ance with the securities laws and the poli-
cies and procedures required under this sec-
tion; 
‘‘(ii) for the receipt, retention, and 
treatment of confidential, anonymous com-
plaints by employees, obligors, issuers, and 
investors; 
‘‘(iii) for the remediation of non-com-
pliance issues found during compliance of-
fice reviews, the reviews required under 
paragraph (7), internal or external audit 
findings, self-reported errors, or through 
validated complaints; and 
‘‘(iv) designed so that ratings that the 
nationally recognized statistical rating or-
ganization disseminates reflect consider-
ation of all information in a manner gen-
erally consistent with the nationally recog-
nized statistical rating organization’s pub-
lished rating methodology, including infor-
mation which is provided, received, or oth-
erwise obtained from obligor, issuer and 
non-issuer sources, such as investors, the 
media, and other interested or informed 
parties. 
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‘‘(3) LIMITATIONS.—The compliance officer shall 
not, while serving in that capacity— 
‘‘(A) determine credit ratings; 
‘‘(B) participate in the establishment of the 
procedures and methodologies or the qualitative 
methodologies and quantitative inputs used to 
determine credit ratings; 
‘‘(C) perform marketing or sales functions; 
or 
‘‘(D) participate in establishing compensa-
tion levels, other than for employees working for 
the compliance officer. 
‘‘(4) ANNUAL REPORTS REQUIRED.—The compli-
ance officer shall annually prepare and sign a report 
on the compliance of the nationally recognized statis-
tical rating organization with the securities laws and 
such organization’s internal policies and procedures, 
including its code of ethics and conflict of interest 
policies, in accordance with rules prescribed by the 
Commission. Such compliance report shall accom-
pany the financial reports of the nationally recog-
nized statistical rating organization that are required 
to be filed with the Commission pursuant to this sec-
tion and shall include a certification that, under pen-
alty of law, the report is accurate and complete. 
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‘‘(5) COMPENSATION.—The compensation of the 
compliance officer shall not be linked to the business 
performance of the nationally recognized statistical 
rating organization and shall be arranged so as to en-
sure the independence of the officer’s judgment.’’; 
(8) in subsection (k)— 
(A) by striking ‘‘, on a confidential basis,’’; 
(B) by striking ‘‘furnish to’’ and inserting 
‘‘file with’’; 
(C) by striking ‘‘Each nationally’’ and in-
serting the following: 
‘‘(1) IN GENERAL.—Each nationally’’; and 
(D) by adding at the end the following new 
paragraph: 
‘‘(2) EXCEPTION.—The Commission may treat 
as confidential any information provided by a na-
tionally recognized statistical rating organization 
under this section consistent with applicable Federal 
laws or Commission rules.’’; 
(9) in subsection (l)(2)(A)(i), by striking ‘‘fur-
nished’’ and inserting ‘‘filed’’; 
(10) by amending subsection (p) to read as fol-
lows: 
‘‘(p) ESTABLISHMENT OF SEC OFFICE.— 
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‘‘(1) IN GENERAL.—The Commission shall estab-
lish an office that administers the rules of the Com-
mission with respect to the practices of nationally rec-
ognized statistical rating organizations. 
‘‘(2) STAFFING.—The office of the Commission 
established under this subsection shall be staffed suffi-
ciently to carry out fully the requirements of this sec-
tion. 
‘‘(3) RULEMAKING
AUTHORITY.—The Commis-
sion shall— 
‘‘(A) establish, by rule, fines and other pen-
alties for any nationally recognized statistical 
rating organization that violates the applicable 
requirements of this title; and 
‘‘(B) issue such rules as may be necessary 
to carry out this section with respect to nation-
ally recognized statistical rating organizations.’’; 
and 
(11) by adding after subsection (p) the following 
new subsections: 
‘‘(q) TRANSPARENCY OF RATINGS PERFORMANCE.— 
‘‘(1) RULEMAKING REQUIRED.—The Commission 
shall, by rule, require each nationally recognized sta-
tistical rating organization to publicly disclose infor-
mation on initial ratings and subsequent changes to 
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such ratings for the purpose of providing a gauge of 
the performance of ratings and allowing investors to 
compare performance of ratings by different nation-
ally recognized statistical rating organizations. 
‘‘(2) CONTENT.—The rules of the Commission 
under this subsection shall require, at a minimum, 
disclosures that— 
‘‘(A) are comparable among nationally rec-
ognized statistical rating organizations, so that 
investors can compare rating performance across 
rating organizations; 
‘‘(B) are clear and informative for a wide 
range of investor sophistication; 
‘‘(C) include performance information over 
a range of years and for a variety of classes of 
credit ratings, as determined by the Commission; 
‘‘(D) are published and made freely avail-
able by the nationally recognized statistical rat-
ing organization, on an easily accessible portion 
of its website and in written form when re-
quested by investors; and 
‘‘(E) each nationally recognized statistical 
rating organization include an attestation with 
any credit rating it issues affirming that no 
part of the rating was influenced by any other 
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business activities, that the rating was based 
solely on the merits of the instruments being 
rated, and that such rating was an independent 
evaluation of the risks and merits of the instru-
ment. 
‘‘(r) CREDIT RATINGS METHODOLOGIES.— 
‘‘(1) IN GENERAL.—The Commission shall pre-
scribe rules, in the public interest and for the protec-
tion of investors, that require each nationally recog-
nized statistical rating organization to establish, 
maintain, and enforce written procedures and meth-
odologies and an internal control system with respect 
to such procedures and methodologies that are reason-
ably designed to— 
‘‘(A) ensure that credit ratings are deter-
mined using procedures and methodologies, in-
cluding qualitative methodologies and quan-
titative inputs that are determined in accordance 
with the policies and procedures of the nation-
ally recognized statistical rating organization for 
developing and modifying credit rating proce-
dures and methodologies; 
‘‘(B) ensure that when major changes to 
credit rating procedures and methodologies, in-
cluding to qualitative methodologies and quan-
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titative inputs, are made, that the changes are 
applied consistently to all credit ratings to which 
the changed procedures and methodologies apply 
and, to the extent the changes are made to credit 
rating surveillance procedures and methodolo-
gies, they are applied to current credit ratings 
within a time period to be determined by the 
Commission by rule, and that the reason for the 
change is publicly disclosed; 
‘‘(C) notify persons who have access to the 
credit ratings of the nationally recognized statis-
tical rating organization, regardless of whether 
they are made readily accessible for free or a rea-
sonable fee, of the procedure or methodology, in-
cluding qualitative methodologies and quan-
titative inputs, used with respect to a particular 
credit rating; 
‘‘(D) notify persons who have access to the 
credit ratings of the nationally recognized statis-
tical rating organization, regardless of whether 
they are made readily accessible for free or a rea-
sonable fee, when a change is made to a proce-
dure or methodology, including to qualitative 
methodologies and quantitative inputs, or an 
error is identified in a procedure or methodology 
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that may result in credit rating actions, and the 
likelihood of the change resulting in current cred-
it ratings being subject to rating actions; and 
‘‘(E) use credit rating symbols that distin-
guish credit ratings for structured products from 
credit ratings for other products that the Com-
mission determines appropriate or necessary in 
the public interest and for the protection of in-
vestors. 
‘‘(2) RATING CLARITY AND CONSISTENCY.— 
‘‘(A) COMMISSION OBLIGATION.—Subject to 
subparagraphs (B) and (C), the Commission 
shall require, by rule, each nationally recognized 
statistical rating organization to establish, 
maintain, and enforce written policies and pro-
cedures reasonably designed— 
‘‘(i) with respect to credit ratings of se-
curities and money market instruments, to 
assess the risk that investors in securities 
and money market instruments may not re-
ceive payment in accordance with the terms 
of such securities and instruments; 
‘‘(ii) to define clearly any credit rating 
symbol used by that organization; and 
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‘‘(iii) to apply such credit rating sym-
bol in a consistent manner for all types of 
securities and money market instruments. 
‘‘(B) ADDITIONAL CREDIT FACTORS.—Noth-
ing in subparagraph (A)— 
‘‘(i) prohibits a nationally recognized 
statistical rating organization from using 
additional credit factors that are docu-
mented and disclosed by the organization 
and that have a demonstrated impact on 
the risk an investor in a security or money 
market instrument will not receive repay-
ment in accordance with the terms of 
issuance; 
‘‘(ii) prohibits a nationally recognized 
statistical rating organization from consid-
ering credit factors that are unique to mu-
nicipal securities; or 
‘‘(iii) prohibits a nationally recognized 
statistical rating organization from using 
an additional symbol with respect to the 
ratings described in subparagraph (A)(i) for 
the purpose of distinguishing the ratings of 
a certain type of security or money market 
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instrument from ratings of any other types 
of securities or money market instruments. 
‘‘(C) 
COMPLEMENTARY
RATINGS.—The 
Commission shall not impose any requirement 
under subparagraph (A) that prevents nationally 
recognized statistical rating organizations from 
establishing ratings that are complementary to 
the ratings described in subparagraph (A)(i) and 
that are created to measure a discrete aspect of 
the security’s or instrument’s risk. 
‘‘(s) TRANSPARENCY OF CREDIT RATING METHODOLO-
GIES AND INFORMATION REVIEWED.— 
‘‘(1) IN
GENERAL.—The Commission shall re-
quire, by rule, a nationally recognized statistical rat-
ing organization to include with the publication of 
each credit rating regardless of whether the credit rat-
ing is made readily accessible for free or a reasonable 
fee a form that discloses information about the as-
sumptions underlying the procedures and methodolo-
gies used, and the data relied on, to determine the 
credit rating in the format prescribed in paragraph 
(2) and containing the information described in 
paragraph (3). 
‘‘(2) FORMAT.—The Commission shall prescribe 
a form for use under paragraph (1) that— 
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‘‘(A) is designed in a user-friendly and 
helpful manner for investors to understand the 
information contained in the report; 
‘‘(B) requires the nationally recognized sta-
tistical rating organization to provide the con-
tent, as required by paragraph (3), in a manner 
that is directly comparable across securities; and 
‘‘(C) the nationally recognized statistical 
rating organization certifies the information on 
the form as true and accurate. 
‘‘(3) CONTENT.—The Commission shall prescribe 
a form that requires a nationally recognized statis-
tical rating organization to disclose — 
‘‘(A) the main assumptions included in con-
structing procedures and methodologies, includ-
ing qualitative methodologies and quantitative 
inputs and assumptions about the correlation of 
defaults across underlying assets used in rating 
certain structured products; 
‘‘(B) the potential shortcomings of the credit 
ratings, and the types of risks not measured in 
the credit ratings that the nationally recognized 
statistical rating organization is not com-
menting on, such as liquidity, market, and other 
risks; 
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‘‘(C) information on the certainty of the 
rating, including information on the reliability, 
accuracy, and quality of the data relied on in 
determining the ultimate credit rating and a 
statement on the extent to which key data inputs 
for the credit rating were reliable or limited, in-
cluding any limits on the reach of historical 
data, limits in accessibility to certain documents 
or other forms of information that would have 
better informed the credit rating, and the com-
pleteness of certain information considered; 
‘‘(D) whether and to what extent third 
party due diligence services have been utilized, 
and a description of the information that such 
third party reviewed in conducting due diligence 
services; 
‘‘(E) a description of relevant data about 
any obligor, issuer, security, or money market 
instrument that was used and relied on for the 
purpose of determining the credit rating; 
‘‘(F) a statement containing an overall as-
sessment of the quality of information available 
and considered in producing a credit rating for 
a security in relation to the quality of informa-
tion available to the nationally recognized statis-
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tical rating organization in rating similar obli-
gors, securities, or money market instruments; 
‘‘(G) an explanation or measure of the po-
tential volatility for the credit rating, including 
any factors that might lead to a change in the 
credit rating, and the extent of the change that 
might be anticipated under different conditions; 
‘‘(H) information on the content of the cred-
it rating, including— 
‘‘(i) the expected default probability; 
and 
‘‘(ii) the loss given default; 
‘‘(I) information on the sensitivity of the 
rating to assumptions made by the nationally 
recognized statistical rating organization, in-
cluding— 
‘‘(i) 5 assumptions made in the ratings 
process that, without accounting for any 
other factor, would have the greatest impact 
on a rating if such assumptions were prov-
en false or inaccurate; and 
‘‘(ii) an analysis, using concrete exam-
ples, on how each of the 5 assumptions iden-
tified under clause (i) impacts a rating. 
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‘‘(J) where applicable, how the nationally 
recognized statistical rating organization used 
servicer or remittance reports, and with what 
frequency, to conduct surveillance of the credit 
rating; and 
‘‘(K) such additional information as may 
be required by the Commission. 
‘‘(4) DUE DILIGENCE SERVICES.— 
‘‘(A) CERTIFICATION
REQUIRED.—In any 
case in which third-party due diligence services 
are employed by a nationally recognized statis-
tical rating organization or an issuer, under-
writer, or sponsor in connection with the 
issuance of a credit rating, the firm providing 
the due diligence services shall provide to the na-
tionally recognized statistical rating organiza-
tion written certification of such due diligence, 
which shall be subject to review by the Commis-
sion, and the issuer, underwriter, or sponsor 
shall provide any reports issued by the provider 
of such due diligence services to the nationally 
recognized statistical rating organization. 
‘‘(B) FORMAT AND CONTENT.—The Commis-
sion shall establish the appropriate format and 
content for written certifications required under 
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subparagraph (A) to ensure that providers of due 
diligence services have conducted a thorough re-
view of data, documentation, and other relevant 
information necessary for the nationally recog-
nized statistical rating organization to provide 
an reliable rating. 
‘‘(C) DISCLOSURE OF CERTIFICATION.—The 
Commission shall adopt rules requiring a na-
tionally recognized statistical rating organiza-
tion to disclose to persons who have access to the 
credit ratings of the nationally recognized statis-
tical rating organization regardless of whether 
they are made readily accessible for free or a rea-
sonable fee the certification described in subpara-
graph (A) with the publication of the applicable 
credit rating in a manner that may permit the 
persons to determine the adequacy and level of 
due diligence services provided by the third 
party. 
‘‘(t) PROHIBITED ACTIVITIES.—Beginning 180 days 
from the date of enactment of the Accountability, Reli-
ability, and Transparency in Rating Agencies Act, it shall 
be unlawful for a nationally recognized statistical rating 
organization, or an affiliate of a nationally recognized sta-
tistical rating organization, or any person associated with 
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a nationally recognized statistical rating organization, that 
provides a credit rating for an issuer, underwriter, or place-
ment agent of a security to provide any non-rating service, 
including— 
‘‘(1) risk management advisory services; 
‘‘(2) advice or consultation relating to any merg-
er, sales, or disposition of assets of the issuer; 
‘‘(3) ancillary assistance, advice, or consulting 
services unrelated to any specific credit rating 
issuance; and 
‘‘(4) such further activities or services as the 
Commission may determine as necessary or appro-
priate in the public interest or for the protection of 
investors.’’. 
SEC. 3. STANDARDS FOR PRIVATE ACTIONS. 
(a) IN GENERAL.—Section 21D(b)(2) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78u-4(b)(2)) is amended 
by inserting before the period at the end of the following: 
‘‘, and in the case of an action brought under this title for 
money damages against a nationally recognized statistical 
rating organization, it shall be sufficient for purposes of 
pleading any required state of mind for purposes of such 
action that the complaint shall state with particularity 
facts giving rise to a strong inference that the nationally 
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recognized statistical rating organization knowingly or 
recklessly violated the securities laws’’. 
(b) PLEADING STANDARD.—Section 15E(m) of the Se-
curities Exchange Act of 1934 (15 U.S.C. 78o-7(m)) amend-
ed to read as follows: 
‘‘(m) APPLICATION
OF ENFORCEMENT PROVISIONS; 
PLEADING STANDARD IN PRIVATE RIGHTS OF ACTION.— 
Statements made by nationally recognized statistical rating 
organizations shall not be deemed forward looking state-
ments for purposes of section 21E. In any private right of 
action commenced against a nationally recognized statis-
tical rating organization under this title, the same pleading 
standards with respect to knowledge and recklessness shall 
apply to the nationally recognized statistical rating organi-
zation as would apply to any other person in the same or 
a similar private right of action against such person.’’. 
SEC. 4. ISSUER DISCLOSURE OF PRELIMINARY RATINGS. 
The Securities and Exchange Commission shall adopt 
rules under authority of the Securities Act of 1933 (15 
U.S.C. 77a, et seq.) to require issuers to disclose prelimi-
nary credit ratings received from nationally recognized sta-
tistical rating agencies on structured products and all forms 
of corporate debt. 
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SEC. 5. CHANGE TO DESIGNATION. 
The Securities Act of 1933 and the Securities Ex-
change Act of 1934 are each amended by striking ‘‘nation-
ally recognized statistical rating’’ each place it appears and 
inserting ‘‘nationally registered statistical rating’’. 
SEC. 6. TIMELINE FOR REGULATIONS. 
Unless otherwise specified in this Act, the Securities 
and Exchange Commission shall adopt rules and regula-
tions, as required by the amendments made by this Act, 
not later than 365 days after the date of enactment. 
SEC. 7. ELIMINATION OF EXEMPTION FROM FAIR DISCLO-
SURE RULE. 
Not later than 90 days after the date of enactment of 
this Act, the Securities Exchange Commission shall revise 
Regulation FD (17 C.F.R. 243.100) to remove from such 
regulation the exemption for entities whose primary busi-
ness is the issuance of credit ratings (17 C.F.R. 
243.100(b)(2)(iii)). 
SEC. 8. ADVISORY BOARD. 
(a) ESTABLISHMENT.—Not later than 90 days after 
the date of the enactment of this Act, the Securities and 
Exchange Commission shall establish an advisory board to 
be known as the Credit Ratings Agency Advisory Board (in 
this section referred to as ‘‘the Board’’). 
(b) APPOINTMENT
AND TERMS
OF SERVICE.—The 
Board shall consist of 7 members appointed by the Commis-
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sion, no more than 2 of whom may be former employees 
of a credit rating agency. Members of the Board shall be 
prominent individuals of integrity and reputation who 
have a demonstrated commitment to the interests of inves-
tors and the public, and an understanding of the role that 
credit ratings play to a broad range of investors. Terms 
of service shall be staggered as determined by the Commis-
sion. 
(c) DUTIES.—The Board shall— 
(1) advise the Commission concerning the rules 
and regulations required by the amendments made by 
this Act; 
(2) insure that the Commission properly and 
fully executes its oversight functions and responsibil-
ities with the respect to nationally recognized statis-
tical rating organizations and individual partici-
pants; and 
(3) issue an annual report to Congress detailing 
its work and recommending any additional Congres-
sional actions necessary to aid the Commission and 
such additional reports from time to time as appro-
priate when it feels that the Commission is not prop-
erly executing its oversight functions. 
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SEC. 9. REMOVAL OF STATUTORY REFERENCES TO CREDIT 
RATINGS. 
(a) FEDERAL DEPOSIT INSURANCE ACT.—The Federal 
Deposit Insurance Act (12 U.S.C. 1811 et seq.) is amend-
ed— 
(1) in section 28(d)— 
(A) in the subsection heading, by striking 
‘‘NOT OF INVESTMENT GRADE’’; 
(B) in paragraph (1), by striking ‘‘not of 
investment grade’’ and inserting ‘‘that does not 
meet standards of credit-worthiness as estab-
lished by the Corporation’’; 
(C) in paragraph (2), by striking ‘‘not of 
investment grade’’; 
(D) by striking paragraph (3) and redesig-
nating paragraph (4) as paragraph (3); and 
(E) in paragraph (3) (as so redesignated)— 
(i) by striking subparagraph (A) and 
redesignating subparagraphs (B) and (C) as 
subparagraphs (A) and (B), respectively; 
and 
(ii) in subparagraph (B) (as so redes-
ignated), by striking ‘‘not of investment 
grade’’ and inserting ‘‘that does not meet 
standards of credit-worthiness as established 
by the Corporation’’; 
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(2) in section 28(e)— 
(A) in the subsection heading, by striking 
‘‘NOT OF INVESTMENT GRADE’’; 
(B) in paragraph (1), by striking ‘‘not of 
investment grade’’ and inserting ‘‘that does not 
meet standards of credit-worthiness as estab-
lished by the Corporation’’; and 
(C) in paragraphs (2) and (3), by striking 
‘‘not of investment grade’’ each place that it ap-
pears and inserting ‘‘that does not meet stand-
ards of credit-worthiness established by the Cor-
poration’’; and 
(3) in section 7(b)(1)(E)(i), by striking ‘‘credit 
rating entities, and other private economic’’ and in-
sert ‘‘private economic, credit,’’. 
(b) FEDERAL
HOUSING
ENTERPRISES
FINANCIAL 
SAFETY AND SOUNDNESS ACT OF 1992.—Section 1319 of 
the Federal Housing Enterprises Financial Safety and 
Soundness Act of 1992 (12 U.S.C. 4519) is amended— 
(1) in the section heading, by striking ‘‘BY RAT-
ING ORGANIZATION’’; and 
(2) by striking ‘‘that is a nationally recognized 
statistical rating organization, as such term is de-
fined in section 3(a) of the Securities Exchange Act 
of 1934,’’. 
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(c) INVESTMENT COMPANY ACT
OF 1940.—Section 
6(a)(5)(A)(iv)(I) Investment Company Act of 1940 (15 
U.S.C. 80a-6(a)(5)(A)(iv)(I)) is amended by striking ‘‘is 
rated investment grade by not less than 1 nationally recog-
nized statistical rating organization’’ and inserting ‘‘meets 
such standards of credit-worthiness that the Commission 
shall adopt’’. 
(d) REVISED STATUTES.—Section 5136A of title LXII 
of the Revised Statutes of the United States (12 U.S.C. 24a) 
is amended— 
(1) in subsection (a)(2)(E), by striking ‘‘any ap-
plicable rating’’ and inserting ‘‘standards of credit- 
worthiness established by the Comptroller of the Cur-
rency’’; 
(2) in the heading for subsection (a)(3) by strik-
ing ‘‘RATING OR COMPARABLE REQUIREMENT’’ and 
inserting ‘‘REQUIREMENT’’; 
(3) subsection (a)(3), by amending subparagraph 
(A) to read as follows: 
‘‘(A) IN GENERAL.—A national bank meets 
the requirements of this paragraph if the bank is 
one of the 100 largest insured banks and has not 
fewer than 1 issue of outstanding debt that meets 
standards of credit-worthiness or other criteria 
as the Secretary of the Treasury and the Board 
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of Governors of the Federal Reserve System may 
jointly establish.’’. 
(4) in the heading for subsection (f), by striking 
‘‘MAINTAIN
PUBLIC
RATING
OR’’ and inserting 
‘‘MEET STANDARDS OF CREDIT-WORTHINESS’’; and 
(5) in subsection (f)(1), by striking ‘‘any appli-
cable rating’’ and inserting ‘‘standards of credit-wor-
thiness established by the Comptroller of the Cur-
rency’’. 
(e) SECURITIES EXCHANGE ACT OF 1934.—Section 
3(a) Securities Exchange Act of 1934 (15 U.S.C. 78a(3)(a)) 
is amended— 
(1) in paragraph (41), by striking ‘‘is rated in 
one of the two highest rating categories by at least one 
nationally recognized statistical rating organization’’ 
and inserting ‘‘meets standards of credit-worthiness 
as defined by the Commission’’; and 
(2) in paragraph (53)(A), by striking ‘‘is rated 
in 1 of the 4 highest rating categories by at least 1 
nationally recognized statistical rating organization’’ 
and inserting ‘‘meets standards of credit-worthiness 
as defined by the Commission’’. 
(f) WORLD BANK DISCUSSIONS.—Section 3(a)(6) of 
the amendment in the nature of a substitute to the text of 
H.R. 4645, as ordered reported from the Committee on 
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Banking, Finance and Urban Affairs on September 22, 
1988, as enacted into law by section 555 of Public Law 
100-461, (22 U.S.C. 286hh(a)(6)), is amended by striking 
‘‘rating’’ and inserting ‘‘worthiness’’. 
(g) EFFECTIVE DATE.—The amendments made by this 
section shall take effect after the end of the 6-month period 
beginning on the date of the enactment of this Act. 
SEC. 10. REVIEW OF RELIANCE ON RATINGS. 
(a) AGENCY REVIEW.— 
(1) REVIEW.—Not later than 1 year after the 
date of the enactment of this Act, each Federal agency 
listed in paragraph (4) shall, to the extent applicable, 
review— 
(A) any regulation issued by such agency 
that requires the use of an assessment of the cred-
it-worthiness of a security or money market in-
strument, and 
(B) any references to or requirements in 
such regulations regarding credit ratings. 
(2) 
MODIFICATIONS
REQUIRED.—Each 
such 
agency shall modify any such regulations identified 
by the review conducted under paragraph (1) to re-
move any reference to or requirement of reliance on 
credit ratings and to substitute in such regulations 
such standard of credit-worthiness as each respective 
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agency shall determine as appropriate for such regu-
lations. In making such determination, such agencies 
shall seek to establish, to the extent feasible, uniform 
standards of credit-worthiness for use by each such 
agency, taking into account the entities regulated by 
each such agency and the purposes for which such en-
tities would rely on such standards of credit-worthi-
ness. 
(3) REPORT.—Upon conclusion of the review re-
quired under paragraph (1), each Federal agency list-
ed in paragraph (4) shall transmit a report to Con-
gress containing a description of any modification of 
any regulation such agency made pursuant to para-
graph (2). 
(4) APPLICABLE
AGENCIES.—The agencies re-
quired to conduct the review and report required by 
this subsection are— 
(A) the Securities and Exchange Commis-
sion; 
(B) the Federal Deposit Insurance Corpora-
tion; 
(C) the Office of Thrift Supervision; 
(D) the Office of the Comptroller of the Cur-
rency; 
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(E) the Board of Governors of the Federal 
Reserve; 
(F) the National Credit Union Administra-
tion; and 
(G) the Federal Housing Finance Agency. 
(b) GAO REVIEW OF OTHER AGENCIES.— 
(1) REVIEW.—The Comptroller General shall 
conduct a comprehensive review of the use of credit 
ratings by Federal agencies other than those listed in 
subsection (a)(3), including an analysis of the provi-
sions of law or regulation applicable to each such 
agency that refer to and require the use of credit rat-
ings by the agency, and the policies and practices of 
each agency with respect to credit ratings. 
(2) REPORT.—Not later than 1 year after the 
date of the enactment of this Act, the Comptroller 
General shall transmit to Congress a report on the 
findings of the study conducted pursuant to para-
graph (1), including recommendations for any legisla-
tion or rulemaking necessary or appropriate in order 
for such agencies to reduce their reliance on credit 
ratings. 
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SEC. 11. PUBLICATION OF RATING HISTORIES ON THE 
EDGAR SYSTEM. 
Not later than 180 days after the date of the enactment 
of this Act, the Securities and Exchange Commission shall 
revise its rules in section 240.17g-2(a) and (d) of title 17, 
Code of Federal Regulations, to require that the random 
sample of ratings histories of credit ratings required under 
such rules to be disclosed on the website of a nationally rec-
ognized statistical rating organization also be provided to 
the Commission in a format consistent with publication by 
the Commission on the EDGAR system. 
SEC. 12. EFFECT OF RULE 436(G). 
Rule 436(g), promulgated by the Securities and Ex-
change Commission under the Securities Act of 1933, shall 
have no force or effect. 
SEC. 13. STUDIES. 
(a) GAO STUDY.— 
(1) IN GENERAL.—The Comptroller General shall 
conduct a study of— 
(A) the implementation of this Act and the 
amendments made by this Act by the Securities 
and Exchange Commission; 
(B) the appropriateness of relying on rat-
ings for use in Federal, State, and local securi-
ties and banking regulations, including for deter-
mining capital requirements; and 
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(C) the effect of liability in private actions 
arising under the Securities Exchange Act of 
1934; 
(D) alternative means for compensating 
credit rating agencies that would create incen-
tives for accurate credit ratings and what, if 
any, statutory changes would be required to per-
mit or facilitate the use of such alternative 
means of compensation; and 
(E) alternative methodologies to assess cred-
it risk, including market-based measures. 
(2) REPORT.—Not later than 30 months after the 
date of enactment of this Act, the Comptroller General 
shall submit to Congress and the Securities Exchange 
Commission, a report containing the findings under 
the study required by subsection (a). 
(b) SEC STUDY ON ASSIGNING CREDIT RATING AGEN-
CIES ON A ROTATING BASIS.—The Securities and Exchange 
Commission shall undertake a study on creating a system 
whereby nationally recognized statistical rating organiza-
tions are assigned on a rotating basis to issuers and obligors 
seeking a credit rating. Not later than 1 year after the date 
of enactment of this Act, the Securities and Exchange Com-
mission shall transmit to Congress a report containing the 
findings of the study. 
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(c) SEC STUDY ON EFFECT OF NEW REQUIREMENTS 
ON NRSRO REGISTRATION.—The Securities and Exchange 
Commission shall conduct a study on the effect of the 
amendments made by section 2 on credit rating agencies 
seeking to register as nationally recognized statistical rat-
ing organizations, including whether the new requirements 
in such amendments deter credit rating agencies from reg-
istering as nationally recognized statistical rating organi-
zations. Not later than 1 year after the date of enactment 
of this Act, the Commission shall transmit to the Committee 
on Financial Services of the House of Representatives and 
the Committee on Banking, Housing, and Urban Affairs 
of the Senate a report on the findings of such study. 
(d) STUDY
OF CREDIT RATINGS
OF DIFFERENT 
CLASSES OF BONDS.— 
(1) STUDY.—The Securities and Exchange Com-
mission shall conduct a study of the treatment of dif-
ferent classes of bonds (municipal versus corporate) 
by the nationally recognized statistical rating organi-
zations. Such study shall examine— 
(A) whether there are fundamental dif-
ferences in the treatment of different classes of 
bonds by such rating organizations that cause 
some classes of bonds to suffer from undue dis-
crimination; 
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(B) if there are such differences, what are 
the causes of such differences and how can they 
be alleviated; 
(C) whether there are factors other than risk 
of loss that are appropriate for the credit ratings 
agencies to consider when rating bonds, and do 
those factors vary across different sectors 
(D) the types of financing arrangement 
used by municipal issuers 
(E) the differing legal and regulatory re-
gimes governing disclosures for corporate bonds 
and municipal bonds; 
(F) the extent to which retail investors 
could be disadvantaged by a single ratings scale; 
and 
(G) practices, policies, and methodologies by 
the nationally recognized statistical rating orga-
nizations with respect to rating municipal 
bonds. 
(2) REPORT.—Within 6 months after the date of 
enactment of this Act, the Securities and Exchange 
Commission shall submit a report on the results of the 
study required by paragraph (1) to the Committee on 
Financial Services of the House of Representatives 
and the Committee on Banking, Housing, and Urban 
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Development of the Senate. Such report shall include 
as assessment of each of the issues and subjects de-
scribed in subparagraphs (A) through (G) of para-
graph (1). 
(e) SEC STUDY ON MEANINGFUL MULTI DIGIT RAT-
ING SYMBOLS.— 
(1) STUDY.—The Securities and Exchange Com-
mission shall conduct a study on the feasibility and 
desirability of implementing a standardized rating 
system whereby ratings symbols contain multiple 
characters, each representing a range of default prob-
abilities and loss expectations under standardized and 
increasingly severe levels of market stress. The study 
shall optimize the definitions of the symbols to maxi-
mize their overall usefulness for users of credit rat-
ings. 
(2) INITIAL EXAMPLE FOR GUIDANCE.—An ex-
ample to provide initial guidance for the study is a 
ratings symbol consisting of three digits, each of 
which corresponds to default probabilities under dif-
ferent levels of market stress as follows: 
(A) The first digit represents the default 
probability under ‘‘normal’’ market stress, char-
acterized by normal economic fluctuations in ad-
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dition to a 5 percent decline in asset value and 
2 percent increase in unemployment. 
(B) The second digit represents the default 
probability under more severe market stress, 
characterized a 20 percent decline in asset value 
and 5 percent increase in unemployment. 
(C) The third digit represents the default 
probability under extreme market stress, charac-
terized by a 50 percent decline in asset value 
and 10 percent increase in unemployment. 
(3) REPORT.—Not later than 1 year after the 
date of the enactment of this Act, the Commission 
shall transmit to Congress a report of the study con-
ducted pursuant to paragraph (1), including rec-
ommendations on whether the system similar to that 
described in paragraph (2) should be implemented 
and, if so, any necessary legislation required to im-
plement such a system. 
(f) SEC STUDY ON RATINGS STANDARDIZATION.— 
(1) IN GENERAL.—The Securities and Exchange 
Commission shall undertake a study on the feasability 
and desirability of— 
(A) standardizing credit ratings termi-
nology, so that all credit rating agencies issue 
credit ratings using identical terms; 
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(B) standardizing the market stress condi-
tions under which ratings are evaluated; 
(C) requiring a quantitative correspondence 
between credit ratings and a range of default 
probabilities and loss expectations under stand-
ardized conditions of economic stress; and 
(D) standardizing credit rating terminology 
across asset classes, so that named ratings shall 
correspond to a standard range of default prob-
abilities and expected losses independent of asset 
class and issuing entity. 
(2) REPORT.—Not later than 1 year after the 
date of enactment of this Act, the Securities and Ex-
change Commission shall transmit to Congress a re-
port containing the findings of the study and the rec-
ommendations of the Commission. 
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Union Calendar No. 406 
111TH CONGRESS 
2D SESSION 
H. R. 3890 
[Report No. 111–685, Part I] 
A BILL 
To amend the Securities Exchange Act of 1934 to 
enhance oversight of nationally recognized statis-
tical rating organizations, and for other pur-
poses. 
DECEMBER 17, 2010 
Committee on the Judiciary discharged; committed to the 
Committee of the Whole House on the State of the 
Union and ordered to be printed 
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