities from sales and marketing. Development, documentation, or application of methodologies, criteria, or models. The report notes that all of the staff’s findings from prior examinations have been appropriately addressed and their recommendations based on exam findings have identified areas for NRSRO improvement. The staff found that NRSROs continue to integrate and enhance internal systems and processes to comply with their obligations as regulated entities, such as: Implementing IT systems to increase the efficiency, capacity, and accuracy of compliance tasks. Adding personnel and resources to anticipate and address risk management issues. Increasing the number and frequency of audits and other internal testing. “As a result of our efforts, NRSROs are redoubling their focus on policy and procedure adherence to achieve enhanced transparency, quality, and integrity,” said Thomas J. Butler, Director of the SEC’s Office of Credit Ratings. “The firms’ additional investments in information technology and personnel serve to bolster governance, risk, and compliance functions.” The annual report, mandated by the 2006 Credit Rating Agency Reform Act, discusses the state of competition, transparency, and conflicts of interest at NRSROs. The report notes that two NRSROs recently became registered in additional ratings categories and that smaller NRSROs continue to actively compete with more established rating agencies, particularly in the asset-backed securities rating category, and also are rating new types of issuances referred to as “esoteric” asset-backed securities. The following SEC staff contributed to the examinations and reports: Diane Audino, Michael Bloise, David Bobillot, Sondra Boddie, Rita Bolger, Patrick Boyle, Aaron Byrd, Roseann Catania, Matthew Chan, Leah Clague, Kristin Costello, Doreen Crawford, Scott Davey, Franco Destro, Jill Flory, Ilya Fradkin, William Garnett, Kenneth Godwin, Michael Gonzalez, Karen Healer, Barry Huang, Natalia Kaden, Julia Kiel, Russell Long, David Nicolardi, Sam Nikoomanesh, Kevin O’Neill, Harriet Orol, Abraham Putney, Smeeta Ramarathnam, Jeremiah Roberts, Mary Ryan, Charles Schiller, Andrew Smith, Alexa Strear, Warren Tong, Evelyn Tuntono, Chris Valtin, Kevin Vasel, Andrew Vita, and Michele Wilham.
The Securities and Exchange Commission today issued two annual staff reports that demonstrate compliance and competition continue to increase among the credit rating agencies under SEC oversight as nationally recognized statistical rating organizations (NRSROs). “Dedicated oversight of credit rating agencies is a critical part of the SEC’s mission,” said SEC Chair Mary Jo White. “I am pleased that the firms are advancing initiatives to address the staff’s recommendations, including responses to the comprehensive credit rating reforms adopted by the Commission in August 2014.” The annual examination report, required by the 2010 Dodd-Frank Act, summarizes the staff’s findings from the most recently completed examinations of each NRSRO, including: Policies and procedures for determining, surveilling, or withdrawing ratings. Separation of analytical activities from sales and marketing. Development, documentation, or application of methodologies, criteria, or models. The report notes that all of the staff’s findings from prior examinations have been appropriately addressed and their recommendations based on exam findings have identified areas for NRSRO improvement. The staff found that NRSROs continue to integrate and enhance internal systems and processes to comply with their obligations as regulated entities, such as: Implementing IT systems to increase the efficiency, capacity, and accuracy of compliance tasks. Adding personnel and resources to anticipate and address risk management issues. Increasing the number and frequency of audits and other internal testing. “As a result of our efforts, NRSROs are redoubling their focus on policy and procedure adherence to achieve enhanced transparency, quality, and integrity,” said Thomas J. Butler, Director of the SEC’s Office of Credit Ratings. “The firms’ additional investments in information technology and personnel serve to bolster governance, risk, and compliance functions.” The annual report, mandated by the 2006 Credit Rating Agency Reform Act, discusses the state of competition, transparency, and conflicts of interest at NRSROs. The report notes that two NRSROs recently became registered in additional ratings categories and that smaller NRSROs continue to actively compete with more established rating agencies, particularly in the asset-backed securities rating category, and also are rating new types of issuances referred to as “esoteric” asset-backed securities. The following SEC staff contributed to the examinations and reports: Diane Audino, Michael Bloise, David Bobillot, Sondra Boddie, Rita Bolger, Patrick Boyle, Aaron Byrd, Roseann Catania, Matthew Chan, Leah Clague, Kristin Costello, Doreen Crawford, Scott Davey, Franco Destro, Jill Flory, Ilya Fradkin, William Garnett, Kenneth Godwin, Michael Gonzalez, Karen Healer, Barry Huang, Natalia Kaden, Julia Kiel, Russell Long, David Nicolardi, Sam Nikoomanesh, Kevin O’Neill, Harriet Orol, Abraham Putney, Smeeta Ramarathnam, Jeremiah Roberts, Mary Ryan, Charles Schiller, Andrew Smith, Alexa Strear, Warren Tong, Evelyn Tuntono, Chris Valtin, Kevin Vasel, Andrew Vita, and Michele Wilham.