Alert September 02, 2014

SEC Adopts Final Credit Rating Agency Rules

The SEC adopted new rules and rule amendments (collectively, the “Final Rules”) that impose a range of additional requirements on credit rating agencies registered as nationally recognized statistical rating organizations (“NRSROs”) and create new obligations for issuers, underwriters, and third-party due diligence services with respect to third-party due diligence regarding asset-backed securities.  The Final Rules respond to a number of rulemaking mandates under the Dodd‑Frank Act.

The new requirements for NRSROs address (a) considerations and reporting related to internal controls, (b) conflicts of interest relating to sales and marketing activities, (c) disclosure of credit rating performance statistics, (d) procedures relating to the approval, implementation and transparency of rating methodologies, (e) quantitative and qualitative disclosures to accompany credit ratings, (f) standards for training, experience, and competence of credit analysts and (g) annual certifications by NRSRO CEOs as to the effectiveness of internal controls and certifications to accompany credit ratings attesting that the rating was not influenced by other business activities.

The Final Rules have multiple effective dates with the earliest being 60 days after publication of the adopting release in the Federal Register.