On December 18, 2020, the SEC published the Annual Report on Nationally Recognized Statistical Rating Organizations (NRSROs) and the 2020 Summary Report of SEC Staff’s Examinations of Each Nationally Recognized Statistical Rating Organization. The report, which generally concentrates on the period from June 26, 2019 to June 25, 2020, features a thorough summary of the Office of Credit Rating’s (OCR) assessments of the NRSROs, including the staff’s key findings and suggestions.
The Dodd-Frank Act ordered the formation of OCR, which, under the Section 15E of the Exchange Act (“Section 15E”) and Exchange Act Rules 17g-1 through 17g-10, is responsible for overseeing credit rating agencies registered with the SEC as NRSROs. Under the SEC’s rules for NRSROs, an NRSRO must, among other things, file certifications of its Form NRSRO registrations annually with the SEC and make its current Form NRSRO filing and the majority of its current Form NRSRO Exhibits available to the public on its website. The NRSRO is also required to make public certain information, including information pertaining to the NRSRO’s performance measurement statistics and its processes and methodologies to determine ratings.
The OCR’s efforts to promote accuracy in credit ratings, safeguard users of credit ratings, and guarantee that credit ratings are not excessively influenced by conflicts of interest and its oversight of the NRSROs are important aspects of the SEC’s overall focus on the following matters:
maintaining fair, efficient, and orderly markets
facilitating capital formation
the state of competition
The exam report places special emphasis on the SEC staff’s oversight of the NRSROs and on the risk-based nature of OCR’s exam program. According to the report, OCR staff also studied the NRSROs’:
consideration of environmental, social, and governance factors and products in credit analysis
responses to the COVID-19 pandemic
activities associated with Collateralized Loan Obligations
conflicts with respect to investor-paid ratings
responses to the LIBOR phase-out
adherence to policies, procedures, and methodologies connected to low-investment grade corporate securities
potential marketing conflicts
The OCR staff prepares the annual report and the exam report annually. Previous years’ reports are available on OCR’s Reports and Studies webpage. The staff will continue to oversee NRSROs by conducting examinations and taking part in other activities that promote OCR’s regulatory mission.