330

Mandatory Registration of Credit Rating Agencies

The Administration’s proposal for mandatory registration of credit rating agencies—

which would exempt an agency if (1) it does not provide ratings of securities in 

exchange for fees or other forms of compensation from the securities’ issuers; and 

(2) it issues credit ratings only in any bona fide newspaper, news magazine or business 

or financial publication of general and regular circulation—would comply with the 

First Amendment.

October 22, 2009

LETTER OPINION FOR THE 

ASSISTANT SECRETARY FOR FINANCIAL INSTITUTIONS

DEPARTMENT OF THE TREASURY

You have asked us to assess whether the Administration’s proposal 

for mandatory registration of credit rating agencies, which would include 

an exemption designed to address First Amendment concerns, would be 

constitutional. For the reasons given below, we conclude that the Administration’s registration proposal would satisfy the First Amendment’s 

requirements.1

Under existing law, a credit rating agency may “elect[] to be treated as 

a nationally recognized statistical rating organization” by furnishing an 

application demonstrating that it meets certain criteria. 15 U.S.C. § 78o7(a)(1)(A) (emphasis added). A registered credit rating agency receives 

certain benefits by being a “nationally recognized rating organization” 

and must abide by certain statutory requirements. See id. § 78o-7. As 

we understand it, the Administration wishes to amend the law to make 

 

1 Our conclusion assumes that application of the particular requirements and limitations that would be required of registered agencies would be tailored in accord with First 

Amendment requirements so that there would be no unconstitutional constraints imposed 

on the speech of registered agencies. We have not had sufficient time to consider the 

various particular regulatory requirements, either under the existing statute or in the 

Administration’s proposal, and we express no view on whether any particular requirement 

would be constitutionally permissible as applied to the publication or conveyance of 

particular credit ratings. It is our understanding that, under the Administration’s proposal, 

those requirements and limitations would only take effect once the Securities and Exchange Commission issues regulations implementing the new statute—regulations that 

that would have to reflect any exemptions or limitations the First Amendment may 

require.
Mandatory Registration of Credit Rating Agencies

331

it mandatory for credit rating agencies to register as nationally recognized 

statistical rating organizations—to the extent consistent with the Constitution. The current definition of “credit rating agency” is any person

(A) engaged in the business of issuing credit ratings on the Internet 

or through another readily accessible means, for free or for a reasonable fee, but does not include a commercial credit reporting company;

(B) employing either a quantitative or qualitative model, or both, 

to determine credit ratings; and

(C) receiving fees from either issuers, investors, or other market 

participants, or a combination thereof.

Id. § 78c(a)(61).

A requirement that all “credit rating agen[cies]” so defined register 

with the federal government would implicate the First Amendment because such a requirement may impose at least some burden on their

speech activities—namely, “issuing credit ratings on the Internet or 

through another readily accessible means, for free or for a reasonable 

fee.” “As a matter of principle,” the Supreme Court has explained, “a 

requirement of registration in order to make a public speech would seem 

generally incompatible with an exercise of the rights of free speech and 

free assembly.” Thomas v. Collins, 323 U.S. 516, 539 (1945); see also id.

at 540 (“If the exercise of the rights of free speech and free assembly 

cannot be made a crime, we do not think this can be accomplished by the 

device of requiring previous registration as a condition for exercising 

them and making such a condition the foundation for restraining in advance their exercise and for imposing a penalty for violating such a restraining order.”).

In light of these First Amendment concerns, analogous registration 

requirements in other financial regulatory statutes include exemptions 

designed to avoid constitutional problems. The Investment Advisers Act, 

for example, contains an exemption from its registration requirement for 

“the publisher of any bona fide newspaper, news magazine or business or 

financial publication of general and regular circulation.” 15 U.S.C. § 80b2(a)(11). And the Commodity Futures Trading Commission has adopted 

by regulation an exemption from the registration requirement of the 
33 Op. O.L.C. 330 (2009)

332

Commodity Exchange Act for any person that “does not engage in . . .

[d]irecting client accounts; or . . . [p]roviding commodity trading advice 

based on, or tailored to, the commodity interest or cash market positions 

or other circumstances or characteristics of particular clients; or . . . [i]f, 

as provided for in section 4m(1) of the Act, during the course of the 

preceding 12 months, it has not furnished commodity trading advice to 

more than 15 persons and it does not hold itself out generally to the public 

as a commodity trading advisor.” 17 C.F.R. § 4.14(a)(9), (10).

The Administration’s proposal mirrors these other financial regulatory 

statutes. The proposal would exempt from the registration requirement 

any credit rating agency that satisfies two criteria: (i) it does not provide 

ratings of securities in exchange for fees or other forms of compensation 

from the securities’ issuers; and (ii) it issues credit ratings only in any 

bona fide newspaper, news magazine or business or financial publication 

of general and regular circulation.2

Although the precise line for First Amendment purposes is not absolutely clear in this area, we believe that a mandatory registration requirement for credit rating agencies that contained such an exemption 

would comply with the First Amendment. We begin with the prong of 

the exemption that would require credit rating agencies to issue credit 

ratings only in any bona fide newspaper, news magazine or business or 

financial publication of general and regular circulation. This prong of 

the exemption derives from the Supreme Court’s treatment of the similar 

Investment Advisers Act exemption in Lowe v. Securities and Exchange 

Commission, 472 U.S. 181 (1985).

In that case, the Securities and Exchange Commission had sought to 

enjoin Lowe from publishing an investment advice newsletter because it 

had previously revoked his registration as an investment adviser under the 

Act, due to his conviction for a series of financial crimes. Particularly in 

light of the “important constitutional question” raised by such a bar on 

publication, the Court read the Act’s exemption for the “publisher of any 

bona fide newspaper, news magazine or business or financial publication 

 

2 The second criterion is adapted from the current Investment Advisers Act, which, as 

we explain below, the Supreme Court has construed so as to avoid First Amendment 

concerns. We assume the criterion in the proposed exemption would be given a similar 

construction.
Mandatory Registration of Credit Rating Agencies

333

of general and regular circulation” broadly to shield Lowe’s newsletter, 

which reached an audience of between 3,000 and 19,000 subscribers. Id. 

at 188, 185. The Court further held that although Lowe’s publication of 

his securities newsletters had not been “regular” in the sense of consistent 

circulation—in that the newsletters had not been published on a regular 

semimonthly basis as advertised—they were nevertheless “regular” for 

purposes of the Investment Advisers Act because there was “no indication 

that they have been timed to specific market activity, or to events affecting or having the ability to affect the securities industry.” Id. at 209. The 

Court explained that its reading of the Act was informed by “the apparent 

intent of Congress to keep the Act free of constitutional infirmities.” Id. at 

207. The majority contrasted the character of Lowe’s newsletter publishing, which it implied was entitled to strong First Amendment protection, 

with professional services involving speech that may be subjected to 

regulation without offending the First Amendment, such as the provision 

of legal advice by lawyers to their clients. The former, the Court emphasized, involved “communications [with] subscribers [that] remain entirely 

impersonal and,” unlike the latter, “do not develop into the kind of fiduciary, person-to-person relationships that were discussed at length in the 

legislative history of the Act and that are characteristic of investment 

adviser-client relationships.” Id. at 210; see also id. at 210 n.57 (noting 

that it was “significant” that Lowe did not engage in “individualized, 

investment-related interactions” with his subscribers).

In a separate opinion in Lowe by Justice White, three Justices found 

that the Act’s statutory “publisher” exemption could not be construed to 

apply to Lowe’s irregular publication, and therefore addressed the First 

Amendment question directly. They observed that the “power of government to regulate the professions is not lost whenever the practice of a 

profession entails speech,” id. at 228, “[b]ut the principle that the government may restrict entry into professions and vocations through licensing schemes has never been extended to encompass the licensing of 

speech per se or of the press. . . . At some point, a measure is no longer a 

regulation of a profession but a regulation of speech or of the press; 

beyond that point, the statute must survive the level of scrutiny demanded 

by the First Amendment.” Id. at 229–30. In attempting to “locate the point 

where regulation of a profession leaves off and prohibitions on speech 

begin,” Justice White wrote,
33 Op. O.L.C. 330 (2009)

334

[o]ne who takes the affairs of a client personally in hand and purports to exercise judgment on behalf of the client in the light of the 

client’s individual needs and circumstances is properly viewed as 

engaging in the practice of a profession. Just as offer and acceptance 

are communications incidental to the regulable transaction called a 

contract, the professional’s speech is incidental to the conduct of the 

profession. If the government enacts generally applicable licensing 

provisions limiting the class of persons who may practice the profession, it cannot be said to have enacted a limitation on freedom of 

speech or the press subject to First Amendment scrutiny. Where the 

personal nexus between professional and client does not exist, and a 

speaker does not purport to be exercising judgment on behalf of any 

particular individual with whose circumstances he is directly acquainted, government regulation ceases to function as legitimate 

regulation of professional practice with only incidental impact on 

speech; it becomes regulation of speaking or publishing as such, subject to the First Amendment’s command that “Congress shall make 

no law . . . abridging the freedom of speech, or of the press.”

Id. at 232 (emphasis added); see also Thomas, 323 U.S. at 544–45 (Jackson, J., concurring) (“Though the one may shade into the other, a rough 

distinction always exists, I think, which is more shortly illustrated than 

explained. A state may forbid one without its license to practice law as a 

vocation, but I think it could not stop an unlicensed person from making a 

speech about the rights of man or the rights of labor, or any other kind of 

right, including recommending that his hearers organize to support his 

views. Likewise, the state may prohibit the pursuit of medicine as an 

occupation without its license, but I do not think it could make it a crime 

publicly or privately to speak urging persons to follow or reject any 

school of medical thought.”).

In accord with the majority and concurring opinions in Lowe regarding 

the line between impermissible regulations on speech and “merely permissible regulation of a profession,” we think the First Amendment concerns that a mandatory registration requirement may raise are addressed 

by an exemption for agencies that supply ratings tailored to meet the 

needs of individual clients. The Court has adopted a somewhat similar 

line in determining whether credit reports constitute matters of public 

concern warranting heightened protection in defamation actions. See 
Mandatory Registration of Credit Rating Agencies

335

Dun & Bradstreet v. Greenmoss, 472 U.S. 749, 761–63 (1985) (plurality 

opinion) (concluding that a credit report issued confidentially to five 

subscribers did not constitute speech about a matter of public concern 

requiring a plaintiff to show “actual malice” in a defamation suit).3 The 

distinction between the provision of advice tailored to meet the needs of 

individual clients, on the one hand, and publication of opinions to a wide

audience, on the other, supports the second prong of the Administration’s 

proposed exemption, i.e., that credit rating agencies would be exempt 

from registration only if they “issue credit ratings only in any bona fide 

newspaper, news magazine or business or financial publication of general 

and regular circulation.” If a credit rating agency provides ratings to select 

investor clients, tailoring the speech it undertakes to those clients’ needs, 

it is engaged in the sort of speech akin to that of other professionals when 

 

3 In accord with Dun & Bradstreet, lower courts considering credit rating agencies’ 

First Amendment defenses to claims for defamation, fraud, and various other business 

torts (as well as breach of contract in at least one instance) have looked in part to whether 

the reports were distributed to a public audience or tailored to a discrete group of clients.

See, e.g., Compuware Corp. v. Moody’s Investors Servs., Inc., 499 F.3d 520, 525–34 (6th

Cir. 2007) (affirming grant of summary judgment in favor of credit rating agency defendant on defamation and breach of contract claims based on “actual malice” requirement 

where ratings were made available to the public); Abu Dhabi Commercial Bank v. Morgan 

Stanley & Co., No. 08-Civ-7508 (SAS), 2009 WL 2828018, *9 (S.D.N.Y. Sept. 2, 2009) 

(rejecting First Amendment defense to various common law tort claims, including fraud, 

in part because “plaintiffs have plainly alleged that the . . . ratings were never widely 

disseminated, but were provided instead in connection with a private placement to a select 

group of investors”); In re Nat’l Century Fin. Enters., Inc., Inv. Litig., 580 F. Supp. 2d 

630, 640 (S.D. Ohio 2008) (rejecting First Amendment defense to securities fraud and 

various common law claims in part because ratings disseminated to a “select class of 

investors”); In re Enron Corp., 511 F. Supp. 2d 742, 820 (S.D. Tex. 2005) (finding that 

the First Amendment shielded credit rating agency from negligent misrepresentation 

claim where the “credit rating reports regarding Enron by national credit rating agencies 

were not private or confidential, but distributed ‘to the world’ and were related to the 

creditworthiness of a powerful public corporation that operated internationally”). At least 

one court of appeals has invoked the same consideration as one of its reasons for ruling 

that a credit rating agency could not avail itself of a statutory state-law journalist’s 

privilege to refuse to comply with a subpoena. In re Fitch, Inc., 330 F.3d 104, 109 (2d 

Cir. 2003) (“Unlike a business newspaper or magazine, which would cover any transactions deemed newsworthy, Fitch only ‘covers’ its own clients.”); see also id. at 110 

(“Fitch’s information-disseminating activity does not seem to be based on a judgment 

about newsworthiness, but rather on client needs. We believe this weighs against Fitch 

being able to assert the privilege for the information at issue.”).
33 Op. O.L.C. 330 (2009)

336

they advise their clients—speech that is constitutionally distinct from the 

publication of facts or opinions to the public at large. See Taucher v. 

Born, 53 F. Supp. 2d 464 (D.D.C. 1999) (Commodity Exchange Act 

requirement that commodity trading advisors register with Commodity

Futures Trading Commission was unconstitutional as applied to publishers of general commodity trading information strategy and advice, and 

trading systems, who made general buy and sell recommendations not 

tailored to any specific individuals, and never had contact with individual 

investors).

Indeed, federal courts have repeatedly rejected First Amendment challenges to professional licensing statutes as applied to persons who provide 

services to particular clients, and do not simply offer published advice or 

information to the general public. See, e.g., Nat’l Ass’n for the Advancement of Psychoanalysis v. Cal. Bd. of Psychology, 228 F.3d 1043, 1053–

55 (9th Cir. 2000) (psychologists/psychoanalysts); Lawline v. Am. Bar 

Ass’n, 956 F.2d 1378, 1386 (7th Cir. 1992) (lawyers); Accountant’s Soc’y 

of Va. v. Bowman, 860 F.2d 602, 603–05 (4th Cir. 1988) (accountants); 

Fidelity Nat’l Info. Solutions, Inc. v. Sinclair, No. Civ. A. 02-6928, 2004 

WL 764834 (E.D. Pa. Mar. 31) (real estate appraisers); see also Planned 

Parenthood of Se. Pa. v. Casey, 505 U.S. 833, 884 (1992) (plurality 

opinion) (rejecting doctors’ argument that they had a First Amendment 

right not to provide information to their patients about the risks of abortion, and childbirth, in a manner mandated by state statute; “[t]o be sure, 

the physician’s First Amendment rights not to speak are implicated, . . .

but only as part of the practice of medicine, subject to reasonable licensing and regulation by the State”). These precedents provide support for 

the application of the registration requirement to credit rating agencies 

that do not limit their issuance of credit ratings only to any bona fide 

newspaper, news magazine or business or financial publication of general 

and regular circulation.

The same reasons that support the constitutionality of mandatory registration for credit ratings agencies that do not satisfy the general publication criterion described above also support application of that registration 

requirement to any credit rating agency that receives fees or other forms 

of compensation from issuers of securities in return for its provision of 

ratings. Just as a credit ratings agency may be required to register, in 

accord with the distinction set forth in Lowe, if it provides individualized 
Mandatory Registration of Credit Rating Agencies

337

advice to client investors, so too can registration be required if the agency 

provides its ratings (even to a public audience) as a professional service 

on behalf of individual issuers of securities. When a credit rating agency 

is hired by a particular issuer to rate a particular security, it is providing a 

particular client with a valuable professional service tailored to that client’s needs, one for which the issuer-client is willing to pay, presumably 

because it believes the agency will “exercise judgment on behalf of the 

client,” Lowe, 472 U.S. at 232 (White, J., concurring), in order to advance 

the issuer’s own commercial goals. Cf. Commercial Fin. Servs., Inc. v. 

Arthur Andersen LLP, 94 P.3d 106, 110 (Okla. Civ. App. 2004) (rating 

agencies sued by issuer that hired it not protected by First Amendment 

against liability for negligent misrepresentation because “[w]hile the 

Rating Agencies gave ‘opinions,’ they did so as professionals being paid 

to provide their opinions to a client”).4

This conclusion is bolstered by our understanding, based on information provided by officials at the Treasury Department, that a payment 

by an issuer to a credit rating agency in exchange for issuance of a rating 

ordinarily entails receipt of the rating by the issuer in advance of public 

disclosure, and the opportunity for discussion and exchange between the 

issuer and agency during the development of the rating. In this respect, 

this criterion of the proposed exemption would appear to be similar to an 

element of the exemption under the Commodity Exchange Act for “commodity trading advice based on, or tailored to, the commodity interest or 

cash market positions or other circumstances or characteristics of particular clients.” 17 C.F.R. § 4.14(a)(9). To be sure, in developing the rating 

for the client, the credit rating agency may provide a neutral and candid 

assessment, using professional methods. But the same is true of accountants and other professionals when they give their clients advice, and yet 

 

4 We recognize that at least two lower courts, in determining whether a credit rating 

agency was entitled to the benefit of a statutory journalist’s privilege, have rejected the 

significance of the fact that the agency had been hired by the issuer. See In re Pan Am 

Corp., 161 B.R. 577 (S.D.N.Y. 1993); In re Scott Paper Co., 145 F.R.D. 366 (E.D. Pa. 

1993). But the lower courts are divided on that issue, even in the context of that analogous 

statutory question. See Fitch, 330 F.3d 104 (discussed supra note Error! Bookmark not 

defined.). Moreover, the considerations relevant to the application of the statutory 

journalist’s privilege may differ from those that determine the constitutional permissibility of a registration requirement.
33 Op. O.L.C. 330 (2009)

338

those professionals may be required to register consistent with the First 

Amendment. Admittedly, even issuer-paid agencies typically convey their 

ratings to the public. But other professionals who may be required to 

register also may subsequently convey to a wider audience some of the 

information the client has retained them to provide. It is the fact of the 

individualized provision of a service to a client that supports the registration requirement in either case. Although widespread publication of their 

ratings may be more central to the service provided by credit rating agencies than is the less frequent public speech by members of regulated 

professions acting on behalf of their clients (such as when a lawyer publicly discloses an advice of counsel letter), this appears to us to be a 

difference of degree rather than of kind. Cf. Lowe, 472 U.S. at 231 

(White, J., concurring) (“the distinguishing factor was whether the speech 

in any particular case was ‘associat[ed] . . . with some other factor which 

the state may regulate so as to bring the whole within official control’” 

(quoting Thomas, 323 U.S. at 547)). In light of the context-specific analysis courts have followed in assessing First Amendment protections in such 

cases, we believe findings reflecting the realities of how credit rating 

agencies operate in providing ratings, such as those that would support the 

representations made to us by the Treasury Department, would bolster the 

legal basis for a mandatory registration requirement.

DAVID J. BARRON

Acting Assistant Attorney General

Office of Legal Counsel