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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A few years later, the Credit Rating Agency Reform Act of 2006 provided the SEC with statutory authority to regulate credit ratings firms and required the SEC to clarify the guidelines for obtaining the NRSRO designation.
which made its name in mutual fund ratings, acquired credit ratings firm Real-point LLC, an NRSRO, in early 2010.
Until that time, only five agencies were granted NRSRO status, two of which were later acquired by one of the "big three," again leaving only Moody's, S&P and Fitch to rate the nation's public sector debt.
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.
District Court for the Southern District of New York recognized typical First Amendment protections for NRSRO credit ratings because they are matters of public concern.
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.
Regulators should allow other rating firms the opportunity to earn NRSRO designation.
The SEC issued its annual staff report on the findings of examinations of credit rating agencies registered as nationally recognized statistical rating organizations (NRSROs) and submitted a separate report on NRSROs to Congress.
SEC's proposed rules would require that the NRSRO include a description of how the representations, warranties and enforcement mechanisms differ from those in issuances of similar securities.
Investors rely upon statements that NRSROs make in their applications and reports submitted to the Commission, particularly those that describe how the NRSRO determines credit ratings," said Robert Khuzami, Director of the SEC's Division of Enforcement.
NRSRO status was obtained by requesting a staff no-action letter from the SEC.