SEC Report to Congress on Credit Rating Standardization

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The SEC staff has issued a report to Congress on credit rating standardization required by Section 939(h)(1) of the Dodd-Frank Act. The SEC staff recommended that the SEC not take any further action at this time with respect to:

  • standardizing credit rating terminology, so that all credit rating agencies issue credit ratings using identical terms;
  • standardizing the market stress conditions under which ratings are evaluated;
  • requiring a quantitative correspondence between credit ratings and a range of default probabilities and loss expectations under standardized conditions of economic stress; and
  • standardizing credit rating terminology across asset classes, so that named ratings correspond to a standard range of default probabilities and expected losses independent of asset class and issuing entity.

Check dodd-frank.com frequently for updated information on the JOBS Act, the Dodd-Frank Act and other important securities law matters.

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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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