The U.S. Securities and Exchange Commission (SEC) issued its annual Staff Report on Nationally Recognized Statistical Rating Organizations (NRSROs) this week.
The report provides a summary of the SEC staff’s examinations of NRSROs and examines the state of competition, transparency, and conflicts of interest among NRSROs.
“The oversight of Nationally Recognized Statistical Rating Organizations is critical to the Commission’s focus on investor protection,” SEC Chair Gary Gensler said. “The Office of Credit Ratings’ work contributes to our efforts to promote accuracy in credit ratings and help ensure that credit ratings are not unduly influenced by conflicts of interest.”
In past reports, the SEC’s Office of Credit Ratings (OCR) covered these subject areas in two separate annual reports. This new combined report includes a variety of organizational changes to provide greater transparency about NRSROs and their credit ratings businesses.
“OCR’s examinations protect investors by scrutinizing NRSRO compliance with applicable laws and rules and identifying instances of non-compliance,” OCR Director Ahmed Abonamah said. “The report provides a comprehensive and integrated overview of OCR’s activities, demonstrating the exceptional work of my colleagues in their efforts to protect investors.”
In addition to the eight statutorily mandated review areas, OCR staff examined the NRSROs’ consideration of ESG factors and products; COVID-19 related risk areas; activities related to collateralized loan obligations, commercial real estate, and consumer asset-backed securities; adherence to policies, procedures, and methodologies with respect to rating low-investment grade corporate securities; and controls, policies, and procedures for ratings of municipal securities.