I 
111TH CONGRESS 
1ST SESSION H. R. 3890 
To amend the Securities Exchange Act of 1934 to enhance oversight of 
nationally recognized statistical rating organizations, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
OCTOBER 21, 2009 
Mr. KANJORSKI (for himself, Mr. CAPUANO, Ms. KILROY, Mr. CLEAVER, and 
Ms. KOSMAS) introduced the following bill; which was referred to the 
Committee on Financial Services 
A BILL 
To amend the Securities Exchange Act of 1934 to enhance 
oversight of nationally recognized statistical rating orga-
nizations, and for other purposes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This title may be cited as the ‘‘Accountability and 
Transparency in Rating Agencies Act’’. 
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SEC. 2. ENHANCED REGULATION OF NATIONALLY RECOG-
NIZED 
STATISTICAL 
RATING 
ORGANIZA-
TIONS. 
Section 15E of the Securities Exchange Act of 1934 
(15 U.S.C. 78o–7) is amended— 
(1) in subsection (a)— 
(A) in paragraph (1)(A), by striking ‘‘fur-
nish to’’ and inserting ‘‘file with’’; 
(B) in paragraph (2)(A), by striking ‘‘fur-
nished to’’ and inserting ‘‘filed with’’; and 
(C) in paragraph (2)(B)(i)(II), by striking 
‘‘furnished to’’ and inserting ‘‘filed with’’; 
(2) in subsection (b)— 
(A) in paragraph (1)(A), by striking ‘‘fur-
nished’’ and inserting ‘‘filed’’ and by striking 
‘‘furnishing’’ and inserting ‘‘filing’’; 
(B) in paragraph (1)(B), by striking ‘‘fur-
nishing’’ and inserting ‘‘filing’’; and 
(C) in the first sentence of paragraph (2), 
by striking ‘‘furnish to’’ and inserting ‘‘file 
with’’; 
(3) in subsection (c)— 
(A) paragraph (2)— 
(i) in the second sentence by inserting 
‘‘including the requirements of this sec-
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tion,’’ after ‘‘Notwithstanding any other 
provision of law,’’; and 
(ii) by inserting before the period at 
the end of the last sentence ‘‘, provided 
that this paragraph does not afford a de-
fense against any action or proceeding 
brought by the Commission to enforce the 
antifraud provision of the securities laws’’; 
and 
(B) by adding at the end the following new 
paragraph: 
‘‘(3) REVIEW
OF
INTERNAL
PROCESSES
FOR 
DETERMINING CREDIT RATINGS.— 
‘‘(A) IN GENERAL.—The Commission shall 
review credit ratings issued by, and the policies, 
procedures, and methodologies employed by, 
each nationally recognized statistical rating or-
ganization to ensure that— 
‘‘(i) the nationally recognized statis-
tical rating organization has established 
and documented a system of internal con-
trols, due diligence and implementation of 
methodologies for determining credit rat-
ings, taking into consideration such factors 
as the Commission may prescribe by rule; 
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‘‘(ii) the nationally recognized statis-
tical rating organization adheres to such 
system; and 
‘‘(iii) the public disclosures of the na-
tionally recognized statistical rating orga-
nization required under this section about 
its ratings, methodologies, and procedures 
are consistent with such system. 
‘‘(B) MANNER
AND
FREQUENCY.—The 
Commission shall conduct reviews required by 
this paragraph no less frequently than annually 
in a manner to be determined by the Commis-
sion. 
‘‘(4) PROVISION OF INFORMATION TO THE COM-
MISSION.—Each nationally recognized statistical rat-
ing organization shall make available and maintain 
such records and information, for such a period of 
time, as the Commission may prescribe, by rule, as 
necessary for the Commission to conduct the reviews 
under paragraph (3).’’; 
(4) in subsection (d)— 
(A) in the heading, by inserting ‘‘FINE,’’ 
after ‘‘CENSURE,’’; 
(B) by striking ‘‘shall censure’’ and all 
that follows through ‘‘revocation’’ and inserting 
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(i) by striking ‘‘furnish’’ and inserting 
‘‘file’’; and 
(ii) by striking ‘‘or’’ at the end; 
(E) in paragraph (5), by striking the pe-
riod at the end; and 
(F) by adding at the end the following: 
‘‘(6) has failed reasonably to supervise another 
person who commits a violation of the securities laws 
or any rules of the Municipal Securities Rulemaking 
Board if such other person is subject to his or her 
supervision, except that no person shall be deemed 
to have failed reasonably to supervise any other per-
son under this paragraph, if— 
‘‘(A) there have been established proce-
dures, and a system for applying such proce-
dures, which would reasonably be expected to 
prevent and detect, insofar as practicable, any 
such violation by such other person; and 
‘‘(B) such person has reasonably dis-
charged the duties and obligations incumbent 
upon him or her by reason of such procedures 
and system without reasonable cause to believe 
that such procedures and system were not being 
complied with; or 
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‘‘(7) fails to conduct sufficient surveillance to 
ensure that credit ratings remain current and reli-
able, as applicable.’’; 
(5) in subsection (e)— 
(A) by striking paragraph (1); and 
(B) in paragraph (2), by striking ‘‘(2) 
COMMISSION
AUTHORITY.—’’ and moving the 
text of such paragraph to follow the heading of 
subsection (e); 
(6) by amending subsection (h) to read as fol-
lows: 
‘‘(h) CORPORATE GOVERNANCE, ORGANIZATION, AND 
MANAGEMENT OF CONFLICTS OF INTEREST.— 
‘‘(1) BOARD OF DIRECTORS.— 
‘‘(A) IN GENERAL.—Each nationally recog-
nized statistical rating organization or its par-
ent entity shall have a board of directors. 
‘‘(B) INDEPENDENT DIRECTORS.—At least 
1⁄3 of such board, but no less than 2 of the 
members of the board of directors, shall be 
independent directors. In order to be considered 
independent for purposes of this subsection, a 
director of a nationally recognized statistical 
rating organization may not, other than in his 
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or her capacity as a member of the board of di-
rectors or any committee thereof— 
‘‘(i) accept any consulting, advisory, 
or other compensatory fee from the nation-
ally recognized statistical rating organiza-
tion; or 
‘‘(ii) be a person associated with the 
nationally recognized statistical rating or-
ganization or with any affiliated company 
thereof. 
‘‘(C) COMPENSATION
AND
TERM.—The 
compensation of the independent directors shall 
not be linked to the business performance of the 
nationally recognized statistical rating organiza-
tion and shall be arranged so as to ensure the 
independence of their judgment. The term of 
office of the independent directors shall be for 
a pre-agreed fixed period not exceeding 5 years 
and shall not be renewable. 
‘‘(D) DUTIES.—In addition to the overall 
responsibility of the board of directors, the 
board shall oversee— 
‘‘(i) the establishment, maintenance, 
and enforcement of policies and procedures 
for determining credit ratings; 
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‘‘(ii) the establishment, maintenance, 
and enforcement of policies and procedures 
to address, manage, and disclose any con-
flicts of interest; 
‘‘(iii) the effectiveness of the internal 
control system with respect to policies and 
procedures for determining credit ratings; 
and 
‘‘(iv) the compensation and promotion 
policies and practices of the nationally rec-
ognized statistical rating organization. 
‘‘(2) ORGANIZATION
POLICIES
AND
PROCE-
DURES.—Each nationally recognized statistical rat-
ing organization shall establish, maintain, and en-
force written policies and procedures reasonably de-
signed, taking into consideration the nature of the 
business of the nationally recognized statistical rat-
ing organization and affiliated persons and affiliated 
companies thereof, to address, manage, and disclose 
any conflicts of interest that can arise from such 
business. 
‘‘(3) COMMISSION
RULES.—The Commission 
shall issue rules to prohibit, or require the manage-
ment and disclosure of, any conflicts of interest re-
lating to the issuance of credit ratings by a nation-
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ally recognized statistical rating organization, includ-
ing— 
‘‘(A) conflicts of interest relating to the 
manner in which a nationally recognized statis-
tical rating organization is compensated by the 
obligor, or any affiliate of the obligor, for 
issuing credit ratings or providing related serv-
ices; 
‘‘(B) conflicts of interest relating to the 
provision of consulting, advisory, or other serv-
ices by a nationally recognized statistical rating 
organization, or any person associated with 
such nationally recognized statistical rating or-
ganization, to the obligor, or any affiliate of the 
obligor; 
‘‘(C) disclosure of conflicts of interests re-
lating to business relationships, ownership in-
terests, and affiliations of nationally recognized 
statistical rating organization board members 
with obligors, or any other financial or personal 
interests between a nationally recognized statis-
tical rating organization, or any person associ-
ated with such nationally recognized statistical 
rating organization, and the obligor, or any af-
filiate of the obligor; 
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‘‘(D) disclosure of conflicts of interests re-
lating to any affiliation of a nationally recog-
nized statistical rating organization, or any per-
son associated with such nationally recognized 
statistical rating organization, with any person 
who underwrites securities, money market in-
struments, or other instruments that are the 
subject of a credit rating; 
‘‘(E) a requirement that each nationally 
recognized statistical rating organization dis-
close on such organization’s website a consoli-
dated report at the end of each fiscal year that 
shows— 
‘‘(i) the percent of net revenue earned 
by the nationally recognized statistical rat-
ing organization or an affiliate of a nation-
ally recognized statistical rating organiza-
tion, or any person associated with a na-
tionally recognized statistical rating orga-
nization, to the extent determined appro-
priate by the Commission, for that fiscal 
year for providing services and products 
other than credit rating services to each 
person who paid for a credit rating; and 
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‘‘(ii) the relative standing of each per-
son who paid for a credit rating that was 
outstanding as of the end of the fiscal year 
in terms of the amount of net revenue 
earned by the nationally recognized statis-
tical rating organization attributable to 
each such person and classified by the 
highest 5, 10, 25, and 50 percentiles and 
lowest 50 and 25 percentiles; 
‘‘(F) rules providing for the establishment 
of a system of payment for each nationally rec-
ognized statistical rating organization that re-
quires that payments are structured in a man-
ner designed to ensure that the nationally rec-
ognized statistical rating organization conducts 
accurate and reliable surveillance of ratings 
over time, as applicable, and that incentives for 
reliable ratings are in place; 
‘‘(G) a requirement that a nationally rec-
ognized statistical rating organization disclose 
with the publication of a credit rating the type 
and number of credit ratings it has provided to 
the person being rated or affiliates of such per-
son, the fees it has billed for the credit rating, 
and the aggregate amount of net revenue 
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earned by the nationally recognized statistical 
rating in the preceding 2 fiscal years attrib-
utable to the person being rated and its affili-
ates; and 
‘‘(H) any other potential conflict of inter-
est, as the Commission determines necessary or 
appropriate in the public interest or for the pro-
tection of investors. 
‘‘(4) LOOK-BACK REQUIREMENT.— 
‘‘(A) REVIEW BY THE NATIONALLY RECOG-
NIZED STATISTICAL RATING ORGANIZATION.— 
Each nationally recognized statistical rating or-
ganization shall establish, maintain, and enforce 
policies and procedures reasonably designed to 
ensure that, in any case in which an employee 
of a person subject to a credit rating of the na-
tionally recognized statistical rating organiza-
tion or the issuer, underwriter, or sponsor of a 
security or money market instrument subject to 
a credit rating of the nationally recognized sta-
tistical rating organization was employed by the 
nationally recognized statistical rating organiza-
tion and participated in any capacity in deter-
mining credit ratings for the person or the se-
curities or money market instruments during 
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the 1-year period preceding the date an action 
was taken with respect to the credit rating, the 
nationally recognized statistical rating organiza-
tion shall— 
‘‘(i) conduct a review to determine 
whether any conflicts of interest of the em-
ployee influenced the credit rating; and 
‘‘(ii) take action to revise the rating if 
appropriate, in accordance with such rules 
as the Commission shall prescribe. 
‘‘(B) REVIEW BY COMMISSION.— 
‘‘(i) IN GENERAL.—The Commission 
shall conduct periodic reviews of the poli-
cies described in subparagraph (A) and the 
implementation of the policies at each na-
tionally recognized statistical rating orga-
nization to ensure they are reasonably de-
signed and implemented to most effectively 
eliminate conflicts of interest. 
‘‘(ii) TIMING OF REVIEWS.—The Com-
mission shall review the code of ethics and 
conflict of interest policy of each nationally 
recognized statistical rating organization— 
‘‘(I) not less frequently than an-
nually; and 
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‘‘(II) whenever such policies are 
materially modified or amended. 
‘‘(5) REPORT TO COMMISSION ON CERTAIN EM-
PLOYMENT TRANSITIONS.— 
‘‘(A) REPORT REQUIRED.—Each nationally 
recognized statistical rating organization shall 
report to the Commission any case such organi-
zation knows or can reasonably be expected to 
know where a former employee of such organi-
zation obtains employment with any issuer, un-
derwriter, or sponsor of a security or money 
market instrument for which the organization 
issued a credit rating during the 12-month pe-
riod prior to such employment, if such em-
ployee— 
‘‘(i) was an officer of such organiza-
tion; 
‘‘(ii) participated in any capacity in 
determining credit ratings for such issuer, 
underwriter, or sponsor; or 
‘‘(iii) supervised an employee de-
scribed un subparagraph (B). 
‘‘(B) PUBLIC DISCLOSURE.—Upon receiv-
ing such a report, the Commission shall make 
such information publicly available.’’; 
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(7) by amending subsection (j) to read as fol-
lows: 
‘‘(j) DESIGNATION OF COMPLIANCE OFFICER.— 
‘‘(1) IN GENERAL.—Each nationally recognized 
statistical rating organization shall designate an in-
dividual to serve as a compliance officer. 
‘‘(2) DUTIES.—The compliance officer shall— 
‘‘(A) report directly to the board of the na-
tionally recognized statistical rating organiza-
tion; 
‘‘(B) review compliance with policies and 
procedures to manage conflicts of interest and 
assess the risk that the compliance (or lack of 
such compliance) may compromise the integrity 
of the credit rating process; 
‘‘(C) review compliance with internal con-
trols with respect to the procedures and meth-
odologies for determining credit ratings, includ-
ing quantitative models and qualitative inputs 
used in the rating process, and assess the risk 
that such compliance with the internal controls 
(or lack of such compliance) may compromise 
the integrity and quality of the credit rating 
process; 
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‘‘(D) in consultation with the board of the 
nationally recognized statistical rating organiza-
tion, resolve any conflicts of interest that may 
arise; 
‘‘(E) be responsible for administering the 
policies and procedures required to be estab-
lished pursuant to this section; 
‘‘(F) ensure compliance with securities 
laws and the rules and regulations issued there-
under, including rules prescribed by the Com-
mission pursuant to this section; and 
‘‘(G) shall establish procedures— 
‘‘(i) for the receipt, retention, and 
treatment of complaints regarding credit 
ratings, models, methodologies, and com-
pliance with the securities laws and the 
policies and procedures required under this 
section; 
‘‘(ii) for the receipt, retention, and 
treatment of confidential, anonymous com-
plaints by employees, issuers, and inves-
tors; 
‘‘(iii) for the remediation of non-com-
pliance issues found during compliance of-
fice reviews, the reviews required under 
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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 that comes to the 
attention of and is believed by the nation-
ally recognized statistical rating organiza-
tion to be relevant, in a manner generally 
consistent with the nationally recognized 
statistical rating organization’s published 
rating methodology, including information 
which is provided, received, or otherwise 
obtained 
from 
issuer 
and 
non-issuer 
sources, such as investors, the media, and 
other interested or informed parties. 
‘‘(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 quan-
titative models and qualitative inputs used to 
determine credit ratings; 
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‘‘(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 com-
pliance officer shall annually prepare and sign a re-
port on the compliance of the nationally recognized 
statistical 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 pre-
scribed by the Commission. Such compliance report 
shall accompany the financial reports of the nation-
ally recognized statistical rating organization that 
are required to be filed with the Commission pursu-
ant to this section and shall include a certification 
that, under penalty of law, the report is accurate 
and complete.’’; 
(8) in subsection (k)— 
(A) by striking ‘‘, on a confidential basis,’’; 
(B) by striking ‘‘Each nationally’’ and in-
serting the following: 
‘‘(1) IN GENERAL.—Each nationally’’; and 
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(C) by adding at the end the following new 
paragraph: 
‘‘(2) EXCEPTION.—The Commission may treat 
as confidential any item filed with the Commission 
under paragraph (1), the publication of which the 
Commission determines may have a harmful effect 
on a nationally recognized statistical rating organi-
zation.’’; 
(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.—The Com-
mission shall establish an office that administers the rules 
of the Commission with respect to the practices of nation-
ally recognized statistical rating organizations in deter-
mining ratings, in the public interest and for the protec-
tion of investors, including rules designed to ensure that 
credit ratings issued by such registrants are accurate and 
not unduly influenced by conflicts of interest.’’; and 
(11) by adding after subsection (p) the fol-
lowing new subsections: 
‘‘(q) TRANSPARENCY OF RATINGS PERFORMANCE.— 
‘‘(1) RULEMAKING
REQUIRED.—The Commis-
sion shall, by rule, require each nationally recognized 
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statistical rating organization to publicly disclose in-
formation on initial ratings and subsequent changes 
to such ratings for the purpose of providing a gauge 
of the performance of ratings and allowing investors 
to compare performance of ratings by different na-
tionally 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 Commis-
sion; and 
‘‘(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. 
‘‘(r) CREDIT RATINGS METHODOLOGIES.— 
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‘‘(1) IN GENERAL.—The Commission shall pre-
scribe rules, in the public interest and for the pro-
tection of investors, that require each nationally rec-
ognized statistical rating organization to establish, 
maintain, and enforce written procedures and meth-
odologies that are reasonably designed to— 
‘‘(A) ensure that credit ratings are deter-
mined using procedures and methodologies, in-
cluding quantitative models and qualitative in-
puts that are determined in accordance with the 
policies and procedures of the nationally recog-
nized statistical rating organization for devel-
oping and modifying credit rating procedures 
and methodologies; 
‘‘(B) ensure that when major changes to 
credit rating procedures and methodologies, in-
cluding to quantitative models and qualitative 
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 meth-
odologies, they are applied to current credit rat-
ings within a time period to be determined by 
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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 sta-
tistical rating organization, regardless of wheth-
er they are made readily accessible for free or 
a reasonable fee, of the version of a procedure 
or methodology, including quantitative models 
and qualitative inputs, used with respect to a 
particular credit rating; 
‘‘(D) notify persons who have access to the 
credit ratings of the nationally recognized sta-
tistical rating organization, regardless of wheth-
er they are made readily accessible for free or 
a reasonable fee, when a change is made to a 
procedure or methodology, including to quan-
titative models and qualitative inputs, or an 
error is identified in a procedure or method-
ology that may result in credit rating actions, 
and the likelihood of the change resulting in 
current credit 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 
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Commission determines appropriate or nec-
essary in the public interest and for the protec-
tion of investors. 
‘‘(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 
securities and money market instruments, 
to assess the risk that investors in securi-
ties and money market instruments may 
not receive payment in accordance with the 
terms of such securities and instruments; 
‘‘(ii) to define clearly any credit rating 
symbol used by that organization; and 
‘‘(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.— 
Nothing in subparagraph (A)— 
‘‘(i) prohibits a nationally recognized 
statistical rating organization from using 
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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 that are not backed by 
the issuer’s full faith and credit in its as-
sessment of the risk an investor in a secu-
rity or money market instrument will not 
receive repayment in accordance with the 
terms of issuance; 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 rat-
ings of a certain type of security or money 
market instrument from ratings of any 
other types of securities or money market 
instruments. 
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‘‘(C) 
COMPLEMENTARY
RATINGS.—The 
Commission shall not impose any requirement 
under subparagraph (A) that prevents nation-
ally recognized statistical rating organizations 
from establishing ratings that are complemen-
tary to the ratings described in subparagraph 
(A)(i) and that are created to measure a dis-
crete aspect of the security’s or instrument’s 
risk. 
‘‘(s) TRANSPARENCY
OF CREDIT RATING METH-
ODOLOGIES 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 
rating is made readily accessible for free or a rea-
sonable fee a form that discloses information about 
the assumptions underlying the procedures and 
methodologies used, and the data relied on, to deter-
mine the credit rating in the format prescribed in 
paragraph (2) and containing the information de-
scribed 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 
statistical rating organization to provide the 
content, as required by paragraph (3), in a 
manner that is directly comparable across secu-
rities; and 
‘‘(C) the nationally recognized statistical 
rating organization certifies the information on 
the form as true and accurate. 
‘‘(3) CONTENT.—The Commission shall pre-
scribe a form that requires a nationally recognized 
statistical rating organization to disclose— 
‘‘(A) the main assumptions included in 
constructing procedures and methodologies, in-
cluding quantitative models and qualitative in-
puts and assumptions about the correlation of 
defaults across obligors used in rating certain 
structured products; 
‘‘(B) the potential shortcomings of the 
credit ratings, and the types of risks not meas-
ured in the credit ratings that the registrant is 
not commenting 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 in-
puts for the credit rating were reliable or lim-
ited, including any limits on the reach of histor-
ical data, limits in accessibility to certain docu-
ments or other forms of information that would 
have better informed the credit rating, and the 
completeness 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 sta-
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tistical rating organization in rating similar ob-
ligors, 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 
credit 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; 
‘‘(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 
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are employed by a nationally recognized statis-
tical rating organization or an issuer or under-
writer in connection with the issuance of a cred-
it rating, the firm providing the due diligence 
services shall provide to the nationally recog-
nized statistical rating organization written cer-
tification of such due diligence, which shall be 
subject to review by the Commission, and the 
issuer or underwriter 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 Com-
mission shall establish the appropriate format 
and content for written certifications required 
under subparagraph (A) to ensure that pro-
viders of due diligence services have conducted 
a thorough review of data, documentation, and 
other relevant information necessary for the na-
tionally recognized statistical rating organiza-
tion to provide an reliable rating. 
‘‘(C) DISCLOSURE
OF
CERTIFICATION.— 
The Commission shall adopt rules requiring a 
nationally recognized statistical rating organiza-
tion to disclose to persons who have access to 
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the credit ratings of the nationally recognized 
statistical rating organization regardless of 
whether they are made readily accessible for 
free or a reasonable fee the certification de-
scribed in subparagraph (A) with the publica-
tion of the applicable credit rating in a manner 
that may permit the persons to determine the 
adequacy and level of due diligence services pro-
vided by the third party. 
‘‘(t) PROHIBITED ACTIVITIES.— 
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), beginning 180 days from the date of en-
actment of the Accountability, Reliability, and 
Transparency in Rating Agencies Act, it shall be un-
lawful for a nationally recognized statistical rating 
organization, or an affiliate of a nationally recog-
nized statistical rating organization, or any person 
associated with a nationally recognized statistical 
rating organization, to the extent determined appro-
priate by the Commission, that provides a rating for 
an issuer, underwriter, or placement agent of a secu-
rity to provide to that issuer, underwriter, or place-
ment agent, any non-rating service that preceded the 
retention of the nationally recognized statistical rat-
ing organization by the issuer, underwriter, or place-
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ment agent to provide a rating for the security in 
question or any assistance provided after such point 
for which additional compensation is paid directly or 
indirectly, including— 
‘‘(A) risk management advisory services; 
‘‘(B) advice or consultation relating to any 
merger, sales, or disposition of assets of the 
issuer; 
‘‘(C) ancillary assistance, advice, or con-
sulting services unrelated to any specific credit 
rating issuance; and 
‘‘(D) such further activities or services as 
the Commission may determine as necessary or 
appropriate in the public interest or for the pro-
tection of investors. 
‘‘(2) EXEMPTION
AUTHORITY.—The Commis-
sion may, on a case by case basis, exempt any per-
son, issuer, underwriter, placement agent, or nation-
ally recognized statistical rating organization from 
the prohibition in subsection (t), to the extent that 
such exemption is necessary or appropriate in the 
public interest and is consistent with the protection 
of investors, and subject to review by the Commis-
sion.’’. 
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SEC. 3. STANDARDS FOR PRIVATE ACTIONS. 
(a) IN GENERAL.—Section 21D(b)(2) of the Securi-
ties 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 recog-
nized 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 recognized statistical rating organization 
knowingly or recklessly violated the securities laws.’’. 
(b) PLEADING STANDARD.—Section 15E(m) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78o–7(m)) 
amended to read as follows: 
‘‘(m) APPLICATION OF ENFORCEMENT PROVISIONS; 
PLEADING STANDARD IN PRIVATE RIGHTS OF ACTION.— 
Statements made by nationally recognized statistical rat-
ing organizations shall not be deemed forward looking 
statements for purposes of section 21E. In any private 
right of action commenced against a nationally recognized 
statistical rating organization under this title, the same 
pleading standards with respect to knowledge and reck-
lessness shall apply to the nationally recognized statistical 
rating organization as would apply to any other person 
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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 
statistical rating agencies on structured products and all 
forms of corporate debt. 
SEC. 5. 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. 6. FEDERAL AGENCY REVIEW OF RELIANCE ON RAT-
INGS. 
(a) REVIEW.—Not later than 1 year after the date 
of the enactment of this Act, each Federal agency and de-
partment shall, to the extent applicable, review— 
(1) any regulation issued by such agency or de-
partment that requires the use of an assessment of 
the creditworthiness of a security or money market 
instrument; and 
(2) its policies and practices with regard to 
such ratings, 
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to determine if another measure of creditworthiness is ap-
propriate in order to reduce the reliance of such agency 
on such ratings, to the extent permitted by law. 
(b) REPORT.—Upon conclusion of the review required 
under subsection (a), each Federal agency and department 
shall submit a report to the Congress containing a descrip-
tion of— 
(1) any modification of any regulation such 
agency or department made following the review re-
quired by subsection (a); and 
(2) each regulation issued by such agency or 
department that requires the use of an assessment 
of the creditworthiness of a security or money mar-
ket instrument that such agency or department did 
not modify pursuant to subsection (a), accompanied 
by an explanation of why such modification could 
not be made. 
SEC. 7. STUDIES AND REPORTS. 
(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; 
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(B) the appropriateness of relying on rat-
ings for use in Federal, State, and local securi-
ties and banking regulations, including for de-
termining capital requirements; 
(C) the effect of liability in private actions 
arising under the Securities Exchange Act of 
1934; and 
(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 
permit or facilitate the use of such alternative 
means of compensation. 
(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 find-
ings under the study required by subsection (a). 
(b) SEC STUDY.—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 seeking 
a credit rating. Not later than 1 year after the date of 
enactment of this Act, the Securities and Exchange Com-
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mission shall transmit to Congress a report containing the 
findings of the study. 
Æ 
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