SEC issues report praising credit rating agencies

The SEC has praised credit agencies for having made “operational improvements.'”

The U.S. Securities and Exchange Commission (SEC) has issued its two annual staff reports on credit rating agencies registered as nationally recognized statistical rating organizations (NRSROs). In the reports, the SEC praises the agencies for having made “operational improvements and have enhanced process accountability, controls and governance.”

“The SEC has praised credit agencies for having made “operational improvements.'”

Following the failure of several of the largest credit rating agencies to adequately anticipate the poor health of mortgage-backed bonds, leading to the economic crisis of years prior, the SEC had been putting the agencies under increased scrutiny. In 2010, NRSROs were made subject to SEC examinations by the Dodd-Frank Act, leading to stricter compliance standards.

“Regular examinations of each NRSRO are an important component of the SEC’s oversight regime” commented Thomas J. Butler, director of the SEC’s Office of Credit Ratings. “The staff is in contact with the firms throughout the year at all levels of the organization to maintain lines of communication, assess potential risks, and promote transparency and compliance.”

“These reports demonstrate the SEC’s vigilant oversight of the credit rating industry,” added Mary Jo White, SEC chair. “The staff’s continued efforts are yielding valuable results as we are seeing improvements in the overall compliance cultures at many of the credit rating agencies.”

The report showed that NRSROs across the board have “enhanced their understanding of their obligations as regulated entities” making significant operational improvements and implementing and enhancing compliance strategies previously suggested. The reports also offered recommendations relating to procedures designed to protect and reinforce the consistency, transparency and integrity of the ratings.

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