On January 31th, the SEC issued its annual Staff Report on Nationally Recognized Statistical Rating Organizations (NRSROs), as required by Section 6 of the Credit Rating Agency Reform Act of 2006 and Section 15E(p)(3)(C) of the Securities Exchange Act of 1934.
The SEC’s Office of Credit Ratings (OCR) provides oversight of NRSROs, which is critical to the SEC’s ongoing endeavor to protect investors by promoting both accuracy in credit ratings and NRSRO compliance with applicable laws and rules and identifying instances of non-compliance. The report is comprised of a variety of substantive and organizational updates to offer enhanced disclosure requirements for NRSROs, their credit ratings businesses, and the market.
The publication provides an overview of the following matters concerning NRSROs:
- SEC staff’s evaluation of NRSROs
- examinations and monitoring, including risk management
- the state of competition, transparency, and conflicts of interest among NRSROs
- comprehensive summary of activities of NRSROs, including SEC orders and releases and staff publications
The report details eight legally required review areas and places emphasis on the risk-based method of OCR's evaluation program. Additionally, OCR staff evaluated the NRSROs’:
- controls, policies, and procedures for ratings of municipal securities
- adherence to policies, procedures, and methodologies with respect to rating low-investment grade corporate securities
- COVID-19 related risk areas
- activities related to collateralized loan obligations, commercial real estate, and consumer asset-backed securities
- consideration of ESG factors and products
Annual reports for previous years are accessible on the Reports and Studies webpage on sec.gov.
Sources:
SEC Publishes Annual Staff Report on Nationally Recognized Statistical Rating Organizations (sec.gov)
