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“Dedicated oversight of credit rating agencies is a critical part of the SEC’s mission,” said SEC Chair Mary Jo White. “I am pleased that the firms are advancing initiatives to address the staff’s recommendations, including responses to the comprehensive credit rating reforms adopted by the Commission in August 2014.”
The annual examination report, required by the 2010 Dodd-Frank Act, summarizes the staff’s findings from the most recently completed examinations of each NRSRO, including:
The report notes that all of the staff’s findings from prior examinations have been appropriately addressed and their recommendations based on exam findings have identified areas for NRSRO improvement. The staff found that NRSROs continue to integrate and enhance internal systems and processes to comply with their obligations as regulated entities, such as:
“As a result of our efforts, NRSROs are redoubling their focus on policy and procedure adherence to achieve enhanced transparency, quality, and integrity,” said Thomas J. Butler, Director of the SEC’s Office of Credit Ratings. “The firms’ additional investments in information technology and personnel serve to bolster governance, risk, and compliance functions.”
The annual report, mandated by the 2006 Credit Rating Agency Reform Act, discusses the state of competition, transparency, and conflicts of interest at NRSROs. The report notes that two NRSROs recently became registered in additional ratings categories and that smaller NRSROs continue to actively compete with more established rating agencies, particularly in the asset-backed securities rating category, and also are rating new types of issuances referred to as “esoteric” asset-backed securities.