On May 19, 2011,
The Proposed Rules
The SEC proposed rules related to NRSROs and third-party due diligence providers as well as issuers and underwriters, of asset-backed securities, including:
1. Reporting on Internal Controls:
Under the proposed rule amendment, the NRSRO would be required to file a report with the SEC containing a description of management’s responsibility in establishing the internal control structure and an assessment of the effectiveness of those internal controls.
2. Preventing Conflicts of Interest Relating to Sales and Marketing:
Under the proposed rule amendments, an NRSRO would be prohibited from issuing or maintaining a credit rating where an employee of the NRSRO – who participates in the sales or marketing of a product or service of the NRSRO or of a person associated with the NRSRO – also participates in determining or monitoring a credit rating or developing or approving procedures used for determining a credit rating.
Additionally, the proposal would establish a mechanism:
3. Enhancing the “Look-Back” Review:
Section 932 of the Dodd-Frank Act requires NRSROs to establish policies regarding former employees:
such cases, the NRSRO must conduct a “look-back” review to:
the proposed rule, if the NRSRO “look-back” review determined that a conflict influenced
a rating, the NRSRO would be required to, at a minimum:
4. Standardizing Disclosure of Information About the Performance of Credit Ratings:
The SEC proposals would, among other things:
5. Strengthening Credit Rating Methodologies:
Under the proposed rule, policies and procedures governing the way the NRSRO determined credit rating would have to be reasonably designed to ensure, among other things, that:
6. Leveraging Third-Party Due Diligence for Asset-Backed Securities:
SEC’s proposed rules would require that due diligence providers for asset-backed securities must provide a written certification to any NRSRO that rates the securities (Form ABS due Diligience-15E).
7. Enhancing the Disclosure of Information About Credit Ratings:
Under the proposed rule, the NRSRO would be required to publish a form with each credit rating:
form and certifications would have to be published in the same medium and made
available to the same persons who can receive or access the credit rating.
The NRSRO would need to disclose in the form substantial qualitative and
quantitative information about the credit rating and methodologies used to
determine the credit rating.
8. Upgrading Standards of Training, Experience, and Competence:
The proposed rule would require NRSROs to establish standards of training, experience and competence for credit analysts and to:
9. Addressing Rating Symbols:
The rule proposal would require an NRSRO to have policies and procedures that are reasonably designed to:
10. Mandating Electronic Filings of Form NRSRO and the Annual Reports:
Under the proposed rule amendments, an NRSRO would be required to use the SEC’s EDGAR system to electronically submit Form NRSR:
proposal also would require NRSROs to use EDGAR to file their annual reports.
11. Filing NRSRO Compliance Officer Reports:
Section 932 of the Dodd-Frank Act requires the designated compliance officer of an NRSRO to submit to the NRSRO an annual report on the rating agency’s compliance with the securities laws and its policies and procedures that must be filed together with the report that NRSROs must submit to the SEC annually.
Read the complete proposed rules>>