CONSTITUTIONALITY OF MANDATORY 

REGISTRATION OF CREDIT RATING AGENCIES 

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

would include an exemption designed to address First Amendment concerns, would satisfy the First 

Amendment’s requirements. 

 October 22, 2009 

LETTER OPINION FOR THE ASSISTANT SECRETARY FOR 

 FINANCIAL INSTITUTIONS 

U.S. 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. § 78o-7(a)(1)(A) (2006) (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 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. 

 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. 
 

 

 

Opinions of the Office of Legal Counsel in Volume 33 

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. § 80b-2(a)(11). And the Commodity 

Futures Trading Commission has adopted by regulation an exemption from the registration 

requirement of the 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 

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. 

2
 
Constitutionality of Mandatory Registration of Credit Rating Agencies 

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 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, 

[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 

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Opinions of the Office of Legal Counsel in Volume 33 

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 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 

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., Inc., 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) (“[u]nlike 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 

4
 
 

 

 

Constitutionality of Mandatory Registration of Credit Rating Agencies 

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 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., National 

Ass’n for the Advancement of Psychoanalysis v. California Bd. of Psychology, 228 F.3d 1043, 

1053-55 (9th Cir. 2000) (psychologists/psychoanalysts); Lawline v. American 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, 2004) (real estate appraisers); see also Planned 

Parenthood of Southeastern 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; “To 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 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. 

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.”). 

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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 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 contextspecific 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. 

 

 /s/

 

 DAVID J. BARRON 

 Acting Assistant Attorney General 

 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 Company, 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 In re Fitch, Inc., discussed supra note 3. 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. 

6