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SEC Issues Annual Staff Reports on Credit Rating Agencies


Washington D.C., Dec. 21, 2016 —

The Securities and Exchange Commission today issued two annual staff reports that demonstrate compliance and competition continue to increase among the credit rating agencies under SEC oversight as nationally recognized statistical rating organizations (NRSROs). 

“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:

  • Policies and procedures for determining, surveilling, or withdrawing ratings.
  • Separation of analytical activities from sales and marketing.
  • Development, documentation, or application of methodologies, criteria, or models.

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:

  • Implementing IT systems to increase the efficiency, capacity, and accuracy of compliance tasks.
  • Adding personnel and resources to anticipate and address risk management issues.
  • Increasing the number and frequency of audits and other internal testing.

“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. 

The following SEC staff contributed to the examinations and reports: Diane Audino, Michael Bloise, David Bobillot, Sondra Boddie, Rita Bolger, Patrick Boyle, Aaron Byrd, Roseann Catania, Matthew Chan, Leah Clague, Kristin Costello, Doreen Crawford, Scott Davey, Franco Destro, Jill Flory, Ilya Fradkin, William Garnett, Kenneth Godwin, Michael Gonzalez, Karen Healer, Barry Huang, Natalia Kaden, Julia Kiel, Russell Long, David Nicolardi, Sam Nikoomanesh, Kevin O’Neill, Harriet Orol, Abraham Putney, Smeeta Ramarathnam, Jeremiah Roberts, Mary Ryan, Charles Schiller, Andrew Smith, Alexa Strear, Warren Tong, Evelyn Tuntono, Chris Valtin, Kevin Vasel, Andrew Vita, and Michele Wilham.


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