Nationally Recognized Statistical Ratings Organization

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Nationally Recognized Statistical Ratings Organization

A credit rating agency that the Securities and Exchange Commission in the United States uses for regulatory purposes. Credit rating agencies provide assessments of an investment's risk. The issuers of investments, especially debt securities, pay credit rating agencies to provide them with ratings. Investments must receive a high rating from two or more nationally recognized statistical ratings organizations before banks in the United States may purchase them. There are 10 nationally recognized statistical ratings organization; Fitch, S&P, and Moody's are the three most prominent.
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which made its name in mutual fund ratings, acquired credit ratings firm Real-point LLC, an NRSRO, in early 2010.
This opacity began clearing in 2006 when the Credit Rating Agency Reform Act required the SEC to lower NRSRO licensing entry barriers, make the process more transparent and allow all qualified applicants to obtain the NRSRO designation.
The NRSRO designation, however, had become a significant regulatory barrier to entry into the bond rating business and a significant regulatory protection for the incumbents.
The system afforded substantial advantages to the handful of credit rating agencies that received the NRSRO designation.
Regulators should allow other rating firms the opportunity to earn NRSRO designation.
The report cautions NRSROs that, when appropriate, the Commission will pursue antifraud enforcement actions against deceptive ratings conduct, including actions pursuant to the Dodd-Frank Act provisions regarding conduct that physically occurs outside the US but involves significant steps or foreseeable effects within the US.
To qualify for NRSRO registration, a CRA must have been issuing ratings on bonds issued by the financial services industry, broker-dealers, corporate issuers, slate and local governments, and issuers of asset-backed securities (ABS) for at least three years.
The SEC also immediately "grandfathered" the three incumbents (Moody's, S&P, and Fitch) into the NRSRO category.
In the rare case where a security included in the fund is not rated by an NRSRO the rating is determined by Citigroup Alternative Investments, LLC ("CAI"), the fund's investment manager (and not an NRSRO).
It also adopted amendments to the Commission's rules and forms to remove certain references to credit ratings by nationally recognised statistical rating organisations and at the same time reopened the public comment period to allow further comment on Commission proposals to eliminate references to NRSRO credit ratings from certain other rules and forms.
Under the exception, an NRSRO may refuse to issue a credit rating to, or withdraw a credit rating of, a structured product if the NRSRO has rated less than 85% of the market value of the assets underlying the structured product.