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SEC Proposes New Rules Governing Credit Rating Agencies

At its open meeting last week, the SEC proposed new rules implementing certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act and intended to enhance the SEC's existing rules governing credit ratings and Nationally Recognized Statistical Rating Organizations (NRSROs).  

Under the SEC's proposal, NRSROs would be required to:

  • Report on internal controls;
  • Protect against conflicts of interest;
  • Establish professional standards for credit analysts;
  • Publicly provide - along with the publication of the credit rating - disclosure about the credit rating and the methodology used to determine it; and
  • Enhance their public disclosures about the performance of their credit ratings.

The SEC's proposal also requires disclosure concerning third-party due diligence reports for asset-backed securities.

Public comments on the SEC's proposal should be received within 60 days after it is published in the Federal Register.  The full text of the rule proposal is available at:  http://www.sec.gov/rules/proposed/2011/34-64514.pdf