OFFICE OF CREDIT RATINGS

Staff

Report

ON 

NATIONALLY RECOGNIZED 

STATISTICAL RATING 

ORGANIZATIONS

As Required by Section 6 

of the Credit Rating Agency 

Reform Act of 2006 and 

Section 15E(p)(3)(C) of 

the Securities Exchange 

Act of 1934

January 2022

U.S. SECURITIES AND EXCHANGE COMMISSION
ii | OFFICE OF CREDIT RATINGS

This is a report of the Staff of the U.S. Securities and Exchange Commission. Staff reports, Investor Bulletins, 

and other staff documents represent the views of Commission staff and are not a rule, regulation, or 

statement of the Commission. The Commission has neither approved nor disapproved the content of these 

documents and, like all staff statements, they have no legal force or effect, do not alter or amend applicable 

law, and create no new or additional obligations for any person. The Commission has expressed no view 

regarding the analysis, findings, or conclusions contained herein.
STAFF REPORT | i

Contents

CHARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .ii

I. MESSAGE FROM THE DIRECTOR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

II. INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

A. Status of Registrants and Applicants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

III. EXAMINATIONS AND MONITORING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

A. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

B. Risk Assessment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

C. Monitoring. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

D. 2021 Section 15E(p)(3) Examinations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

1. 2021 Section 15E Examinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

2. Terms Used in This Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

3. Summary of Essential Findings and Responses to Material Regulatory Deficiencies. . 12

4. Responses to Recommendations from the 2020 Section 15E Examinations . . . . . 18

5. Essential Findings Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

IV. STATE OF COMPETITION, TRANSPARENCY, AND CONFLICTS OF INTEREST . . . . . . . . 21

A. Competition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

1. Select NRSRO Statistics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

2. Developments in the State of Competition Among NRSROs . . . . . . . . . . . . . . 32

3. Barriers to Entry. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

B. Transparency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43

C. Conflicts of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

V. ACTIVITIES RELATING TO NRSROS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49

A. Commission Orders and Releases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49

B. Staff Publications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50

C. Advisory Committees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50

VI. APPENDIX: SUMMARY OF STATUTORY FRAMEWORK AND RULES. . . . . . . . . . . . . . . 51
ii | OFFICE OF CREDIT RATINGS

Charts

Chart 1. Table of NRSROs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Chart 2. Essential Findings by Section 15E Review Area: 2016 to 2021. . . . . . . . . . . . . 19

Chart 3. Number of Essential Findings by Section 15E Review Area: 2016 to 2021. . . . . 20

Chart 4. Average Number of Essential Findings by Large, Medium, and 

Small NRSROs: 2016 to 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Chart 5. Number of Outstanding Credit Ratings as of December 31, 2020 

by Rating Category. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23

Chart 6. Year-Over-Year Changes in Percentage Share of Total Number of 

Ratings Outstanding from 2019 – 2020. . . . . . . . . . . . . . . . . . . . . . . . . .23

Chart 7. Percentage by Rating Category of Each NRSRO’s Outstanding 

Credit Ratings of the Total Outstanding Credit Ratings of all NRSROs 

as of December 31, 2020. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24

Chart 8. Percentage Change of Total Ratings Outstanding Per Asset Class 

2019 to 2020 – Large NRSROs Compared to Small/Medium NRSROs. . . . . . . .25

Chart 9. Breakdown of Ratings Reported Outstanding by Rating Category 

as of December 31, 2020. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26

Chart 10. Breakdown of Ratings Reported Outstanding by NRSRO as of 

December 31, 2020. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26

Chart 11. Breakdown of Non-Government Securities Ratings Reported Outstanding 

by NRSRO as of December 31, 2020. . . . . . . . . . . . . . . . . . . . . . . . . . . .27

Chart 12. Breakdown of Government Securities Ratings Reported Outstanding 

on December 31, 2020. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27

Chart 13. NRSRO Credit Analysts and Credit Analyst Supervisors. . . . . . . . . . . . . . . .28

Chart 14. NRSRO Fiscal Year Revenue as a Percentage of Aggregate 

Reported Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Chart 15. Rating Agency Market Share for Total Non-Agency U.S. CMBS Issued in 

2019, 2020, and First Half of 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Chart 16. Rating Agency Market Share for U.S. Conduit CMBS Issued in 2019, 2020, 

and First Half of 2021. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Chart 17. Rating Agency Market Share for U.S. Single-Borrower CMBS Issued in 

2019, 2020, and First Half of 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Chart 18. Rating Agency Market Share for Agency CMBS Issued in 2019, 2020, 

and First Half of 2021. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35

Chart 19. Rating Agency Market Shares for U.S. ABS Issued in 2019, 2020, 

and First Half of 2021. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37

Chart 20. Rating Agency Market Shares for U.S. MBS Issued in 2019, 2020, 

and First Half of 2021. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38

Chart 21. Rating Agency Market Shares for U.S. CLO Issued in First Half of 

2019, 2020, and First Half of 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
S TAFF REPORT | 1

I. MESSAGE FROM

THE DIRECTOR

I

am pleased to share the Office of Credit Ratings’ 

(OCR) Staff Report (Report) on nationally recognized statistical rating organizations (NRSROs) 

for calendar year 2021. During 2021, OCR, the 

U.S. Securities and Exchange Commission (the 

Commission or SEC), and the market continued to 

navigate the extraordinary circumstances caused

by COVID-19. Through it all, OCR continued,

without interruption, to excel at its mission of

assisting the Commission in protecting investors,

promoting capital formation, and maintaining fair,

orderly, and efficient markets through the oversight

of NRSROs.

In past years, OCR published two separate annual

reports: The Annual Report to Congress and the

Summary Examination Report. For the first time,

OCR has prepared one report that combines

the information from the two reports to present

OCR’s annual activity in a more integrated way.

In addition to combining the reports, we have

also made a variety of substantive and organizational changes to the Report to provide greater

transparency about the NRSROs and their credit

ratings businesses, and the market more broadly.

For example, to increase transparency about

OCR’s exam findings, the Report organizes the

NRSROs into three groups—“large,” “medium,” 

and “small”—instead of two groups (“larger” and 

“smaller”) as in past years.

The Report includes a summary of the Commission 

staff’s (the Staff) essential findings from the most 

recently completed examination of each NRSRO. 

These examinations covered the eight statutorily 

mandated review areas and focused on certain 

subjects and activities that the Staff, through its 

risk assessment process, identified as relevant to 

certain NRSROs, including Environmental, Social, 

and Governance (ESG) issues, COVID-19, and 

collateralized loan obligations (CLOs). In addition, 

the Report also includes, for the first time, the 

Staff’s definitions of the terms “essential finding” 

and “material regulatory deficiencies” to provide 

greater transparency regarding OCR’s work.

OCR’s examinations have been successful in 

promoting greater compliance by NRSROs with 

applicable laws and rules as the NRSROs advance 

initiatives to address the Staff’s recommendations. 

The Report includes a new section on essential 

findings trends from examinations conducted 

between 2016 and 2021.
2 | OFFICE OF CREDIT RATINGS

The Report also discusses the state of competition, 

transparency, and conflicts of interest at NRSROs. 

Importantly, the Report illustrates that the small 

and medium NRSROs (as defined below) continue 

to compete with the largest three NRSROs, with 

each of the small and medium firms increasing its 

total number of ratings outstanding as compared 

to declines among two of the largest three firms. 

The data show these increases occurring across 

all rating categories and, though modest in total 

number, illustrate, in some cases, significant yearover-year increases in rating activity for some firms. 

To help inform its risk assessment process, exam 

program, and policy initiatives, OCR monitors 

credit rating activity and industry developments, 

especially in connection with capital market and 

economic events and trends, such as ESG and 

COVID-19. Staff communicates with NRSROs 

and a variety of market participants, and reviews

NRSRO publications, news reports, trade publications, academic papers, and government reports, 

among other information sources.

The year continued to see OCR leadership and 

Staff engaged in discussions about the issues and 

challenges of diversity, equity, and inclusion. Along 

with our partners in the Office of Minority and 

Women Inclusion, the Office of Equal Employment 

Opportunity, and the Office of the Chair we will 

continue to embrace these topics as we continuously work to fulfill our mission.

As proud as I am of everything OCR accomplished 

throughout 2021, I truly believe that the best is 

yet to come as OCR advances the SEC’s mission 

through the dedicated oversight of NRSROs in the 

coming years. I hope you find the Report interesting and informative.

Ahmed Abonamah
S TAFF REPORT | 3

II. INTRODUCTION

The Staff of the Commission provides this 

Report regarding NRSROs pursuant to 

Section 6 of the Credit Rating Agency 

Reform Act of 2006 (Rating Agency Act)1

and Section 15E(p)(3)(C) of the Securities Exchange 

Act of 1934 (Exchange Act).2 This Report generally 

focuses on the period from January 1, 2021 to 

December 31, 2021 (the Report Period).3

Section 6 of the Rating Agency Act requires the 

Commission to submit an annual report to the 

Committee on Banking, Housing, and Urban 

Affairs of the U.S. Senate and the Committee on 

Financial Services of the U.S. House of Representatives that, with respect to the year to which the 

report relates:

■ Identifies applicants for registration as NRSROs 

under Section 15E;

■ Specifies the number of, and actions taken on, 

such applications; and

■ Specifies the views of the Commission on the 

state of competition, transparency, and conflicts 

of interest among NRSROs. 

Section 15E(p)(3)(C) requires the Commission 

to make available to the public an annual report 

summarizing: 

■ Essential findings of all Section 15E 

examinations, as deemed appropriate by the 

Commission; 

■ NRSROs’ responses to any material regulatory 

deficiencies identified by the Commission; and

■ Whether the NRSROs have appropriately 

addressed the recommendations of the 

Commission contained in previous annual 

reports on examinations.

This Report addresses the items specified in Section 

6 of the Rating Agency Act and Section 15E(p)(3). 

This is a report of the Staff and, as such, reflects 

solely the Staff’s views.

1 Pub. L. No. 109-291, 120 Stat. 1327 (Sept. 29, 2006).

2 Unless otherwise noted, all Section and Rule references in this report are to the Exchange Act and rules under the

Exchange Act.

3 The Annual Report and the Summary Examination Report covered different time periods. In order to align the time

periods, Sections II.A and IV. of this Report include information about applications for registration as NRSROs and views 

of the Commission on the state of competition, transparency, and conflicts of interest among NRSROs from June 26, 

2020 through December 31, 2021 (the December 2020 Annual Report reported this information through June 25, 2020). 

Section V of this Report includes information about activities relating to NRSROs from December 1, 2020 through 

December 31, 2021 (the December 2020 Annual Report included this information through November 30, 2020).
4 | OFFICE OF CREDIT RATINGS

Information regarding the topics covered in this 

Report with respect to prior periods can be found 

on the OCR page of the Commission’s website.4

Information regarding the registration and 

oversight program for credit rating agencies that 

are registered with the Commission as NRSROs 

can be found in Section VI. of this Report.

A. STATUS OF REGISTRANTS

AND APPLICANTS

In 2007, the Commission began granting registrations to credit rating agencies that applied to be 

registered as an NRSRO. Section 3(a)(62) defines 

a “nationally recognized statistical rating organization” as a credit rating agency that is registered 

under Section 15E and issues credit ratings certified 

by qualified institutional buyers, in accordance 

with Section 15E(a)(1)(B)(ix), with respect to: 

(i) Financial institutions, brokers, or dealers; 

(ii) Insurance companies; 

(iii) Corporate issuers; 

(iv) Issuers of asset-backed securities (as that term 

is defined in 17 CFR 229.1101(c)); 

(v) Issuers of government securities, municipal 

securities, or securities issued by a foreign 

government; or 

(vi) A combination of one or more categories of 

obligors described in any of clauses (i) through 

(v) above.5

As of December 31, 2021, there were nine credit 

rating agencies registered as NRSROs.6 Chart 

1 below lists each NRSRO registered with the 

Commission, the categories of credit ratings 

described in clauses (i) through (v) of Section 3(a)

(62)(A) in which each NRSRO is registered, and 

the location of each NRSRO’s principal office.7

4 The prior annual reports pursuant to Section 6 of the Rating Agency Act, through December 2020, can be found under

“Annual Reports to Congress” in the “Reports and Studies” section of the OCR webpage, available at https://www.

sec.gov/ocr/ocr-reports-and-studies.html. Separately, the prior summary reports of the Staff’s examinations of NRSROs 

pursuant to Section 15E(p)(3), through December 2020, can be found under “Summary Examination Reports” in the 

“Reports and Studies” section of the OCR webpage, available at https://www.sec.gov/ocr/ocr-reports-and-studies.html.

5 Section 3(a)(62)(A).

6 Section 15E(a) sets out registration procedures for a credit rating agency to voluntarily apply to be registered with the

Commission as an NRSRO. 

7 See each NRSRO’s current Form NRSRO for any updates to this information. Each NRSRO must file with the 

Commission on EDGAR a Form NRSRO for annual certification and registration updates pursuant to Rule 17g-1(e) 

and (1)(f), and each NRSRO must make its current Form NRSRO publicly and freely available on its website pursuant 

to Rule 17g-1(i). Form NRSRO filings are available on the EDGAR system at https://www.sec.gov/edgar/searchedgar/

companysearch.html. Links to each NRSRO’s website can be found under the “Current NRSROs” section of the OCR 

webpage, available at https://www.sec.gov/ocr/ocr-current-nrsros.html. 
S TAFF REPORT | 5

Chart 1. Table of NRSROs

NRSRO Categories of Credit Ratings Principal Office

A.M. Best Rating Services, Inc. (AMB) (ii), (iii), and (iv) U.S.

DBRS, Inc. (DBRS) (i) through (v) U.S.

Egan-Jones Ratings Company (EJR) (i) through (iii) U.S.

Fitch Ratings, Inc. (Fitch) (i) through (v) U.S.

HR Ratings de México, S.A. de C.V. (HR) (i), (iii), and (v) Mexico

Japan Credit Rating Agency, Ltd. (JCR) (i), (ii), (iii), and (v) Japan

Kroll Bond Rating Agency, Inc. (KBRA) (i) through (v) U.S.

Moody’s Investors Service, Inc. (MIS) (i) through (v) U.S.

S&P Global Ratings (S&P) (i) through (v) U.S.

For purposes of this Report only, we refer to Fitch, 

MIS, and S&P as “large NRSROs”; AMB, DBRS, 

and KBRA as “medium NRSROs”; and EJR, HR, 

and JCR as “small NRSROs” based on revenue.8

Applications for initial registration by a credit 

rating agency and for registration by a current 

NRSRO in additional rating categories are filed 

on Form NRSRO.9

 A credit rating agency may 

choose not to apply for registration as an NRSRO, 

in which case it may issue credit ratings as a credit 

rating agency but it may not issue credit ratings as

an NRSRO.10 In addition, a credit rating agency 

may choose to apply for registration as an NRSRO 

in one or more rating categories.11 As noted in 

Chart 1 above, certain NRSROs are registered in 

all of the rating categories and certain NRSROs are 

registered in fewer than all of the rating categories.

No applications for initial registration as an 

NRSRO or for registration by a current NRSRO 

in additional rating categories were filed with the 

Commission in the Report Period. 

8 OCR’s prior reports categorized the NRSROs in two groups: the “larger NRSROs” (Fitch, MIS, and S&P) and the 

“smaller NRSROs” (AMB, DBRS, EJR, HR, JCR, and KBRA). Beginning with this Report, we have re-categorized 

the NRSROs into three groups based on revenue as reported on each NRSRO’s most recently filed Rule 17g-3(a)(3) 

financial report.

9 See Section 15E(a) and Rule 17g-1; see also Form NRSRO, available at https://www.sec.gov/about/forms/formnrsro.

pdf. In addition, Section 15E(b) requires NRSROs to promptly amend Form NRSRO if any information or document 

provided therein becomes materially inaccurate.

10 Section 3(a)(60) defines the term “credit rating,” Section 3(a)(61) defines the term “credit rating agency,” and Section 

3(a)(62) defines the term “nationally recognized statistical rating organization.” For additional information about credit 

ratings, see Updated Investor Bulletin: The ABCs of Credit Ratings (Oct. 12, 2017), available at https://www.sec.gov/oiea/

investor-alerts-and-bulletins/ib_creditratings.

11 See Section 3(a)(62)(A)(i) – (vi).

STAFF REPORT | 7

III. EXAMINATIONS 

AND MONITORING

A. OVERVIEW

Generally, the purpose of NRSRO examinations is to promote compliance with 

applicable federal securities laws and 

rules by identifying potential instances of 

non-compliance of NRSROs with their statutory 

and regulatory obligations and encouraging 

remedial action. Examinations also inform the 

Commission and the NRSROs’ compliance 

personnel of regulatory obligations and noteworthy 

industry developments. 

To facilitate and promote compliance by NRSROs 

with their statutory and regulatory obligations, the 

Staff sends each NRSRO an examination summary 

letter that discusses its findings related to that 

NRSRO and recommends remedial measures. When 

appropriate, the Staff may refer findings to the 

Commission’s Division of Enforcement for investigation.

Section 15E(p)(3)(B) provides that each NRSRO 

examination shall include a review of the following 

eight topic areas (Section 15E Review Areas): 

■ Whether the NRSRO conducts business in 

accordance with its policies, procedures, and 

rating methodologies; 

■ Management of conflicts of interest by 

the NRSRO; 

■ Implementation of ethics policies by 

the NRSRO;

■ Internal supervisory controls of the NRSRO;

■ Governance of the NRSRO; 

■ Activities of the Designated Compliance Officer 

(DCO) of the NRSRO; 

■ Processing of complaints by the NRSRO; and 

■ Policies of the NRSRO governing the 

post-employment activities of its former staff.

B. RISK ASSESSMENT

The 2021 Section 15E examinations encompassed 

all of the statutorily required Section 15E Review 

Areas. Within each of the Section 15E Review 

Areas, the Staff determined areas of emphasis 

and issues of focus for each NRSRO based upon 

an NRSRO-specific risk assessment performed 

by the Staff, while also considering how to limit 

the amount of personal data collected in the 

examination process. The NRSRO-specific risk 

assessments considered a number of factors, 

including, but not limited to: 

■ NRSROs’ rating activities and operations; 

■ Staff’s findings, recommendations, and other 

observations from prior examinations; 

■ Impact of a potential or actual internal control 

or compliance failure by the NRSRO; 

■ Recent industry developments affecting 

NRSROs and the asset classes in which the 

NRSRO is registered; 

■ NRSROs’ filings with the Commission and 

public disclosures; 
8 | OFFICE OF CREDIT RATINGS

■ NRSROs’ self-identified weaknesses; and

■ Relevant Tips, Complaints, and Referrals 

(TCRs) received by the Commission. 

The 2021 Section 15E examinations also focused 

on certain subjects and activities that the Staff, 

through its risk assessment process, identified as 

relevant to certain NRSROs, as summarized below. 

■ ESG Factors and Products: NRSROs and their 

affiliates have developed and are offering an 

increasing number of ESG-related products and 

services.12 Development in the area has grown 

rapidly, and competition has increased among 

NRSRO and non-NRSRO providers, leading 

the Staff to identify several areas of potential 

risk to NRSROs. These include the risks that, 

in incorporating ESG factors into ratings 

determinations, NRSROs may not adhere to 

their methodologies or policies and procedures, 

consistently apply ESG factors, make adequate 

disclosure regarding the use of ESG factors 

applied in rating actions, or maintain effective 

internal controls involving the use in ratings of 

ESG-related data from affiliates or unaffiliated 

third parties. The Staff also identified the 

potential risk for conflicts of interest if an 

NRSRO offers ratings and non-ratings ESG 

products and services.

■ COVID-19 Related Risk Areas: COVID-19 

caused a sudden economic shock that led 

to NRSROs downgrading certain ratings, 

changing their macroeconomic forecasts and 

assumptions, and revising some methodologies. 

The Staff identified as potential risks whether 

the NRSROs have sufficient controls in place 

to ensure that changes to assumptions and 

inputs are applied and disclosed in ratings 

determinations, and whether data collected by 

NRSROs during the pre-COVID period and 

used in ratings determinations was adjusted to 

reflect how assets will perform in a COVIDaffected economy. The Staff noted that such 

risks could have a heightened effect on the 

assignment and surveillance of ratings in 

particular sectors. 

■ CLOs: Qualitative adjustments may be made 

during the rating process for certain CLOs. The 

Staff identified a potential risk that NRSROs 

may not adhere to their policies, procedures, 

and methodologies in making such adjustments, 

as well as the risk that the practice could lead to 

inconsistent use of ratings symbols. 

■ Commercial Real Estate: Commercial real 

estate assets experienced a period of economic 

distress that could have an effect on credit 

ratings associated with such properties. The 

Staff identified a potential risk that NRSROs 

may not adhere to their policies and procedures 

regarding surveillance of such ratings, or to their 

methodologies with respect to the use of data 

associated with determining cash flows from the 

underlying properties and property valuations.

12 Some NRSROs offer ESG products and services separate from their credit ratings, and corporate affiliates of NRSROs,

which are entirely separate from the NRSROs, may also offer ESG products and services. Examples of such ESG products 

and services include: evaluations of the environmental benefits of a project financed with the proceeds of a “green” bond 

issuance; ESG scores based on the expected impact of ESG factors on a company’s growth, profitability, capital efficiency, 

and risk exposure; and assessments of a company’s risk from climate-related scenarios. These products and services are 

not credit ratings and are therefore not directly regulated by OCR.
S TAFF REPORT | 9

■ Consumer Asset-Backed Securities: The 

COVID-19 economic shock reduced consumer 

incomes resulting in potential impact to

ratings on consumer asset-backed securities. 

The Staff identified potential risks to credit 

ratings with regard to repayment challenges, 

a lack of standardization with regard to 

servicers, reporting standards and treatment 

of forbearances, deferrals, and extensions,

and the absence of standardized definitions 

of default in the sector, if NRSROs did not 

adhere to their relevant policies, procedures, 

and methodologies.

■ Low-Investment Grade-Rated Corporates:

The proportion of U.S. corporate debt rated in 

the BBB category increased over several years, 

reaching a historically high level in 2020. The 

Staff identified a risk posed to credit ratings 

if NRSROs did not adhere to their relevant 

surveillance practices, policies, procedures, 

and methodologies regarding such debt. 

■ Municipal Securities: An NRSRO did not make 

a timely discovery of incorrect information it 

received regarding when securities had been 

paid off and also failed to identify existing 

rating errors where a rating had gone through 

the surveillance process. The Staff identified 

as a potential risk, particularly for NRSROs 

with a large volume of municipal ratings, that 

such NRSROs may lack adequate controls for 

detecting rating errors or may not adhere to 

policies and procedures used to determine when 

municipal ratings should be withdrawn. 

The foregoing were incorporated into the Section 

15E examinations as appropriate for each NRSRO.

C. MONITORING

To help inform its risk assessment process and 

exam program, the Staff also actively monitored 

credit rating activity and industry developments 

during the Report Period, especially in connection 

with capital market and economic events and 

trends, such as ESG, COVID-19, cybersecurity, 

and digital assets. The Staff communicated with 

NRSROs and market participants, and reviewed 

NRSRO publications, news reports, trade publications, academic papers, and government reports, 

among other information sources.

The Staff’s monitoring efforts included, for 

example, discussions that covered the scope and 

nature of rating actions for which NRSROs cited 

the impact of COVID-19 and resulting business 

shutdowns as material credit considerations and 

how NRSROs incorporated ESG considerations 

into credit ratings and communicated such considerations to the market. Monitoring also covered 

NRSRO considerations of distributed ledger 

technologies, digital assets, and smart contracts in 

credit ratings13 and NRSRO perspectives on cyber 

risk management and the vulnerability to and 

financial impact of cyber attacks.

13 OCR continues to monitor these developing areas and has observed limited NRSRO ratings activity. For example, 

in early 2020, DBRS rated debt securities issued on a blockchain, noting that the structuring consultant intends to 

issue security tokens to all investors and record the transaction on the Ethereum blockchain. See Press Release: DBRS 

Morningstar Finalizes Provisional Ratings on FAT Brands Royalty I, LLC (Mar. 9, 2020), available at https://www.

dbrsmorningstar.com/research/357772/dbrs-morningstar-finalizes-provisional-ratings-on-fat-brands-royalty-i-llc.
10 | OFFICE OF CREDIT RATINGS

The Staff also monitored other industry events 

during the Report Period, including, for example, 

the NRSRO response to Archegos Capital 

Management,14 the NRSRO approach to rating 

companies emerging from special purpose acquisition company (SPAC) transactions,15 and the 

NRSRO response to financial stress experienced by 

Chinese property and development companies.16

Monitoring also covered NRSRO projections for 

inflation, perceptions of its causes, and views as to 

the potential credit impacts on entities and transactions across different market sectors. 

D. 2021 SECTION 15E(p)(3) 

EXAMINATIONS

1. 2021 Section 15E Examinations

The 2021 Section 15E examinations generally 

focused on the NRSROs’ activities for the period 

covering January 1, 2020 through December 31, 

2020 (the Review Period). Examinations also 

reviewed certain activities or credit rating actions 

from outside the Review Period.17

The 2021 Section 15E examinations reviewed 

the Section 15E Review Areas and examined 

each NRSRO’s adherence to Section 15E and 

Rules 17g-1 through 17g-10. For example, the 

Staff reviewed a sample of rating actions of each 

NRSRO in certain asset classes for which it is 

registered and for certain issuers and obligors 

to determine whether the NRSRO operated in 

accordance with its policies, procedures, and rating 

methodologies. The Staff also reviewed rating 

files and documentation to evaluate whether each 

NRSRO adhered to recordkeeping requirements.18

During the Review Period, the Staff also continued 

to participate in meetings that involved rating 

agency regulators globally, including those of 

the supervisory colleges that were formed for the 

largest internationally active credit rating agencies. 

The supervisory colleges were formed to enhance 

communication among credit rating agency 

regulators globally with respect to examinations 

of the relevant credit rating agencies.19 During the 

Review Period, each college conducted periodic

14 See e.g., Fitch, Archegos Fallout Signals Heightened Counterparty, Regulatory Risk, available at https://www.fitchratings.

com/research/banks/archegos-fallout-signals-heightened-counterparty-regulatory-risk-01-04-2021.

15 See e.g., S&P, Credit FAQ: SPACs and Credit Quality: S&P Global Ratings’ Recent Ratings Experience, available at 

https://www.spglobal.com/ratings/en/research/articles/210312-credit-faq-spacs-and-credit-quality-s-p-global-ratingsrecent-ratings-experience-11868991.

16 See e.g., Moody’s, Research Announcement: Chinese Property Developers’ Liquidity Stress Will Continue Amid Tight 

Credit Conditions and Lowered Sales, available at https://www.moodys.com/research/Moodys-Chinese-propertydevelopers-liquidity-stress-will-continue-amid-tight--PBC_1311317.

17 For example, the Staff may review information relating to TCRs in a current examination, even if the referenced activities

occurred outside of the Review Period.

18 To select rating actions and rating files to review, the Staff used a risk-based sampling process that is consistent with its 

overall risk assessment approach described in this Report. The Staff also considered factors including, but not limited 

to, the size of the rated asset class in the financial markets and the NRSRO’s business, the NRSRO’s activity in the 

rated asset class, the likelihood of impact on investors if a rating was not determined in accordance with the NRSRO’s 

methodologies and procedures, news reports and developments concerning the NRSROs or particular asset classes, 

TCRs, and information the Staff learned during examinations.

19 See IOSCO, Supervisory Colleges for Credit Rating Agencies, Final Report (July 2013), available at https://www.iosco.

org/library/pubdocs/pdf/IOSCOPD416.pdf. The SEC serves as chair of the colleges for S&P and MIS, and OCR Staff 

represents the SEC in this regard. The European Securities and Markets Authority serves as chair of the college for Fitch.
S TAFF REPORT | 11

calls to discuss supervisory activities related to the 

credit rating agencies. The Staff also conducted 

additional discussions with international regulators, 

as appropriate.

2. Terms Used in This Report

Section 15E(p)(3)(C)(i)-(iii) requires this Report to 

contain a summary of, respectively, the essential 

findings of the annual examinations, as deemed 

appropriate by the Commission; the NRSROs’ 

responses to any material regulatory deficiencies 

identified by the Commission; and whether the 

NRSROs have appropriately addressed the recommendations of the Commission contained in 

previous reports.20

For purposes of this Report, the Staff considers an 

“essential finding” to be any instance of apparent 

non-compliance by an NRSRO with the federal 

securities laws or related Commission rules 

applicable to NRSROs, except those instances 

attributable to a non-recurring and non-significant 

clerical or ministerial error or omission.

For purposes of this Report, the Staff considers 

“material regulatory deficiencies” to be essential 

findings that involve:

■ Conduct or a deficiency that could undermine 

the quality of a credit rating or impair the 

objectivity of an NRSRO’s credit rating 

process; or

■ Conduct that may be inconsistent with 

the anti-fraud provisions of the federal 

securities laws.

The Staff’s determination that an NRSRO appropriately addressed a recommendation does not 

constitute its endorsement of that NRSRO or its 

policies, procedures, internal controls, or operations. In a future examination, the Staff may 

reevaluate the NRSRO’s response to recommendations that it previously deemed to be appropriately 

addressed by, for example, assessing whether the 

NRSRO fully implemented remedial measures 

and whether those remedial measures appear to 

be effective. The Staff may also review and make 

recommendations concerning the NRSRO’s policies, 

procedures, internal controls, or operations related 

to the general subject matter of a recommendation 

that it previously deemed to be appropriately 

addressed. The determination of whether an 

NRSRO appropriately addressed a recommendation reflects solely the Staff’s view and does not 

necessarily reflect the views of the Commission. 

The Staff’s assessment of whether an NRSRO 

has appropriately addressed a recommendation 

depends on the specific facts and circumstances, 

including, but not limited to, the promptness of the 

NRSRO’s response, the severity of the conduct at 

issue, and whether the remedial action undertaken 

by the NRSRO is expected to fully resolve the 

Staff’s concerns.

20 In this Report, essential findings are organized by NRSRO within the applicable large, medium, and small groups. This

Report uses the phrases “significant,” “numerous,” “several,” and “some” to describe and distinguish the frequency of 

conduct or instances underlying certain essential findings. The particular phrase used generally reflects the number of 

instances during the Review Period, recognizing that the number of instances may be reflective of a test sample and not 

necessarily an NRSRO’s comprehensive activities during the Review Period.
12 | OFFICE OF CREDIT RATINGS

3. Summary of Essential Findings and 

Responses to Material Regulatory 

Deficiencies

a. Large NRSRO #1

(1) The NRSRO did not report an allegation of 

fraud and therefore did not appear to comply 

with Section 15E(u) or the NRSRO’s policies 

and procedures. The NRSRO issued a credit 

rating on a bond after the underwriter for 

the bond communicated to an analyst of the 

NRSRO an allegation of potential fraud relating 

to the authenticity of a letter of credit upon 

which such credit rating was based. The Staff 

also noted that the NRSRO did not withdraw 

the credit rating for some months during which 

the NRSRO had knowledge of a potential fraud. 

The Staff recommended that the NRSRO adhere 

to its policies and procedures to ensure that it 

fulfils its obligations under Section 15E(u).

The Staff identified such essential finding as a 

material regulatory deficiency. 

The NRSRO stated in its response that, while 

the analyst inquired of the underwriter and its 

counsel, the analyst did not report the matter 

because communication with the underwriter 

led him to believe that the matter was under 

review by the bank that provided the letter 

of credit. The NRSRO also stated that the 

failure of the transaction to close was not itself 

indicative of fraud because transactions can fail 

to close for other reasons. The NRSRO agreed 

that the allegation should have been reported 

to the compliance department, and the NRSRO 

conducted an internal investigation, resulting 

in discipline of the analyst. Furthermore, 

the NRSRO issued a communication to all 

employees regarding their obligations to 

internally report allegations that may implicate 

the NRSRO’s obligations under Section 15E(u), 

encouraging them to consult with a compliance 

officer if they have any doubt as to whether a 

particular matter should be reported. 

(2) The NRSRO did not appear to preserve certain 

documents in the manner that the NRSRO’s 

policies and procedures require, and the 

NRSRO did not promptly produce complete 

copies of records required to be retained in 

accordance with Rule 17g-2(b)(2). The NRSRO 

also did not timely provide to the Staff other 

documents in accordance with Rule 17g-2(f). 

The Staff recommended that the NRSRO 

ensure that it includes all relevant documents 

in its productions and retains required records 

in a way that enables it to promptly furnish 

complete copies of such records in response to 

requests from the Staff.

(3) The NRSRO did not appear to evaluate and 

record all potential complaints in the manner 

that its policies and procedures required. The 

NRSRO also did not document its conclusion 

with respect to handling a complaint, contrary 

to the NRSRO’s policies and procedures. The 

Staff recommended that the NRSRO ensure 

that all complaints are subject to its policies 

and procedures for the receipt, retention, and 

treatment of complaints.

b. Large NRSRO #2

(1) The NRSRO did not appear to comply with 

Rule 17g-7(a) disclosure requirements when 

taking a significant number of rating actions. 

As a result of a coding error that the NRSRO 

identified in its systems, the NRSRO did not 
STAFF REPORT | 13

timely publish information disclosure forms 

for a significant number of surveillance rating 

actions during some years. The Staff recommended that the NRSRO ensure compliance 

with Rule 17g-7(a) disclosure requirements.

(2) The NRSRO did not appear to enforce its 

policies and procedures as required by Section 

15E(h)(4)(A) and (5)(A). The NRSRO produced 

to the Staff a report that identified a number of 

instances where the NRSRO did not appear to 

comply with its policies and procedures related 

to statutorily-mandated post-employment 

requirements. Among other things, such report 

indicated that the NRSRO did not submit 

certain Employment Transition Reports to the 

Commission. The Staff recommended that the 

NRSRO enforce its policies and procedures 

related to post-employment requirements.

c. Large NRSRO #3

(1) The NRSRO made clarifying changes to a draft 

rating report for an issuer’s credit rating after 

receiving comments from the issuer, and such 

changes did not appear to be approved in the 

manner required by the NRSRO’s policies and 

procedures. The Staff recommended that the 

NRSRO ensure that it adheres to its policies 

and procedures for documentation evidencing 

approval of changes to a rating report requested 

by an issuer.

(2) The NRSRO did not appear to have effective 

internal controls pursuant to Section 15E(c)

(3)(A) to ensure that it does not inadvertently 

withdraw certain active credit ratings. Specifically, the NRSRO reported two instances in 

which it inadvertently withdrew from its 

website a significant number of credit ratings 

for active securities. Such instances were based 

on the NRSRO incorrectly processing third 

party data. The Staff recommended that the 

NRSRO establish effective internal controls to 

ensure that it does not inadvertently withdraw 

certain active credit ratings.

d. Medium NRSRO #1

(1) The NRSRO issued and maintained some credit 

ratings that appeared to be prohibited by Rule 

17g-5(c)(2). Contrary to the NRSRO’s policies 

and procedures, certain NRSRO employees 

held restricted securities in a managed account 

and the NRSRO’s compliance department did 

not routinely perform post-trade reviews of 

brokerage statements for managed accounts. 

On some occasions, an analyst participated 

in a rating committee while holding securities 

of the rated entity in a managed account. The 

Staff recommended that the NRSRO establish, 

maintain, and enforce written policies and 

procedures reasonably designed to address and 

manage conflicts of interest with respect to 

securities held in employees’ managed accounts.

The Staff identified such essential finding as a 

material regulatory deficiency. 

In its response, the NRSRO stated that it 

has commenced an action plan designed to 

strengthen relevant systems, practices, policies, 

resources, and personnel. The action plan 

includes, among other things: (i) changes to the 

organizational design and staffing of a relevant 

team; (ii) selection and deployment of a new 

system used to monitor and enforce compliance 

with applicable procedures; (iii) an organizational initiative led by senior management to 

foster adherence to policies and procedures; 
14 | OFFICE OF CREDIT RATINGS

(iv) a review, led by counsel, of (and appropriate 

enhancements to) policies, procedures and 

practices focused on avoidance or management 

of actual, potential or perceived conflicts 

of interest relating to the issuance of credit 

ratings; (v) improvements to certain compliance 

reporting to senior management; and 

(vi) outreach by compliance to analytical 

personnel regarding their responsibilities and 

obligations under applicable policies and 

procedures, with a particular focus on securities 

held in managed accounts. The NRSRO has 

completed some measures of such action plan, 

and others are still on-going. The NRSRO will 

continue assessing the robustness of its action 

plan and may implement additional measures.

(2) The NRSRO did not appear to enforce its 

policies and procedures in some instances as 

Section 15E(g)(1) requires, by granting access to 

certain information without required approval, 

mistakenly sending certain information intended 

for one recipient to numerous recipients, and not 

taking reasonable steps to protect confidential 

information from inadvertent disclosure. The 

Staff recommended that the NRSRO enforce 

its policies and procedures with respect to the 

protection of material non-public information.

(3) The NRSRO did not appear to follow Section 

15E(b)(2), Rule 17g-1(f), and the Form NRSRO 

Instructions when filing certain information 

with the Commission. The NRSRO filed with 

the Commission some Form NRSRO Exhibits 

that included incomplete transition/default 

matrices, incomplete and potentially inaccurate 

identifications of conflicts of interest relating to 

the issuance of credit ratings, and incomplete 

information about the NRSRO’s DCO. The 

Staff recommended that the NRSRO ensure that 

all Form NRSRO filings adhere to the Form 

NRSRO Instructions and the required information is accurate and complete.

e. Medium NRSRO #2

(1) The NRSRO did not appear to adhere to Rule 

17g-7(a)(1)(iii) when publishing Rule 17g-7(a) 

information disclosure forms. Such forms did 

not contain an attestation that was signed as 

the rule requires. In addition, the attestation 

provided was inconsistent with the requirements 

of the rule. The Staff recommended that the 

NRSRO ensure that a person with responsibility for the rating action signs the information 

disclosure forms and attests to the statements 

contained therein and that all such statements 

are consistent with the requirements of Rule 

17g-7(a)(1)(iii).

(2) The NRSRO did not appear to make certain 

disclosures that Rule 17g-7(a)(1)(ii)(B) requires 

relating to the version of the NRSRO’s rating 

methodology used for certain rating actions. 

The Staff recommended that the NRSRO 

ensure that it discloses in information disclosure 

forms the version of the methodology used to 

determine credit ratings.

(3) The NRSRO did not appear to comply with 

Rule 17g-7(a)(1)(ii)(L)(1) for certain credit 

ratings. Specifically, the NRSRO’s information 

disclosure form for certain rating actions did 

not include applicable information related to 

the historical performance of the relevant credit 
STAFF REPORT | 15

rating. The Staff recommended that the NRSRO 

ensure that its information disclosure forms for 

all rating actions contain the information that 

Rule 17g-7(a)(1)(ii)(L)(1) requires.

(4) The NRSRO did not appear to provide a 

required disclosure about the conflict of interest 

described in Rule 17g-5(b)(6) in Exhibit 6 of 

Form NRSRO, given that the NRSRO’s policies 

and procedures allowed employees, in certain 

circumstances, to own securities of issuers or 

obligors subject to a credit rating determined by 

the NRSRO. Also, the NRSRO recorded that 

during the Review Period, eight employees held 

or purchased restricted securities contrary to 

such policies and procedures. The Staff recommended that the NRSRO disclose conflicts of 

interest related to securities ownership by its 

employees, as the Instructions to Form NRSRO 

require, and establish, maintain, and enforce 

written policies and procedures designed to 

address and manage conflicts of interest.

(5) The NRSRO’s policies and procedures did not 

appear to be reasonably designed to ensure 

that it will promptly publish the notice of the 

existence of a significant error as Rule 17g-8(a)

(4)(ii) requires. The NRSRO’s policies and 

procedures required the NRSRO to publish 

notice of the existence of a significant error 

identified in a procedure or methodology only 

after the development and approval of a revised 

procedure or methodology. Application of 

these policies and procedures is likely to delay 

publication of such notice. The Staff recommended that the NRSRO establish, maintain, 

enforce, and document policies and procedures 

reasonably designed to ensure that it promptly 

publishes notice of the existence of a significant 

error as Rule 17g-8(a)(4)(ii) requires.

f. Medium NRSRO #3

(1) The NRSRO did not appear to adhere to Rule 

17g-7(a)(1)(iii) when publishing Rule 17g-7(a) 

information disclosure forms. Such forms 

contained an attestation that was inconsistent 

with the requirements of the rule. The Staff 

recommended that the NRSRO ensure the attestation statement in information disclosure forms 

is consistent with Rule 17g-7(a)(1)(iii) text.

(2) The NRSRO did not appear to enforce 

its policies and procedures with regard to 

publishing on an easily accessible portion of 

its website information relating to material 

changes to methodologies, as Rule 17g-8(a)

(4)(i) requires. The NRSRO’s reason for 

certain material changes to methodologies 

and disclosure about the likelihood those 

changes will result in changes to any current 

credit ratings were not easily accessible on the 

NRSRO’s website, as its policies and procedures require. The Staff recommended that the 

NRSRO ensure that it promptly publishes on an 

easily accessible portion of its website material 

changes to methodologies, the reason for the 

changes, and the likelihood the changes will 

result in changes to current credit ratings.

(3) The NRSRO did not withdraw credit ratings on 

certain matured bonds that the NRSRO stated 

it should have withdrawn and, accordingly, it 

did not appear that the NRSRO maintained 

effective internal supervisory controls as 
16 | OFFICE OF CREDIT RATINGS

required by Section 15E(c)(3)(A). The Staff 

recommended that the NRSRO enhance its 

internal controls to ensure that credit ratings on 

bonds that have matured are promptly detected 

and withdrawn.

(4) The NRSRO’s policies and procedures regarding 

complaints by employees did not appear to 

adequately address all of the requirements of 

Section 15E(j)(3). Specifically, such policies and 

procedures did not address complaints from 

employees regarding credit ratings, models, and 

methodologies and did not address employee 

complaints about the NRSRO or certain other 

third parties. The Staff recommended that the 

NRSRO establish procedures for the receipt, 

retention, and treatment of complaints to 

adequately address the requirements of Section 

15E(j)(3) for complaints from employees.

g. Small NRSRO #1

(1) The NRSRO did not appear to have reasonably 

designed procedures to ensure accurate, reliable, 

and consistent revenue information to effectively monitor and prevent the occurrence of the 

conflict of interest identified in Rule 17g-5(c)

(1). The Staff recommended that the NRSRO 

establish, maintain, and enforce written policies 

and procedures, including policies and procedures regarding the recognition of revenue 

in accordance with applicable accounting 

standards, reasonably designed to ensure that 

the NRSRO does not issue or maintain credit 

ratings subject to the prohibited conflict of 

interest specified in Rule 17g-5(c)(1).

The Staff identified such essential finding as a 

material regulatory deficiency.

In its response, the NRSRO stated that it is 

drafting a new policy and procedure to address 

the finding and recommendation in accordance 

with applicable standards relating to revenue 

from customer contracts. The NRSRO further 

stated that the new policy and procedure will 

provide requirements to ensure that revenue 

is recognized according to the new policy and 

procedure and will also include provisions 

addressing treatment for Rule 17g-5(c)(1) 

purposes where a client is billed in separate 

years. The NRSRO represented that it will begin 

complying with the new policy and procedure 

by January 1, 2022. 

(2) The NRSRO published information disclosure 

forms that did not appear to comply with Rule 

17g-7(a)(1)(ii)(J)(1), (K), and (M). Specifically, 

several such forms did not include required 

disclosures regarding the source of payment for 

the credit rating, the potential volatility of the 

credit rating, and the sensitivity of the credit 

rating to assumptions made by the NRSRO. 

The Staff recommended that the NRSRO ensure 

that its information disclosure forms contain all 

the disclosures that Rule 17g-7(a)(1)(ii) requires.

(3) The NRSRO’s policies and procedures did not 

appear to be reasonably designed pursuant to 

Section 15E(h)(1) to prevent the occurrence 

of the prohibited conflict of interest in Rule 

17g-5(c)(7). The NRSRO’s policies and procedures allowed employees to receive gifts with 

a specified limited dollar amount, but did not 

limit such gifts to items provided in the context 

of normal business activities such as meetings. 

The Staff recommended that the NRSRO 

establish, maintain, and enforce written policies 
STAFF REPORT | 17

and procedures reasonably designed to ensure 

that it does not issue or maintain credit ratings 

subject to the prohibited conflict of interest 

specified in Rule 17g-5(c)(7).

(4) The NRSRO appeared to misrepresent the 

effect of its registration as an NRSRO in certain 

rating reports. The NRSRO made a statement 

in several reports accompanying a non-credit 

rating product that appeared to misrepresent 

the effect of the NRSRO’s registration as an 

NRSRO and could lead recipients of the reports 

to mistakenly conclude that such product is 

an NRSRO rating. The Staff also noted that 

certain templates for reports and letters of the 

NRSRO potentially could result in misrepresentations or false statements in the future. The 

Staff recommended that the NRSRO revise its 

templates for reports and letters so that they do 

not contain any statements about its registration 

with the SEC as an NRSRO that are incorrect 

or misleading or that misrepresent the effect of 

such registration.

(5) The NRSRO’s policies and procedures for the 

receipt, retention, and treatment of complaints 

appeared to improperly exclude certain 

complaints. The Staff recommended that the 

NRSRO revise its policies and procedures for the 

receipt, retention, and treatment of complaints 

to ensure that they cover all complaints contemplated under Section 15E(j)(3). 

(6) The NRSRO’s policies and procedures did 

not appear to require the disclosure of the 

information that Rule 17g-7(a)(1)(ii)(J)(3)(i) 

and (J)(3)(ii) require for rating revisions and 

affirmations, respectively, resulting from a 

look-back review. The Staff recommended that 

the NRSRO establish, maintain, and enforce 

policies and procedures that are reasonably 

designed to ensure that the information required 

by Rule 17g-7(a)(1)(ii)(J)(3) is included with 

the publication of a revised credit rating or 

affirmation following a look-back review that 

determines that a conflict of interest had influenced the rating.

h. Small NRSRO #2

(1) The NRSRO did not appear to adhere to Rule 

17g-7(a) and its policies and procedures with 

regard to the publication of an information 

disclosure form for a credit rating withdrawal. 

Such policies and procedures did not appear to 

accurately reflect the Rule 17g-7(a) disclosure 

requirements, and the NRSRO did not publish 

a required information disclosure form for 

the withdrawal. Also, the NRSRO did not 

appear to generate a certain report as the 

NRSRO’s policies and procedures require. The 

Staff recommended that the NRSRO ensure it 

adheres to its policies and procedures, and all 

applicable requirements under Rule 17g-7(a), 

when it withdraws a credit rating.

(2) The NRSRO did not appear to have effective 

internal controls pursuant to Section 15E(c)

(3)(A) governing surveillance of certain ratings 

and did not appear to adhere to the applicable 

methodology. Specifically, the NRSRO did 

not perform surveillance of a credit rating in 

accordance with the enumerated time period in 

the NRSRO’s methodology. Also, such methodology did not clearly indicate how frequently 

the NRSRO must conduct surveillance on such 

rating. The Staff recommended that the NRSRO 
18 | OFFICE OF CREDIT RATINGS

enhance its internal controls with respect to its 

policies and procedures governing surveillance 

of certain credit ratings. The Staff also recommended that the NRSRO ensure that it adheres 

to the applicable methodology.

(3) The NRSRO did not appear to have effective 

internal controls pursuant to Section 15E(c)(3)

(A) governing the review and testing of its credit 

rating models. Specifically, the NRSRO used 

a model in determining credit ratings which 

contained data that was not consistent with the 

NRSRO’s policies and procedures. Such model 

also contained errors with one or more formula 

references. The Staff recommended that the 

NRSRO enhance its internal controls governing 

the review and testing of its credit rating models.

i. Small NRSRO #3

(1) The NRSRO did not appear to have effective 

internal controls pursuant to Section 15E(c)(3)

(A) with respect to credit ratings that are linked 

to other credit rating actions. Specifically, the 

NRSRO took a rating action on an outstanding 

credit rating without taking appropriate 

action with respect to a linked credit rating, 

and the NRSRO did not have an effective 

internal control at the relevant time to ensure 

that the NRSRO takes such action. The Staff 

recommended that the NRSRO establish, 

maintain, enforce, and document effective 

internal controls to ensure that it correctly issues 

and maintains credit ratings that are linked to 

other credit rating actions.

4. Responses to Recommendations from 

the 2020 Section 15E Examinations

To assess whether NRSROs appropriately 

addressed findings from the 2020 Section 15E 

examinations, the Staff reviewed each NRSRO’s 

written response describing its planned remedial 

measures, and participated in calls with each 

NRSRO to discuss its written response.

During the 2021 Section 15E examinations, the 

Staff assessed each NRSRO’s progress in implementing remedial measures such as establishing 

new or enhancing existing policies or procedures 

or internal controls, or adding personnel and other 

resources in areas such as compliance, information 

technology, or analytics. The Staff takes into 

account that NRSROs may not be able to fully 

implement remedial measures and the Staff may 

not be able to fully assess the effectiveness of these 

measures during the 2021 examination. 

The Staff has determined all findings from the 

2020 Section 15E examinations have been appropriately addressed, except in one instance. In such 

instance, the Staff issued a finding relating to a 

small NRSRO’s revenue recognition practices 

related to the NRSRO’s obligations under Rule 

17g-5(c)(1) and recommended that the NRSRO 

establish, maintain, and enforce policies and 

procedures that are reasonably designed to ensure 

that it does not issue or maintain ratings subject to 

the Rule 17g-5(c)(1) prohibited conflict of interest. 

However, as discussed further in Section III.C.3(g), 

the Staff observed in the 2021 examination that, 

despite efforts to address the previous finding, 

the NRSRO did not appear to have reasonably 
S TAFF REPORT | 19

designed procedures to ensure accurate, reliable, 

and consistent revenue information to effectively 

monitor and prevent the occurrence of the conflict 

of interest identified in Rule 17g-5(c)(1). Except 

for such instance, NRSROs generally addressed 

2020 recommendations by taking remedial 

measures such as adopting new or enhancing 

existing policies or procedures, internal controls, 

or systems and processes, and by adding personnel 

and other resources.

5. Essential Findings Trends

Chart 2 depicts the percentage of essential findings by Section 15E Review Area for all NRSROs 

from the Section 15E examinations conducted 

from 2016 to 2021. Of the 487 total essential 

findings arising from the Section 15E examinations 

conducted from 2016 to 2021, internal supervisory 

controls, adherence, and conflicts of interest were 

the top Section 15E Review Areas, accounting for 

42.3%, 30.6%, and 11.5%, respectively, of all 

essential findings.

The other five Section 15E Review Areas each 

accounted for less than 5% of the total essential 

findings from 2016 to 2021. Certain essential 

findings may relate to more than one Section 

15E Review Area but are categorized in only one 

category for counting purposes. For example, the 

Staff did not make any essential findings based 

solely on an NRSRO’s implementation of ethics 

policies and procedures, as such essential findings 

were accounted for in other Section 15E Review 

Areas. OCR continues to review all eight statutorily 

mandated review areas as required by Section 15E, 

described in Section III.A.

Chart 2. Essential Findings by Section

 15E Review Area: 2016 to 2021

Internal Supervisory Controls 42.3%

Governance 4.3% 

DCO Activities 3.3%

Complaints 3.9%

Post-Employment 4.1%

Adherence 30.6%

Conflicts of Interest 11.5%

Ethics Policies 0.0%

42.3%

3.9%

3.3%

4.3%

4.1%

30.6%

11.5%

0.0%

Chart 3 shows the number of essential findings by 

Section 15E Review Area from the Section 15E 

examinations conducted from 2016 to 2021. The 

number of essential findings from the 2016 examination cycle was higher in several review areas, 

which was likely related to the new and amended 

rules that became effective in 2015.21 Essential 

findings have generally decreased in subsequent 

exam cycles, which indicates the NRSROs’ greater 

awareness of applicable laws and their obligations 

as regulated entities.

21 See note 21.
20 | OFFICE OF CREDIT RATINGS

Chart 3. Number of Essential Findings by Section 15E Review Area: 2016 to 2021

0

10

20

30

40

50

60

70

80

PostEmploymentDCO Complaints

Activities

Internal Governance

Supervisory

Controls

Ethics

Policies

Conflicts

of Interest

Adherence

2016 2017 2018 2019 2020 2021

From the Section 15E examinations conducted 

from 2016 to 2021, there were 147 essential 

findings for large NRSROs, 145 essential findings 

for medium NRSROs, and 195 essential findings 

for small NRSROs.22 Chart 4 shows the average 

number of essential findings the large, medium, 

and small NRSROs for each examination cycle 

from 2016 to 2021. From 2016 to 2021, the large 

NRSROs had an average of 8.2 essential findings 

per exam cycle, the medium NRSROs had an 

average of 8.1 essential findings per exam cycle, 

and the small NRSROs had an average of 8.6 

essential findings per exam cycle.

Chart 4. Average Number of Essential Findings by Large, Medium, and Small NRSROs: 2016 to 2021

0

2

4

6

8

10

12

14

16

18

2016 2017 2018 2019 2020 2021

Large NRSROs Medium NRSROs Small NRSROs

22 The number of essential findings is based on the findings identified in prior summary reports of the Staff’s examinations 

of NRSROs pursuant to Section 15E(p)(3). For purposes of this Section of the Report, MCR is considered a “small 

NRSRO” for the Section 15E examinations conducted in 2016, 2017, 2018, and 2019.
S TAFF REPORT | 21

IV. STATE OF COMPETITION, 

TRANSPARENCY, AND 

CONFLICTS OF INTEREST

A. COMPETITION

1. Select NRSRO Statistics

Sections IV.A.1.a through 1.c below 

summarize and discuss certain information 

reported by NRSROs on Form NRSRO 

or pursuant to Rule 17g-3 that provides 

insight into the state of competition among 

NRSROs. While this information indicates that 

the large NRSROs continue to account for the 

highest percentages of outstanding ratings, the 

small and medium NRSROs continue to compete 

with the large NRSROs with each increasing its 

total number of ratings outstanding as compared 

to declines among two of the large NRSROs. 

The information also suggests that some medium 

NRSROs have gained ratings share in the assetbacked securities category. None of the small 

NRSROs is registered with the Commission in the 

asset-backed securities category.23

a. NRSRO Credit Ratings Outstanding

Each NRSRO annually reports not later than 

March 31st the number of credit ratings 

outstanding, as of the end of the preceding calendar 

year, in each rating category for which it is registered.24 This information, for the calendar year 

ending December 31, 2020, is summarized in 

Charts 5 through 10 below and can be useful in 

determining the breadth of an NRSRO’s coverage 

with respect to issuers, obligors, and securities or 

money market instruments within a particular 

rating category:

■ Chart 5 depicts the number of credit ratings 

each NRSRO had outstanding in each rating 

category for which it was registered as of 

December 31, 2020. 

■ Chart 6 shows the percentage change of credit 

ratings outstanding from 2019 to 2020 for 

each NRSRO.

23 See Chart 1. As discussed in Section IV.A.2 of this Report, information available on the websites of Commercial Mortgage 

Alert (https://www.greenstreet.com/news/library/commercial-mortgage-alert) and Asset-Backed Alert (https://www.

greenstreet.com/news/library/asset-backed-alert) regarding NRSRO market shares in the asset-backed securities category 

indicates that some of the medium NRSROs have developed significant market shares in such rating category over the 

past few years. In addition, Section IV.A.2 of this Report provides examples of certain asset classes in which it has been 

reported that medium NRSROs have gained market share. 

24 Annual certifications on Form NRSRO must be filed with the Commission on EDGAR pursuant to Rule 17g-1(f) and

made publicly available without cost on each NRSRO’s website pursuant to Rule 17g-1(i). The number of outstanding 

credit ratings for each rating category for which an NRSRO is registered is reported on Item 7A of Form NRSRO. 
22 | OFFICE OF CREDIT RATINGS

■ Chart 7 illustrates the relative size of each rating 

category based on the aggregate number of 

ratings reported outstanding by all NRSROs. 

■ Chart 8 shows the percentage change of credit 

ratings outstanding from 2019 to 2020 for 

large NRSROs compared to small and medium 

NRSROs across all rating categories.

■ Chart 9 depicts the percentage of ratings 

each NRSRO had outstanding across all 

rating categories other than the government 

securities category. 

■ Chart 10 depicts the percentage of ratings each 

NRSRO had outstanding in the government 

securities category.

While comparing the number of ratings outstanding

among NRSROs (Chart 5) illustrates one dimension 

of the current state of competition, comparing the 

number of ratings issued by such NRSROs in a 

given period provides a more real-time picture of 

competition among NRSROs. For example, certain 

NRSROs (particularly the large NRSROs) have a 

longer history of issuing ratings and their ratings 

include those for debt obligations and obligors that 

were rated well before the establishment of the 

newer entrants.25 Consequently, the information 

described in Section IV.A.2 of this Report (relating

to recent market share developments in the assetbacked securities rating category), which provides 

information about ratings issued each year since 

2019, may provide additional insight regarding 

competition among the NRSROs in the assetbacked securities rating category. 

There are additional limitations to assessing the 

state of competition in each rating category and in 

the aggregate based on the number of outstanding 

ratings. For instance, some NRSROs have pursued 

business strategies to specialize in particular rating 

categories or sub-categories.26Also, the reported 

information does not reflect any credit ratings 

being issued by NRSROs in rating categories in 

which they are not registered with the Commission, 

nor does it reflect ratings issued by an affiliate of an 

NRSRO unless the affiliate is identified as a credit 

rating affiliate on Item 3 of Form NRSRO.

Further, when reporting its outstanding ratings, 

each NRSRO makes its own determination of the 

applicable rating category into which each of its 

ratings falls. The classification of ratings into the 

five rating categories is not necessarily consistent 

across NRSROs.27

25 The ratings counts disclosed on Item 7A of Form NRSRO include outstanding credit ratings, regardless of when they

were issued. As a result, the ratings counts of the more established NRSROs may include credit ratings that were issued 

before the newer entrants began issuing credit ratings. 

26 For example, AMB has traditionally focused on rating insurance companies and their affiliates.

27 Effective January 1, 2015, Item 7A of Form NRSRO and the corresponding Instructions were amended to clarify the

manner in which the number of outstanding credit ratings should be calculated and presented. The clarifying amendments 

were designed to help ensure that disclosures on Item 7A of Form NRSRO are consistent across NRSROs. See Nationally 

Recognized Statistical Rating Organizations, Release No. 34-72936 (Aug. 27, 2014), 79 FR 55078, 55220-22 (Sept. 15, 

2014) (“2014 Adopting Release”), available at https://www.govinfo.gov/content/pkg/FR-2014-09-15/pdf/2014-20890.pdf

(discussing the clarifying amendments to Item 7A of Form NRSRO). It may be more difficult to draw rating comparisons 

to rating counts disclosed prior to January 1, 2015.
STAFF REPORT | 23

Chart 5 provides the number of outstanding credit 

ratings reported by each NRSRO in its annual 

certification for the calendar year ending December 

31, 2020, in each of the five rating categories 

identified in Section 3(a)(62)(A) for which the 

NRSRO is registered, as applicable, as well as the 

percentage change in total ratings for each NRSRO 

from 2019 to 2020. 

Chart 6 provides a visual representation of the 

year-over-year changes in each firm’s percentage 

share of the aggregate number of NRSRO ratings 

outstanding from 2019 to 2020.

Chart 5. Number of Outstanding Credit Ratings as of December 31, 2020 by Rating Category

NRSRO Financial 

Institutions

Insurance 

Companies

Corporate 

Issuers

AssetBacked 

Securities

Government 

Securities

Total 

Ratings

Year-Over-Year 

Change in 

Total Ratings 

(2019 to 2020)

AMB N/R 7,251 985 5 N/R 8,241 0.82%

DBRS 11,214 192 4,327 23,482 22,556 61,771 6.76%

EJR 10,119 975 9,339 N/R N/R 20,433 13.81%

Fitch 33,440 3,198 20,318 34,108 177,665 268,729 -3.42%

HR 796 N/R 396 N/R 469 1,661 19.41%

JCR 950 86 2,971 N/R 348 4,355 4.61%

KBRA 1,326 132 224 14,470 141 16,293 13.52%

MIS 34,540 2,557 32,738 47,411 560,892 678,138 -0.52%

S&P 50,798 6,846 55,758 36,821 927,144 1,077,367 0.79%

Total 143,183 21,237 127,056 156,297 1,689,215 2,136,988 0.20%

N/R indicates that the NRSRO was not registered in the applicable rating category as of the reporting date.

Percentages have been rounded to the nearest one-hundredth of one percent.

Source: NRSRO annual certifications for the 2019 and 2020 calendar years, Item 7A on Form NRSRO.

Chart 6. Year-Over-Year Changes in Percentage Share of Total Number of Ratings Outstanding from 2019 – 2020

0.00%

-0.6

-0.5

-0.4

-0.3

-0.2

-0.1

0.0

0.1

0.2

0.3

0.4

AMB DBRS EJR Fitch HR JCR KBRA MIS S&P

Year-Over-Year Change

0.18%

0.11%

-0.47%

0.01% 0.01%

0.09%

-0.23%

0.30%

Percentages have been rounded to the nearest one-hundredth of one percent.

Source: NRSRO annual certifications for the 2019 and 2020 calendar years, Item 7A on Form NRSRO.
24 | OFFICE OF CREDIT RATINGS

Chart 7 displays the percentage of each NRSRO’s 

outstanding credit ratings of the total outstanding 

credit ratings of all NRSROs, for each rating 

category in which the NRSRO was registered, as

reported by each NRSRO in its annual certification 

for the calendar year ending December 31, 2020, as 

well as the percentage increase or decrease in total 

ratings from 2019 to 2020.28

Chart 7. Percentage by Rating Category of Each NRSRO’s Outstanding Credit Ratings 

of the Total Outstanding Credit Ratings of all NRSROs as of December 31, 2020

NRSRO Financial 

Institutions

Insurance 

Companies

Corporate 

Issuers

AssetBacked 

Securities

Government 

Securities Total Ratings

Change in 

% of Total 

Ratings from 

2019 to 2020

AMB N/R 34.1% 0.8% 0.0% N/R 0.4% 0.00%

DBRS 7.8% 0.9% 3.4% 15.0% 1.3% 2.9% 0.18%

EJR 7.1% 4.6% 7.4% N/R N/R 1.0% 0.11%

Fitch 23.4% 15.1% 16.0% 21.8% 10.5% 12.6% -0.47%

HR 0.6% N/R 0.3% N/R 0.0% 0.1% 0.01%

JCR 0.7% 0.4% 2.3% N/R 0.0% 0.2% 0.01%

KBRA 0.9% 0.6% 0.2% 9.3% 0.0% 0.8% 0.09%

MIS 24.1% 12.0% 25.8% 30.3% 33.2% 31.7% -0.23%

S&P 35.5% 32.2% 43.9% 23.6% 54.9% 50.4% 0.30%

N/R indicates that the NRSRO was not registered in the applicable rating category as of the reporting date.

Percentages have been rounded to the nearest one-tenth of one percent and nearest one-hundredth of one percent 

with respect to the change from 2019 to 2020.

Source: NRSRO annual certifications for the 2019 and 2020 calendar years, Item 7A on Form NRSRO.

The large NRSROs accounted for 94.7% of 

all the ratings outstanding as of December 31, 

2020—slightly lower than their 95.1% share as 

of December 31, 2019.29 The share of outstanding 

credit ratings of the large NRSROs decreased in all

five categories, most significantly in the financial 

institutions, corporate issuers, and asset-backed 

securities categories, which each decreased by at 

least 1.5 percentage points.

28 For example, according to Chart 5, AMB reported that it had 7,251 insurance company credit ratings, and the total

of the credit ratings in that category reported by all NRSROs was 21,237. Therefore, the percentage of NRSRO 

insurance company ratings attributable to AMB was approximately 34.1% (i.e., 7,251 divided by 21,237, expressed as a 

percentage), as shown on Chart 7.

29 In 2007, the year when NRSROs began reporting outstanding ratings on Form NRSRO, the large NRSROs accounted

for 98.8% of all outstanding ratings.
S TAFF REPORT | 25

Charts 5 and 7 also show that AMB, one of the 

medium NRSROs, had the most credit ratings 

outstanding in the insurance category. In each of the 

past seven years, AMB reported that it had the most 

credit ratings outstanding in the insurance category.30

Chart 8 shows the percentage change of total 

ratings outstanding per asset class from 2019 to 

2020 when comparing large NRSROs to small 

and medium NRSROs.

Chart 8. Percentage Change of Total Ratings Outstanding Per Asset Class 

2019 to 2020 – Large NRSROs Compared to Small/Medium NRSROs

-6

-4

-2

0

2

4

6

8

10

12

14

Gov't 

Securitites

(Med/Small)

Gov't

Securities

(Large)

ABD

(Med/Small)

ABS 

(Large)

Corporate 

Issuers 

(Med/Small)

Corporate 

Issuers

(Large)

Insurance

(Med/Small)

Insurance

(Large)

Financial 

Institutions

(Med/Small)

Financial

 Institutions 

(Large)

Year-Over-Year Change

-3.73%

9.55%

-0.13%

12.45%

1.46%

10.70%

-1.05%

4.73%

-1.02%

8.26%

Percentages have been rounded to the nearest one-hundredth of one percent.

Source: NRSRO annual certifications for the 2019 and 2020 calendar years, Item 7A on Form NRSRO.

30 See Annual Reports for prior years, which can be found under “Annual Reports to Congress” in the “Reports and 

Studies” section of the OCR webpage, available at https://www.sec.gov/ocr/ocr-reports-and-studies.html.
26 | OFFICE OF CREDIT RATINGS

Chart 9 depicts the percentages of outstanding 

credit ratings attributable to each rating category, 

as reported by the NRSROs in their annual 

certifications for the calendar year ending 

December 31, 2020.

Chart 9. Breakdown of Ratings Reported Outstanding by 

Rating Category as of December 31, 2020

Government Securities 79.0%

Financial Institutions 6.7%

Insurance Companies 1.0%

Corporate Issuers 5.9%

Asset-Backed Securities 7.3%

79.0% 5.9%

1.0%

6.7%

7.3%

Percentages have been rounded to the nearest 

one-tenth of one percent.

Source: NRSRO annual certifications for the 2020 

calendar year, Item 7A on Form NRSRO.

As illustrated by Chart 9, as of December 31, 

2020, the largest proportion of the aggregate 

credit ratings reported to be outstanding were in 

the government securities category, which may be 

attributable to the large number of government 

bond issuers (e.g., issuers of municipal securities) 

and their multiple debt offerings. The government 

securities category accounted for 79.0% of the 

total number of credit ratings reported across all 

categories and, as shown on Chart 7 and Chart 12, 

is also the most concentrated rating category, with 

the large NRSROs accounting for 98.6% of all 

outstanding government ratings.

Chart 10 depicts the percentages of the credit 

ratings outstanding that are attributable to each 

NRSRO over all the rating categories, as reported 

by each NRSRO in its annual certification for the 

calendar year ending December 31, 2020. 

Chart 10. Breakdown of Ratings Reported Outstanding by 

NRSRO as of December 31, 2020

S&P 50.4%

AMB 0.4% 

DBRS 2.9%

EJR 1.0%

Fitch 12.6%

HR 0.1%

JCR 0.2%

KBRA 0.8%

MIS 31.7%

50.4%

2.9%

.04%

0.2%

12.6%

31.7%

0.8%

1.0%

0.1%

Percentages have been rounded to the nearest 

one-tenth of one percent.

Source: NRSRO annual certifications for the 2020 

calendar year, Item 7A on Form NRSRO.
STAFF REPORT | 27

Chart 11 depicts the percentages of the credit 

ratings outstanding that are attributable to each 

NRSRO over all the rating categories other than 

the government securities category, as reported 

by each NRSRO in its annual certification for the 

calendar year ending December 31, 2020.

Chart 11. Breakdown of Non-Government Securities 

Ratings Reported Outstanding by NRSRO as of 

December 31, 2020

S&P 33.5%

AMB 1.8% 

DBRS 8.8%

EJR 4.6%

Fitch 20.3%

HR 0.3%

JCR 0.9%

KBRA 3.6%

MIS 26.2%

33.5%

8.8%

1.8%

0.9%

20.3%

26.2%

3.6%

4.6%

0.3%

Percentages have been rounded to the nearest 

one-tenth of one percent.

Source: NRSRO annual certifications for the 2020 

calendar year, Item 7A on Form NRSRO.

Chart 12 depicts the percentages of the credit 

ratings outstanding that are attributable to each 

applicable NRSRO in the government securities 

category, as reported by each NRSRO in its annual 

certification for the calendar year ending December 

31, 2020.

Chart 12. Breakdown of Government Securities Ratings 

Reported Outstanding on December 31, 2020

S&P 54.89%

DBRS 1.34%

Fitch 10.52%

HR 0.03%

JCR 0.02%

KBRA 0.01%

MIS 33.20%

54.89%

1.34%

0.02%

10.52%

33.20%

0.03%

0.01%

Percentages have been rounded to the nearest 

one-hundredth of one percent.

This chart only includes the NRSROs that are registered 

in the government securities category.

Source: NRSRO annual certifications for the 2020 

calendar year, Item 7A on Form NRSRO.

A comparison of Chart 10 to Chart 11 illustrates that there is less concentration in the 

non-government securities rating categories. S&P’s 

and MIS’s percentage share of all outstanding 

ratings declines by 16.9 and 5.5 percentage points, 

respectively, when government securities are 

excluded. Fitch’s percentage share of outstanding 

ratings, on the other hand, increases by 7.8 

percentage points when government securities 

are excluded. The percentage share for all 

the remaining NRSROs also increases when 

government securities are excluded. Chart 10 
28 | OFFICE OF CREDIT RATINGS

again shows that the government securities 

category makes up the largest number of credit 

ratings reported across all categories and is the 

most concentrated within the three large NRSROs.

Further, when government securities are included 

in the total calculation, each of the small and 

medium NRSROs, except for DBRS and EJR, has 

1.0% or less of all outstanding ratings, making 

it difficult to assess their relative rating shares. 

When government securities are excluded, a clearer 

picture of the relative percentage shares of the small 

and medium NRSROs in the categories in which

they are active can be observed, as illustrated in 

Chart 11. The percentage share of each small and 

medium NRSRO for all rating categories other 

than government securities as of December 31, 

2020 did not change significantly compared to its 

percentage share as of December 31, 2019.31

b. NRSRO Analytical Staffing Levels

Chart 13 reports the number of credit analysts 

(including credit analyst supervisors) and the 

number of credit analyst supervisors employed by 

each of the NRSROs, as reported on Exhibit 8 to 

Form NRSRO.32

Chart 13. NRSRO Credit Analysts and Credit Analyst Supervisors

NRSRO Credit Analysts (Including 

Credit Analyst Supervisors)

Credit Analyst 

Supervisors

% Change in Analytical Staff 

(Including Supervisors) 

from 2019 to 2020

AMB 160 62 3.9%

DBRS 428 131 -9.9%

EJR 25 12 8.7%

Fitch 1,301 331 1.9%

HR 63 10 21.2%

JCR 62 30 0.0%

KBRA 176 54 2.3%

MIS 1,830 271 5.7%

S&P 1,560 122 0.1%

Total 5,605 1,023 1.8%

Percentages have been rounded to the nearest one-tenth of one percent.

Source: Exhibit 8 to Form NRSRO, in effect as of each NRSRO’s annual certification for the 2020 calendar year filed 

on or before March 31, 2021.

31 A comparison of Chart 11 in this Report with Chart 5 in Section IV.A.1 of the December 2020 Annual Report (available 

at https://www.sec.gov/files/2020-annual-report-on-nrsros.pdf) shows that each small and medium NRSRO’s total 

non-government market share as of December 31, 2020 remained constant or increased modestly compared to the 

market shares as of December 31, 2019. 

32 Effective January 1, 2015, the Instructions for Exhibit 8 to Form NRSRO were amended to clarify that NRSROs must

include credit analyst supervisors in the total number of credit analysts disclosed on Exhibit 8. This amendment was 

designed to enhance consistency of the disclosures on Exhibit 8 of Form NRSRO. See 2014 Adopting Release, 79 FR at 

55222 (discussing the clarifying amendments to Exhibit 8 of Form NRSRO).
S TAFF REPORT | 29

The large NRSROs report employing 4,691 credit 

analysts (including supervisors), which is approximately 83.7% of the total number employed by all 

of the NRSROs. The small and medium NRSROs, 

in the aggregate, employ approximately 16.3% of 

all credit analysts employed by NRSROs.33 Some 

of the small NRSROs have reported significant 

increases in their analytical staff. Between the 2019 

and 2020 calendar years, the number of credit 

analysts (including credit analyst supervisors) 

employed by small NRSROs, in the aggregate, 

increased 9.5%, compared to an increase of 2.7% 

at the large NRSROs, in the aggregate. Between the 

2019 and 2020 calendar years, the number of

credit analysts (including credit analyst supervisors) 

employed by medium NRSROs, in the aggregate, 

decreased 4.6%.34

c. NRSRO Revenue

Chart 14 shows the percentage of total NRSRO 

revenues since 2017 attributable to the large 

NRSROs, medium NRSROs, and small NRSROs.35

With the exception of fiscal year 2020, the percentage of aggregate NRSRO revenue reported by the 

large NRSROs has gradually declined over this time 

period and the percentage of total revenue reported 

by the medium and small NRSROs has correspondingly gradually increased.

Chart 14. NRSRO Fiscal Year Revenue as a Percentage of Aggregate Reported Revenue

2020 2019 2018 2017

Large NRSROs 94.1% 93.3% 93.5% 94.1%

Medium NRSROs 5.1% 5.9% 5.8% 5.3%

Small NRSROs 0.8% 0.8% 0.7% 0.6%

Total 100.0% 100.0% 100.0% 100.0%

Percentages have been rounded to the nearest one-tenth of one percent.

Source: Financial reports filed with the Commission under Rule 17g-3(a)(3) for the fiscal years ended 2017 through 

2020. For the preparation of this Report, if an NRSRO reported revenue in a foreign currency, the revenue was 

converted to U.S. dollars using the average exchange rate over all U.S. banking days in the fiscal year of such NRSRO.

33 Based on reports by the NRSROs on their annual certifications for the applicable calendar year, the small and medium 

NRSROs, in the aggregate, employed approximately 11.4% of all NRSRO analysts in 2014, 12.8% of all NRSRO 

analysts in 2015, 14.6% of all NRSRO analysts in 2016, 15.2% of all NRSRO analysts in 2017, 15.4% of all NRSRO 

analysts in 2018, and 17.0% of all NRSRO analysts in 2019. 

34 As described in the December 2020 Annual Report, in 2019, DBRS and MCR combined analytical operations

following a corporate combination. Prior to the combination, the two NRSROs had reported a total of 515 analysts 

as of December 31, 2019. At the end of 2019, the combined entity had a total of 475 analysts. At the end of 2020, the 

combined entity had a total of 428 analysts. The reduction in analytical staff at the combined entity may be the primary 

driver behind the overall reduction among the medium-sized NRSROs.

35 Under Rule 17g-3(a)(3), each NRSRO is required to file annually with the Commission an unaudited report providing

revenue information, including revenue from determining and maintaining credit ratings, revenue from subscribers, 

revenue from granting licenses or rights to publish credit ratings, and revenue from other services and products. These 

reports are not required to be made publicly available by the NRSROs.
30 | OFFICE OF CREDIT RATINGS

Further revenue information is available for 

NRSROs that are owned, in whole or in part, by 

public companies. The following information is 

from the 2020 annual reports of public companies 

with an ownership interest in an NRSRO:

■ Moody’s Corporation, which is MIS’s parent 

company, reported a 15% increase in external 

revenue at MIS compared to 2019 results. The 

increase, according to the report, was largely 

driven by higher corporate debt issuance 

(both investment-grade and high-yield) as 

issuers bolstered liquidity positions in response 

to COVID-19 uncertainties and issued 

opportunistically for refinancing needs. The 

corporate finance group, financial institutions 

group, and public, project and infrastructure 

finance group of MIS had an increase in revenue 

compared to 2019 results. In comparison, the 

structured finance group of MIS had a decrease 

in revenue compared to 2019 results.36

■ S&P Global Inc. (S&P Global), which is 

S&P’s parent company, indicated that revenue 

at S&P increased by 16% compared to its 

2019 results, due to an increase in transaction 

revenue. S&P Global attributed the increase 

in S&P’s revenue to an increase in corporate 

bond ratings revenue primarily driven by higher 

corporate bond issuance in the U.S. mainly 

resulting from borrowers’ need for increased 

liquidity in light of the COVID-19-related 

economic downturn, historically low borrowing 

costs, and central bank lending actions initially 

announced at the end of the first quarter of 

2020. This was partially offset by a decrease 

in bank loan ratings revenue and structured 

finance revenues.37

36 See Moody’s Corporation, Annual Report on Form 10-K for the year ended December 31, 2020, available at 

https://www.sec.gov/ix?doc=/Archives/edgar/data/1059556/000105955621000010/mco-20201231.htm. 

37 See S&P Global Inc., Annual Report on Form 10-K for the year ended December 31, 2020, available at 

https://www.sec.gov/ix?doc=/Archives/edgar/data/64040/000006404021000063/spgi-20201231.htm. 
S TAFF REPORT | 31

■ Morningstar, Inc. (Morningstar), which is 

DBRS’s parent company, reported that for 

the year ended December 31, 2020, DBRS’s 

revenue was $207.3 million, accounting for 

14.9% of Morningstar’s consolidated revenue. 

Morningstar reported that its transactionbased revenue grew 49.2% during 2020, 

primarily driven by the contribution of 

DBRS—approximately 59.9% of the revenue 

generated by DBRS came from one-time, 

transaction-based fees driven by its provision 

of ratings on newly issued securities, with the 

remainder comprised of recurring revenue from 

surveillance, credit research, or other services. 

Morningstar attributed strong Canadian 

corporate credit issuances as the primary driver 

of DBRS’s revenue growth for 2020.38

Recent regulatory filings also show increases in 

revenue at MIS and S&P in the first half of 2021. 

Moody’s Corporation reported a 16% increase in 

MIS external revenue in the first half of 2021, as 

compared to the first half of 2020, due to strong 

growth mainly driven by leveraged finance

issuance as issuers refinanced existing debt and 

funded M&A activity, and increased CLO and 

commercial mortgage-backed securities (CMBS) 

activity amid favorable market conditions.39 S&P 

Global reported a 14% increase in S&P transaction 

revenue in the first half of 2021, as compared to 

the first half of 2020, due to an increase in bank 

loan ratings revenue driven by increased M&A 

activity and an increase in structured finance 

revenue primarily driven by increased issuance 

of U.S. CLOs, partially offset by a decrease in 

corporate bond ratings revenue driven by decreased 

investment-grade issuance volumes.40

Morningstar, Inc. reported a 29.4% increase 

in DBRS revenue in the first half of 2021, as 

compared to the first half of 2020, due to stronger 

issuance activity in both commercial mortgagebacked and asset-backed securities, which offset 

lower issuance activity in the Canadian corporate 

markets. Recurring annual fees tied to surveillance, 

research, and other transaction-related services 

represented 36.5% of DBRS’s revenue in the first 

six months of 2021.41

38 See Morningstar, Inc., Annual Report on Form 10-K for the year ended December 31, 2020, available at https://www.sec.

gov/ix?doc=/Archives/edgar/data/1289419/000128941921000039/morn-20201231.htm.

39 See Moody’s Corporation, Quarterly Report on Form 10-Q for the period ended June 30, 2021, available at https://www.

sec.gov/ix?doc=/Archives/edgar/data/0001059556/000105955621000025/mco-20210630.htm.

40 See S&P Global Inc., Quarterly Report on Form 10-Q, for the period ended June 30, 2021, available at https://www.sec.

gov/ix?doc=/Archives/edgar/data/64040/000006404021000155/spgi-20210630.htm. 

41 See Morningstar, Inc., Quarterly Report on Form 10-Q for the period ended June 30, 2021, available at https://www.sec.

gov/ix?doc=/Archives/edgar/data/1289419/000128941921000186/morn-20210630.htm.
32 | OFFICE OF CREDIT RATINGS

2. Developments in the State of Competition 

Among NRSROs

a. Market Share Observations in the AssetBacked Securities Rating Category

As noted in Section IV.A.1.a of this Report, the 

number of ratings recently issued by NRSROs 

may give a clearer picture of competition than 

the number of ratings each NRSRO currently has 

outstanding. For example, Chart 7 indicates that, 

as of December 31, 2020, the medium NRSROs 

collectively had 24.3% of the ratings outstanding 

in the asset-backed securities rating category. 

However, the market share data discussed in 

this Section IV.A.242 shows that higher market 

share percentages have been obtained by medium 

NRSROs in recent years for ratings issuance with 

respect to certain types of asset-backed securities.

This market share data continues the growth 

trend the Staff has observed since 2011 for some 

medium NRSROs in the asset-backed securities 

rating category.43

Section IV.A.2.a.i and 2.a.ii below discuss 

NRSRO market share information with respect 

to certain asset-backed securities, as reported on 

the Commercial Mortgage Alert and Asset-Backed 

Alert websites.44 Commercial Mortgage Alert

shares information on one category of asset-backed 

securities: CMBS.45 Asset-Backed Alert reports 

NRSRO market share information on three 

categories of asset-backed securities: (i) ABS;46

(ii) MBS;47 and (iii) CLO.48

42 Unless noted otherwise, all market share percentages in this Section IV.A.2 are based on dollar amounts of issuance. The 

information in this Section IV.A.2 is from the Asset-Backed Alert’s ABS database as of July 26, 2021.

43 EJR, HR, and JCR are not registered with the Commission in the asset-backed securities category. See Chart 1. While 

AMB is registered to rate asset-backed securities, as shown in Chart 5, it only has five outstanding asset-backed securities 

ratings as of December 31, 2020, all of which were issued before 2019. For these reasons, this section only discusses 

observations related to DBRS, Fitch, KBRA, MIS, and S&P, which are the five NRSROs with current rating activity in the 

asset-backed securities category.

44 See Commercial Mortgage Alert website, available at https://www.greenstreet.com/news/library/commercial-mortgagealert and Asset-Backed Alert website, available at https://www.greenstreet.com/news/library/asset-backed-alert. The 

information in Charts 15 through 18 is based on the Commercial Mortgage Alert’s CMBS database as of July 26, 2021, 

and the information in Charts 19 through 21 is based on the Asset-Backed Alert’s ABS database as of July 26, 2021. 

Although the information available on these websites may provide insight into recent developments regarding the state 

of competition among NRSROs in the asset-backed securities rating category, it has certain limitations. For instance, the 

information treats each transaction as one undivided whole. An NRSRO is counted as having rated a transaction, and the 

aggregate amount of securities issued, even if the NRSRO rated only a portion of it.

45 The “CMBS” category is comprised of transactions collateralized by mortgages or leases on commercial or multi-family

income-producing properties (excluding commercial real estate collateralized debt obligations). See Commercial Mortgage 

Alert website, available at https://www.greenstreet.com/news/library/commercial-mortgage-alert.

46 The “ABS” category is comprised of securities that are collateralized by assets other than the following: CMBS; MBS;

Fannie Mae and Freddie Mac issues (other than risk transfer transactions); issuances by municipalities; tax exempt 

issues; issues that are fully retained by an affiliate of the deal sponsor; commercial paper and other continuously offered 

securities such as medium-term notes; CLOs and other collateralized debt obligations; and refinancing of previously offered 

securities. See Asset-Backed Alert website, available at https://www.greenstreet.com/news/library/asset-backed-alert.

47 The “MBS” category is comprised of securities secured by U.S. first-lien mortgages on residential properties (excluding

Fannie Mae and Freddie Mac issues, securities secured by non-performing or re-performing mortgages, subprime 

mortgages, or mortgages financing single-family rental businesses, and refinancings of previously offered securities). See id.

48 The “CLO” category is comprised of arbitrage collateralized loan obligations secured by broadly syndicated corporate

loans and middle market collateralized loan obligations secured by loans to small to medium sized enterprises. See id. 
S TAFF REPORT | 33

i. CMBS

Charts 15 through 18 provide information 

concerning U.S.49 CMBS ratings by NRSROs,50

as reported in Commercial Mortgage Alert. 

NRSRO market share varies between the conduit 

CMBS and single-borrower CMBS segments,51

the two segments that account for most of the

non-agency52 U.S. CMBS transactions rated by

NRSROs. The charts include reported market 

share information for total non-agency U.S. CMBS 

transactions,53 U.S. conduit CMBS transactions, 

U.S. single-borrower CMBS transactions, and 

agency CMBS transactions54 for calendar year 

2019, calendar year 2020, and the first half of 

calendar year 2021.

49 See id. References to “U.S.” CMBS, MBS, ABS, and CLO issuance and market shares in this Section IV.A.2 reflect 

securities issued for sale primarily in the U.S., which include securities issued publicly and those issued under 

Rule 144A under the Securities Act of 1933 (the “Securities Act”). Commercial Mortgage Alert website, available 

at https://www.greenstreet.com/news/library/commercial-mortgage-alert.

50 For purposes of Charts 15 through 18, all rating activity for pre-integration DBRS, MCR, and DBRS has been aggregated

and presented for DBRS for calendar year 2019. Please refer to the December 2020, January 2020, and December 2018 

Annual Reports for information for pre-integration DBRS and MCR, which can be found under “Annual Reports to 

Congress” in the “Reports and Studies” section of the OCR webpage, available at https://www.sec.gov/ocr/ocr-reportsand-studies.html.

51 The term “conduit” refers to a financial intermediary that functions as a link, or conduit, between the lender(s)

originating loans and the ultimate investor(s). The conduit makes loans or purchases loans from third party 

correspondents under standardized underwriting parameters and once sufficient volume has accumulated, pools the loans 

for sale to investors in the CMBS market. See https://www.crefc.org/uploadedFiles/Site_Framework/Industry_Resources/

Glossary%20Revised%202014%20-Update.pdf. In contrast, a single-borrower transaction includes commercial 

mortgage loans made to a single borrower. 

52 “Non-agency” CMBS refers to CMBS that are not issued or guaranteed by Fannie Mae, Freddie Mac, or Ginnie Mae.

“Agency” CMBS generally refers to CMBS that are issued or guaranteed by such entities. 

53 Total U.S. CMBS transactions include conduit CMBS, single-borrower CMBS, and other types of CMBS, such as 

distressed/non-performing CMBS transactions and re-securitizations of CMBS transactions.

54 Only agency CMBS transactions with a rating from one or more NRSROs are included for determining NRSRO market

share in the agency CMBS category. See Commercial Mortgage Alert website, available at https://www.greenstreet.com/

news/library/commercial-mortgage-alert.
34 | OFFICE OF CREDIT RATINGS

Chart 15. Rating Agency Market Share for Total Non-Agency U.S. CMBS Issued in 2019, 2020, and First Half of 2021

1H-2021 

Rank NRSRO

1H-2021

Issuance 

($Mil.)

No. of 

deals

Market 

Share %

($)/(#)

2020 

Issuance 

($Mil.)

No. of 

deals

Market 

Share %

($)/(#)

2019 

Issuance 

($Mil.)

No. of 

deals

Market 

Share %

($)/(#)

1 Fitch 31,114 27 68.1/45.8 38,037 46 64.2/52.3 56,048 66 57.3/46.2

2 KBRA 23,053 20 50.4/33.9 25,825 32 43.6/36.4 45,924 56 47.0/39.2

3 DBRS 18,350 25 40.1/42.4 21,893 34 36.9/38.6 42,425 56 43.4/39.2

4 MIS 16,409 21 35.9/35.6 25,076 42 42.3/47.7 42,184 55 43.1/38.5

5 S&P 15,927 23 34.8/39.0 23,275 27 39.3/30.7 49,634 70 50.8/49.0

Total 

Rated 

Market

45,722 59 59,254 88 97,767 143

Chart 15 reflects market share percentages based on dollar amounts of issuance and number of deals rated. The sum 

of the market share percentages exceeds 100% because more than one NRSRO may rate a particular transaction. 

Likewise, the aggregate issuance volume and number of deals represented above exceed the Total Rated Market 

values for each time period. 

Source: Based on information from the Commercial Mortgage Alert’s CMBS database as of July 26, 2021, available 

at https://www.greenstreet.com/news/library/commercial-mortgage-alert. For calendar year 2019, the Staff has 

adjusted the presentation of the information by aggregating individual pre-integration DBRS and MCR information 

to present the information consistently as a combined entity, DBRS. See note 43.

Chart 16. Rating Agency Market Share for U.S. Conduit CMBS Issued in 2019, 2020, and First Half of 2021

1H-2021 

Rank NRSRO

1H-2021

Issuance 

($Mil.)

No. of 

deals

Market 

Share %

($)/(#)

2020 

Issuance 

($Mil.)

No. of 

deals

Market 

Share % 

($)/(#)

2019 

Issuance 

($Mil.)

No. of 

deals

Market 

Share %

($)/(#)

1 Fitch 15,184 16 100.0/100.0 26,953 30 100.0/100.0 49,154 52 100.0/100.0

2 KBRA 12,244 13 80.6/81.3 17,400 20 64.6/66.7 32,755 36 66.6/69.2

3 S&P 11,409 11 75.1/68.8 14,769 14 54.8/46.7 35,582 36 72.4/69.2

4 DBRS 4,305 4 28.4/25.0 9,553 10 35.4/33.3 18,318 18 37.2/34.6

5 MIS 2,560 3 16.9/18.8 11,457 15 42.5/50.0 14,836 17 30.2/32.7

Total 

Rated 

Market

15,184 16 26,953 30 49,154 52

Chart 16 reflects market share percentages based on dollar amounts of issuance and number of deals rated. The sum 

of the market share percentages exceeds 100% because more than one NRSRO may rate a particular transaction. 

Likewise, the aggregate issuance volume and number of deals represented above exceed the Total Rated Market 

values for each time period.

Source: Based on information from the Commercial Mortgage Alert’s database as of July 26, 2021, available at 

https://www.greenstreet.com/news/library/commercial-mortgage-alert. For calendar year 2019, the Staff has 

adjusted the presentation of the information by aggregating individual pre-integration DBRS and MCR information 

to present the information consistently as a combined entity, DBRS. See note 43.
STAFF REPORT | 35

Chart 17. Rating Agency Market Share for U.S. Single-Borrower CMBS Issued in 2019, 2020, and First Half of 2021

1H-2021 

Rank NRSRO

1H-2021

Issuance 

($Mil.)

No. of 

deals

Market 

Share %

($)/(#)

2020 

Issuance 

($Mil.)

No. of 

deals

Market 

Share %

($)/(#)

2019 

Issuance 

($Mil.)

No. of 

deals

Market 

Share %

($)/(#)

1 Fitch 15,930 11 52.2/25.6 8,582 12 36.1/25.5 6,894 14 15.0/16.9

2 DBRS 14,045 21 46.0/48.8 10,108 20 42.5/42.6 23,368 35 50.7/42.2

3 MIS 13,849 18 45.4/41.9 11,388 23 47.9/48.9 26,518 36 57.6/43.4

4 KBRA 10,809 7 35.4/16.3 7,231 9 30.4/19.1 12,506 18 27.2/21.7

5 S&P 4,517 12 14.8/27.9 3,154 8 13.3/17.0 12,638 30 27.4/36.1

Total 

Rated 

Market

30,537 43 23,776 47 46,060 83

Chart 17 reflects market share percentages based on dollar amounts of issuance and number of deals rated. The sum 

of the market share percentages exceeds 100% because more than one NRSRO may rate a particular transaction. 

Likewise, the aggregate issuance volume and number of deals represented above exceed the Total Rated Market 

values for each time period.

Source: Based on information from the Commercial Mortgage Alert’s CMBS database as of July 26, 2021, available 

at https://www.greenstreet.com/news/library/commercial-mortgage-alert. For calendar year 2019, the Staff has 

adjusted the presentation of the information by aggregating individual pre-integration DBRS and MCR information 

to present the information consistently as a combined entity, DBRS. See note 43.

Chart 18. Rating Agency Market Share for Agency CMBS Issued in 2019, 2020, and First Half of 2021

1H-2021 

Rank NRSRO

1H-2021

Issuance 

($Mil.)

No. of 

deals

Market 

Share %

($)/(#)

2020 

Issuance 

($Mil.)

No. of 

deals

Market 

Share %

($)/(#)

2019 

Issuance 

($Mil.)

No. of 

deals

Market 

Share %

($)/(#)

1 Fitch 12,275 10 100.0/100.0 26,820 21 90.9/91.3 16,767 12 59.2/60.0

2 DBRS 8,954 7 72.9/70.0 15,011 12 50.9/52.2 15,995 11 56.5/55.0

3 KBRA 3,322 3 27.1/30.0 14,480 11 49.1/47.8 12,311 9 43.5/45.0

4 MIS 0 0 0.0/0.0 2,671 2 9.1/8.7 5,862 4 20.7/20.0

5 S&P 0 0 0.0/0.0 0 0 0.0/0.0 5,677 4 20.1/20.0

Total 

Rated 

Market

12,275 10 29,491 23 28,306 20

Chart 18 reflects market share percentages based on dollar amounts of issuance and number of deals rated. The sum 

of the market share percentages exceeds 100% because more than one NRSRO may rate a particular transaction. 

Likewise, the aggregate issuance volume and number of deals represented above exceed the Total Rated Market 

values for each time period.

Source: Based on information from the Commercial Mortgage Alert’s CMBS database as of July 26, 2021, available 

at https://www.greenstreet.com/news/library/commercial-mortgage-alert. For calendar year 2019, the Staff has 

adjusted the presentation of the information by aggregating individual pre-integration DBRS and MCR information 

to present the information consistently as a combined entity, DBRS. See note 43.
36 | OFFICE OF CREDIT RATINGS

Charts 15 through 17 show that in 2019, 2020, and 

the first half of 2021 the large NRSROs generally 

held a large percentage of the market shares in 

rating non-agency U.S. CMBS transactions, but 

DBRS and KBRA have achieved significant market 

shares as well.55

As illustrated in Chart 15, in the first half of 2021, 

KBRA and DBRS had the second and third-highest 

market shares, respectively, in the non-agency U.S. 

CMBS segment. KBRA has consistently attained 

a market share of at least 43% in each of 2019, 

2020, and the first half of 2021, and DBRS has 

attained a market share of over 36% during the 

same time period.

The relative size of the U.S. conduit CMBS segment 

had been about half of the non-agency U.S. CMBS 

transactions in 2019 and 2020. In the first half 

of 2021, the U.S. conduit segment accounted for 

about a third of all non-agency U.S. CMBS transactions.56 Fitch has continued to maintain market 

share in the U.S. conduit CMBS segment.

As illustrated in Chart 16, Fitch had the highest 

market share, measured by dollar value of issuance, 

in this segment during 2019, 2020, and the first 

half of 2021, rating all of the transactions over that 

period. KBRA had the third-highest market share, 

measured by dollar value of issuance, in the U.S. 

conduit CMBS segment in 2019, and the secondhighest ranking in 2020 and the first half of 2021. 

In each of 2017, 2018, 2019, 2020, and the first 

half of 2021, KBRA has rated more than half of 

these transactions. 

The relative size of the U.S. single-borrower segment 

was over 40% of the non-agency U.S. CMBS 

transactions in 2019 and 2020. In the first half of 

2021, the U.S. single-borrower segment accounted 

for about two-thirds of all non-agency U.S. CMBS 

transactions.57 DBRS gained market share in this 

segment, achieving the second highest market share 

in the first half of 2021, rating twenty-one of the 

forty-three transactions in the segment. 

55 Non-agency U.S. CMBS issuance came to a near halt in March 2020 because of COVID-19. Issuance began to pick-up

in the third and fourth quarters of 2020, but overall issuance in 2020 was down nearly 40% from 2019 due to 

COVID-19 and the resulting economic impact. See S&P Loses to Moody’s, Commercial Mortgage Alert, Jan. 22, 2021; 

CMBS Issuance Off 27% Year-Over-Year, Commercial Mortgage Alert, Oct. 2, 2020. Non-agency U.S. CMBS issuance 

continued to grow in the first half of 2021, with U.S. conduit CMBS transactions accounting for approximately 33% and 

U.S. single-borrower transactions accounting for 67%. See CMBS, CLO Issuers Prep for Busier 2nd Half, Commercial 

Mortgage Alert, July 9, 2021.

56 U.S. conduit CMBS issuance has resumed, albeit more slowly than other non-agency U.S. CMBS segments, because it

takes more time and effort than it did before COVID-19 to aggregate enough collateral for a transaction—investors 

continue to shy away from offerings that are backed by more than minimal amounts of loans on hotel and retail 

properties, which have suffered as a result of COVID-19. See CMBS, CLO Issuers Prep for Busier 2nd Half, Commercial 

Mortgage Alert, July 9, 2021; Election Day Looms Large for CMBS Issuers, Commercial Mortgage Alert, Oct. 2, 2020. 

57 U.S. single-borrower sector issuance resumed in the third quarter of 2020 and continued to grow in the first half of

2021 as lenders and investors have been attracted to securitizations of large loans tied to prominent borrowers and/or 

significant properties and portfolios during COVID-19. See CMBS, CLO Issuers Prep for Busier 2nd Half, Commercial 

Mortgage Alert, July 9, 2021; Election Day Looms Large for CMBS Issuers, Commercial Mortgage Alert, Oct. 2, 2020. 
S TAFF REPORT | 37

As illustrated in Chart 18, Fitch has continued 

to improve its market share in the agency CMBS 

segment. Fitch had the highest market share in 

this segment during 2019, 2020, and the first half 

of 2021. Over the same period, DBRS and KBRA 

had the second and third-highest market shares, 

respectively, in the agency CMBS segment.

ii. ABS/MBS/CLO

Charts 19 through 21 provide information 

concerning U.S. ABS, U.S. MBS, and U.S. CLO 

ratings by NRSROs,58 as reported in Asset-Backed 

Alert. The charts include reported market share 

information for these transactions for calendar 

years 2019, calendar year 2020, and the first half 

of calendar year 2021. 

Chart 19. Rating Agency Market Shares for U.S. ABS Issued in 2019, 2020, and First Half of 2021

1H-2021 

Rank NRSRO

1H-2021

Issuance 

($Mil.)

No. of 

deals

Market 

Share %

($)/(#)

2020 

Issuance 

($Mil.)

No. of 

deals

Market 

Share %

($)/(#)

2019 

Issuance 

($Mil.)

No. of 

deals

Market 

Share %

($)/(#)

1 S&P 92,741 148 49.5/45.7 159,396 239 58.3/47.9 193,378 317 57.6/53.9

2 MIS 88,584 97 47.3/29.9 114,383 157 41.8/31.5 143,742 203 42.8/34.5

3 Fitch 63,954 85 34.1/26.2 109,286 151 40.0/30.3 151,090 192 45.0/32.7

4 DBRS 61,933 111 33.1/34.3 76,121 168 27.8/33.7 107,086 201 31.9/34.2

5 KBRA 40,538 108 21.6/33.3 50,228 137 18.4/27.5 64,909 177 19.3/30.1

Total 

Rated 

Market

187,300 324 273,360 499 335,931 588

Chart 19 reflects market share percentages based on dollar amounts of issuance and number of deals rated. The sum 

of the market share percentages exceeds 100% because more than one NRSRO may rate a particular transaction. 

Likewise, the aggregate issuance volume and number of deals represented above exceed the Total Rated Market 

values for each time period.

Source: Based on information from the Asset-Backed Alert’s ABS database as of July 26, 2021, available at

https://www.greenstreet.com/news/library/asset-backed-alert. For calendar year 2019, the Staff has adjusted 

the presentation of the information by aggregating individual pre-integration DBRS and MCR information to 

present the information consistently as a combined entity, DBRS. See note 51.

58 For purposes of Charts 19 through 21, all rating activity for pre-integration DBRS, MCR, and DBRS has been aggregated

and presented for DBRS for calendar year 2019. Please refer to the December 2020, January 2020, and December 2018 

Annual Reports for information for pre-integration DBRS and MCR, which can be found under “Annual Reports to 

Congress” in the “Reports and Studies” section of the OCR webpage, available at https://www.sec.gov/ocr/ocr-reportsand-studies.html.
38 | OFFICE OF CREDIT RATINGS

Chart 20. Rating Agency Market Shares for U.S. MBS Issued in 2019, 2020, and First Half of 2021

1H-2021 

Rank NRSRO

1H-2021

Issuance 

($Mil.)

No. of 

deals

Market 

Share %

($)/(#)

2020 

Issuance 

($Mil.)

No. of 

deals

Market 

Share %

($)/(#)

2019 

Issuance 

($Mil.)

No. of 

deals

Market 

Share %

($)/(#)

1 Fitch 21,920 48 68.1/66.7 14,755 46 48.9/57.5 8,664 29 31.0/38.2

2 MIS 21,861 39 67.9/54.2 14,642 31 48.6/38.8 19,074 44 68.3/57.9

3 KBRA 9,051 22 28.1/30.6 10,576 25 35.1/31.3 13,126 33 47.0/43.4

4 DBRS 3,092 7 9.6/9.7 10,810 24 35.9/30.0 11,679 26 41.8/34.2

5 S&P 2,306 6 7.2/8.3 2,756 8 9.1/10.0 2,433 5 8.7/6.6

Total 

Rated 

Market

32,203 72 30,148 80 27,941 76

Chart 20 reflects market share percentages based on dollar amounts of issuance and number of deals rated. The 

sum of the market share percentages exceeds 100% because more than one NRSRO may rate a particular transaction. Likewise, the aggregate issuance volume and number of deals represented above exceed the Total Rated 

Market values for each time period. 

Source: Based on information from the Asset-Backed Alert’s ABS database as of July 26, 2021, available at 

https://www.greenstreet.com/news/library/asset-backed-alert. For calendar year 2019, the Staff has adjusted the 

presentation of the information by aggregating individual pre-integration DBRS and MCR information to present the 

information consistently as a combined entity, DBRS. See note 51.

Chart 21. Rating Agency Market Shares for U.S. CLO Issued in First Half of 2019, 2020, and First Half of 2021

1H-2021 

Rank NRSRO

1H-2021

Issuance 

($Mil.)

No. of 

deals

Market 

Share %

($)/(#)

2020 

Issuance 

($Mil.)

No. of 

deals

Market 

Share %

($)/(#)

2019 

Issuance 

($Mil.)

No. of 

deals

Market 

Share %

($)/(#)

1 S&P 56,824 119 66.9/68.0 81,589 193 87.0/86.2 73,791 152 60.1/58.5

2 MIS 31,746 65 37.4/37.1 18,890 45 20.1/20.1 73,538 155 59.9/59.6

3 Fitch 16,878 34 19.9/19.4 32,815 72 35.0/32.1 79,889 166 65.1/63.8

4 KBRA 6,066 12 7.1/609 3,541 10 3.8/4.5 5,678 13 4.6/5.0

5 DBRS 2,588 3 3.0/1.7 330 1 0.4/0.4 3,424 8 2.8/3.1

Total 

Rated 

Market

84,983 175 93,785 224 122,716 260

Chart 21 reflects market share percentages based on dollar amounts of issuance and number of deals rated. The sum 

of the market share percentages exceeds 100% because more than one NRSRO may rate a particular transaction. 

Likewise, the aggregate issuance volume and number of deals represented above exceed the Total Rated Market 

values for each time period. 

Source: Based on information from the Asset-Backed Alert’s ABS database as of July 26, 2021, available at 

https://www.greenstreet.com/news/library/asset-backed-alert. For calendar year 2019, the Staff has adjusted the 

presentation of the information by aggregating individual pre-integration DBRS and MCR information to present the 

information consistently as a combined entity, DBRS. See note 51.
S TAFF REPORT | 39

Chart 19 shows that DBRS and KBRA have built 

and maintained significant U.S. ABS rating market 

shares.59 DBRS has consistently attained a market 

share of over 27% in each of 2019, 2020, and the 

first half of 2021, and KBRA has attained a market 

share of over 18% during the same time period.60

For example, DBRS has been able to gain market 

share in rating more traditional types of assetbacked securities (aside from the MBS and CMBS 

categories). As another example, DBRS rated 

95.1% of the transactions backed by student loans 

that priced during the first half of 2021.61 DBRS 

also rated 34.1% of the transactions backed by 

credit card transactions (one of the larger classes of 

asset-backed securities) that priced during the first 

half of 2021.62 DBRS has also been able to gain 

market share in auto-related asset-backed securities, 

rating 55.7% of the auto-fleet lease transactions,

22.2% of the subprime auto loan transactions, 

5.6% of the prime auto loan transactions, and 

19.0% of the auto lease transactions that priced 

during the first half of 2021.63 KBRA has also 

established a market share in some of these 

auto-related asset-backed security categories, rating 

32% of the subprime auto loan transactions and 

3% of the prime auto loan transactions that priced 

during the first half of 2021.64 Chart 20 shows that 

the highest market shares for the U.S. MBS segment 

have been achieved by two of the large NRSROs. 

KBRA and DBRS had achieved market shares of 

over 40% in this segment in 2019, but have since 

seen their market share decrease in 2020 and the 

first half of 2021. DBRS and KBRA have, however, 

achieved notable market share in certain types of 

residential mortgage-backed securities not included 

in Chart 20. For example, DBRS rated 69% of the

59 See also Section IV.A.2 of this Report for a discussion of additional ABS asset classes where these two NRSROs have 

reported success in gaining market share. 

60 There was a significant reduction in U.S. ABS issuance volume in the second quarter of 2020 as COVID-19 caused vast

financial market disruptions. Issuance began to resume in the third quarter of 2020, but overall U.S. ABS issuance in 2020 

was down nearly 19% from 2019 due to COVID-19. See After Bleak Year, Pros Eye Issuance Rebound, Asset-Backed 

Alert, Jan. 8, 2021; Worldwide Issuance Rebound Falling Flat, Asset-Backed Alert, Oct. 2, 2020. U.S. ABS issuance has 

been strong in the first half of 2021, with issuance up 52% from a year ago. See Second Half Kicking Off on $1 Trillion 

Tempo, Asset-Backed Alert, July 9, 2021; Worldwide Issuance On Pace for Banner Year, Asset-Backed Alert, Apr. 9, 2021.

61 See Asset-Backed Alert’s ABS database indicates that twenty-three student loan transactions totaling $17.6 billion priced 

during the first half of 2021.

62 The Asset-Backed Alert database lists 12 credit card transactions totaling $5.5 billion that priced during the first half of 

2021.

63 See Asset-Backed Alert’s ABS database, which indicates that the following transactions were priced during the first 

half of 2021: 10 auto-fleet lease transactions totaling $8.9 billion, 32 subprime auto loan transactions totaling $20.7 

billion, 48 prime auto loan transactions totaling $44.3 billion, and 28 auto lease transactions totaling $25.7 billion.

64 See id.
40 | OFFICE OF CREDIT RATINGS

re-performing mortgage transactions that priced 

in the first half of 2021.65 Additionally, DBRS 

and KBRA were active rating securities backed by 

subprime mortgages and risk transfer securities 

during the first half of 2021. For securities backed 

by subprime mortgages, DBRS rated 32% and 

KBRA rated 28% that priced during the first half 

of 2021;66 for risk transfer securities, DBRS rated 

50% and KBRA rated 14% that priced during the 

first half of 2021.67

Chart 21 shows that the large NRSROs have the 

highest, second highest, and third highest market 

shares in the U.S. CLO segment. However, DBRS 

and KBRA have attained some market share in the 

U.S. CLO segment.

b. Market Share Observations in Other AssetBacked Securities Classes

While the large NRSROs maintain a large market 

share in some newer or more esoteric asset-backed 

securities asset classes, DBRS and KBRA have 

gained significant market share in these areas, 

as well.

For instance, DBRS and KBRA are significant 

raters of securities backed by unsecured consumer 

loans, including consumer loans originated through 

marketplace lending platforms. DBRS and KBRA 

had the two highest market shares in this category 

in the first half of 2021, both rating over 53% 

of the transactions priced during such period.68

Comparatively, MIS and S&P each rated less 

than 30% of these transactions for the same 

time period.69

Another example of market share gains achieved 

by a medium NRSRO in a discrete asset class 

is KBRA’s rating of securitizations backed by 

aircraft-lease receivables. KBRA rated 85.0% of the 

aircraft-lease receivables transactions that priced 

during the first half of 2021, while MIS and S&P 

rated 63.4% and 29.1%, respectively, of these 

transactions for the same time period.70 KBRA has 

rated sixty-four of the sixty-six, or 97.0%, of the 

aircraft-lease receivables transactions issued from 

December 2015 through the end of the second 

quarter of 2021.71

65 See Asset-Backed Alert’s ABS database, which indicates that fourteen re-performing mortgage-backed securities 

transactions totaling $8.5 billion priced during the first half of 2021. 

66 See Asset-Backed Alert’s ABS database, which indicates that forty-two subprime mortgage-backed securities transactions 

totaling $11.6 billion priced during the first half of 2021.

67 See Asset-Backed Alert’s ABS database, which indicates that twenty-one risk transfer transactions totaling $13.0 billion 

priced during the first half of 2021.

68 See Asset-Backed Alert’s ABS database, which indicates that thirty unsecured consumer loan transactions totaling 

$10.4 billion priced during the first half of 2021. 

69 See id.

70 See Asset-Backed Alert’s ABS database, which indicates that eight aircraft-lease receivables transactions totaling 

$4.1 billion priced during the first half of 2021. 

71 See id.
S TAFF REPORT | 41

KBRA was also active rating whole-business securitizations during the first half of 2021, rating 45.5% 

of the issuance amount of such transactions.72

While MIS had a greater market share for this time 

period (rating 65% of the transactions), KBRA’s 

gain in the whole-business category is further 

demonstrated when measured by the number 

of transactions rather than dollar amounts of 

issuance; KBRA rated six of the nine transactions 

priced during the first half of 2021.73

3. Barriers to Entry

Barriers to entry continue to exist in the credit 

ratings industry, presenting competitive challenges 

for the small and medium NRSROs.

One such potential barrier that has been raised 

by certain small and medium NRSROs are 

the investment management contracts of some 

institutional fund managers and the investment 

guidelines of some fixed income mutual fund 

managers, pension plan sponsors, and endowment 

fund managers, which require the use of ratings 

of specified rating agencies.74 The effect of these 

requirements can be to increase the demand for and 

liquidity of securities bearing the ratings of specified 

rating agencies. Historically, many of these guidelines refer to the ratings from the large NRSROs by 

name (i.e., Fitch, MIS, and S&P). Despite reports 

in recent years that investors are increasingly 

changing their guidelines to allow for investments 

in securities rated by a wider group of NRSROs,75

investment guidelines continue to be identified as a 

factor impacting the selection of NRSROs to rate 

certain transactions.76

A related barrier to entry is the inclusion requirements of some fixed income indices. To be included 

in certain of these indices, securities must be 

rated by specified NRSROs. Certain investment 

companies try to closely track the performance of 

the indices by purchasing the securities included 

in them, and can thus increase the demand for 

securities bearing the ratings of particular

72 See Asset-Backed Alert’s ABS database, which indicates that nine whole-business securitization transactions totaling $6.1 

billion priced during the first half of 2021. DBRS rated one whole-business securitization transaction representing 7.0% 

of the issuance amount of such transactions priced during the first half of 2021. Fitch rated 5.9% of the issuance amount 

of the whole-business transactions during the same time period.

73 See id.

74 See Statement of Jim Nadler, President and CEO, Kroll Bond Rating Agency, Bond Rating Agencies: Examining the 

“Nationally Recognized” Statistical Rating Organizations Hearing Before the Subcommittee on Investor Protection, 

Entrepreneurship and Capital Markets of the House Committee on Financial Services, 117th Congress (July 21, 2021), 

available at https://democrats-financialservices.house.gov/UploadedFiles/HHRG-117-BA16-Wstate-NadlerJ-20210721.

pdf; see also Letter from KBRA to the Commission (Aug. 19, 2014), available at https://www.sec.gov/comments/s7-18-11/

s71811-88.pdf. This barrier to entry was also mentioned during the SEC’s Credit Ratings Roundtable held on May 14, 

2013. At the roundtable, a representative of a former NRSRO mentioned that, according to a study conducted by the 

former NRSRO, approximately 42% of open-end fixed income funds with investment guidelines that reference ratings 

specifically refer to S&P, MIS, or a “major NRSRO.” See Credit Rating Roundtable, May 14, 2013, available at 

https://www.sec.gov/spotlight/credit-ratings-roundtable.shtml.

75 See, e.g., Big Investors Accept More Rating Agencies, Asset-Backed Alert, May 19, 2017.

76 See S&P Vaults Past Moody’s in Conduit Sector, Commercial Mortgage Alert, Jan. 24, 2020; S&P, Moody’s Duke It Out 

in Fitch’s Shadow, Commercial Mortgage Alert, Jan. 25, 2019.
42 | OFFICE OF CREDIT RATINGS

NRSROs.77 For instance, Fitch announced that its 

ratings had been added to the J.P. Morgan HighYield Bond Indices, noting that investors rely on 

such indices to determine which bonds suit their 

level of credit risk.78

Market participants and academics have identified 

various other barriers to entry in the credit rating 

industry, including economic and regulatory 

barriers.79 Among the regulatory barriers to entry 

for NRSROs are the potential challenges associated 

with complying with the statutory provisions 

included in the Rating Agency Act, such as the 

requirement in Section 15E(a)(1)(C) to furnish 

written certifications from qualified institutional 

buyers, and the costs associated with the DoddFrank Act and the related rules and rule amendments adopted by the Commission (the NRSRO 

Amendments).80 When the Commission issued

the proposed NRSRO Amendments, commenters 

expressed concerns that certain of the proposed 

requirements would be burdensome for small 

NRSROs to implement and could raise barriers to 

entry for credit rating agencies to seek to register as 

NRSROs.81 In connection with the adoption of the 

NRSRO Amendments, the Commission acknowledged that, despite efforts to limit the impact on 

small entities, the Dodd-Frank Act contained 

requirements, including those implemented by the 

NRSRO Amendments, which impose costs on 

NRSROs and may consequently create barriers 

to entry and have negative impacts on competition.82 The NRSRO Amendments as adopted by 

the Commission include various changes from 

the proposed amendments intended to address 

concerns regarding barriers to entry, including 

standards allowing NRSROs to tailor particular 

requirements to their business models, size, and 

rating methodologies.83

77 See, e.g., Rating Firms Seek Changes to Index, Asset-Backed Alert, May 26, 2017.

78 See Fitch Ratings Joins J.P. Morgan High Yield Bond Indices, Fitch Ratings, June 28, 2017. In a related example, 

DBRS announced that its ratings would be included in the determination of index credit quality classifications for 

CAD-denominated securities in the Bloomberg Barclays Canada Aggregate Index and the Global Aggregate Index, 

resulting in approximately 49 securities being added to the Canadian Aggregate Index. See DBRS Bond Ratings to Be 

Included in the Bloomberg Barclays Canada Aggregate Index, DBRS, Inc., Apr. 19, 2018.

79 See, e.g., Section IV.C of the March 2012 Annual Report, available at https://www.sec.gov/divisions/marketreg/

ratingagency/nrsroannrep0312.pdf; Fitch Assigns ‘A-’ Rating to S&P’s Senior Unsecured Notes Offering, Outlook Stable, 

Fitch Ratings, Aug. 10, 2020; Fitch Assigns ‘BBB+’ Rating to Moody’s Senior Unsecured Notes Offering, Outlook Stable, 

Fitch Ratings, Aug. 4, 2020.

80 See 2014 Adopting Release, 79 FR 55078 (Sept. 15, 2014), available at https://www.govinfo.gov/content/pkg/FR-2014-

09-15/pdf/2014-20890.pdf.

81 See 2014 Adopting Release, 79 FR at 55090, 55154, 55161, and 55254-55. See also comment letters received with 

respect to the NRSRO Amendments as proposed, available at https://www.sec.gov/comments/s7-18-11/s71811.shtml.

82 See 2014 Adopting Release, 79 FR at 55254.

83 See Section IV.C of the December 2015 Annual Report, available at https://www.sec.gov/ocr/reportspubs/annualreports/2015-annual-report-on-nrsros.pdf.
S TAFF REPORT | 43

Additionally, there are provisions for exemptions 

built into several rules and statutes that relate to 

small and medium NRSROs, if the Commission 

deems that these requirements may impose an 

unreasonable burden on the NRSRO. NRSROs 

may also request exemptions under Section 36 to 

other rules and statutes that do not have exemptions built into them.84

B. TRANSPARENCY

Congress described the Rating Agency Act as an 

act to improve ratings quality for the protection of 

investors and in the public interest “by fostering 

accountability, transparency, and competition in the 

credit rating agency industry.”85 Section 932 of the 

Dodd-Frank Act is entitled “Enhanced regulation, 

accountability, and transparency of NRSROs.” 

Both acts contain various provisions designed to 

increase the transparency—through clear disclosure 

open to public scrutiny—of, among other things,

NRSROs’ credit rating procedures and methodologies, business practices, and credit ratings 

performance. Under Exchange Act rules, NRSROs 

are required to disclose:

■ Standardized performance statistics;86

■ Consolidated information about credit rating 

histories;87

■ Information about material changes and significant errors in the procedures and methodologies 

used to determine credit ratings;88

■ Information about specific rating actions;89 and 

■ Clear definitions of each symbol, number, or 

score in the rating scale used by the NRSRO.90

NRSROs must also disclose certain information in 

connection with each rating action.91 Such information includes, among other things, the version of 

the procedure or methodology used to determine 

the credit rating, a description of the types of data

84 For example, KBRA was granted a temporary conditional exemption from Rule 17g-5(c)(1), which prohibits an NRSRO

from issuing or maintaining a credit rating solicited by a person that, in the most recently ended fiscal year, provided 

the NRSRO with net revenue equaling or exceeding 10% of the total net revenue of the NRSRO for the fiscal year. In 

another example, the Commission granted JCR a temporary conditional exemption from certain requirements of Section 

15E(t), which include provisions regarding the composition and duties of the supervisory board of an NRSRO. The 

Commission’s orders granting exemption requests can be found under “Exemption Orders” in the “Commission Orders” 

section of the OCR webpage, available at https://www.sec.gov/ocr/ocr-commission-orders.html.

85 See the preamble to the Rating Agency Act. 

86 See Instructions for Exhibit 1 to Form NRSRO. 

87 See Rule 17g-7(b). 

88 See Rule 17g-8(a)(4). 

89 See Rule 17g-7(a). 

90 See Rule 17g-8(b)(2).

91 See Rule 17g-7(a). 
44 | OFFICE OF CREDIT RATINGS

that were relied upon for purposes of determining 

the credit rating, an assessment of the quality of 

information available and considered in determining the credit rating, and information on the 

sensitivity of the credit ratings to assumptions made 

by the NRSRO.92

In addition to or in connection with required 

disclosures, NRSROs often issue press releases and 

reports at the time of a rating action to describe 

the rationale behind such rating action, and make 

versions of methodologies for determining credit 

ratings available on their websites.93 The availability of underlying methodologies, together with a 

report discussing the analysis supporting the rating 

action, may provide additional transparency into an 

NRSRO’s credit analysis and credit rating process.

From time-to-time, NRSROs also publish revisions 

and updates to their methodologies. They may 

also at times publish revisions to the assumptions 

that are inputs to their methodologies and rating 

approaches, including changes to their economic 

outlooks or default rate assumptions. Revised 

methodologies and related assumptions may 

provide additional transparency into changes in 

the NRSROs’ credit views and analyses.

NRSROs may also provide transparency to the 

extent they publish commentaries or research. 

NRSROs publish commentaries and research 

that generally include data, analyses, or projections on market sectors and economic outlooks.94

These publications may be helpful to investors 

to understand industry trends and the NRSROs’ 

credit views.

For example, following the emergence of 

COVID-19 in early 2020, NRSROs began 

publishing commentaries and research that provide 

their perspectives on the potential credit and 

rating impacts of COVID-19 on issuers and debt 

obligations in different market sectors. They also 

began publishing COVID-19-related commentaries on economic and market trends. KBRA 

published research discussing valuation declines 

in distressed commercial real estate properties in 

CMBS transactions during COVID-19.95 A DBRS 

report examining how the self-storage industry has 

fared during COVID-19 describes how the selfstorage industry had been growing steadily prior 

to COVID-19 and remained resilient as pandemic 

related restrictions persisted, in contrast to certain 

other types of commercial real estate properties, 

including those in the hotel and non-essential 

retail sectors.96

92 See Rule 17g-7(a)(1)(ii). 

93 The reports accompanying a rating action are frequently available on a paid subscription basis, although some NRSROs

provide access to such reports for free.

94 NRSROs may also make market and economic data separately available.

95 See KBRA, Appraisals for Distressed CRE Continue to Trend Lower in COVID’s Wake (May 18, 2021), available at 

https://www.kbra.com/documents/report/48884/appraisals-for-distressed-cre-continue-to-trend-lower-in-covid-s-wake.

96 See DBRS, Self-Storage in the Pandemic: People Need Their Space (Aug. 23, 2021), available at https://www.

dbrsmorningstar.com/research/383322/self-storage-in-the-pandemic-people-need-their-space.
S TAFF REPORT | 45

NRSROs have also produced research in recent 

years regarding their views on ESG matters and 

how they incorporate ESG considerations in 

their credit rating actions. For example, DBRS 

published research discussing the potential impact 

of climate change on portfolios of renewable and 

gas-based power plants and how, in some power 

markets, increases in green power generation 

entails risks, such as power supply volatility due to 

more frequent weather-related outages caused by 

climate change.97 KBRA also published research 

regarding how it views the consideration of ESG 

issues in credit analysis and why it does not deploy 

subjective value-based ESG scoring rubrics. KBRA 

indicated that it believes that ESG factors that 

impact credit risk need better disclosure and are 

best examined through the lens of risk management 

analysis for corporate, financial institution, and 

government debt issues and issuers.98

Between 2016 and 2021, several of the Section 

15E Review Areas discussed in Section III above, 

including adherence to policies, procedures, and 

methodologies, conflicts of interest, internal

supervisory controls, DCO activities, and postemployment activities, included examination 

findings that addressed transparency-related issues. 

In total, there were 172 transparency-related 

findings, accounting for approximately 39% of all 

essential findings, in the Section 15E examinations 

conducted from 2016 to 2021. On average, each 

Section 15E examination cycle from 2016 to 2021 

included 29 transparency-related essential findings. 

For the 2020 and 2021 examinations specifically, 

transparency-related essential findings accounted 

for 16 and 18 essential findings, respectively.

C. CONFLICTS OF INTEREST

NRSROs operate under one or more business 

models, each having potential conflicts of interest. 

Most of the NRSROs primarily operate under the 

“issuer-pay” model, which is subject to a potential 

conflict in that the credit rating agency may be 

influenced to determine more favorable (i.e., 

higher) ratings than warranted in order to retain 

the obligors or issuers as clients. Another business 

model is the “subscriber-pay” model, under 

which investors pay a subscription fee to access 

97 See DBRS, Impact of Climate Change on Renewable and Natural Gas-Fired Power Generation Assets (Oct. 4, 2021), 

available at https://www.dbrsmorningstar.com/research/385386/impact-of-climate-change-on-renewable-and-natural-gasfired-power-generation-assets. 

98 See KBRA, Credit Ratings Deserve ESG Risk Analysis, Not ESG Scores (Feb. 3, 2021), available at https://www.kbra.

com/documents/report/44260/credit-ratings-deserve-esg-risk-analysis-not-esg-scores. 
46 | OFFICE OF CREDIT RATINGS

an NRSRO’s ratings. This model is also subject 

to potential conflicts of interests. For example, 

an NRSRO may be aware that an influential 

subscriber holds a securities position (long or 

short) that could be advantaged if a credit rating 

upgrade or downgrade causes the market value 

of the security to increase or decrease or that a 

subscriber invests in newly issued bonds and 

would obtain higher yields if the bonds were to 

have lower ratings.

Section 15E and the related Commission rules 

address conflicts of interest.99 For example, Rule 

17g-5 identifies certain conflicts of interest that are 

prohibited under all circumstances100 and other 

conflicts of interest that are prohibited unless an 

NRSRO has publicly disclosed the existence of the 

conflict and has implemented policies and procedures reasonably designed to address and manage 

such conflict.101

Among the conflicts of interest identified in Rule 

17g-5 are conflicts involving individual credit 

analysts or other employees of an NRSRO. For 

example, an NRSRO is prohibited from issuing or 

maintaining a credit rating for a person where an 

employee of the NRSRO that participated in determining, or is responsible for approving, the credit 

rating directly owns securities of, or is an officer or 

director of, the person that would be subject to the 

credit rating.102

Rule 17g-5(c)(8) is another example of a prohibited 

conflict of interest involving persons within an 

NRSRO. Under the Rule, an NRSRO is prohibited 

from issuing or maintaining a credit rating where 

a person within the NRSRO who participates in 

determining or monitoring the rating, or developing 

or approving procedures or methodologies used for 

determining the rating, also (i) participates in sales 

or marketing activities of the NRSRO or its affiliate, 

or (ii) is influenced by sales or marketing considerations.103 In May 2020, the Commission instituted 

settled administrative proceedings against MCR for 

issuing or maintaining credit ratings where MCR 

employees who participated in determining or 

monitoring the credit ratings also participated in the 

sales or marketing of a product or service of MCR, 

in violation of Rule 17g-5(c)(8)(i).104

Other statutory provisions and Commission rules 

address potential conflicts of interest that may arise 

when a credit analyst seeks employment outside 

the NRSRO. Section 15E requires each NRSRO 

to have policies and procedures in place to provide 

for an internal “look-back” review process in 

order to determine whether any conflict of interest 

of a former employee influenced a credit rating 

in certain instances.105 Rule 17g-8(c) requires 

an NRSRO’s policies and procedures to address 

instances in which a “look-back” review determined that a conflict of interest influenced a credit

99 See, e.g., Section 15E(h) and Rule 17g-5. 

100 See Rule 17g-5(c).

101 See Rule 17g-5(a)(1)-(2) and Rule 17g-5(b); Instructions for Exhibits 6 and 7 to Form NRSRO. In addition, Section 

15E(t)(3)(B) requires an NRSRO’s board of directors to oversee the establishment, maintenance, and enforcement of 

policies and procedures to address, manage, and disclose any conflicts of interest.

102 See Rule 17g-5(c)(2) and Rule 17g-5(c)(4).

103 See Rule 17g-5(c)(8).

104 See In re Morningstar Credit Ratings, LLC, Exch. Act Rel. No. 88880 (May 15, 2020) (settled action), available at 

https://www.sec.gov/litigation/admin/2020/34-88880.pdf. 

105 See Section 15E(h)(4)(A).
S TAFF REPORT | 47

rating. Such policies and procedures are required to 

be reasonably designed to ensure that the NRSRO 

will promptly determine whether a credit rating 

must be revised and promptly publish a revised 

credit rating or an affirmation of the credit rating, 

along with certain disclosures about the existence 

of the conflict.106

One of the conflict of interest rules concerns the 

issuer-pay conflict of interest relating to structured finance products. The Commission adopted 

Rule 17g-5(a)(3) in 2009 to address this conflict 

of interest. An exemption was in effect for Rule 

17g-5(a)(3) with regard to structured finance 

products issued by non-U.S. issuers in transactions 

outside the United States until the Commission 

codified the exemption in August 2019. In the 

adopting release, the Commission directed the 

Staff to further evaluate the effectiveness of Rule 

17g-5(a)(3) with respect to ratings of structured 

finance products that are not eligible for relief 

under the adopted exemption.107 Towards this end, 

in a February 2020 speech, then OCR Director

Jessica Kane welcomed input and engagement 

from all interested parties on the effectiveness of 

Rule 17g-5(a)(3).108 In the May 26, 2021 hearing 

before the House Appropriations Subcommittee 

on Financial Services and General Government, 

SEC Chair Gary Gensler testified that he has asked 

the Staff to take a fresh look at the Staff’s prior 

work on the issuer-pay conflict to assess if there are 

further modifications to be done.109

As discussed in Section III.C.5 of this Report, 

conflicts of interest accounted for 11.5% of all 

essential findings from the Section 15E examinations conducted from 2016 to 2021. As Chart 3 

shows, conflicts of interest accounted for 19 of the 

essential findings from the 2016 to 2021 examinations.110 Conflicts of interest have accounted for 

approximately seven essential findings for each 

examination, on average, from 2017 to 2021. 

For the 2020 and 2021 examinations, conflicts 

of interest accounted for five and four essential 

findings, respectively.

106 See Rule 17g-8(c). 

107 See Amendments to Rules for Nationally Recognized Statistical Rating Organizations, Release No. 34-86590 (Aug. 7, 

2019), 84 FR 40247, 40250 (Aug. 14, 2019) (“2019 Adopting Release”), available at https://www.govinfo.gov/content/

pkg/FR-2019-08-14/pdf/2019-17218.pdf.

108 See Jessica Kane, Speech, The SEC’s Office of Credit Ratings and NRSRO Regulation: Past, Present, and Future 

(Feb. 24, 2020), available at https://www.sec.gov/news/speech/speech-jessica-kane-2020-02-24. OCR then-Director 

Jessica Kane delivered a speech describing the NRSRO regulatory framework and certain regulatory requirements; 

OCR’s responsibility for administering this regulatory framework; and observed trends in NRSRO compliance. The 

speech referenced the Commission’s 2019 Adopting Release and invited interested parties to provide input on the 

effectiveness of Rule 17g-5(a)(3). 

109 See Securities and Exchange Commission Oversight Hearing Before the Subcommittee on Financial Services and 

General Government of the House Committee on Appropriations, 117th Congress (May 26, 2021), available at 

https://appropriations.house.gov/events/hearings/securities-and-exchange-commission-oversight-hearing.

110 This was likely related to the new and amended rules that became effective in 2015. See note 21.
48 | OFFICE OF CREDIT RATINGS
S TAFF REPORT | 49

V. ACTIVITIES 

RELATING TO NRSROs

A. COMMISSION ORDERS 

AND RELEASES

The Commission issued the following orders 

and releases relating to NRSROs or credit 

ratings in general during the Report Period:

■ In re DBRS, Inc., Exch. Act Rel. No. 92952 

(Sept. 13, 2021) (settled action).

111 The 

Commission instituted settled administrative 

proceedings against DBRS concerning violations 

of Rule 17g-8(b)(1) in connection with rating 

CLO Combo Notes.112 The SEC’s order finds 

that DBRS’s policies and procedures were not 

reasonably designed to ensure that it rated CLO 

Combo Notes in accordance with the terms of 

those securities.

■ Continuance of Exemption Pursuant to Order 

Granting Temporary Conditional Exemption 

for Japan Credit Rating Agency, Ltd. from 

Certain Requirements of Section 15E(t) of 

the Securities Exchange Act of 1934.

113 On 

August 17, 2018, the Commission granted 

JCR a temporary, conditional exemption from 

certain corporate governance requirements 

under Section 15E(t). On August 20, 2021, the 

exemption automatically renewed until August 

20, 2023.114

■ SEC v. Morningstar Credit Ratings, LLC, No. 

1:21-cv-1359 (S.D.N.Y. filed Feb. 16, 2021).

115

The Commission filed a civil action alleging that 

former credit rating agency Morningstar Credit 

Ratings, LLC, violated disclosure and internal 

controls provisions of Section 15E and the rules 

promulgated thereunder in rating CMBS.116

111 Available at https://www.sec.gov/litigation/admin/2021/34-92952.pdf. 

112 See https://www.sec.gov/enforce/34-92952-s.

113 Release No. 34-83884 (Aug. 17, 2018), available at https://www.sec.gov/rules/exorders/2018/34-83884.pdf. 

114 See id.

115 Available at https://www.sec.gov/litigation/complaints/2021/comp-pr2021-29.pdf.

116 See https://www.sec.gov/news/press-release/2021-29.
50 | OFFICE OF CREDIT RATINGS

B. STAFF PUBLICATIONS

The Staff issued the following publications relating 

to NRSROs or credit ratings in general during the 

Report Period:

■ 2020 Summary Report of Commission Staff’s 

Examinations of Each Nationally Recognized 

Statistical Rating Organization, dated December 

2020 (December 2020 Exam Report), as 

required under Section 15E(p)(3)(C).117 The 

December 2020 Exam Report summarizes 

the essential findings of the examinations 

conducted by the Staff under Section 15E(p)

(3)(C) for the period January 1, 2019 through 

December 31, 2019.

■ Annual Report on Nationally Recognized 

Statistical Rating Organizations, dated 

December 2020 (December 2020 Annual 

Report), as required by Section 6 of the Rating 

Agency Act.118 The December 2020 Annual 

Report addresses the matters described in the 

second paragraph under Section II of this Report 

for the period June 26, 2019 to June 25, 2020. 

C. ADVISORY COMMITTEES

The SEC’s Investor Advisory Committee (IAC)119

has considered the SEC’s approach to regulation of 

the credit rating agency industry. The IAC met five 

times during the Report Period. At the IAC meeting 

on March 11, 2021,120 the IAC approved, for the 

Commission’s consideration, the Market Structure 

Subcommittee’s recommendation for increasing 

transparency in OCR Staff’s annual examination 

reports of NRSROs.121

117 Available at https://www.sec.gov/files/nrsro-summary-report-2020.pdf. 

118 Available at https://www.sec.gov/files/2020-annual-report-on-nrsros.pdf. 

119 Section 911 of the Dodd-Frank Act established the IAC to advise the Commission on regulatory priorities, the regulation 

of securities products, trading strategies, fee structures, the effectiveness of disclosure, and on initiatives to protect 

investor interests and to promote investor confidence and the integrity of the securities marketplace. The Dodd-Frank 

Act authorizes the IAC to submit findings and recommendations for review and consideration by the Commission. 

See https://www.sec.gov/spotlight/investor-advisory-committee.shtml; https://www.sec.gov/spotlight/investor-advisorycommittee-2012/iac-charter.pdf.

120 See Webcast of IAC Meeting, SEC (Mar. 11, 2021), available at https://www.sec.gov/video/webcast-archive-player.

shtml?document_id=iac031121. The IAC’s Market Structure Subcommittee circulated its draft recommendation 

ahead of this IAC meeting. See https://www.sec.gov/spotlight/investor-advisory-committee-2012/credit-rating-agenciesrecommendation-03112021.pdf. 

121 See Recommendation of the Market Structure Subcommittee of the SEC Investor Advisory Committee Regarding Credit 

Rating Agencies (Mar. 11, 2021), available at https://www.sec.gov/spotlight/investor-advisory-committee-2012/20210311-

credit-rating-agencies-recommendation.pdf.
S TAFF REPORT | 51

VI. APPENDIX: 

SUMMARY OF STATUTORY 

FRAMEWORK AND RULES

Section 15E and Rules 17g-1 through 17g-10 

govern the registration and oversight 

program for credit rating agencies that 

are registered with the Commission as 

NRSROs. This regulatory regime was established 

by the Rating Agency Act122 and amended by the 

Dodd-Frank Wall Street Reform and Consumer 

Protection Act (Dodd-Frank Act).123

The Dodd-Frank Act mandated the creation of 

the Office of Credit Ratings (OCR), which is 

responsible for oversight of credit rating agencies 

registered with the Commission as NRSROs. 

OCR’s Staff includes professionals with expertise 

in a variety of areas that relate to its regulatory 

mission, such as corporate, municipal, and 

structured debt finance.124

Pursuant to the Commission’s regulatory regime 

for NRSROs, an NRSRO is required to, among 

other things:

■ File with the Commission an annual certification 

of its Form NRSRO registration,125 promptly 

update its filing in certain circumstances,126 and 

make its current Form NRSRO filing and most 

of its current Form NRSRO Exhibits available 

on its public website.127

■ Disclose certain information, including 

information concerning the NRSRO’s 

performance measurement statistics and 

its procedures and methodologies to 

determine ratings.128

■ Establish, maintain, enforce, and document 

an effective internal control structure governing 

the implementation of and adherence to policies,

procedures, and methodologies for determining 

credit ratings,129 and retain records of its internal 

control structure.130

■ Consider certain factors with respect to its 

establishment, maintenance, enforcement, 

and documentation of an effective internal 

control structure.131

122 Pub. L. No. 109-291, 120 Stat. 1327 (2006).

123 Pub. L. No. 111-203, § 932, 124 Stat. 1376, 1872-83 (2010).

124 See Section 15E(p)(2) for a description of OCR staffing requirements.

125 Section 15E(b)(2) and Rule 17g-1(f).

126 Section 15E(b)(1) and Rule 17g-1(e).

127 Section 15E(a)(3) and Rule 17g-1(i).

128 Section 15E(a)(1)(B)(i) and Section 15E(a)(1)(B)(ii).

129 Section 15E(c)(3)(A). 

130 Rule 17g-2(b)(12).

131 See, e.g., Rule 17g-8(d)(1)–(4). 
52 | OFFICE OF CREDIT RATINGS

■ Establish, maintain, enforce, and document 

policies and procedures reasonably designed 

to: achieve certain objectives concerning its 

development and application of, and disclosures 

related to, methodologies and models.132

■ File an unaudited report containing an 

assessment by management of the effectiveness 

during the fiscal year of the NRSRO’s internal 

control structure governing the implementation 

of and adherence to policies, procedures, and 

methodologies for determining credit ratings.133

The report must be accompanied by a signed 

statement by the NRSRO’s chief executive officer 

or an individual performing similar functions.134

■ Establish, maintain, enforce, and document 

policies and procedures that are reasonably 

designed to: assess the probability that an issuer 

of a security or money market instrument will 

default or fail to make required payments to 

investors,135 and ensure that it applies any rating 

symbol, number, or score in a manner that is 

consistent for all types of obligors, securities, 

and money market instruments for which the 

symbol, number, or score is used.136

■ Publish an information disclosure form when 

taking a rating action with respect to a rating 

assigned to an obligor, security, or money-market 

instrument in a class for which it is registered 

as an NRSRO.137 The information form must 

disclose certain information with respect to 

the particular rating action.138 In addition, 

the NRSRO must attach to the information 

disclosure form a signed statement by a person 

within the NRSRO with responsibility for the 

rating action.139

132 See, e.g., Rule 17g-8(a)(2)–(5). 

133 Rule 17g-3(a)(7)(i).

134 Rule 17g-3(b)(2).

135 Rule 17g-8(b)(1).

136 Rule 17g-8(b)(3).

137 Rule 17g-7(a). Rule 17g-7(a) defines rating action to include an expected or preliminary rating, an initial rating, an 

upgrade or downgrade of an existing rating (including a downgrade to, or assignment of, default), and an affirmation 

or withdrawal of an existing rating if the affirmation or withdrawal is the result of the NRSRO’s review of the rating 

using applicable procedures and methodologies for determining credit ratings. Pursuant to Rule 17g-7(a)(3), an NRSRO 

is exempt from publishing an information disclosure form for a particular rating if: (i) the rated obligor or issuer of the 

rated security or money market instrument is not a U.S. person; and (ii) the NRSRO has a reasonable basis to conclude 

that: (A) with respect to any security or money market instrument issued by a rated obligor, all offers and sales by any 

issuer, sponsor, or underwriter linked to the security or money market instrument will occur outside the United States; or 

(B) with respect to a rated security or money market instrument, all offers and sales by any issuer, sponsor, or underwriter 

linked to a security or money market instrument will occur outside the United States.

138 Rule 17g-7(a)(1)(ii)(A)-(N) specifies the information that must be disclosed in the information disclosure form. These 

required disclosures include: the version of the procedure or methodology used to determine the credit rating; disclosures 

concerning the uncertainty of the rating, including regarding the reliability, accuracy, quality, and accessibility of data 

related to the rating; a statement containing an overall assessment of the quality of information available and considered 

in determining the credit rating for the obligor, security, or money market instrument; and information on the sensitivity of 

the rating to assumptions made by the NRSRO. In addition, an NRSRO must attach to the information disclosure form 

any executed Form ABS Due Diligence-15E containing information about the security or money market instrument subject 

to the rating action that is received by the NRSRO or obtained by the NRSRO through a Rule 17g-5(a)(3) website. 

139 Rule 17g-7(a)(1)(iii).
S TAFF REPORT | 53

■ Make and retain, or retain, certain records, 

including a record documenting its established 

procedures and methodologies used to 

determine credit ratings140 and records related 

to its ratings.141 An NRSRO must promptly 

furnish to the Commission or its representatives 

copies of required records, including English 

translations of those records, upon request.142

■ Establish, maintain, and enforce written policies 

and procedures reasonably designed to prevent 

the misuse of material non-public information 

(MNPI), including the inappropriate dissemination of MNPI both within and outside the 

NRSRO, the inappropriate trading of securities 

using MNPI by a person within the NRSRO, 

and the inappropriate dissemination of pending 

credit rating actions within and outside the 

NRSRO before issuing the rating on the Internet 

or through another readily accessible means.143

■ Establish, maintain, and enforce written 

policies and procedures reasonably designed 

to address and manage conflicts of interest.144

Certain conflicts of interest are expressly 

prohibited,145 and for other types of conflicts of 

interest, the NRSRO must disclose the conflicts 

and have policies and procedures in place to 

manage them.146

■ Refrain from engaging in specified unfair, 

coercive, or abusive practices.147

■ Provide information on whether it has in effect a 

code of ethics, and if not, the reasons it does not 

have a code of ethics.148

■ Establish procedures for the receipt, retention, 

and treatment of complaints regarding 

credit ratings, models, methodologies, and 

compliance with the securities laws and its 

policies and procedures developed under 

this regulatory regime, and of confidential, 

anonymous complaints.149

140 Rule 17g-2(a)(6).

141 The records that an NRSRO must make and retain, or retain, with respect to its ratings include the identity of certain 

persons who participated in determining or approving the rating, records used to form the basis of a rating, external 

and internal communications received or sent by the NRSRO and its employees related to a rating, and for ABS ratings, 

a record of the rationale for any material difference between the final rating assigned and the rating implied by a 

quantitative model that was a substantial component in determining the rating. Rule 17g-2(a)(2)(i), (ii), and (iii); 

Rule 17g-2(b)(2) and (b)(7).

142 Section 15E(a) and (b) and Rule 17g-2(f).

143 Section 15E(g) and Rule 17g-4.

144 Section 15E(h) and Rule 17g-5. See also Section IV.C of this Report.

145 Rule 17g-5(c). See also Section IV.C of this Report.

146 Rule 17g-5(a)(1) and (a)(2); Rule 17g-5(b). Moreover, Rule 17g-5(a)(3) prohibits an NRSRO from having a conflict

of interest related to a rating for a security or money market instrument issued by an asset pool or as part of any ABS 

transaction unless the NRSRO, among other things, maintains and provides access to a password-protected Internet 

Web site containing a list of each such security or money market instrument for which it is currently in the process of 

determining an initial credit rating, and obtains certain written representations from the issuer, sponsor, or underwriter 

of each such security or money market instrument. 

147 Rule 17g-6.

148 Section 15E(a)(1)(B)(v).

149 Section 15E(j)(3).
54 | OFFICE OF CREDIT RATINGS

■ Designate a compliance officer (the DCO) 

responsible for administering policies and 

procedures related to MNPI and conflicts 

of interest, ensuring compliance with the 

securities laws and regulations, and establishing 

procedures for handling complaints by 

employees or users of credit ratings.150 The 

DCO must submit an annual report to the

NRSRO on the compliance of the NRSRO with 

the securities laws and the NRSRO’s policies 

and procedures, and the NRSRO must file the 

report with the Commission.151

■ Have a board of directors or similar governing 

body (collectively, the Board), certain of 

whose members must be independent from 

the NRSRO.152 An NRSRO’s Board, or 

members thereof, are responsible for exercising 

oversight of specified subjects related to the 

NRSRO’s rating business and for approving 

the procedures and methodologies, including 

qualitative and quantitative data and models 

that the NRSRO uses to determine ratings.153

■ Establish, maintain, enforce, and document 

standards of training, experience, and 

competence for the individuals it employs 

to participate in the determination of credit

ratings that are reasonably designed to achieve 

the objective that the NRSRO produces 

accurate credit ratings, and retain a record

of these standards.154

■ Establish policies and procedures regarding 

post-employment activities of certain 

former personnel.155

150 Section 15E(j)(1) and (3).

151 Section 15E(j)(5).

152 Section 15E(t)(2).

153 Section 15E(t)(3) and Rule 17g-8(a)(1).

154 Rule 17g-9.

155 Section 15E(h)(4) and (5); Rule 17g-8(c).
S TAFF REPORT | 55
Washington, DC