109TH CONGRESS 

2D SESSION H. R. 2990

AN ACT

To improve ratings quality by fostering competicredit rating agency industry. tion, transparency, and accountability in the 

109TH CONGRESS 

2D SESSION H. R. 2990

AN ACT

To improve ratings quality by fostering competition, transparency, and accountability in the credit rating agency 

industry.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 
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1 SECTION 1. SHORT TITLE; REFERENCES. 

2 (a) SHORT TITLE.—This Act may be cited as the 

3 ‘‘Credit Rating Agency Duopoly Relief Act of 2006’’. 

4 (b) REFERENCES.—Except as otherwise expressly 

5 provided, whenever in this Act an amendment or repeal 

6 is expressed in terms of an amendment to, or repeal of, 

7 a section or other provision, the reference shall be consid8 ered to be made to a section or other provision of the Secu9 rities Exchange Act of 1934 (15 U.S.C. 78a et seq.). 

10 SEC. 2. FINDINGS. 

11 Upon the basis of facts disclosed by the record and 

12 report of the Securities and Exchange Commission made 

13 pursuant to section 702 of the Sarbanes-Oxley Act of 

14 2002 (116 Stat. 797), hearings before the House Com15 mittee on Financial Services during the 108th and 109th 

16 Congresses, comment letters to the concept releases and 

17 proposed rules of the Securities and Exchange Commis18 sion, and facts otherwise disclosed and ascertained, the 

19 Congress finds that—

20 (1) credit rating agencies are of national con21 cern, in that, among other things—

22 (A) their ratings, publications, writings, 

23 analyses, and reports are furnished and distrib24 uted, and their contracts, subscription agree25 ments, and other arrangements with clients are 

26 negotiated and performed, by the use of the 
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1 mails and means and instrumentalities of inter2 state commerce; 

3 (B) their ratings, publications, writings, 

4 analyses, and reports customarily relate to the 

5 purchase and sale of securities traded on securi6 ties exchanges and in interstate over-the7 counter markets, securities issued by companies 

8 engaged in business in interstate commerce, 

9 and securities issued by national banks and 

10 member banks of the Federal Reserve System; 

11 (C) the foregoing transactions occur in 

12 such volume as substantially to affect interstate 

13 commerce, and securities markets, the national 

14 banking system, and the national economy; and 

15 (D) their regulation serves the compelling 

16 interest of investor protection; and 

17 (2) the Securities and Exchange Commission—

18 (A) has, through its staff designation of 

19 certain credit rating agencies as nationally rec20 ognized statistical rating organizations, created 

21 an artificial barrier to entry for new partici22 pants; and 

23 (B) would, in its latest proposed rule defin24 ing nationally recognized statistical rating orga25 nizations, codify and strengthen this barrier. 
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1 SEC. 3. DEFINITIONS. 

2 Section 3(a) (15 U.S.C. 78c(a)) is amended by add3 ing at the end the following new paragraphs: 

4 ‘‘(60) CREDIT RATING.—The term ‘credit rat5 ing’ means an assessment of the creditworthiness of 

6 an obligor as an entity or with respect to specific se7 curities or money market instruments. 

8 ‘‘(61) CREDIT RATING AGENCY.—The term 

9 ‘credit rating agency’ means any person—

10 ‘‘(A) engaged in the business of issuing 

11 credit ratings on the Internet or through an12 other readily accessible means, for free or for a 

13 reasonable fee but does not include a commer14 cial credit reporting company; 

15 ‘‘(B) employing either a quantitative or 

16 qualitative model, or both, to determine credit 

17 ratings; and 

18 ‘‘(C) receiving fees from either issuers, in19 vestors, or other market participants, or a com20 bination thereof. 

21 ‘‘(62) NATIONALLY RECOGNIZED STATISTICAL

22 RATING ORGANIZATION OR NRSRO.—The term ‘na23 tionally recognized statistical rating organization’ 

24 means a credit rating agency that—
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1 ‘‘(A) has been in business as a credit rat2 ing agency for at least the past 3 consecutive 

3 years; and 

4 ‘‘(B) is registered under section 15E. 

5 ‘‘(63) PERSON ASSOCIATED WITH A NATION6 ALLY RECOGNIZED STATISTICAL RATING ORGANIZA7 TION.—The term ‘person associated with a nation8 ally recognized statistical rating organization’ means 

9 any partner, officer, director, or branch manager of 

10 such nationally recognized statistical rating organi11 zation (or any person occupying a similar status or 

12 performing similar functions), any person directly or 

13 indirectly controlling, controlled by, or under com14 mon control with such nationally recognized statis15 tical rating organization, or any employee of such 

16 nationally recognized statistical rating organiza17 tion.’’. 

18 SEC. 4. REGISTRATION OF NATIONALLY RECOGNIZED STA19 TISTICAL RATING ORGANIZATIONS. 

20 (a) AMENDMENT.—The Securities Exchange Act of 

21 1934 is amended by inserting after section 15D (15 

22 U.S.C. 78o–6) the following new section: 

23 ‘‘SEC. 15E. REGISTRATION OF NATIONALLY RECOGNIZED 

24 STATISTICAL RATING ORGANIZATIONS. 

25 ‘‘(a) REGISTRATION PROCEDURES.—
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1 ‘‘(1) FURNISHING OF APPLICATION FORM.—A 

2 credit rating agency that elects to be treated as a 

3 nationally recognized statistical rating organization 

4 for the purposes of Federal statutes, rules, and reg5 ulations may be registered by furnishing to the Com6 mission an application for registration in such form 

7 and containing such of the following and any other 

8 information and documents concerning such organi9 zation and any persons associated with such organi10 zation as the Commission, by rule, may prescribe as 

11 necessary or appropriate in the public interest or for 

12 the protection of investors: 

13 ‘‘(A) any conflicts of interest relating to 

14 the issuance of credit ratings by a nationally 

15 recognized statistical rating organization; 

16 ‘‘(B) the procedures and methodologies 

17 such nationally recognized statistical rating or18 ganization uses in determining credit ratings; 

19 ‘‘(C) credit ratings performance measure20 ment statistics over short-term, mid-term, and 

21 long-term periods (as applicable) of such na22 tionally recognized statistical rating organiza23 tion; 

24 ‘‘(D) policies or procedures adopted and 

25 implemented by such nationally recognized sta-
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1 tistical rating organization to prevent the mis2 use in violation of this title (or the rules and 

3 regulations thereunder) of material, non-public 

4 information; and 

5 ‘‘(E) the organizational structure of such 

6 nationally recognized statistical rating organiza7 tion. 

8 ‘‘(2) REVIEW OF APPLICATION.—

9 ‘‘(A) INITIAL DETERMINATION.—Within 

10 90 days of the date of the furnishing of such 

11 application (or within such longer period as to 

12 which the applicant consents) the Commission 

13 shall—

14 ‘‘(i) by order grant such registration; 

15 or 

16 ‘‘(ii) institute proceedings to deter17 mine whether registration should be de18 nied. 

19 ‘‘(B) CONDUCT OF PROCEEDINGS.—Such 

20 proceedings shall include notice of the grounds 

21 for denial under consideration and opportunity 

22 for hearing and shall be concluded within 120 

23 days of the date of the furnishing of the appli24 cation for registration. At the conclusion of 

25 such proceedings the Commission, by order, 
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1 shall grant or deny such registration. The Com2 mission may extend the time for conclusion of 

3 such proceedings for up to 90 days if it finds 

4 good cause for such extension and publishes its 

5 reasons for so finding or for such longer period 

6 as to which the applicant consents. 

7 ‘‘(C) GROUNDS FOR DECISION.—The Com8 mission shall grant such registration if the 

9 Commission finds that the requirements of this 

10 section are satisfied. The Commission shall 

11 deny such registration if it does not make such 

12 a finding or if it finds that if the applicant were 

13 so registered, its registration would be subject 

14 to suspension or revocation under subsection 

15 (d). 

16 ‘‘(3) PUBLIC AVAILABILITY OF INFORMATION.—

17 Subject to section 24, the Commission, by rule, shall 

18 require a nationally recognized statistical rating or19 ganization, upon the granting of registration under 

20 this section, to make the information and documents 

21 furnished to the Commission in its application for 

22 registration, or in any amendment furnished under 

23 subsection (b)(1) or (2), publicly available on its 

24 website or through another comparable readily ac25 cessible means. 
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1 ‘‘(b) UPDATE OF REGISTRATION.—

2 ‘‘(1) UPDATE.—Each nationally recognized sta3 tistical rating organization shall promptly amend its 

4 application for registration under this section if any 

5 information or documents provided therein become 

6 materially inaccurate, except that a nationally recog7 nized statistical rating organization is not required 

8 to amend the information required to be furnished 

9 under subsection (a)(1)(C) by an amendment fur10 nished under this paragraph, but shall amend such 

11 information in such organization’s annual amend12 ment furnished under paragraph (2) of this sub13 section. 

14 ‘‘(2) CERTIFICATION.—Not later than 90 days 

15 after the end of each calendar year, each nationally 

16 recognized statistical rating organization shall fur17 nish to the Commission an amendment to its reg18 istration, in such form as the Commission, by rule, 

19 may prescribe as necessary or appropriate in the 

20 public interest or for the protection of investors—

21 ‘‘(A) certifying that the information and 

22 documents in the application for registration of 

23 such nationally recognized statistical rating or24 ganization continue to be accurate; and 
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1 ‘‘(B) listing any material changes that oc2 curred to such information or documents during 

3 the previous calendar year. 

4 ‘‘(c) ACCOUNTABILITY FOR RATINGS PROCE5 DURES.—

6 ‘‘(1) AUTHORITY.—The Commission shall have 

7 the authority under this Act to take action against 

8 any nationally recognized statistical rating organiza9 tion if such nationally recognized statistical rating 

10 organization issues credit ratings in contravention of 

11 those procedures, criteria, and methodologies that 

12 such nationally recognized statistical rating organi13 zation—

14 ‘‘(A) includes in its application for reg15 istration under this section; or 

16 ‘‘(B) makes and disseminates in reports 

17 pursuant to section 17(a) or the rules and regu18 lations thereunder. 

19 ‘‘(2) LIMITATION.—The rules and regulations 

20 applicable to nationally recognized statistical rating 

21 organizations the Commission may prescribe pursu22 ant to this Act shall be narrowly tailored to meet the 

23 requirements of this Act applicable to nationally rec24 ognized statistical rating organizations and shall not 

25 purport to regulate the substance of credit ratings or 
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1 the procedures and methodologies by which such na2 tionally recognized statistical rating organizations 

3 determine credit ratings. 

4 ‘‘(d) CENSURE, DENIAL, OR SUSPENSION OF REG5 ISTRATION; NOTICE AND HEARING.—The Commission, by 

6 order, shall censure, place limitations on the activities, 

7 functions, or operations of, suspend for a period not ex8 ceeding 12 months, or revoke the registration of any na9 tionally recognized statistical rating organization if the 

10 Commission finds, on the record after notice and oppor11 tunity for hearing, that such censure, placing of limita12 tions, suspension, or revocation is in the public interest 

13 and that such nationally recognized statistical rating orga14 nization, or any person associated with such nationally 

15 recognized statistical rating organization, whether prior to 

16 or subsequent to becoming so associated—

17 ‘‘(1) has committed or omitted any act, or is 

18 subject to an order or finding, enumerated in sub19 paragraph (A), (D), (E), (H), or (G) of paragraph 

20 (4) of section 15(b), has been convicted of any of21 fense specified in subparagraph (B) of such para22 graph (4) within 10 years of the commencement of 

23 the proceedings under this subsection, or is enjoined 

24 from any action, conduct, or practice specified in 

25 subparagraph (C) of such paragraph (4); 
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1 ‘‘(2) has been convicted during the 10-year pe2 riod preceding the date of furnishing any application 

3 for registration, or at any time thereafter, of—

4 ‘‘(A) any crime that is punishable by im5 prisonment for 1 or more years, and that is not 

6 described in section 15(b)(4)(B); or 

7 ‘‘(B) a substantially equivalent crime by a 

8 foreign court of competent jurisdiction; or 

9 ‘‘(3) is subject to any order of the Commission 

10 barring or suspending the right of the person to be 

11 associated with a nationally recognized statistical 

12 rating organization. 

13 ‘‘(e) WITHDRAWAL FROM REGISTRATION.—A nation14 ally recognized statistical rating organization registered 

15 under this section may, upon such terms and conditions 

16 as the Commission may establish as necessary in the pub17 lic interest or for the protection of investors, withdraw 

18 from registration by furnishing a written notice of with19 drawal to the Commission. If the Commission finds that 

20 any nationally recognized statistical rating organization is 

21 no longer in existence or has ceased to do business as a 

22 credit rating agency, the Commission, by order, shall can23 cel the registration of such nationally recognized statistical 

24 rating organization. 

25 ‘‘(f) REPRESENTATIONS.—
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1 ‘‘(1) REPRESENTATIONS OF SPONSORSHIP BY

2 UNITED STATES OR AGENCY THEREOF.—It shall be 

3 unlawful for any nationally recognized statistical rat4 ing organization registered under this section to rep5 resent or imply in any manner whatsoever that such 

6 nationally recognized statistical rating organization 

7 has been designated, sponsored, recommended, or 

8 approved, or that such nationally recognized statis9 tical rating organization’s abilities or qualifications 

10 have in any respect been passed upon, by the United 

11 States or any agency, any officer, or any employee 

12 thereof. 

13 ‘‘(2) REPRESENTATION AS NRSRO OF UNREGIS14 TERED CREDIT RATING AGENCIES.—It shall be un15 lawful for any credit rating agency to represent or 

16 imply in any manner whatsoever that such credit 

17 rating agency has been designated, sponsored, rec18 ommended, or approved, or that such credit rating 

19 agency’s abilities or qualifications have in any re20 spect been passed upon, by the United States or any 

21 agency, any officer, or any employee thereof. It shall 

22 be unlawful for any credit rating agency that is not 

23 registered under this section as a nationally recog24 nized statistical rating organization to state that 
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1 such credit rating agency is a nationally recognized 

2 statistical rating organization under this Act. 

3 ‘‘(3) STATEMENT OF REGISTRATION UNDER SE4 CURITIES EXCHANGE ACT OF 1934 PROVISIONS.—No 

5 provision of paragraph (1) shall be construed to pro6 hibit a statement that a nationally recognized statis7 tical rating organization is a nationally recognized 

8 statistical rating organization under this Act, if such 

9 statement is true in fact and if the effect of such 

10 registration is not misrepresented. 

11 ‘‘(g) PREVENTION OF MISUSE OF NONPUBLIC IN12 FORMATION.—Each nationally recognized statistical rat13 ing organization shall establish, maintain, and enforce 

14 written policies and procedures reasonably designed, tak15 ing into consideration the nature of such nationally recog16 nized statistical rating organization’s business, to prevent 

17 the misuse in violation of this title, or the rules or regula18 tions thereunder, of material, nonpublic information by 

19 such nationally recognized statistical rating organization 

20 or any person associated with such nationally recognized 

21 statistical rating organization. The Commission, as it 

22 deems necessary or appropriate in the public interest or 

23 for the protection of investors, shall adopt rules or regula24 tions to require specific policies or procedures reasonably 

25 designed to prevent misuse in violation of this title (or the 
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1 rules or regulations thereunder) of material, nonpublic in2 formation. 

3 ‘‘(h) MANAGEMENT OF CONFLICTS OF INTEREST.—

4 Each nationally recognized statistical rating organization 

5 shall establish, maintain, and enforce written policies and 

6 procedures reasonably designed, taking into consideration 

7 the nature of the business of such nationally recognized 

8 statistical rating organization and affiliated persons and 

9 affiliated companies of such nationally recognized statis10 tical rating organization, to address and manage the con11 flicts of interest that can arise from such business. The 

12 Commission, as it deems necessary or appropriate in the 

13 public interest or for the protection of investors, shall 

14 adopt rules or regulations to prohibit, or require the man15 agement or disclosure of, any conflicts of interest relating 

16 to the issuance of credit ratings by a nationally recognized 

17 statistical rating organization including, without limita18 tion, conflicts of interest relating to—

19 ‘‘(1) the manner in which a nationally recog20 nized statistical rating organization is compensated 

21 by the obligor, or any affiliate of the obligor, for 

22 issuing credit ratings or providing related services; 

23 ‘‘(2) the provision of consulting, advisory, or 

24 other services by a nationally recognized statistical 

25 rating organization, or any person associated with 
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1 such nationally recognized statistical rating organi2 zation, to the obligor, or any affiliate of the obligor; 

3 ‘‘(3) business relationships, ownership interests, 

4 or any other financial or personal interests between 

5 a nationally recognized statistical rating organiza6 tion, or any person associated with such nationally 

7 recognized statistical rating organization, and the 

8 obligor, or any affiliate of the obligor; and 

9 ‘‘(4) any affiliation of a nationally recognized 

10 statistical rating organization, or any person associ11 ated with such nationally recognized statistical rat12 ing organization, with any person that underwrites 

13 the securities or money market instruments that are 

14 the subject of a credit rating. 

15 ‘‘(i) PROHIBITED CONDUCT.—

16 ‘‘(1) PROHIBITED ACTS AND PRACTICES.—The 

17 Commission may adopt rules or regulations to pro18 hibit any act or practice relating to the issuance of 

19 credit ratings by a nationally recognized statistical 

20 rating organization that the Commission determines 

21 to be unfair, coercive, or abusive, including any act 

22 or practice relating to—

23 ‘‘(A) seeking payment for a credit rating 

24 that has not been specifically requested by the 

25 obligor—
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1 ‘‘(i) from an obligor; or 

2 ‘‘(ii) from an affiliate of an obligor, 

3 unless—

4 ‘‘(I) the organization is organized 

5 under subsection (a)(1)(E) to receive 

6 fees from investors or other market 

7 participants, or a combination thereof; 

8 and 

9 ‘‘(II) the affiliate is such an in10 vestor or participant; 

11 ‘‘(B) conditioning or threatening to condi12 tion the issuance of a credit rating on the obli13 gor’s, or an affiliate of the obligor’s, purchase 

14 of other services or products, including pre15 credit rating assessment products, of the na16 tionally recognized statistical rating organiza17 tion or any person associated with such nation18 ally recognized statistical rating organization; 

19 ‘‘(C) lowering or threatening to lower a 

20 credit rating on, or refusing to rate, securities 

21 or money market instruments issued by an 

22 asset pool unless a portion of the assets within 

23 such pool also is rated by the nationally recog24 nized statistical rating organization; 
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1 ‘‘(D) modifying or threatening to modify a 

2 credit rating or otherwise departing from its 

3 adopted systematic procedures and methodolo4 gies in determining credit ratings, based on 

5 whether the obligor, or an affiliate of the obli6 gor, pays or will pay for the credit rating or 

7 any other services or products of the nationally 

8 recognized statistical rating organization or any 

9 person associated with such nationally recog10 nized statistical rating organization. 

11 ‘‘(2) RULE OF CONSTRUCTION.—Nothing in 

12 paragraph (1), or in any rules or regulations adopt13 ed thereunder, shall be construed to modify, impair, 

14 or supersede the operation of any of the antitrust 

15 laws. For the purposes of the preceding sentence, 

16 the term ‘antitrust laws’ has the meaning given it in 

17 the first section of the Clayton Act (15 U.S.C. 12), 

18 except that such term includes section 5 of the Fed19 eral Trade Commission Act (15 U.S.C. 45) to the 

20 extent such section 5 applies to unfair methods of 

21 competition. 

22 ‘‘(j) DESIGNATION OF COMPLIANCE OFFICER.—Each 

23 nationally recognized statistical rating organization shall 

24 designate an individual responsible for administering the 

25 policies and procedures that are required to be established 
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1 pursuant to subsections (g) and (h), and for ensuring com2 pliance with the securities laws and the rules and regula3 tions thereunder, including those promulgated by the 

4 Commission pursuant to this section. 

5 ‘‘(k) STATEMENTS OF FINANCIAL CONDITION.—

6 Each nationally recognized statistical rating organization 

7 shall, on a confidential basis, furnish to the Commission, 

8 at intervals determined by the Commission, such financial 

9 statements, certified (if required by the rules or regula10 tions of the Commission) by an independent public ac11 countant, and information concerning its financial condi12 tion as the Commission, by rule, may prescribe as nec13 essary or appropriate in the public interest or for the pro14 tection of investors. 

15 ‘‘(l) ELIMINATION OF COMMISSION STAFF’S DES16 IGNATION PROCESS FOR NRSRO’S.—

17 ‘‘(1) CESSATION OF DESIGNATION.—Within 30 

18 days after the enactment of the Credit Rating Agen19 cy Duopoly Relief Act of 2006, the Commission staff 

20 shall cease to designate persons and companies as 

21 nationally recognized statistical rating organizations, 

22 as that term is used under rule 15c3–1 of the Com23 mission’s rules (17 CFR 240.15c3–1). 

24 ‘‘(2) PROHIBITION ON RELIANCE ON NO-ACTION

25 RELIEF.—The no-action relief that the Commission 
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1 staff has granted with respect to the designation of 

2 nationally recognized statistical rating organizations, 

3 as that term is used under rule 15c3–1 of the Com4 mission’s rules (17 CFR 240.15c3–1), shall be void 

5 and of no force or effect. 

6 ‘‘(3) NOTICE TO OTHER AGENCIES.—Within 30 

7 days after the date of enactment of the Credit Rat8 ing Agency Duopoly Relief Act of 2006, the Com9 mission shall give notice to the Federal agencies 

10 which employ the term ‘nationally recognized statis11 tical rating organization’ (as that term is used under 

12 rule 15c3–1 of the Commission’s rules (17 CFR 

13 240.15c3–1)) in their rules and regulations regard14 ing the actions undertaken pursuant to this section. 

15 ‘‘(4) REVIEW OF EXISTING REGULATIONS.—

16 Within 360 days after the date of enactment of the 

17 Credit Rating Agency Duopoly Relief Act of 2006, 

18 the Commission shall review its existing rules and 

19 regulations which employ the term ‘nationally recog20 nized statistical rating organization’ or ‘NRSRO’ 

21 and promulgate new or revised rules and regulations 

22 as the Commission may prescribe as necessary or 

23 appropriate in the public interest or for the protec24 tion of investors.’’. 
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1 (b) CONFORMING AMENDMENTS TO THE 1934 

2 ACT.—

3 (1) Section 15(b)(4)(B)(ii) (15 U.S.C. 

4 78o(b)(4)(B)(ii)) is amended by inserting ‘‘nationally 

5 recognized statistical rating organization,’’ after 

6 ‘‘transfer agent,’’. 

7 (2) Section 15(b)(4)(C) (15 U.S.C. 

8 78o(b)(4)(C)) is amended by inserting ‘‘nationally 

9 recognized statistical rating organization,’’ after 

10 ‘‘transfer agent,’’. 

11 (3) Section 21B(a) (15 U.S.C. 78u–2(a)) is 

12 amended by inserting ‘‘15E,’’ after ‘‘15C,’’. 

13 (c) OTHER CONFORMING AMENDMENTS.—

14 (1) Section 2(a) of the Investment Company 

15 Act of 1940 (15 U.S.C. 80a–2(a)) is amended by 

16 adding at the end the following new paragraph: 

17 ‘‘(53) The term ‘credit rating agency’ has the 

18 same meaning as given in section 3 of the Securities 

19 Exchange Act of 1934.’’. 

20 (2) Section 9(a)(1) of the Investment Company 

21 Act of 1940 (15 U.S.C. 80a–9(a)) is amended by in22 serting ‘‘credit rating agency,’’ after ‘‘transfer 

23 agent,’’. 

24 (3) Section 9(a)(2) of the Investment Company 

25 Act of 1940 (15 U.S.C. 80a–9(a)) is amended by in-
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1 serting ‘‘credit rating agency,’’ after ‘‘transfer 

2 agent,’’. 

3 (4) Section 202(a) of the Investment Advisers 

4 Act of 1940 (15 U.S.C. 80b–2(a)) is amended by 

5 adding at the end the following new paragraph: 

6 ‘‘(28) The term ‘credit rating agency’ has the 

7 same meaning as given in section 3 of the Securities 

8 Exchange Act of 1934.’’. 

9 (5) Section 203(e)(2)(B) of the Investment Ad10 visers Act of 1940 (15 U.S.C. 80b–3(e)) is amended 

11 by inserting ‘‘credit rating agency,’’ after ‘‘transfer 

12 agent,’’. 

13 (6) Section 203(e)(4) of the Investment Advis14 ers Act of 1940 (15 U.S.C. 80b–3(e)) is amended by 

15 inserting ‘‘credit rating agency,’’ after ‘‘transfer 

16 agent,’’. 

17 (7) Section 1319 of the Housing and Commu18 nity Development Act of 1992 (12 U.S.C. 4519) is 

19 amended by striking ‘‘effectively’’ and all that fol20 lows through ‘‘broker-dealers’’ and inserting ‘‘that is 

21 a nationally recognized statistical rating organiza22 tion, as such term is defined in section 3(a) of the 

23 Securities Exchange Act of 1934’’. 

24 (8) Section 439 of the Higher Education Act of 

25 1965 (20 U.S.C. 1087–2) is amended in subsection 
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1 (r)(15)(A) by striking ‘‘means any entity recognized 

2 as such by the Securities and Exchange Commis3 sion’’ and inserting ‘‘means any nationally recog4 nized statistical rating organization as that term is 

5 defined under the Securities Exchange Act of 1934’’. 

6 (9) Section 601(10) of title 23, United States 

7 Code, is amended by striking ‘‘identified by the Se8 curities and Exchange Commission as a Nationally 

9 Recognized Statistical Rating Organization’’ and in10 serting ‘‘registered with the Securities and Exchange 

11 Commission as a nationally recognized statistical 

12 rating organization as that term is defined under the 

13 Securities Exchange Act of 1934 (15 U.S.C. 78 et 

14 seq.)’’. 

15 SEC. 5. ANNUAL AND OTHER REPORTS. 

16 Section 17(a)(1) (15 U.S.C. 78q(a)(1)) is amended—

17 (1) by inserting ‘‘nationally recognized statis18 tical rating organization,’’ after ‘‘registered transfer 

19 agent,’’; and 

20 (2) by adding at the end the following: ‘‘Any re21 port a nationally recognized statistical rating organi22 zation may be required by Commission rules under 

23 this paragraph to make and disseminate to the Com24 mission shall be deemed furnished to the Commis25 sion.’’. 
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1 SEC. 6. GAO STUDY AND REPORT REGARDING CONSOLIDA2 TION OF CREDIT RATING AGENCIES. 

3 (a) STUDY REQUIRED.—The Comptroller General of 

4 the United States shall conduct a study—

5 (1) to identify—

6 (A) the factors that have led to the consoli7 dation of credit rating agencies; 

8 (B) the present and future impact of the 

9 condition described in subparagraph (A) on the 

10 securities markets, both domestic and inter11 national; and 

12 (C) solutions to any problems identified 

13 under subparagraph (B), including ways to in14 crease competition and the number of firms ca15 pable of providing credit rating services to large 

16 national and multinational business organiza17 tions that are subject to the securities laws; 

18 (2) of the problems, if any, faced by business 

19 organizations that have resulted from limited com20 petition among credit rating agencies, including—

21 (A) higher costs; 

22 (B) lower quality of services; 

23 (C) anti-competitive practices; 

24 (D) impairment of independence; and 

25 (E) lack of choice; and 
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1 (3) whether and to what extent Federal or 

2 State regulations impede competition among credit 

3 rating agencies. 

4 (b) CONSULTATION.—In planning and conducting the 

5 study under this section, the Comptroller General shall 

6 consult with—

7 (1) the Securities and Exchange Commission; 

8 (2) the Department of Justice; and 

9 (3) any other public or private sector organiza10 tion that the Comptroller General considers appro11 priate. 

12 (c) REPORT REQUIRED.—Not later than 180 days 

13 after the date of enactment of this Act, the Comptroller 

14 General shall submit a report on the results of the study 

15 required by this section to the Committee on Banking, 

16 Housing, and Urban Affairs of the Senate and the Com17 mittee on Financial Services of the House of Representa18 tives. 

19 SEC. 7. EFFECTIVE DATE. 

20 The amendments made by sections 4 and 5 shall take 

21 effect on January 1, 2008, except as otherwise provided 

22 in paragraphs (1), (3), and (4) of subsection (l) of section 

23 15E of the Securities Exchange Act of 1934 (as added 

24 by such amendments), and except that the Securities and 

25 Exchange Commission is authorized to prescribe rules and 
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1 regulations to carry out such amendments beginning on 

2 the date of enactment of this Act.

Passed the House of Representatives July 12, 2006. 

Attest:

Clerk.