The staff of the SEC has issued a report summarizing the staff’s observations and concerns arising from the examinations of ten credit rating agencies registered with the SEC as Nationally Recognized Statistical Rating Organizations, or NRSROs, and subject to SEC oversight.
The SEC staff conducted the examinations as required by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, which imposed new reporting, disclosure and examination requirements to enhance the regulation and oversight of NRSROs. Among other things, the Dodd-Frank Act requires the SEC staff to examine each NRSRO at least annually and issue an annual report summarizing the essential findings of the examinations.
The report notes that, despite changes by some of the examined credit rating agencies to improve their operations, SEC staff identified concerns at each of the NRSROs. These concerns included apparent failures in some instances to follow ratings methodologies and procedures, to make timely and accurate disclosures, to establish effective internal control structures for the rating process and to adequately manage conflicts of interest. The report notes that the staff made various recommendations to the NRSROs to address the staff’s concerns and that in some cases the NRSROs have already taken steps to address such concerns.
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