II 

111TH CONGRESS 

1ST SESSION S. 1073 

To provide for credit rating reforms, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

MAY 19, 2009 

Mr. REED introduced the following bill; which was read twice and referred to 

the Committee on Banking, Housing, and Urban Affairs 

A BILL 

To provide for credit rating reforms, and for other purposes. 

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. 

4 This Act may be cited as the ‘‘Rating Accountability 

5 and Transparency Enhancement Act of 2009’’ or the 

6 ‘‘RATE Act’’. 

7 SEC. 2. FINDINGS. 

8 Congress finds that— 

9 (1) because of the systemic importance of credit 

10 ratings and the reliance placed on them by indi11 vidual and institutional investors and financial regu12 lators, the activities and performances of credit ratVerDate Nov 24 2008 05:30 May 22, 2009 Jkt 079200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S1073.IS S1073

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1 ing agencies, including nationally recognized statis2 tical rating organizations, are the subject of national 

3 public interest, as they are central to capital forma4 tion, investor confidence, and the efficient perform5 ance of the United States economy; 

6 (2) credit rating agencies, including nationally 

7 recognized statistical rating organizations, play a 

8 critical ‘‘gatekeeper’’ role that is functionally similar 

9 to that of securities analysts, who evaluate the qual10 ity of securities, and auditors, who review the finan11 cial statements of firms, and such role justifies a 

12 similar level of public oversight and accountability; 

13 (3) because credit rating agencies perform eval14 uative and analytical services on behalf of clients, 

15 their activities are fundamentally commercial in 

16 character and should be subject to the same stand17 ards of liability and oversight as apply to auditors 

18 and securities analysts; 

19 (4) in certain of their roles, particularly in ad20 vising arrangers of structured financial products on 

21 potential ratings of such products, credit rating 

22 agencies face conflicts of interest that need to be 

23 carefully monitored and that therefore should be ad24 dressed explicitly in legislation in order to give clear 


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1 authority to the Securities and Exchange Commis2 sion; 

3 (5) in the recent credit crisis, the ratings of 

4 structured financial products have proven to be inac5 curate, and have contributed to the mismanagement 

6 of risks by financial institutions and investors, which 

7 impacts the health of the economy in the United 

8 States and around the world; and 

9 (6) credit rating agencies should determine 

10 their ratings independently, without regulatory ap11 proval of methodologies, in order to avoid overreli12 ance on ratings and to ensure that the rating agen13 cies, rather than the Securities and Exchange Com14 mission, are accountable for such methodologies, ex15 cept that regulators should have strong authority to 

16 ensure that all other aspects of rating agency activi17 ties are designed to ensure the highest quality rat18 ings and accountability for those creating them. 

19 SEC. 3. ENHANCED REGULATION OF NATIONALLY RECOG20 NIZED STATISTICAL RATING ORGANIZA21 TIONS. 

22 Section 15E of the Securities Exchange Act of 1934 

23 (15 U.S.C. 78o–7) is amended— 

24 (1) in subsection (c)— 


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1 (A) in the second sentence of paragraph 

2 (2), by inserting ‘‘including the requirements of 

3 this section,’’ after ‘‘Notwithstanding any other 

4 provision of law,’’; and 

5 (B) by adding at the end the following: 

6 ‘‘(3) REVIEW OF INTERNAL CONTROLS FOR DE7 TERMINING CREDIT RATINGS.— 

8 ‘‘(A) IN GENERAL.—Credit ratings by, and 

9 the policies, procedures, and methodologies em10 ployed by, each nationally recognized statistical 

11 rating organization shall be reviewed by the 

12 Commission to ensure that— 

13 ‘‘(i) the nationally recognized statis14 tical rating organization has established 

15 and documented a system of internal con16 trols for determining credit ratings, taking 

17 into consideration such factors as the Com18 mission may prescribe by rule; and 

19 ‘‘(ii) the nationally recognized statis20 tical rating organization adheres to such 

21 system; and 

22 ‘‘(iii) the public disclosures of the na23 tionally recognized statistical rating orga24 nization required under this section about 


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1 its ratings, methodologies, and procedures 

2 are consistent with such system. 

3 ‘‘(B) SCOPE OF REVIEWS.—The Commis4 sion shall conduct the reviews required by this 

5 paragraph— 

6 ‘‘(i) for all types of credit ratings; and 

7 ‘‘(ii) for new credit ratings, in a time8 ly manner. 

9 ‘‘(C) MANNER AND FREQUENCY.—The 

10 Commission shall conduct reviews required by 

11 this paragraph in a manner and with a fre12 quency to be determined by the Commission. 

13 ‘‘(4) PROVISION OF INFORMATION TO THE COM14 MISSION.—Each nationally recognized statistical rat15 ing organization shall make available and maintain 

16 such records and information, for such a period of 

17 time, as the Commission may prescribe, by rule, as 

18 necessary for the Commission to conduct the reviews 

19 under this subsection;’’; 

20 (2) in subsection (d)— 

21 (A) by inserting ‘‘fine,’’ after ‘‘censure,’’ 

22 each place that term appears; 

23 (B) in the subsection heading, by inserting 

24 ‘‘FINE,’’ after ‘‘CENSURE,’’; 


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1 (C) in paragraph (4), by striking ‘‘or’’ at 

2 the end; 

3 (D) in paragraph (5), by striking the pe4 riod at the end and inserting ‘‘; or’’; and 

5 (E) by adding at the end the following: 

6 ‘‘(6) fails to conduct sufficient surveillance to 

7 ensure that credit ratings remain current, accurate, 

8 and reliable.’’; 

9 (3) by amending subsection (h) to read as fol10 lows: 

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

12 ‘‘(1) ORGANIZATION POLICIES AND PROCE13 DURES.—Each nationally recognized statistical rat14 ing organization shall establish, maintain, and en15 force written policies and procedures reasonably de16 signed, taking into consideration the nature of the 

17 business of such nationally recognized statistical rat18 ing organization and affiliated persons and affiliated 

19 companies thereof, to address, manage, and disclose 

20 any conflicts of interest that can arise from such 

21 business. 

22 ‘‘(2) GOVERNANCE IMPROVEMENTS AT

23 NRSRO.—Each nationally recognized statistical rat24 ing organization shall establish governance proce25 dures to manage conflicts of interest, consistent with 


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1 the protection of users of credit ratings, in accord2 ance with rules issued by the Commission pursuant 

3 to paragraph (3). 

4 ‘‘(3) COMMISSION AUTHORITY.—The Commis5 sion shall issue final rules to prohibit, or require the 

6 management and disclosure of, any conflicts of inter7 est relating to the issuance of credit ratings by a na8 tionally recognized statistical rating organization, in9 cluding— 

10 ‘‘(A) conflicts of interest relating to the 

11 manner in which a nationally recognized statis12 tical rating organization is compensated by the 

13 obligor, or any affiliate of the obligor, for 

14 issuing credit ratings or providing related serv15 ices; 

16 ‘‘(B) conflicts of interest relating to the 

17 provision of consulting, advisory, or other serv18 ices by a nationally recognized statistical rating 

19 organization, or any person associated with 

20 such nationally recognized statistical rating or21 ganization, and the obligor, or any affiliate of 

22 the obligor; 

23 ‘‘(C) disclosure of business relationships, 

24 ownership interests, affiliations of nationally 

25 recognized statistical rating organization board 


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1 members with obligors, or any other financial or 

2 personal interests between a nationally recog3 nized statistical rating organization, or any per4 son associated with such nationally recognized 

5 statistical rating organization, and the obligor, 

6 or any affiliate of the obligor; 

7 ‘‘(D) disclosure of any affiliation of a na8 tionally recognized statistical rating organiza9 tion, or any person associated with such nation10 ally recognized statistical rating organization, 

11 with any person that underwrites securities, en12 tities, or other instruments that are the subject 

13 of a credit rating; and 

14 ‘‘(E) any other potential conflict of inter15 est, as the Commission deems necessary or ap16 propriate in the public interest or for the pro17 tection of users of credit ratings. 

18 ‘‘(4) COMMISSION RULES.—The rules issued by 

19 the Commission under paragraph (3) shall include— 

20 ‘‘(A) the establishment of a system of pay21 ment for each nationally recognized statistical 

22 rating organization that requires that payments 

23 are structured to ensure that the nationally rec24 ognized statistical rating organization conducts 

25 accurate and reliable surveillance of ratings 


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1 over time, and that incentives for accurate rat2 ings are in place; 

3 ‘‘(B) a prohibition on providing credit rat4 ings for structured products that it advised on, 

5 in the form of assistance, advice, consultation, 

6 or other aid that preceded its retention by any 

7 issuer, underwriter, or placement agent to pro8 vide a rating for the securities in question (or 

9 any assistance provided after such point for 

10 which additional compensation is paid directly 

11 or indirectly); 

12 ‘‘(C) requirements that a nationally recog13 nized statistical rating organization disclose any 

14 relationship or affiliation described in subpara15 graphs (C) and (D) of paragraph (3); 

16 ‘‘(D) a requirement that, in each credit 

17 rating report issued to the public, a nationally 

18 recognized statistical rating organization dis19 close the type and number of ratings it has pro20 vided to the obligor or affiliates of the obligor, 

21 including the fees it has billed for the credit 

22 rating and aggregate amount of fees in the pre23 ceding 2 years that it has billed to the par24 ticular obligor or its affiliates; and 


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1 ‘‘(E) any other requirement as the Com2 mission deems necessary or appropriate in the 

3 public interest, or for the protection of users of 

4 credit ratings. 

5 ‘‘(5) LOOK-BACK REQUIREMENT.— 

6 ‘‘(A) REVIEW BY NRSRO.—In any case in 

7 which an employee of an obligor or an issuer or 

8 underwriter of a security or money market in9 strument was employed by a nationally recog10 nized statistical rating organization and partici11 pated in any capacity in determining credit rat12 ings for the obligor or the securities or money 

13 market instruments of the issuer during the 1- 

14 year period preceding the date of the issuance 

15 of the credit rating, the nationally recognized 

16 statistical rating organization shall— 

17 ‘‘(i) conduct a review to determine 

18 whether any conflicts of interest of such 

19 employee influenced the credit rating; and 

20 ‘‘(ii) take action to revise the rating if 

21 appropriate, in accordance with such rules 

22 as the Commission shall prescribe. 

23 ‘‘(B) REVIEW BY COMMISSION.—The Com24 mission shall conduct periodic reviews of the 

25 look-back policies described in subparagraph 


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1 (A) and the implementation of such policies at 

2 each nationally recognized statistical rating or3 ganization to ensure they are appropriately de4 signed and implemented to most effectively 

5 eliminate conflicts of interest in this area. 

6 ‘‘(6) PERIODIC REVIEWS.— 

7 ‘‘(A) REVIEWS REQUIRED.—The Commis8 sion shall conduct periodic reviews of govern9 ance and conflict of interest procedures estab10 lished under this subsection to determine the ef11 fectiveness of such procedures. 

12 ‘‘(B) TIMING OF REVIEWS.—The Commis13 sion shall review and make available to the pub14 lic the code of ethics and conflict of interest 

15 policy of each nationally recognized statistical 

16 rating organization— 

17 ‘‘(i) not less frequently than once 

18 every 3 years; and 

19 ‘‘(ii) whenever such policies are mate20 rially modified or amended.’’; 

21 (4) by amending subsection (j) to read as fol22 lows: 

23 ‘‘(j) DESIGNATION OF COMPLIANCE OFFICER.— 


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1 ‘‘(1) IN GENERAL.—Each nationally recognized 

2 statistical rating organization shall designate an in3 dividual to serve as a compliance officer. 

4 ‘‘(2) DUTIES.—The compliance officer shall— 

5 ‘‘(A) report directly to the board of the na6 tionally recognized statistical rating organiza7 tion (or the equivalent thereof) or to the senior 

8 officer of the nationally recognized statistical 

9 rating organization; and 

10 ‘‘(B) shall— 

11 ‘‘(i) review compliance with policies 

12 and procedures to manage conflicts of in13 terest and assess the risk that such compli14 ance (or lack of such compliance) may 

15 compromise the integrity of the credit rat16 ing process; 

17 ‘‘(ii) review compliance with internal 

18 controls with respect to the procedures and 

19 methodologies for determining credit rat20 ings, including quantitative and qualitative 

21 models used in the rating process, and as22 sess the risk that such compliance with the 

23 internal controls (or lack of such compli24 ance) may compromise the integrity and 

25 quality of the credit rating process; 


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1 ‘‘(iii) in consultation with the board of 

2 the nationally recognized statistical rating 

3 organization, a body performing a function 

4 similar to that of a board, or the senior of5 ficer of the nationally recognized statistical 

6 rating organization, resolve any conflicts of 

7 interest that may arise; 

8 ‘‘(C) be responsible for administering the 

9 policies and procedures required to be estab10 lished pursuant to this section; and 

11 ‘‘(D) ensure compliance with securities 

12 laws and the rules and regulations issued there13 under, including rules promulgated by the Com14 mission pursuant to this section. 

15 ‘‘(3) LIMITATIONS.—No compliance officer des16 ignated under paragraph (1), may, while serving in 

17 such capacity— 

18 ‘‘(A) perform credit ratings; 

19 ‘‘(B) participate in the development of rat20 ing methodologies or models; 

21 ‘‘(C) perform marketing or sales functions; 

22 or 

23 ‘‘(D) participate in establishing compensa24 tion levels, other than for employees working 

25 for such officer. 


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1 ‘‘(4) OTHER DUTIES.—The compliance officer 

2 shall establish procedures for the receipt, retention, 

3 and treatment of— 

4 ‘‘(A) complaints regarding credit ratings, 

5 models, methodologies, and compliance with the 

6 securities laws and the policies and procedures 

7 required under this section; and 

8 ‘‘(B) confidential, anonymous complaints 

9 by employees or users of credit ratings. 

10 ‘‘(5) ANNUAL REPORTS REQUIRED.—The com11 pliance officer shall annually prepare and sign a re12 port on the compliance of the nationally recognized 

13 statistical rating organization with the securities 

14 laws and its policies and procedures, including its 

15 code of ethics and conflict of interest policies, in ac16 cordance with rules prescribed by the Commission. 

17 Such compliance report shall accompany the finan18 cial reports of the nationally recognized statistical 

19 rating organization that are required to be furnished 

20 to the Commission pursuant to this section.’’; 

21 (5) in subsection (k)— 

22 (A) by striking ‘‘, on a confidential basis,’’; 

23 (B) by striking ‘‘Each nationally’’ and in24 serting the following: 

25 ‘‘(1) IN GENERAL.—Each nationally’’; and 


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1 (C) by adding at the end the following: 

2 ‘‘(2) EXCEPTION.—The Commission may treat 

3 as confidential any item furnished to the Commis4 sion under paragraph (1), the publication of which 

5 the Commission determines may have a harmful ef6 fect on a nationally recognized statistical rating or7 ganization.’’; 

8 (6) by amending subsection (p) to read as fol9 lows: 

10 ‘‘(p) NRSRO REGULATION.— 

11 ‘‘(1) IN GENERAL.—The Commission shall es12 tablish an office that administers the rules of the 

13 Commission with respect to the practices of nation14 ally recognized statistical rating organizations in de15 termining ratings, for the protection of users of 

16 credit ratings and in the public interest, and to en17 sure that credit ratings issued by such registrants 

18 are accurate and not unduly influenced by conflicts 

19 of interest. 

20 ‘‘(2) STAFFING.—The office of the Commission 

21 established under this subsection shall be staffed 

22 sufficiently to carry out fully the requirements of 

23 this section. 

24 ‘‘(3) RULEMAKING AUTHORITY.—The Commis25 sion shall— 


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1 ‘‘(A) establish by rule fines and other pen2 alties for any nationally recognized statistical 

3 rating organization that violates the applicable 

4 requirements of this title; and 

5 ‘‘(B) issue such rules as may be necessary 

6 to carry out this section with respect to nation7 ally recognized statistical rating organizations. 

8 ‘‘(q) TRANSPARENCY OF RATINGS PERFORMANCE.— 

9 ‘‘(1) RULEMAKING REQUIRED.—The Commis10 sion shall, by rule, require that each nationally rec11 ognized statistical rating organization shall disclose 

12 publicly information on initial ratings and subse13 quent changes to such ratings for the purpose of 

14 providing a gauge of the accuracy of ratings and al15 lowing users of credit ratings to compare perform16 ance of ratings by different nationally recognized 

17 statistical rating organizations. 

18 ‘‘(2) CONTENT.—The rules of the Commission 

19 under this subsection shall require, at a minimum, 

20 disclosures that— 

21 ‘‘(A) are comparable among nationally rec22 ognized statistical rating organizations, so that 

23 users can compare rating performance across 

24 rating organizations; 


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1 ‘‘(B) are clear and informative for a wide 

2 range of investor sophistication; 

3 ‘‘(C) include performance information over 

4 a range of years and for a variety of classes of 

5 credit ratings, as determined by the Commis6 sion; and 

7 ‘‘(D) are published and made freely avail8 able by the nationally recognized statistical rat9 ing organization, on an easily accessible portion 

10 of its website and in written form when re11 quested by users. 

12 ‘‘(r) CREDIT RATINGS METHODOLOGIES.—The Com13 mission shall promulgate rules, for the protection of users 

14 of credit ratings and in the public interest, with respect 

15 to the procedures and methodologies, including qualitative 

16 and quantitative models, used by nationally recognized 

17 statistical rating organizations that require each nation18 ally recognized statistical rating organization to— 

19 ‘‘(1) ensure that credit ratings are determined 

20 using procedures and methodologies, including quali21 tative and quantitative models, that are approved by 

22 the board of the nationally recognized statistical rat23 ing organization, a body performing a function simi24 lar to that of a board, or the senior officer of the 

25 nationally recognized statistical rating organization, 


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1 and in accordance with the policies and procedures 

2 of the nationally recognized statistical rating organi3 zation for developing and modifying credit rating 

4 procedures and methodologies; 

5 ‘‘(2) ensure that when major changes to credit 

6 rating procedures and methodologies, including to 

7 qualitative and quantitative models, are made, that 

8 the changes are applied consistently to all credit rat9 ings to which such changed procedures and meth10 odologies apply and, to the extent the changes are 

11 made to credit rating surveillance procedures and 

12 methodologies, they are applied to current credit rat13 ings within a time period to be determined by the 

14 Commission by rule, and that the reason for the 

15 change is disclosed publicly; 

16 ‘‘(3) notify users of credit ratings of the version 

17 of a procedure or methodology, including a quali18 tative or quantitative model, used with respect to a 

19 particular credit rating; and 

20 ‘‘(4) notify users of credit ratings when a 

21 change is made to a procedure or methodology, in22 cluding to a qualitative or quantitative model, or an 

23 error is identified in a procedure or methodology 

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1 lihood of the change resulting in current credit rat2 ings being subject to rating actions. 

3 ‘‘(s) TRANSPARENCY OF CREDIT RATING METH4 ODOLOGIES AND INFORMATION REVIEWED.— 

5 ‘‘(1) IN GENERAL.—The Commission shall es6 tablish a form, to accompany each rating issued by 

7 a nationally recognized statistical rating organiza8 tion— 

9 ‘‘(A) to disclose information about assump10 tions underlying credit rating procedures and 

11 methodologies, the data that was relied on to 

12 determine the credit rating and, where applica13 ble, how the nationally recognized statistical 

14 rating organization used servicer or remittance 

15 reports, and with what frequency, to conduct 

16 surveillance of the credit rating; and 

17 ‘‘(B) that can be made public and used by 

18 investors and other users to better understand 

19 credit ratings issued in each class of credit rat20 ing issued by the nationally recognized statis21 tical rating organization. 

22 ‘‘(2) FORMAT.—The Commission shall ensure 

23 that the form established under paragraph (1)— 

24 ‘‘(A) is designed in a user-friendly and 

25 helpful manner for users of credit ratings to 


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1 understand the information contained in the re2 port; and 

3 ‘‘(B) requires the nationally recognized 

4 statistical rating organization to provide the ap5 propriate content, as required by paragraph (3). 

6 ‘‘(3) CONTENT.—Each nationally recognized 

7 statistical rating organization shall include on the 

8 form established under this subsection, along with 

9 its ratings— 

10 ‘‘(A) the main assumptions included in 

11 constructing procedures and methodologies, in12 cluding qualitative and quantitative models; 

13 ‘‘(B) the potential shortcomings of the 

14 credit ratings, and the types of risks excluded 

15 from the credit ratings that the registrant is 

16 not commenting on (such as liquidity, market, 

17 and other risks); 

18 ‘‘(C) information on the reliability, accu19 racy, and quality of the data relied on in deter20 mining the ultimate credit rating and a state21 ment on the extent to which key data inputs for 

22 the credit rating were reliable or limited (in23 cluding, any limits on the reach of historical 

24 data, limits in accessibility to certain documents 

25 or other forms of information that would have 


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1 better informed the credit rating, and the com2 pleteness of certain information considered); 

3 ‘‘(D) whether and to what extent third 

4 party due diligence services have been utilized, 

5 and a description of the information that such 

6 third party reviewed in conducting due diligence 

7 services; 

8 ‘‘(E) a description of relevant data about 

9 any obligor, issuer, security, or money market 

10 instrument that was used and relied on for the 

11 purpose of determining the credit rating; 

12 ‘‘(F) an explanation or measure of the po13 tential volatility for the rating, including any 

14 factors that might lead to a change in the rat15 ing, and the extent of the change that might be 

16 anticipated under different conditions; and 

17 ‘‘(G) additional information, including con18 flict of interest information, as may be required 

19 by the Commission. 

20 ‘‘(4) DUE DILIGENCE SERVICES.— 

21 ‘‘(A) CERTIFICATION REQUIRED.—In any 

22 case in which third party due diligence services 

23 are employed by a nationally recognized statis24 tical rating organization or an issuer or under25 writer, the firm providing the due diligence 


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1 services shall provide to the nationally recog2 nized statistical rating organization written cer3 tification of such due diligence, which shall be 

4 subject to review by the Commission. 

5 ‘‘(B) FORMAT AND CONTENT.—The na6 tionally recognized statistical rating organiza7 tions shall establish the appropriate format and 

8 content for written certifications required under 

9 subparagraph (A), to ensure that providers of 

10 due diligence services have conducted a thor11 ough review of data, documentation, and other 

12 relevant information necessary for the nation13 ally recognized statistical rating organization to 

14 provide an accurate rating.’’; and 

15 (7) by amending subsection (m) to read as fol16 lows: 

17 ‘‘(m) ACCOUNTABILITY.— 

18 ‘‘(1) IN GENERAL.—The enforcement and pen19 alty provisions of this title shall apply to a nationally 

20 recognized statistical rating organization in the same 

21 manner and to the same extent as such provisions 

22 apply to a registered public accounting firm or a se23 curities analyst under the Federal securities laws for 

24 statements made by them, and such statements shall 


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1 not be deemed forward-looking statements for pur2 poses of section 21E. 

3 ‘‘(2) RULEMAKING.—The Commission shall 

4 issue such rules as may be necessary to carry out 

5 this subsection.’’. 

6 SEC. 4. STATE OF MIND IN PRIVATE ACTIONS. 

7 Section 21D(b)(2) of the Securities Exchange Act of 

8 1934 (15 U.S.C. 78u–4(b)(2)) is amended by inserting be9 fore the period at the end the following: ‘‘, except that 

10 in the case of an action brought under this title for money 

11 damages against a nationally recognized statistical rating 

12 organization, it shall be sufficient, for purposes of pleading 

13 any required state of mind for purposes of such action, 

14 that the complaint shall state with particularity facts giv15 ing rise to a strong inference that the nationally recog16 nized statistical rating organization knowingly or reck17 lessly failed either to conduct a reasonable investigation 

18 of the rated security with respect to the factual elements 

19 relied upon by its own methodology for evaluating credit 

20 risk, or to obtain reasonable verification of such factual 

21 elements (which verification may be based on a sampling 

22 technique that does not amount to an audit) from other 

23 sources that it considered to be competent and that were 

24 independent of the issuer and underwriter’’. 


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1 SEC. 5. REGULATIONS. 

2 The Securities and Exchange Commission shall issue 

3 final rules and regulations, as required by the amend4 ments made by this Act, not later than 365 days after 

5 the date of enactment of this Act. 

6 SEC. 6. STUDY AND REPORT. 

7 (a) STUDY.—The Comptroller General of the United 

8 States shall undertake a study of— 

9 (1) the extent to which rulemaking the Securi10 ties and Exchange Commission has carried out the 

11 provisions of this Act; 

12 (2) the appropriateness of relying on ratings for 

13 use in Federal, State, and local securities and bank14 ing regulations, including for determining capital re15 quirements; 

16 (3) the effect of liability in private actions aris17 ing under the Securities Exchange Act of 1934 and 

18 the exception added by section 4 of this Act; and 

19 (4) alternative means for compensating credit 

20 rating agencies that would create incentives for ac21 curate credit ratings and what, if any, statutory 

22 changes would be required to permit or facilitate the 

23 use of such alternative means of compensation. 

24 (b) REPORT.—Not later than 30 months after the 

25 date of enactment of this Act, the Comptroller General 

26 shall submit to Congress and the Securities Exchange 


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1 Commission, a report containing the findings under the 

2 study required by subsection (a). 

Æ 


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