UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

SECURITIES EXCHANGE ACT OF 1934

Release No. 90038 / September 29, 2020

ADMINISTRATIVE PROCEEDING

File No. 3-20097

In the Matter of

KROLL BOND RATING 

AGENCY, LLC,

Respondent.

ORDER DIRECTING PAYMENT OF 

CERTAIN FUNDS RECEIVED BY THE 

COMMISSION 

On September 29, 2020, the Securities and Exchange Commission (“Commission”) issued 

an Order (the “Order”)1that simultaneously instituted and settled public administrative and ceaseand-desist proceedings against Kroll Bond Rating Agency, LLC (“KBRA”). The Commission 

found that beginning in 2018, KBRA, a Nationally Recognized Statistical Rating Organization 

(“NRSRO”), in rating certain collateralized loan obligation (“CLO”) combination notes (“Combo 

Notes”), failed to establish, maintain, enforce and document certain policies and procedures, in 

violation of Rule 17g-8(b)(1) of the Securities Exchange Act of 1934 (“Exchange Act”). The 

Commission ordered KBRA to cease and desist from committing or causing any violations and any 

future violations of Rule 17g 8(b)(1) of the Exchange Act. The Commission also ordered that

KBRA be censured and to comply with undertakings enumerated in the Order. 

The Commission further ordered KBRA to pay disgorgement of $160,000, prejudgment 

interest of $4,836.33, and civil penalties of $600,000.00, pursuant to the payment plan detailed 

therein, with the first payments due within 30 days of the entry of the Order and the last payment 

due within 364 days of the entry of the Order. The Commission created a Fair Fund (the “Fair 

Fund”) pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002 so the civil penalty, along 

with the disgorgement and prejudgment interest, could be distributed to compensate the CLO 

Combo Note issuers that paid for the credit ratings and were harmed by KBRA’s violations as 

described in the Order (the “Issuers”).

 

1 See Order Instituting Administrative and Cease-and-Desist Proceedings Pursuant to Sections 

15E(d) and 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing 

Remedial Sanctions and a Cease-and-Desist Order, Exchange Act. Rel. No. 90037 (September 

29, 2020)
2

The payment of disgorgement, prejudgment interest, and civil penalties constitutes a qualified 

settlement fund (“QSF”) under Section of 468B(g) of the Internal Revenue Code (IRC), 26 U.S.C. § 

468B(g), and related regulations, 26 C.F.R. §§ 1.468B-1 through 1.468B-5. 

Upon receipt of all payments due within 30 days of the entry of the Order (the “Initial 

Payments”), the Commission staff will seek the appointment of a tax administrator to establish a 

reserve for taxes and related administrative expenses (the “Reserve”). Upon establishing and 

withholding the Reserve, and subject to any withholding required by the tax administrator, the 

Commission staff shall disburse $164,094.87 to the Issuers, comprised of the total fees paid by the 

Issuers for the ratings that are the subject of this proceeding, plus reasonable interest.

2

 The distribution 

to each Issuer as determined by the Commission staff is reflected in Exhibit 1. After the distribution 

payments and all taxes and administrative expenses are paid, the Commission staff will transfer the 

remaining funds, if any, that are infeasible to return to investors, to the general fund of the United 

States Treasury subject to Section 21F(g)(3) of the Securities Exchange Act of 1934 (“Exchange 

Act”).

Accordingly, it is ORDERED that: 

A. After the receipt of the Initial Payments simultaneously ordered in this proceeding, 

the Commission staff shall seek the appointment of a tax administrator to, among other 

things, comply with tax-related obligations of the QSF and establish the Reserve; 

B. After withholding the Reserve, and subject to any withholding required by the tax 

administrator, the Commission staff shall disburse $164,094.87 to the Issuers as set 

forth in Exhibit 1; and 

C. Any amounts remaining in the Fair Fund after completion of A and B above, that are 

infeasible to return to the Issuers, and any amounts returned to the Fair Fund in the 

future that are infeasible to return to the Issuers, shall be transferred to the general 

fund of the U.S. Treasury, subject to Section 21F(g)(3) of the Exchange Act.

By the Commission.

Vanessa A. Countryman

Secretary

 

2 This amount includes reasonable interest calculated using the short-term Applicable Federal 

Rate, compounded quarterly from month beginning after the date of each note issuance through 

September 30, 2020.
3

Exhibit 1

Investor Amount

Issuer A $20,698.67

Issuer B $20,521.45

Issuer C $20,521.45

Issuer D $51,746.66

Issuer E $25,388.38

Issuer F $25,218.26

Total $164,094.87