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, 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
Regulators should allow other rating firms the opportunity to earn NRSRO
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.
We have exempted the filings of many securities that are already rated by the NRSROs
The SEC also immediately "grandfathered" the three incumbents (Moody's, S&P, and Fitch) into the NRSRO
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.