Credit rating agencies, also called nationally recognized statistical rating organizations (NRSROs), have shown improved compliance, according to a new report from the Securities and Exchange Commission.
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The report found that increased oversight by the SEC has resulted in improved compliance, increased information technology resources, and continued competition.
“NRSROs are continuing to display a greater awareness of their obligations as regulated entities,” Jessica Kane, acting director of the SEC’s Office of Credit Ratings, said. “The staff will continue to engage with the firms and monitor potential risks to promote compliance, strengthen governance, and ensure that NRSROs provide robust disclosure for the benefit of investors.”
The annual report, required by the Dodd-Frank Act, is a summary of staff examinations of each NRSRO, or credit rating agency.
Improvements in the firms’ compliance monitoring and internal audit functions were observed by staff. Also, staff observed that NRSROs have refined their policies, procedures, and controls related to securities laws and rules.
A separate SEC report, mandated by the 2006 Credit Rating Agency Reform Act, looks at the state of competition, transparency, and conflicts of interest among NRSROs and identifies applicants for NRSRO registration. It concluded that smaller NRSROs are competing with more established rating agencies. Some of these small rating agencies are specializing in particular rating categories and classes.