IB 

Union Calendar No. 306 

109TH CONGRESS 

2D SESSION H. R. 2990 

[Report No. 109–546] 

To improve ratings quality by fostering competition, transparency, and 

accountability in the credit rating agency industry. 

IN THE HOUSE OF REPRESENTATIVES 

JUNE 20, 2005 

Mr. FITZPATRICK of Pennsylvania introduced the following bill; which was 

referred to the Committee on Financial Services 

JULY 7, 2006 

Additional sponsors: Mr. BAKER, Mr. FEENEY, Mr. OXLEY, Mr. AKIN, Mr. 

GARRETT of New Jersey, Mr. DAVIS of Kentucky, Mr. GERLACH, Mr. 

ENGLISH of Pennsylvania, Mr. FOLEY, Mr. BARRETT of South Carolina, 

Ms. HART, Mr. GILLMOR, Mr. CASTLE, Mr. MCHENRY, and Mr. BLUNT

JULY 7, 2006 

Reported with an amendment, committed to the Committee of the Whole 

House on the State of the Union, and ordered to be printed 

[Strike out all after the enacting clause and insert the part printed in italic] 

[For text of introduced bill, see copy of bill as introduced on June 20, 2005] 

A BILL 

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

industry. 


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1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE; REFERENCES. 

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

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

6 (b) REFERENCES.—Except as otherwise expressly pro7 vided, whenever in this Act an amendment or repeal is ex8 pressed in terms of an amendment to, or repeal of, a section 

9 or other provision, the reference shall be considered to be 

10 made to a section or other provision of the Securities Ex11 change Act of 1934 (15 U.S.C. 78a et seq.). 

12 SEC. 2. FINDINGS. 

13 Upon the basis of facts disclosed by the record and re14 port of the Securities and Exchange Commission made pur15 suant to section 702 of the Sarbanes-Oxley Act of 2002 (116 

16 Stat. 797), hearings before the House Committee on Finan17 cial Services during the 108th and 109th Congresses, com18 ment letters to the concept releases and proposed rules of 

19 the Securities and Exchange Commission, and facts other20 wise disclosed and ascertained, the Congress finds that— 

21 (1) credit rating agencies are of national con22 cern, in that, among other things— 

23 (A) their ratings, publications, writings, 

24 analyses, and reports are furnished and distrib25 uted, and their contracts, subscription agreeVerDate Aug 31 2005 22:32 Jul 07, 2006 Jkt 049200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6203 E:\BILLS\H2990.RH H2990

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1 ments, and other arrangements with clients are 

2 negotiated and performed, by the use of the mails 

3 and means and instrumentalities of interstate 

4 commerce; 

5 (B) their ratings, publications, writings, 

6 analyses, and reports customarily relate to the 

7 purchase and sale of securities traded on securi8 ties exchanges and in interstate over-the-counter 

9 markets, securities issued by companies engaged 

10 in business in interstate commerce, and securi11 ties issued by national banks and member banks 

12 of the Federal Reserve System; 

13 (C) the foregoing transactions occur in such 

14 volume as substantially to affect interstate com15 merce, and securities markets, the national bank16 ing system, and the national economy; and 

17 (D) their regulation serves the compelling 

18 interest of investor protection; and 

19 (2) the Securities and Exchange Commission— 

20 (A) has, through its designation of certain 

21 credit rating agencies as nationally recognized 

22 statistical rating organizations, created an arti23 ficial barrier to entry for new participants; and 


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1 (B) will, in its latest proposed rule defining 

2 nationally recognized statistical rating organiza3 tions, codify and strengthen this barrier. 

4 SEC. 3. DEFINITIONS. 

5 Section 3(a) (15 U.S.C. 78c(a)) is amended by adding 

6 at the end the following new paragraphs: 

7 ‘‘(60) CREDIT RATING.—The term ‘credit rating’ 

8 means an assessment of the creditworthiness of an ob9 ligor as an entity or with respect to specific securities 

10 or money market instruments. 

11 ‘‘(61) CREDIT RATING AGENCY.—The term ‘credit 

12 rating agency’ means any person— 

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

14 credit ratings on the Internet or through another 

15 readily accessible means, for free or for a reason16 able fee; 

17 ‘‘(B) employing either a quantitative or 

18 qualitative model, or both, to determine credit 

19 ratings; and 

20 ‘‘(C) receiving fees from either issuers, in21 vestors, or other market participants, or a com22 bination thereof. 

23 ‘‘(62) NATIONALLY RECOGNIZED STATISTICAL

24 RATING ORGANIZATION OR NRSRO.—The term ‘nationVerDate Aug 31 2005 22:32 Jul 07, 2006 Jkt 049200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6203 E:\BILLS\H2990.RH H2990

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1 ally recognized statistical rating organization’ means 

2 a credit rating agency that— 

3 ‘‘(A) has been in business for at least three 

4 consecutive years; and 

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

6 ‘‘(63) PERSON ASSOCIATED WITH A NATIONALLY

7 RECOGNIZED STATISTICAL RATING ORGANIZATION.— 

8 The term ‘person associated with a nationally recog9 nized statistical rating organization’ means any part10 ner, officer, director, or branch manager of such na11 tionally recognized statistical rating organization (or 

12 any person occupying a similar status or performing 

13 similar functions), any person directly or indirectly 

14 controlling, controlled by, or under common control 

15 with such nationally recognized statistical rating or16 ganization, or any employee of such nationally recog17 nized statistical rating organization.’’. 

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 U.S.C. 

22 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) FILING OF APPLICATION FORM.—A credit 

2 rating agency that elects to be treated as a nationally 

3 recognized statistical rating organization for the pur4 poses of Federal statutes, rules, and regulations may 

5 be registered by filing with the Commission an appli6 cation for registration in such form and containing 

7 such of the following and any other information and 

8 documents concerning such organization and any per9 sons associated with such organization as the Com10 mission, by rule, may prescribe as necessary or ap11 propriate in the public interest or for the protection 

12 of investors: 

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

14 issuance of credit ratings by a nationally recog15 nized statistical rating organization; 

16 ‘‘(B) the procedures and methodologies such 

17 nationally recognized statistical rating organiza18 tion uses in determining credit ratings; 

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

21 long-term periods of such nationally recognized 

22 statistical rating organization; 

23 ‘‘(D) policies or procedures adopted and im24 plemented by such nationally recognized statis25 tical rating organization to prevent the misuse 


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1 in violation of this title (or the rules and regula2 tions thereunder) of material, non-public infor3 mation; and 

4 ‘‘(E) the organizational structure of such 

5 nationally recognized statistical rating organiza6 tion. 

7 ‘‘(2) REVIEW OF APPLICATION.— 

8 ‘‘(A) INITIAL DETERMINATION.—Within 90 

9 days of the date of the filing of such application 

10 (or within such longer period as to which the ap11 plicant consents) the Commission shall— 

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

13 or 

14 ‘‘(ii) institute proceedings to determine 

15 whether registration should be denied. 

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

17 proceedings shall include notice of the grounds 

18 for denial under consideration and opportunity 

19 for hearing and shall be concluded within 120 

20 days of the date of the filing of the application 

21 for registration. At the conclusion of such pro22 ceedings the Commission, by order, shall grant or 

23 deny such registration. The Commission may ex24 tend the time for conclusion of such proceedings 

25 for up to 90 days if it finds good cause for such 


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1 extension and publishes its reasons for so finding 

2 or for such longer period as to which the appli3 cant consents. 

4 ‘‘(C) GROUNDS FOR DECISION.—The Com5 mission shall grant such registration if the Com6 mission finds that the requirements of this sec7 tion are satisfied. The Commission shall deny 

8 such registration if it does not make such a find9 ing or if it finds that if the applicant were so 

10 registered, its registration would be subject to 

11 suspension or revocation under subsection (b). 

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

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

14 require a nationally recognized statistical rating or15 ganization, upon the granting of registration under 

16 this section, to make the information and documents 

17 filed with the Commission in its application for reg18 istration, or in any amendment filed under subsection 

19 (b)(1) or (2), publicly available on the website or 

20 comparable readily accessible means of such nation21 ally recognized statistical rating organization. 

22 ‘‘(b) UPDATE OF REGISTRATION.— 

23 ‘‘(1) UPDATE.—Each nationally recognized sta24 tistical rating organization shall promptly amend its 

25 application for registration under this section if any 


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1 information or documents provided therein become 

2 materially inaccurate, except that a nationally recog3 nized statistical rating organization is not required to 

4 amend the information required to be filed under sub5 section (a)(1)(C) by a filing under this paragraph, 

6 but shall amend such information in such organiza7 tion’s annual filing under paragraph (2) of this sub8 section. 

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

10 after the end of each calendar year, each nationally 

11 recognized statistical rating organization shall file 

12 with the Commission an amendment to its registra13 tion, in such form as the Commission, by rule, may 

14 prescribe as necessary or appropriate in the public 

15 interest or for the protection of investors— 

16 ‘‘(A) certifying that the information and 

17 documents in the application for registration of 

18 such nationally recognized statistical rating or19 ganization continue to be accurate; and 

20 ‘‘(B) listing any material changes that oc21 curred to such information or documents during 

22 the previous calendar year. 

23 ‘‘(c) ACCOUNTABILITY FOR RATINGS PROCEDURES.— 

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

25 the authority under this Act to take action against 


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1 any nationally recognized statistical rating organiza2 tion if such nationally recognized statistical rating 

3 organization issues credit ratings in contravention of 

4 those procedures, criteria, and methodologies that such 

5 nationally recognized statistical rating organiza6 tion— 

7 ‘‘(A) includes in its application for reg8 istration under this section; or 

9 ‘‘(B) makes and disseminates in reports 

10 pursuant to section 17(a) or the rules and regu11 lations thereunder. 

12 ‘‘(2) LIMITATION.—The rules and regulations ap13 plicable to nationally recognized statistical rating or14 ganizations the Commission may prescribe pursuant 

15 to this Act shall be narrowly tailored to meet the re16 quirements of this Act applicable to nationally recog17 nized statistical rating organizations and shall not 

18 purport to regulate the substance of credit ratings or 

19 the procedures and methodologies by which such na20 tionally recognized statistical rating organizations de21 termine credit ratings. 

22 ‘‘(d) CENSURE, DENIAL, OR SUSPENSION OF REG23 ISTRATION; NOTICE AND HEARING.—The Commission, by 

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

25 functions, or operations of, suspend for a period not exceedVerDate Aug 31 2005 22:32 Jul 07, 2006 Jkt 049200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6203 E:\BILLS\H2990.RH H2990

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1 ing 12 months, or revoke the registration of any nationally 

2 recognized statistical rating organization if the Commission 

3 finds, on the record after notice and opportunity for hear4 ing, that such censure, placing of limitations, suspension, 

5 or revocation is in the public interest and that such nation6 ally recognized statistical rating organization, or any per7 son associated with such nationally recognized statistical 

8 rating organization, whether prior to or subsequent to be9 coming so associated— 

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

11 subject to an order or finding, enumerated in sub12 paragraph (A), (D), (E), (H), or (G) of paragraph 

13 (4) of section 15(b), has been convicted of any offense 

14 specified in subparagraph (B) of such paragraph (4) 

15 within 10 years of the commencement of the pro16 ceedings under this subsection, or is enjoined from 

17 any action, conduct, or practice specified in subpara18 graph (C) of such paragraph (4); 

19 ‘‘(2) has been convicted during the 10-year pe20 riod preceding the date of filing of any application 

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

22 ‘‘(A) any crime that is punishable by im23 prisonment for 1 or more years, and that is not 

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


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

2 foreign court of competent jurisdiction; or 

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

4 barring or suspending the right of the person to be as5 sociated with a nationally recognized statistical rat6 ing organization. 

7 ‘‘(e) WITHDRAWAL FROM REGISTRATION.—A nation8 ally recognized statistical rating organization registered 

9 under this section may, upon such terms and conditions 

10 as the Commission may establish as necessary in the public 

11 interest or for the protection of investors, withdraw from 

12 registration by filing a written notice of withdrawal with 

13 the Commission. If the Commission finds that any nation14 ally recognized statistical rating organization is no longer 

15 in existence or has ceased to do business as a credit rating 

16 agency, the Commission, by order, shall cancel the registra17 tion of such nationally recognized statistical rating organi18 zation. 

19 ‘‘(f) REPRESENTATIONS.— 

20 ‘‘(1) REPRESENTATIONS OF SPONSORSHIP BY

21 UNITED STATES OR AGENCY THEREOF.—It shall be 

22 unlawful for any nationally recognized statistical rat23 ing organization registered under this section to rep24 resent or imply in any manner whatsoever that such 

25 nationally recognized statistical rating organization 


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1 has been designated, sponsored, recommended, or ap2 proved, or that such nationally recognized statistical 

3 rating organization’s abilities or qualifications have 

4 in any respect been passed upon, by the United States 

5 or any agency, any officer, or any employee thereof. 

6 ‘‘(2) REPRESENTATION AS NRSRO OF UNREGIS7 TERED CREDIT RATING AGENCIES.—It shall be unlaw8 ful for any credit rating agency to represent or imply 

9 in any manner whatsoever that such credit rating 

10 agency has been designated, sponsored, recommended, 

11 or approved, or that such credit rating agency’s abili12 ties or qualifications have in any respect been passed 

13 upon, by the United States or any agency, any offi14 cer, or any employee thereof. It shall be unlawful for 

15 any credit rating agency that is not registered under 

16 this section as a nationally recognized statistical rat17 ing organization to state that such credit rating agen18 cy is a nationally recognized statistical rating orga19 nization under this Act. 

20 ‘‘(3) STATEMENT OF REGISTRATION UNDER SE21 CURITIES EXCHANGE ACT OF 1934 PROVISIONS.—No 

22 provision of paragraph (1) shall be construed to pro23 hibit a statement that a nationally recognized statis24 tical rating organization is a nationally recognized 

25 statistical rating organization under this Act, if such 


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1 statement is true in fact and if the effect of such reg2 istration is not misrepresented. 

3 ‘‘(g) PREVENTION OF MISUSE OF NONPUBLIC INFOR4 MATION.—Each nationally recognized statistical rating or5 ganization shall establish, maintain, and enforce written 

6 policies and procedures reasonably designed, taking into 

7 consideration the nature of such nationally recognized sta8 tistical rating organization’s business, to prevent the misuse 

9 in violation of this title, or the rules or regulations there10 under, of material, nonpublic information by such nation11 ally recognized statistical rating organization or any per12 son associated with such nationally recognized statistical 

13 rating organization. The Commission, as it deems necessary 

14 or appropriate in the public interest or for the protection 

15 of investors, shall adopt rules or regulations to require spe16 cific policies or procedures reasonably designed to prevent 

17 misuse in violation of this title (or the rules or regulations 

18 thereunder) of material, nonpublic information. 

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

20 Each nationally recognized statistical rating organization 

21 shall establish, maintain, and enforce written policies and 

22 procedures reasonably designed, taking into consideration 

23 the nature of the business of such nationally recognized sta24 tistical rating organization and affiliated persons and af25 filiated companies of such nationally recognized statistical 


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1 rating organization, to address and manage the conflicts 

2 of interest that can arise from such business. The Commis3 sion, as it deems necessary or appropriate in the public 

4 interest or for the protection of investors, shall adopt rules 

5 or regulations to prohibit, or require the management or 

6 disclosure of, any conflicts of interest relating to the 

7 issuance of credit ratings by a nationally recognized statis8 tical rating organization including, without limitation, 

9 conflicts of interest relating to— 

10 ‘‘(1) the manner in which a nationally recog11 nized statistical rating organization is compensated 

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

13 issuing credit ratings or providing related services; 

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

15 other services by a nationally recognized statistical 

16 rating organization, or any person associated with 

17 such nationally recognized statistical rating organiza18 tion, to the obligor, or any affiliate of the obligor; 

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

20 or any other financial or personal interests between 

21 a nationally recognized statistical rating organiza22 tion, or any person associated with such nationally 

23 recognized statistical rating organization, and the ob24 ligor, or any affiliate of the obligor; and 


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

2 statistical rating organization, or any person associ3 ated with such nationally recognized statistical rating 

4 organization, with any person that underwrites the 

5 securities or money market instruments that are the 

6 subject of a credit rating. 

7 ‘‘(i) PROHIBITED CONDUCT.— 

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

9 Commission may adopt rules or regulations to pro10 hibit any act or practice relating to the issuance of 

11 credit ratings by a nationally recognized statistical 

12 rating organization that the Commission determines 

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

14 or practice relating to— 

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

16 that has not been specifically requested by the ob17 ligor— 

18 ‘‘(i) from an obligor; or 

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

20 unless— 

21 ‘‘(I) the organization is organized 

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

23 fees from investors or other market 

24 participants, or a combination thereof; 

25 and 


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1 ‘‘(II) the affiliate is such an in2 vestor or participant; 

3 ‘‘(B) conditioning or threatening to condi4 tion the issuance of a credit rating on the obli5 gor’s, or an affiliate of the obligor’s, purchase of 

6 other services or products, including pre-credit 

7 rating assessment products, of the nationally rec8 ognized statistical rating organization or any 

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

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

12 credit rating on, or refusing to rate, securities or 

13 money market instruments issued by an asset 

14 pool unless a portion of the assets within such 

15 pool also is rated by the nationally recognized 

16 statistical rating organization; 

17 ‘‘(D) modifying or threatening to modify a 

18 credit rating or otherwise departing from its 

19 adopted systematic procedures and methodologies 

20 in determining credit ratings, based on whether 

21 the obligor, or an affiliate of the obligor, pays or 

22 will pay for the credit rating or any other serv23 ices or products of the nationally recognized sta24 tistical rating organization or any person associVerDate Aug 31 2005 22:32 Jul 07, 2006 Jkt 049200 PO 00000 Frm 00017 Fmt 6652 Sfmt 6203 E:\BILLS\H2990.RH H2990

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1 ated with such nationally recognized statistical 

2 rating organization. 

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

4 paragraph (1), or in any rules or regulations adopted 

5 thereunder, shall be construed to modify, impair, or 

6 supersede the operation of any of the antitrust laws. 

7 For the purposes of the preceding sentence, the term 

8 ‘antitrust laws’ has the meaning given it in the first 

9 section of the Clayton Act (15 U.S.C. 12), except that 

10 such term includes section 5 of the Federal Trade 

11 Commission Act (15 U.S.C. 45) to the extent such sec12 tion 5 applies to unfair methods of competition. 

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

14 nationally recognized statistical rating organization shall 

15 designate an individual responsible for administering the 

16 policies and procedures that are required to be established 

17 pursuant to subsections (g) and (h), and for ensuring com18 pliance with the securities laws and the rules and regula19 tions thereunder, including those promulgated by the Com20 mission pursuant to this section. 

21 ‘‘(k) STATEMENTS OF FINANCIAL CONDITION.—Each 

22 nationally recognized statistical rating organization shall, 

23 on a confidential basis, file with the Commission, at inter24 vals determined by the Commission, such financial state25 ments, certified (if required by the rules or regulations of 


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1 the Commission) by an independent public accountant, and 

2 information concerning its financial condition as the Com3 mission, by rule, may prescribe as necessary or appropriate 

4 in the public interest or for the protection of investors. 

5 ‘‘(l) ELIMINATION OF COMMISSION DESIGNATION

6 PROCESS FOR NRSRO’S.— 

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

8 days after the enactment of the Credit Rating Agency 

9 Duopoly Relief Act of 2006, the Commission shall 

10 cease to designate persons and companies as nation11 ally recognized statistical rating organizations, as 

12 that term is used under rule 15c3–1 of the Commis13 sion’s rules (17 CFR 240.15c3–1). 

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

15 RELIEF.—The no-action relief that the Commission 

16 has granted with respect to the designation of nation17 ally recognized statistical rating organizations, as 

18 that term is used under rule 15c3–1 of the Commis19 sion’s rules (17 CFR 240.15c3–1), shall be void and 

20 of no force or effect. 

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

22 days after the date of enactment of the Credit Rating 

23 Agency Duopoly Relief Act of 2006, the Commission 

24 shall give notice to the Federal agencies which employ 

25 the term ‘nationally recognized statistical rating orVerDate Aug 31 2005 22:32 Jul 07, 2006 Jkt 049200 PO 00000 Frm 00019 Fmt 6652 Sfmt 6203 E:\BILLS\H2990.RH H2990

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1 ganization’ (as that term is used under rule 15c3–1 

2 of the Commission’s rules (17 CFR 240.15c3–1)) in 

3 their rules and regulations regarding the actions un4 dertaken pursuant to this section. 

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

6 Within 180 days after the date of enactment of the 

7 Credit Rating Agency Duopoly Relief Act of 2006, the 

8 Commission shall review its existing rules and regula9 tions which employ the term ‘nationally recognized 

10 statistical rating organization’ or ‘NRSRO’ and pro11 mulgate new or revised rules and regulations as the 

12 Commission may prescribe as necessary or appro13 priate in the public interest or for the protection of 

14 investors.’’. 

15 (b) CONFORMING AMENDMENTS TO THE 1934 ACT.— 

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

17 78o(b)(4)(B)(ii)) is amended by inserting ‘‘nationally 

18 recognized statistical rating organization,’’ after 

19 ‘‘transfer agent,’’. 

20 (2) Section 15(b)(4)(C) (15 U.S.C. 78o(b)(4)(C)) 

21 is amended by inserting ‘‘nationally recognized statis22 tical rating organization,’’ after ‘‘transfer agent,’’. 

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

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

25 (c) OTHER CONFORMING AMENDMENTS.— 


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

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

3 at the end the following new paragraph: 

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

5 same meaning as given in section 3 of the Securities 

6 Exchange Act of 1934.’’. 

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

8 Act of 1940 (15 U.S.C. 80a–9(a)) is amended by in9 serting ‘‘credit rating agency,’’ after ‘‘transfer 

10 agent,’’. 

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

12 Act of 1940 (15 U.S.C. 80a–9(a)) is amended by in13 serting ‘‘credit rating agency,’’ after ‘‘transfer 

14 agent,’’. 

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

16 Act of 1940 (15 U.S.C. 80b–2(a)) is amended by add17 ing at the end the following new paragraph: 

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

19 same meaning as given in section 3 of the Securities 

20 Exchange Act of 1934.’’. 

21 (5) Section 203(e)(2)(B) of the Investment Advis22 ers Act of 1940 (15 U.S.C. 80b–3(e)) is amended by 

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

24 agent,’’. 


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1 (6) Section 203(e)(4) of the Investment Advisers 

2 Act of 1940 (15 U.S.C. 80b–3(e)) is amended by in3 serting ‘‘credit rating agency,’’ after ‘‘transfer 

4 agent,’’. 

5 (7) Section 1319 of the Housing and Community 

6 Development Act of 1992 (12 U.S.C. 4519) is amend7 ed by striking ‘‘effectively’’ and all that follows 

8 through ‘‘broker-dealers’’ and inserting ‘‘that is a na9 tionally recognized statistical rating organization, as 

10 such term is defined in section 3(a) of the Securities 

11 Exchange Act of 1934’’. 

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

13 1965 (20 U.S.C. 1087–2) is amended in subsection 

14 (r)(15)(A) by striking ‘‘means any entity recognized 

15 as such by the Securities and Exchange Commission’’ 

16 and inserting ‘‘means any nationally recognized sta17 tistical rating organization as that term is defined 

18 under the Securities Exchange Act of 1934’’. 

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

20 Code, is amended by striking ‘‘identified by the Secu21 rities and Exchange Commission as a Nationally 

22 Recognized Statistical Rating Organization’’ and in23 serting ‘‘registered with the Securities and Exchange 

24 Commission as a nationally recognized statistical ratVerDate Aug 31 2005 22:32 Jul 07, 2006 Jkt 049200 PO 00000 Frm 00022 Fmt 6652 Sfmt 6203 E:\BILLS\H2990.RH H2990

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1 ing organization as that term is defined under the Se2 curities Exchange Act of 1934 (15 U.S.C. 78 et seq.)’’. 

3 SEC. 5. ANNUAL AND OTHER REPORTS. 

4 Section 17(a)(1) (15 U.S.C. 78q(a)(1)) is amended by 

5 inserting ‘‘nationally recognized statistical rating organiza6 tion,’’ after ‘‘registered transfer agent,’’. 

7 SEC. 6. GAO STUDY AND REPORT REGARDING CONSOLIDA8 TION OF CREDIT RATING AGENCIES. 

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

10 the United States shall conduct a study— 

11 (1) to identify— 

12 (A) the factors that have led to the consoli13 dation of credit rating agencies; 

14 (B) the present and future impact of the 

15 condition described in subparagraph (A) on the 

16 securities markets, both domestic and inter17 national; and 

18 (C) solutions to any problems identified 

19 under subparagraph (B), including ways to in20 crease competition and the number of firms ca21 pable of providing credit rating services to large 

22 national and multinational business organiza23 tions that are subject to the securities laws; 


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1 (2) of the problems, if any, faced by business or2 ganizations that have resulted from limited competi3 tion among credit rating agencies, including— 

4 (A) higher costs; 

5 (B) lower quality of services; 

6 (C) anti-competitive practices; 

7 (D) impairment of independence; and 

8 (E) lack of choice; and 

9 (3) whether and to what extent Federal or State 

10 regulations impede competition among credit rating 

11 agencies. 

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

13 study under this section, the Comptroller General shall con14 sult with— 

15 (1) the Securities and Exchange Commission; 

16 (2) the Department of Justice; and 

17 (3) any other public or private sector organiza18 tion that the Comptroller General considers appro19 priate. 

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

21 after the date of enactment of this Act, the Comptroller Gen22 eral shall submit a report on the results of the study re23 quired by this section to the Committee on Banking, Hous24 ing, and Urban Affairs of the Senate and the Committee 

25 on Financial Services of the House of Representatives. 


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25 

•HR 2990 RH 

1 SEC. 7. EFFECTIVE DATE. 

2 The amendments made by sections 4 and 5 shall take 

3 effect on January 1, 2008, except as otherwise provided in 

4 paragraphs (1), (3), and (4) of subsection (l) of section 15E 

5 of the Securities Exchange Act of 1934 (as added by such 

6 amendments), and except that the Securities and Exchange 

7 Commission is authorized to prescribe rules and regulations 

8 to carry out such amendments beginning on the date of en9 actment of this Act. 


sroberts on PROD1PC70 with BILLS
Union Calendar No. 306 

109TH CONGRESS 

2D SESSION H. R. 2990 

[Report No. 109

–546] 

A BILL 

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

JULY 7, 2006 

Reported with an amendment, committed to the Comand ordered to be printed mittee of the Whole House on the State of the Union, 


sroberts on PROD1PC70 with BILLS