SEC Releases 2020 Office of Credit Rating Reports

The Securities and Exchange Commission today issued the Annual Report on Nationally Recognized Statistical Rating Organizations (NRSROs) and the 2020 Summary Report of Commission Staff’s Examinations of Each Nationally Recognized Statistical Rating Organization. The annual report discusses, among other topics, the state of competition, transparency, and conflicts of interest among the firms. The exam report provides a comprehensive overview of the Office of Credit Rating (OCR)’s examinations of the NRSROs, including, among other things, the staff’s essential findings and recommendations.

“The Office of Credit Ratings and its oversight of the NRSROs is an important aspect of the Commission’s overall focus on investor protection; maintaining fair, efficient, and orderly markets; and facilitating capital formation,” said Chairman Jay Clayton. “I am grateful for Acting Director Ahmed Abonamah’s capable leadership and the work of the dedicated OCR staff at this critical time for our markets.”

“2020 has been a year of extraordinary and unforeseen challenges, but the work of the Office of Credit Ratings has continued in full force,” said Mr. Abonamah. “This year’s reports continue to demonstrate the exceptional work of my colleagues in their efforts to protect users of credit ratings, promote accuracy in credit ratings, and ensure that credit ratings are not unduly influenced by conflicts of interest.”

The exam report highlights the staff’s oversight of the NRSROs, and highlights the risk-based nature of OCR’s exam program. OCR’s risk-based approach to its NRSRO examinations complements its efforts with respect to the eight statutorily mandated review areas and results in an examination program able to adapt to prevailing market conditions. As described in the report, OCR staff also examined the NRSROs’

• responses to the COVID-19 pandemic
• consideration of ESG factors and products
• activities with respect to Collateralized Loan Obligations
• conflicts with respect to investor-paid ratings
• responses to the LIBOR phase-out
• adherence to policies, procedures, and methodologies with respect to low-investment grade corporate securities; and
• potential marketing conflicts

The Office of Credit Ratings prepares the annual report and the exam report annually. Prior years’ reports are available here.