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U.S. Securities and Exchange Commission

Speech by SEC Chairman:
Opening Statement at SEC Open Meeting: Item 2 — Security Ratings


Chairman Mary Schapiro

U.S. Securities and Exchange Commission

Washington, D.C.
July 26, 2011

Next, we will consider adopting rules that would replace credit ratings as a condition for companies seeking short-form registration when registering certain securities for public sale. If a company qualifies for short-form registration, it can offer its securities “off the shelf” — which is an expedited process for offering securities.

These rules, which were proposed in February, are being considered in light of the requirements of Section 939A of the Dodd-Frank Act — a provision that requires regulators to reduce reliance on credit ratings. Today’s action is part of the Commission’s effort to do just that.

In the securities arena, Forms S-3 and F-3 are the “short forms” used by eligible issuers to register securities offerings under the Securities Act. By using these forms, these issuers can rely on other reports they file to satisfy many of the disclosure requirements under the Securities Act.

Currently, one of the ways that a company can qualify to use these forms is if they are registering an offering of non-convertible securities that have received an investment grade rating by at least one nationally recognized statistical rating organization (NRSRO).

The rules being considered today would eliminate this eligibility test and replace it with four new tests, which the staff will describe shortly. In order to ease transition to the new rules, the rules also would include a temporary, three-year grandfather provision.

We received valuable input from commentators on the proposing release, and I believe the amendments we are considering are better as a result. I believe the rules will provide an appropriate and workable alternative to credit ratings for determining whether an issuer should be able to use short form registration and have access to the shelf offering process.

With the changes that we are making from the proposal, we expect just about all issuers that currently could rely on the existing test would be able to qualify for the revised forms.

In addition, we also are considering rescinding Form F-9 under the Securities Act because we believe that regulatory developments in Canada have rendered that form unnecessary. And we are contemplating changes to several other rules that would be needed in light of the new eligibility criteria.

I would like to thank the staff of the Division of Corporation Finance, specifically, Meredith Cross, Paula Dubberly, Felicia Kung, Blair Petrillo, Paul Dudek, Mike McTiernan and Justin Kisner. From the Division of Investment Management, I would like to thank Susan Nash, Bill Kotapish, Keith Carpenter and Michael Kosoff. From the Office of General Counsel, I would like to thank David Fredrickson, Rich Levine and Bryant Morris. And from the Division of Risk, Strategy and Financial Innovation, I would like to thank Craig Lewis, Scott Bauguess, and Ayla Kayhan.

Finally, I would like to thank the other Commissioners and all of our counsels for their collaborative work and comments. Now I’ll turn the meeting over to Meredith Cross, Director of the Division of Corporation Finance.



Modified: 07/26/2011