Document ID: SEC-2010-1509-0001
Agency: sec
Document Type: Rule
Title: Removal of Exemption for Credit Rating Agencies from Regulation FD
Posted Date: 2010-10-04T04:00Z

[Federal Register: October 4, 2010 (Volume 75, Number 191)]
[Rules and Regulations]               
[Page 61050-61051]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04oc10-3]                         

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 243

[Release Nos. 33-9146; 34-63003; IC-29448; File No. S7-23-10]

 
Removal From Regulation FD of the Exemption for Credit Rating 
Agencies

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

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SUMMARY: This amendment implements Section 939B of the Dodd-Frank Wall 
Street Reform and Consumer Protection Act of 2010, which requires that 
the Securities and Exchange Commission amend Regulation FD to remove 
the specific exemption from the rule for disclosures made to nationally 
recognized statistical rating organizations and credit rating agencies 
for the purpose of determining or monitoring credit ratings.

DATES: Effective Date: October 4, 2010.

FOR FURTHER INFORMATION CONTACT: Steven G. Hearne, Special Counsel in 
the Office of Rulemaking, Division of Corporation Finance, at (202) 
551-3430, 100 F Street, NE., Washington, DC 20549.

SUPPLEMENTARY INFORMATION: The Commission is deleting Rule 
100(b)(2)(iii) \1\ under Regulation FD.\2\
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    \1\ 17 CFR 243.100(b)(2)(iii).
    \2\ 17 CFR 243.100 et seq.
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I. Overview of the Amendment

    Regulation FD provides that when an issuer, or person acting on its 
behalf, discloses material nonpublic information to certain enumerated 
persons (in general, securities market professionals and holders of the 
issuer's securities who may trade on the basis of the information), it 
must make public disclosure of that information.\3\ Section 939B of the 
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the 
``Act'') requires the Commission to ``revise Regulation FD (17 CFR 
243.100) to remove from such regulation the exemption for entities 
whose primary business is the issuance of credit ratings (17 CFR 
243.100(b)(2)(iii))'' within 90 days after the date of enactment.\4\ 
The effective date of the legislation is July 21, 2010 and our revised 
rule will be effective for disclosure made on or after October 4, 2010.
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    \3\ 17 CFR 243.100(a). See Selective Disclosure and Insider 
Trading, Release No. 34-43154 (Aug. 15, 2000) [65 FR 51716] at 51716 
(the ``Regulation FD Adopting Release'').
    \4\ Pub. L. 111-203 (July 21, 2010).
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II. Discussion of the Amendment

    As required by the Act, we are amending Regulation FD to remove the 
specific exemption provided to nationally recognized statistical rating 
organizations and credit rating agencies for disclosure made to them 
for the purpose of determining or monitoring a credit rating. To 
effectuate this change, we are removing Rule 100(b)(2)(iii) of 
Regulation FD. Due to the removal of Rule 100(b)(2)(iii), we are re-
designating Rule 100(b)(2)(iv) as Rule 100(b)(2)(iii).
    Regulation FD is designed to address the problem of selective 
disclosure made to those who would reasonably be expected to trade 
securities on the basis of the information or provide others with 
advice about securities trading.\5\ Under Regulation FD, the timing of 
the required public disclosure of material nonpublic information that 
is provided by an issuer, or persons acting on its behalf, to certain 
enumerated persons depends on whether the selective disclosure was 
intentional. For an intentional selective disclosure, the issuer must 
make public disclosure simultaneously. In other circumstances, the 
issuer must make public disclosure promptly. Under the regulation, the 
required public disclosure may be made by filing or furnishing a Form 
8-K,\6\ or by another method or combination of methods that is 
reasonably designed to provide broad, non-exclusionary distribution of 
the information to the public.\7\
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    \5\ Regulation FD Adopting Release, supra note 3, at 51719.
    \6\ 17 CFR 249.308.
    \7\ 17 CFR 243.101(e).
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    Under Rule 100(b)(2)(iii) of Regulation FD, the issuer or person 
acting on the issuer's behalf need not make the public disclosure if 
the disclosure of material nonpublic information is made to a credit 
rating agency that makes its credit ratings publicly available, or is 
made pursuant to Rule 17g-5(a)(3) \8\ to a nationally recognized 
statistical rating organization. As required by Section 939B of the 
Act, we are removing the exemption specifically available to these 
entities under Regulation FD.\9\
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    \8\ 17 CFR 240.17g-5(a)(3).
    \9\ Regulation FD also provides exemptions for communications 
made to a person who owes the issuer a duty of trust or confidence--
i.e., a ``temporary insider''--such as an attorney, investment 
banker, or accountant (17 CFR 243.100(b)(2)(i)), to any person who 
expressly agrees to maintain the information in confidence (17 CFR 
243.100(b)(2)(ii)), and in connection with most offerings of 
securities registered under the Securities Act (17 CFR 
243.100(b)(2)(iv)). These exemptions are unaffected by the Act.
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III. Procedural and Other Matters

    The Administrative Procedure Act (``APA'') generally requires an 
agency to publish notice of a proposed rulemaking in the Federal 
Register.\10\ This requirement does not apply, however, if the agency 
``for good cause finds * * * that notice and public procedure thereon 
are impracticable, unnecessary, or contrary to the public interest.'' 
\11\ The revision to Regulation FD that the Commission is adopting is 
required by Section 939B of the Act by the legislatively required date. 
Unless the rule and form amendments become effective by that date, 
issuers may be confused regarding their disclosure and reporting 
obligations. The Commission is required by statute to remove the 
specific exemption for disclosure provided to nationally recognized 
statistical rating organizations and credit rating agencies. Because 
this revision is required by Congress, it does not involve the exercise 
of Commission discretion or policy judgments. For these reasons, the 
Commission finds that good cause exists to dispense with a public 
notice and comment period for these amendments because notice and 
comment would be unnecessary, impracticable and contrary to the public 
interest.\12\
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    \10\ See 5 U.S.C. 553(b).
    \11\ 5 U.S.C. 553(b).
    \12\ The Regulatory Flexibility Act requires agencies to prepare 
analyses for rulemaking only when the APA requires general notice of 
proposed rulemaking. 5 U.S.C. 603(a). The Regulatory Flexibility Act 
does not apply to the rules we adopt today because, as noted above, 
the Commission is not required to solicit public comment when using 
the expedited rulemaking procedures under Section 553(b) of the APA.

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[[Page 61051]]

    The Commission is taking this action to implement the Act. Thus, 
any costs and benefits to the economy resulting from the amendments are 
mandated by the Act. Section 23(a)(2) \13\ of the Securities Exchange 
Act of 1934 (``Exchange Act'') \14\ requires us, when adopting rules 
under the Exchange Act, to consider the anti-competitive effect of any 
rules we adopt. Further, Section 3(f) of the Exchange Act \15\ and 
Section 2(c) of the Investment Company Act of 1940 \16\ require us, 
when engaging in rulemaking where we are required to consider or 
determine whether an action is necessary or appropriate in the public 
interest, to consider, in addition to the protection of investors, 
whether the action will promote efficiency, competition and capital 
formation. While the amendments may affect efficiency, competition and 
capital formation, the action we are taking today is required by the 
Act and imposes no burden on efficiency, competition and capital 
formation that is not consistent with implementation of the Act.
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    \13\ 15 U.S.C. 78w(a)(2).
    \14\ 15 U.S.C. 78a et seq.
    \15\ 15 U.S.C. 78c(f).
    \16\ 15 U.S.C. 80a-2(c).
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IV. Paperwork Reduction Act

    Certain provisions of Regulation FD contain ``collection of 
information'' requirements within the meaning of the Paperwork 
Reduction Act of 1995.\17\ An agency may not conduct or sponsor, and a 
person is not required to respond to, a collection of information 
unless it displays a currently valid OMB control number. Compliance 
with the disclosure requirements is mandatory. There is no mandatory 
retention period for the information disclosed, and responses to the 
disclosure requirements will not be kept confidential.
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    \17\ 44 U.S.C. 3501 et seq.
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    The titles for the collections are (1) Form 8-K, and (2) Reg FD-
Other Disclosure Materials. OMB approved the regulation's information 
collection requirements. Form 8-K (OMB Control No. 3235-0060) was 
adopted pursuant to Sections 13,\18\ 15,\19\ and 23 \20\ of the 
Exchange Act, and Regulation FD-Other Disclosure Materials (OMB Control 
No. 3235-0536) was adopted pursuant to Sections 13, 15, 23, and 36 \21\ 
of the Exchange Act.
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    \18\ 15 U.S.C. 78m.
    \19\ 15 U.S.C. 78o.
    \20\ 15 U.S.C. 78w.
    \21\ 15 U.S.C. 78mm.
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    As discussed in the Regulation FD proposing \22\ and adopting 
releases,\23\ in many cases, information disclosed under Regulation FD 
would be information that an issuer ultimately was going to disclose to 
the public. Under Regulation FD, that issuer likely will not make any 
more public disclosure than it otherwise would, but it may make the 
disclosure sooner and it is required to file or disseminate that 
information in a manner reasonably designed to provide broad, non-
exclusionary distribution of the information to the public. Following 
the amendments adopted today, reporting persons will remain obligated 
to disclose the same information that they were previously required to 
report on these forms. We therefore believe that the overall 
information collection burden will remain approximately the same 
because the same transactions will remain reportable.
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    \22\ See Selective Disclosure and Insider Trading, Release No. 
34-42259 (Dec. 20, 1999) [64 FR 72590].
    \23\ See Regulation FD Adopting Release, supra note 3.
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V. Statutory Authority and Text of the Amendment

    The amendments described in this release are being adopted under 
the authority set forth in Sections 10, 19(a), and 28 of the Securities 
Act of 1933, Sections 3, 9, 10, 13, 15, 23, and 36 of the Securities 
Exchange Act of 1934, Section 30 of the Investment Company Act of 1940, 
and Section 939B of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act of 2010.

List of Subjects in 17 CFR Part 243

    Reporting and recordkeeping requirements, Securities.

Text of Amendments

0
For the reasons set out in the preamble, the Commission amends Title 
17, Chapter II of the Code of Federal Regulations as follows:

PART 243--REGULATION FD

0
1. The authority citation for part 243 continues to read as follows:

    Authority: 15 U.S.C. 78c, 78i, 78j, 78m, 78o, 78w, 78mm, and 
80a-29, unless otherwise noted.

Sec.  243.100  [Amended]

0
2. Section 243.100 is amended by removing paragraph (b)(2)(iii) and 
redesignating paragraph (b)(2)(iv) as (b)(2)(iii).

    By the Commission.

     Dated: September 29, 2010.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2010-24802 Filed 10-1-10; 8:45 am]
BILLING CODE 8010-01-P