I 
111TH CONGRESS 
1ST SESSION H. R. 3214 
To provide for credit rating reforms, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
JULY 14, 2009 
Mr. ROONEY introduced the following bill; which was referred to the 
Committee on Financial Services 
A BILL 
To provide for credit rating reforms, 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 Act may be cited as the ‘‘Rating Accountability 
and Transparency Enhancement Act of 2009’’ or the 
‘‘RATE Act’’. 
SEC. 2. FINDINGS. 
Congress finds that— 
(1) because of the systemic importance of credit 
ratings and the reliance placed on them by indi-
vidual and institutional investors and financial regu-
lators, the activities and performances of credit rat-
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ing agencies, including nationally recognized statis-
tical rating organizations, are the subject of national 
public interest, as they are central to capital forma-
tion, investor confidence, and the efficient perform-
ance of the United States economy; 
(2) credit rating agencies, including nationally 
recognized statistical rating organizations, play a 
critical ‘‘gatekeeper’’ role that is functionally similar 
to that of securities analysts, who evaluate the qual-
ity of securities, and auditors, who review the finan-
cial statements of firms, and such role justifies a 
similar level of public oversight and accountability; 
(3) because credit rating agencies perform eval-
uative and analytical services on behalf of clients, 
their activities are fundamentally commercial in 
character and should be subject to the same stand-
ards of liability and oversight as apply to auditors 
and securities analysts; 
(4) in certain of their roles, particularly in ad-
vising arrangers of structured financial products on 
potential ratings of such products, credit rating 
agencies face conflicts of interest that need to be 
carefully monitored and that therefore should be ad-
dressed explicitly in legislation in order to give clear 
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authority to the Securities and Exchange Commis-
sion; 
(5) in the recent credit crisis, the ratings of 
structured financial products have proven to be inac-
curate, and have contributed to the mismanagement 
of risks by financial institutions and investors, which 
impacts the health of the economy in the United 
States and around the world; and 
(6) credit rating agencies should determine 
their ratings independently, without regulatory ap-
proval of methodologies, in order to avoid overreli-
ance on ratings and to ensure that the rating agen-
cies, rather than the Securities and Exchange Com-
mission, are accountable for such methodologies, ex-
cept that regulators should have strong authority to 
ensure that all other aspects of rating agency activi-
ties are designed to ensure the highest quality rat-
ings and accountability for those creating them. 
SEC. 3. 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 (c)— 
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(A) in the second sentence of paragraph 
(2), by inserting ‘‘including the requirements of 
this section,’’ after ‘‘Notwithstanding any other 
provision of law,’’; and 
(B) by adding at the end the following: 
‘‘(3) REVIEW OF INTERNAL CONTROLS FOR DE-
TERMINING CREDIT RATINGS.— 
‘‘(A) IN GENERAL.—Credit ratings by, and 
the policies, procedures, and methodologies em-
ployed by, each nationally recognized statistical 
rating organization shall be reviewed by the 
Commission to ensure that— 
‘‘(i) the nationally recognized statis-
tical rating organization has established 
and documented a system of internal con-
trols for determining credit ratings, taking 
into consideration such factors as the Com-
mission may prescribe by rule; 
‘‘(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 
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its ratings, methodologies, and procedures 
are consistent with such system. 
‘‘(B) SCOPE OF REVIEWS.—The Commis-
sion shall conduct the reviews required by this 
paragraph— 
‘‘(i) for all types of credit ratings; and 
‘‘(ii) for new credit ratings, in a time-
ly manner. 
‘‘(C) MANNER
AND
FREQUENCY.—The 
Commission shall conduct reviews required by 
this paragraph in a manner and with a fre-
quency to be determined by the Commission. 
‘‘(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 this subsection;’’; 
(2) in subsection (d)— 
(A) by inserting ‘‘fine,’’ after ‘‘censure,’’ 
each place that term appears; 
(B) in the subsection heading, by inserting 
‘‘FINE,’’ after ‘‘CENSURE,’’; 
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(C) in paragraph (4), by striking ‘‘or’’ at 
the end; 
(D) in paragraph (5), by striking the pe-
riod at the end and inserting ‘‘; or’’; and 
(E) by adding at the end the following: 
‘‘(6) fails to conduct sufficient surveillance to 
ensure that credit ratings remain current, accurate, 
and reliable.’’; 
(3) by amending subsection (h) to read as fol-
lows: 
‘‘(h) MANAGEMENT OF CONFLICTS OF INTEREST.— 
‘‘(1) 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 such 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. 
‘‘(2) 
GOVERNANCE
IMPROVEMENTS
AT 
NRSRO.—Each nationally recognized statistical rat-
ing organization shall establish governance proce-
dures to manage conflicts of interest, consistent with 
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the protection of users of credit ratings, in accord-
ance with rules issued by the Commission pursuant 
to paragraph (3). 
‘‘(3) COMMISSION AUTHORITY.—The Commis-
sion shall issue final rules to prohibit, or require the 
management and disclosure of, any conflicts of inter-
est relating to the issuance of credit ratings by a na-
tionally recognized statistical rating organization, in-
cluding— 
‘‘(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, and the obligor, or any affiliate of 
the obligor; 
‘‘(C) disclosure of business relationships, 
ownership interests, affiliations of nationally 
recognized statistical rating organization board 
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members with obligors, or any other financial or 
personal interests between a nationally recog-
nized statistical rating organization, or any per-
son associated with such nationally recognized 
statistical rating organization, and the obligor, 
or any affiliate of the obligor; 
‘‘(D) disclosure of any affiliation of a na-
tionally recognized statistical rating organiza-
tion, or any person associated with such nation-
ally recognized statistical rating organization, 
with any person that underwrites securities, en-
tities, or other instruments that are the subject 
of a credit rating; and 
‘‘(E) any other potential conflict of inter-
est, as the Commission deems necessary or ap-
propriate in the public interest or for the pro-
tection of users of credit ratings. 
‘‘(4) COMMISSION RULES.—The rules issued by 
the Commission under paragraph (3) shall include— 
‘‘(A) the establishment of a system of pay-
ment for each nationally recognized statistical 
rating organization that requires that payments 
are structured to ensure that the nationally rec-
ognized statistical rating organization conducts 
accurate and reliable surveillance of ratings 
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over time, and that incentives for accurate rat-
ings are in place; 
‘‘(B) a prohibition on providing credit rat-
ings for structured products that it advised on, 
in the form of assistance, advice, consultation, 
or other aid that preceded its retention by any 
issuer, underwriter, or placement agent to pro-
vide a rating for the securities in question (or 
any assistance provided after such point for 
which additional compensation is paid directly 
or indirectly); 
‘‘(C) requirements that a nationally recog-
nized statistical rating organization disclose any 
relationship or affiliation described in subpara-
graphs (C) and (D) of paragraph (3); 
‘‘(D) a requirement that, in each credit 
rating report issued to the public, a nationally 
recognized statistical rating organization dis-
close the type and number of ratings it has pro-
vided to the obligor or affiliates of the obligor, 
including the fees it has billed for the credit 
rating and aggregate amount of fees in the pre-
ceding 2 years that it has billed to the par-
ticular obligor or its affiliates; and 
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‘‘(E) any other requirement as the Com-
mission deems necessary or appropriate in the 
public interest, or for the protection of users of 
credit ratings. 
‘‘(5) LOOK-BACK REQUIREMENT.— 
‘‘(A) REVIEW BY NRSRO.—In any case in 
which an employee of an obligor or an issuer or 
underwriter of a security or money market in-
strument was employed by a nationally recog-
nized statistical rating organization and partici-
pated in any capacity in determining credit rat-
ings for the obligor or the securities or money 
market instruments of the issuer during the 1- 
year period preceding the date of the issuance 
of the credit rating, the nationally recognized 
statistical rating organization shall— 
‘‘(i) conduct a review to determine 
whether any conflicts of interest of such 
employee 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.—The Com-
mission shall conduct periodic reviews of the 
look-back policies described in subparagraph 
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(A) and the implementation of such policies at 
each nationally recognized statistical rating or-
ganization to ensure they are appropriately de-
signed and implemented to most effectively 
eliminate conflicts of interest in this area. 
‘‘(6) PERIODIC REVIEWS.— 
‘‘(A) REVIEWS REQUIRED.—The Commis-
sion shall conduct periodic reviews of govern-
ance and conflict of interest procedures estab-
lished under this subsection to determine the ef-
fectiveness of such procedures. 
‘‘(B) TIMING OF REVIEWS.—The Commis-
sion shall review and make available to the pub-
lic the code of ethics and conflict of interest 
policy of each nationally recognized statistical 
rating organization— 
‘‘(i) not less frequently than once 
every 3 years; and 
‘‘(ii) whenever such policies are mate-
rially modified or amended.’’; 
(4) by amending subsection (j) to read as fol-
lows: 
‘‘(j) DESIGNATION OF COMPLIANCE OFFICER.— 
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‘‘(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 (or the equivalent thereof) or to the senior 
officer of the nationally recognized statistical 
rating organization; and 
‘‘(B) shall— 
‘‘(i) review compliance with policies 
and procedures to manage conflicts of in-
terest and assess the risk that such compli-
ance (or lack of such compliance) may 
compromise the integrity of the credit rat-
ing process; 
‘‘(ii) review compliance with internal 
controls with respect to the procedures and 
methodologies for determining credit rat-
ings, including quantitative and qualitative 
models used in the rating process, and as-
sess the risk that such compliance with the 
internal controls (or lack of such compli-
ance) may compromise the integrity and 
quality of the credit rating process; and 
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‘‘(iii) in consultation with the board of 
the nationally recognized statistical rating 
organization, a body performing a function 
similar to that of a board, or the senior of-
ficer of the nationally recognized statistical 
rating organization, resolve any conflicts of 
interest that may arise; 
‘‘(C) be responsible for administering the 
policies and procedures required to be estab-
lished pursuant to this section; and 
‘‘(D) ensure compliance with securities 
laws and the rules and regulations issued there-
under, including rules promulgated by the Com-
mission pursuant to this section. 
‘‘(3) LIMITATIONS.—No compliance officer des-
ignated under paragraph (1), may, while serving in 
such capacity— 
‘‘(A) perform credit ratings; 
‘‘(B) participate in the development of rat-
ing methodologies or models; 
‘‘(C) perform marketing or sales functions; 
or 
‘‘(D) participate in establishing compensa-
tion levels, other than for employees working 
for such officer. 
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‘‘(4) OTHER DUTIES.—The compliance officer 
shall establish procedures for the receipt, retention, 
and treatment of— 
‘‘(A) complaints regarding credit ratings, 
models, methodologies, and compliance with the 
securities laws and the policies and procedures 
required under this section; and 
‘‘(B) confidential, anonymous complaints 
by employees or users of credit ratings. 
‘‘(5) 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 its policies and procedures, including its 
code of ethics and conflict of interest policies, in ac-
cordance with rules prescribed by the Commission. 
Such compliance report shall accompany the finan-
cial reports of the nationally recognized statistical 
rating organization that are required to be furnished 
to the Commission pursuant to this section.’’; 
(5) 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: 
‘‘(2) EXCEPTION.—The Commission may treat 
as confidential any item furnished to the Commis-
sion under paragraph (1), the publication of which 
the Commission determines may have a harmful ef-
fect on a nationally recognized statistical rating or-
ganization.’’; 
(6) by amending subsection (p) to read as fol-
lows: 
‘‘(p) NRSRO REGULATION.— 
‘‘(1) IN GENERAL.—The Commission shall es-
tablish an office that administers the rules of the 
Commission with respect to the practices of nation-
ally recognized statistical rating organizations in de-
termining ratings, for the protection of users of 
credit ratings and in the public interest, and to en-
sure that credit ratings issued by such registrants 
are accurate and not unduly influenced by conflicts 
of interest. 
‘‘(2) STAFFING.—The office of the Commission 
established under this subsection shall be staffed 
sufficiently to carry out fully the requirements of 
this section. 
‘‘(3) RULEMAKING AUTHORITY.—The Commis-
sion shall— 
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‘‘(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. 
‘‘(q) TRANSPARENCY OF RATINGS PERFORMANCE.— 
‘‘(1) RULEMAKING
REQUIRED.—The Commis-
sion shall, by rule, require that each nationally rec-
ognized statistical rating organization shall disclose 
publicly information on initial ratings and subse-
quent changes to such ratings for the purpose of 
providing a gauge of the accuracy of ratings and al-
lowing users of credit ratings to compare perform-
ance of ratings by different nationally 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 
users can compare rating performance across 
rating organizations; 
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