SEC Issues Staff Summary Report of Examinations of Nationally Recognized Statistical Rating Organizations

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The SEC has issued its second annual staff report on the findings of examinations of credit rating agencies registered with the SEC as Nationally Recognized Statistical Rating Organizations, or NRSROs.

The 2012 report discusses the staff’s findings and recommendations in eight areas, including whether the NRSRO conducts business in accordance with its policies, procedures, and methodologies, how it manages conflicts of interest, and whether it maintains effective internal controls.  The staff identified findings and made recommendations to all NRSROs.  Findings identified at one or more NRSROs include the following:

  • The methodology applied to rating certain securities appears to have been changed, but the change was not publicly disclosed for several months;
  • Certain securities were not timely downgraded in accordance with policies and procedures related to rating watch status;
  • Methodologies were published and disclosed inconsistently and in a less-than-transparent manner; and
  • Directors were not actively exercising their required oversight duties.

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Published In: Administrative Agency Updates, Finance & Banking Updates, Securities Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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