Federal Register / Vol. 77, No. 48 / Monday, March 12, 2012 / Notices 14581 

2Release No. 34–55857 (June 5, 2007), 72 FR 

33564, 33598 (June 18, 2007). 

3Release No. 34–58001 (June 23, 2008), 73 FR 

36362 (June 26, 2008). 

4See Report of the Senate Committee on Banking, 

Housing, and Urban Affairs to Accompany S. 3850, 

Credit Rating Agency Reform Act of 2006, S. Report 

No. 109–326, 109th Cong., 2d Sess. (Sept. 6, 2006). 

5Release No. 34–57301 (Feb. 11, 2008), 73 FR 

8720 (Feb. 14, 2008). 

6Release No. 34–65339 (Sept. 14, 2011), 76 FR 

58319 (Sept. 20, 2011). 

III. Discussion 

The Commission, when adopting Rule 

17g–5(c)(1), noted that it intended to 

monitor how the prohibition operates in 

practice, particularly with respect to 

asset-backed securities, and whether 

exemptions may be appropriate.2 The 

Commission has previously granted 

three temporary exemptions from Rule 

17g–5(c)(1), including one on June 28, 

2008 to Realpoint, as Morningstar was 

formerly known, in connection with its 

initial registration as an NRSRO 

(‘‘Realpoint Exemptive Order’’).3 The 

Commission noted several factors in 

granting that exemption, including the 

fact that the revenue in question was 

earned prior to the adoption of the rule, 

the likelihood of smaller firms such as 

Realpoint being more likely to be 

affected by the rule, Realpoint’s 

expectation that the percentage of total 

revenue provided by the relevant client 

would decrease, and the increased 

competition in the asset-backed 

securities class that could result from 

Realpoint’s registration. In granting the 

Realpoint Exemptive Order, the 

Commission also noted that an 

exemption would further the primary 

purpose of the Credit Rating Agency 

Reform Act of 2006 (‘‘Rating Agency 

Act’’) as set forth in the Report of the 

Senate Committee on Banking, Housing, 

and Urban Affairs accompanying the 

Rating Agency Act: To ‘‘improve ratings 

quality for the protection of investors 

and in the public interest by fostering 

accountability, transparency, and 

competition in the credit rating 

industry’’.4 Previously, on February 11, 

2008, the Commission, citing the same 

factors it later set forth in the Realpoint 

Exemptive Order, issued a similar order 

granting LACE LLC (‘‘LACE’’) a 

temporary exemption from the 

requirements of Rule 17g–5(c)(1) in 

connection with LACE’s registration as 

an NRSRO (‘‘LACE Exemptive Order’’).5

Most recently, the Commission issued 

an order granting Kroll Bond Rating 

Agency, Inc. (‘‘Kroll’’), formerly known 

as LACE, a temporary, limited and 

conditional exemption from Rule 17g– 

5(c)(1) allowing Kroll to enter the 

market for rating structured finance 

products (‘‘Kroll Exemptive Order’’).6 In 

this order, the Commission noted that 

an exemption is consistent with the 

Commission’s goal of improving ratings 

quality for the protection of investors 

and in the public interest by fostering 

accountability, transparency, and 

competition in the credit rating 

industry. 

The Commission believes that a 

temporary, limited and conditional 

exemption allowing Morningstar to 

expand in the market for rating 

structured finance products on an 

issuer-paid basis is consistent with the 

Commission’s goal of improving ratings 

quality for the protection of investors 

and in the public interest by fostering 

accountability, transparency, and 

competition in the credit rating 

industry. In order to maintain this 

exemption, Morningstar will be required 

to publicly disclose in Exhibit 6 to Form 

NRSRO, as applicable, that the firm 

received more than 10% of its net 

revenue in fiscal years 2011 and 2012 

from a client or clients that paid it to 

rate asset-backed securities. This 

disclosure is designed to alert users of 

credit ratings to the existence of this 

specific conflict and is consistent with 

exemptive relief the Commission has 

previously granted to Realpoint, LACE 

and Kroll. In addition to Morningstar’s 

existing obligations as an NRSRO to 

maintain policies, procedures, and 

internal controls, by the terms of this 

order, Morningstar will also be required 

to maintain policies, procedures, and 

internal controls specifically designed 

to address the conflict created by 

exceeding the 10% threshold. 

Furthermore, the exemption would also 

require that revenue from a single client 

does not exceed 25% of Morningstar’s 

total net revenue for either fiscal year 

2011 or 2012. 

Section 15E(p) of the Exchange Act, as 

added by Section 932(a)(8) of the DoddFrank Wall Street Reform and Consumer 

Protection Act, requires Commission 

staff to conduct an examination of each 

NRSRO at least annually. As part of this 

annual examination regimen for 

NRSROs, Commission staff will closely 

review Morningstar’s activities with 

respect to managing this conflict and 

meeting the conditions set forth below 

and will consider whether to 

recommend that the Commission take 

additional action, including 

administrative or other action. 

The Commission therefore finds that 

a temporary, limited and conditional 

exemption allowing Morningstar to 

expand in the market for rating 

structured finance products on an 

issuer-paid basis is consistent with the 

Commission’s goal, as established by the 

Rating Agency Act, of improving ratings 

quality by fostering accountability, 

transparency, and competition in the 

credit rating industry, and is necessary 

and appropriate in the public interest 

and is consistent with the protection of 

investors, subject to Morningstar’s 

making public disclosure of the conflict 

created by exceeding the 10% threshold; 

its maintenance of policies, procedures 

and internal controls to address that 

conflict; and that revenue from a single 

client does not exceed 25% of 

Morningstar’s total net revenue for 

either the fiscal year ending December 

31, 2011 or the fiscal year ending 

December 31, 2012. 

IV. Conclusion 

Accordingly, pursuant to Section 36 

of the Exchange Act, 

It is hereby ordered that Morningstar 

Credit Ratings, LLC, formerly known as 

Realpoint LLC, is exempt from the 

conflict of interest prohibition in 

Exchange Act Rule 17g–5(c)(1) until 

January 1, 2013, with respect to any 

revenue derived from issuer-paid 

ratings, provided that: (1) Morningstar 

Credit Ratings, LLC publicly discloses 

in Exhibit 6 to Form NRSRO, as 

applicable, that the firm received more 

than 10% of its total net revenue in 

fiscal year 2011 or 2012 from a client or 

clients; (2) in addition to fulfilling its 

existing obligations as an NRSRO to 

maintain policies, procedures, and 

internal controls, Morningstar Credit 

Ratings, LLC also maintains policies, 

procedures, and internal controls 

specifically designed to address the 

conflict created by exceeding the 10% 

threshold; and (3) revenue from a single 

client does not exceed 25% of 

Morningstar’s total net revenue for 

either the fiscal year ending December 

31, 2011 or the fiscal year ending 

December 31, 2012. 

By the Commission. 

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2012–5830 Filed 3–9–12; 8:45 am] 

BILLING CODE 8011–01–P 

DEPARTMENT OF STATE 

[Public Notice 7767; Guatemala Docket No. 

DOS–2012–0011; Mali Docket No. DOS– 

2012–0012] 

Notice of Meeting of the Cultural 

Property Advisory Committee 

There will be a meeting of the 

Cultural Property Advisory Committee 

April 24–27, 2012, at the Department of 

State, Annex 5, 2200 C Street NW., 

Washington, DC. Portions of this 


pmangrum on DSK3VPTVN1PROD with NOTICES
14582 Federal Register / Vol. 77, No. 48 / Monday, March 12, 2012 / Notices 

meeting will be closed to the public, as 

discussed below. 

During the closed portions of the 

meeting, the Committee will review the 

proposal to extend the Memorandum of 

Understanding Between the Government 

of the United States of America and the 

Government of the Republic of 

Guatemala Concerning the Imposition 

of Import Restrictions on Archaeological 

Objects and Materials from the PreColumbian Cultures of Guatemala 

(MOU) [Docket No. DOS–2012–0011] 

and the Agreement Between the 

Government of the United States of 

America and the Government of the 

Republic of Mali Concerning the 

Imposition of Import Restrictions on 

Archaeological Material from the 

Paleolithic Era (Stone Age) to 

Approximately the Mid-Eighteenth 

Century [Docket No. DOS–2012–0012]. 

Additionally, the Government of 

Guatemala has asked that the MOU be 

amended to include ethnological 

ecclesiastical material representing the 

Colonial Period of its cultural heritage. 

An open session to receive oral public 

comment on these two proposals will be 

held on Tuesday, April 24, 2012, 2:30 

p.m. EDT. 

Also during the closed portions of the 

meeting, the Committee will continue 

its review of a new cultural property 

request from the Government of the 

Republic of Bulgaria seeking import 

restrictions on archaeological and 

ethnological material. Please see the 

link to the Public Summary of this 

request at http://exchanges.state.gov/ 

heritage/whatsnew.html. 

The Committee’s responsibilities are 

carried out in accordance with 

provisions of the Convention on 

Cultural Property Implementation Act 

(19 U.S.C. 2601 et seq.). The text of the 

Act and the subject MOU and 

Agreement, as well as related 

information, may be found at http:// 

exchanges.state.gov/heritage/ 

culprop.html. 

If you wish to attend the open session 

on April 24, 2012, you should notify the 

Cultural Heritage Center of the 

Department of State at (202) 632–6301 

no later than 5 p.m. (EDT) April 3, 2012, 

to arrange for admission. Seating is 

limited. When calling, please specify if 

you have special accommodation needs. 

The open session will be held at 2200 

C St. NW., Washington, DC 20037. 

Please plan to arrive 15 minutes before 

the beginning of the open session. 

If you wish to make an oral 

presentation at the open session, you 

must request to be scheduled and must 

submit a written text of your oral 

comments, ensuring that it is received 

no later than April 3, 2012, 11:59 p.m. 

(EDT), via the eRulemaking Portal (see 

below), to allow time for distribution to 

Committee members prior to the 

meeting. Oral comments will be limited 

to allow time for questions from 

members of the Committee. All oral and 

written comments must relate 

specifically to the determinations under 

Section 303(a)(1) (19 U.S.C. 2602) of the 

Convention on Cultural Property 

Implementation Act, pursuant to which 

the Committee must make findings. This 

statute can be found at the Web site 

noted above. 

If you do not wish to make oral 

comment, but still wish to make your 

views known, you may send written 

comments for the Committee to 

consider. Again, your comments must 

relate specifically to the determinations 

under Section 303(a)(1) (19 U.S.C. 2602) 

of the Convention on Cultural Property 

Implementation Act, pursuant to which 

the Committee must make findings. 

Submit all written materials 

electronically through the eRulemaking 

Portal (see below), ensuring that they 

are received no later than April 3, 2012, 

11:59 p.m. (EDT). Our adoption of this 

procedure facilitates public 

participation, implements Section 206 

of the E–Government Act of 2002, 

Public Law 107–347, 116 Stat. 2915, and 

supports the Department of State’s 

‘‘Greening Diplomacy’’ initiative which 

aims to reduce the State Department’s 

environmental footprint and reduce 

costs. 

Confidential written comments: If you 

wish to submit information that is 

privileged or confidential in your 

comments, pursuant to 19 U.S.C. 

2605(i)(1), do so via regular mail, 

commercial delivery, or hand delivery. 

Only comments reasonably asserted to 

be confidential will be accepted via 

those methods. 

As a general reminder comments 

submitted by fax or by email are not 

accepted. In the past, twenty copies of 

texts over five pages in length were 

requested. Please note that this is no 

longer necessary; all comments, other 

than confidential comments, should 

now be submitted via the eRulemaking 

Portal only. Please submit comments 

only one time. 

• Electronic Delivery. To submit 

comments electronically, go to the 

Federal eRulemaking Portal (http:// 

www.regulations.gov), enter the Docket 

No. DOS–2012–0011 for Guatemala or 

Docket No. DOS–2012–0012 for Mali, 

and follow the prompts to submit a 

comment. For further information, see 

http://exchanges.state.gov/heritage/ 

whatsnew.html. 

• Comments submitted in confidence 

only: Regular Mail or Commercial 

Delivery. Cultural Heritage Center (ECA/ 

P/C), SA–5, Fifth Floor, Department of 

State, Washington, DC 20522–0505. 

Hand Delivery. Cultural Heritage Center 

(ECA/P/C), Department of State, 2200 C 

Street NW., Washington, DC 20522– 

0505. 

Are Comments Private? No. 

Comments submitted in electronic form 

will be posted on the site http:// 

www.regulations.gov. Because the 

comments cannot be edited to remove 

any identifying or contact information, 

the Department of State cautions against 

including any information in an 

electronic submission that one does not 

want publicly disclosed (including trade 

secrets and commercial or financial 

information that is privileged or 

confidential pursuant to 19 U.S.C. 

2605(i)(1)). The Department of State 

requests that any party soliciting or 

aggregating comments received from 

other persons for submission to the 

Department of State inform those 

persons that the Department of State 

will not edit their comments to remove 

any identifying or contact information, 

and that they therefore should not 

include any information in their 

comments that they do not want 

publicly disclosed. 

On Closed Meetings: As noted above, 

portions of the meeting will be closed 

pursuant to 5 U.S.C. 552b(c)(9)(B) and 

19 U.S.C. 2605(h), the latter of which 

stipulates that ‘‘The provisions of the 

Federal Advisory Committee Act shall 

apply to the Cultural Property Advisory 

Committee except that the requirements 

of subsections (a) and (b) of section 10 

and 11 of such Act (relating to open 

meetings, public notice, public 

participation, and public availability of 

documents) shall not apply to the 

Committee, whenever and to the extent 

it is determined by the President or his 

designee that the disclosure of matters 

involved in the Committee’s 

proceedings would compromise the 

government’s negotiation objectives or 

bargaining positions on the negotiations 

of any agreement authorized by this 

title.’’ The President’s designee has 

made such a determination. 

Dated: February 29, 2012. 

Ann Stock, 

Assistant Secretary, Bureau of Educational 

and Cultural Affairs, Department of State. 

[FR Doc. 2012–5909 Filed 3–9–12; 8:45 am] 

BILLING CODE 4710–05–P 


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