I 
109TH CONGRESS 
1ST SESSION H. R. 2990 
To improve ratings quality by fostering competition, transparency, and 
accountability in the credit rating agency industry. 
IN THE HOUSE OF REPRESENTATIVES 
JUNE 20, 2005 
Mr. FITZPATRICK of Pennsylvania introduced the following bill; which was 
referred to the Committee on Financial Services 
A BILL 
To improve ratings quality by fostering competition, trans-
parency, and accountability in the credit rating agency 
industry. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE; REFERENCES. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Credit Rating Agency Duopoly Relief Act of 2005’’. 
(b) REFERENCES.—Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal 
is expressed in terms of an amendment to, or repeal of, 
a section or other provision, the reference shall be consid-
ered to be made to a section or other provision of the Secu-
rities Exchange Act of 1934 (15 U.S.C. 78a et seq.). 
SEC. 2. FINDINGS. 
Upon the basis of facts disclosed by the record and 
report of the Securities and Exchange Commission made 
pursuant to section 702 of the Sarbanes-Oxley Act of 
2002 (116 Stat. 797), hearings before the House Com-
mittee on Financial Services during the 108th and 109th 
Congresses, comment letters to the concept releases and 
proposed rules of the Securities and Exchange Commis-
sion, and facts otherwise disclosed and ascertained, the 
Congress finds that— 
(1) credit rating agencies are of national con-
cern, in that, among other things— 
(A) their ratings, publications, writings, 
analyses, and reports are furnished and distrib-
uted, and their contracts, subscription agree-
ments, and other arrangements with clients are 
negotiated and performed, by the use of the 
mails and means and instrumentalities of inter-
state commerce; 
(B) their ratings, publications, writings, 
analyses, and reports customarily relate to the 
purchase and sale of securities traded on securi-
ties exchanges and in interstate over-the-
counter markets, securities issued by companies 
engaged in business in interstate commerce, 
and securities issued by national banks and 
member banks of the Federal Reserve System; 
(C) the foregoing transactions occur in 
such volume as substantially to affect interstate 
commerce, and securities markets, the national 
banking system, and the national economy; and 
(D) their regulation serves the compelling 
interest of investor protection; and 
(2) the Securities and Exchange Commission— 
(A) has, through its designation of certain 
credit rating agencies as nationally recognized 
statistical rating organizations, created an arti-
ficial barrier to entry for new participants; and 
(B) will, in its latest proposed rule defining 
nationally recognized statistical rating organiza-
tions, codify and strengthen this barrier. 
SEC. 3. DEFINITIONS. 
Section 3(a) (15 U.S.C. 78c(a)) is amended by add-
ing at the end the following new paragraphs: 
‘‘(60) STATISTICAL RATING ORGANIZATION.— 
‘‘(A) DEFINITION.—The term ‘statistical 
rating organization’ means an entity—
‘‘(i) the primary business of which, for 
at least the most recent three consecutive 
years, has been the issuance of publicly 
available ratings; and 
‘‘(ii) that employs either a quan-
titative or qualitative model, or both, to de-
termine its publicly available ratings. 
‘‘(B) PUBLICLY
AVAILABLE
RATINGS.— 
For purposes of subparagraph (A), the term 
‘publicly available ratings’ means ratings on 
public companies or specific debt securities or 
both disseminated on the Internet for free or a 
fee. 
‘‘(61) NATIONALLY
REGISTERED
STATISTICAL 
RATING ORGANIZATION; NRSRO.—The term ‘nation-
ally registered statistical rating organization’ or 
‘NRSRO’ means a statistical rating organization 
registered or required to register pursuant to section 
15E of this title.’’. 
SEC. 4. REGISTRATION OF STATISTICAL RATING ORGANI-
ZATIONS. 
(a) AMENDMENT.—The Securities Exchange Act of 
1934 is amended by inserting after section 15D (15 
U.S.C. 78o–6) the following new section:
‘‘SEC. 15E. REGISTRATION OF STATISTICAL RATING ORGA-
NIZATIONS. 
‘‘(a) REGISTRATION REQUIRED.—Except as provided 
in subsection (b), it shall be unlawful for any statistical 
rating organization, unless registered under this section, 
to make use of the mails or any means or instrumentality 
of interstate commerce in connection with its business as 
a statistical rating organization. 
‘‘(b) EXCEPTIONS.—The Commission, by rule or 
order, as it deems consistent with the public interest and 
the protection of investors, may conditionally or uncondi-
tionally exempt from subsection (a) of this section any sta-
tistical rating organization specified in such rule or order. 
‘‘(c) REGISTRATION PROCEDURES.— 
‘‘(1) FILING OF APPLICATION FORM.—A statis-
tical rating organization may be registered by filing 
with the Commission an application for registration 
in such form and containing such of the following 
and any other information and documents con-
cerning such statistical rating organization and any 
persons associated with such statistical rating orga-
nization as the Commission, by rule, may prescribe 
as necessary or appropriate in the public interest or 
for the protection of investors: 
‘‘(A) conflicts of interest faced by such sta-
tistical rating organization and the management
of those conflicts by such statistical rating orga-
nization; 
‘‘(B) the procedures and methodologies 
such statistical rating organization uses in de-
termining ratings; 
‘‘(C) ratings performance measurement 
statistics over short-term and long-term periods 
of such statistical rating organization; and 
‘‘(D) procedures put in place by such sta-
tistical rating organization to prevent the mis-
use of non-public information. 
‘‘(2) REVIEW OF APPLICATION.— 
‘‘(A) INITIAL
DETERMINATION.—Within 
90 days of the date of the filing of such applica-
tion (or within such longer period as to which 
the applicant consents) the Commission shall— 
‘‘(i) by order grant such registration; 
or 
‘‘(ii) institute proceedings to deter-
mine whether registration should be de-
nied. 
‘‘(B) CONDUCT
OF
PROCEEDINGS.—Such 
proceedings shall include notice of the grounds 
for denial under consideration and opportunity 
for hearing and shall be concluded within 90
days of the date of the filing of the application 
for registration. At the conclusion of such pro-
ceedings the Commission, by order, shall grant 
or deny such registration. The Commission may 
extend the time for conclusion of such pro-
ceedings for up to 90 days if it finds good cause 
for such extension and publishes its reasons for 
so finding or for such longer period as to which 
the applicant consents. 
‘‘(C) GROUNDS FOR DECISION.—The Com-
mission shall grant such registration if the 
Commission finds that the requirements of this 
section are satisfied. The Commission shall 
deny such registration if it does not make such 
a finding or if it finds that if the applicant were 
so registered, its registration would be subject 
to suspension or revocation under subsection 
(d) of this section. 
‘‘(d) CENSURE, DENIAL, OR SUSPENSION OF REG-
ISTRATION; NOTICE AND HEARING.—The Commission, by 
order, shall censure, place limitations on the activities, 
functions, or operations of, suspend for a period not ex-
ceeding 12 months, or revoke the registration of any sta-
tistical rating organization if the Commission finds, on the 
record after notice and opportunity for hearing, that such
censure, placing of limitations, suspension, or revocation 
is in the public interest and that such statistical rating 
organization, or any person associated with such statis-
tical rating organization, whether prior to or subsequent 
to becoming so associated— 
‘‘(1) has committed or omitted any act, or is 
subject to an order or finding, enumerated in sub-
paragraph (A), (D), (E), (H), or (G) of paragraph 
(4) of section 15(b), has been convicted of any of-
fense specified in subparagraph (B) of such para-
graph (4) within 10 years of the commencement of 
the proceedings under this subsection, or is enjoined 
from any action, conduct, or practice specified in 
subparagraph (C) of such paragraph (4); 
‘‘(2) has been convicted during the 10-year pe-
riod preceding the date of filing of any application 
for registration, or at any time thereafter, of— 
‘‘(A) any crime that is punishable by im-
prisonment for 1 or more years, and that is not 
described in section 15(b)(4)(B); or 
‘‘(B) a substantially equivalent crime by a 
foreign court of competent jurisdiction; or 
‘‘(3) is subject to any order of the Commission 
barring or suspending the right of the person to be 
associated with a statistical rating organization.
‘‘(e) WITHDRAWAL OF ADVISERS REGISTRATION.— 
Each statistical rating organization registered under sec-
tion 203 of the Investment Advisers Act of 1940 shall 
withdraw from registration under such section by filing 
a written notice of withdrawal with the Commission pursu-
ant to section 203(h) of the Investment Advisers Act, upon 
the granting of registration of such organization by the 
Commission pursuant to subsection (c) of this section. 
‘‘(f) REPRESENTATIONS.— 
‘‘(1) REPRESENTATIONS OF SPONSORSHIP BY 
UNITED STATES OR AGENCY THEREOF.—It shall be 
unlawful for any statistical rating organization reg-
istered under this section to represent or imply in 
any manner whatsoever that such statistical rating 
organization has been sponsored, recommended, or 
approved, or that such statistical rating organiza-
tion’s abilities or qualifications have in any respect 
been passed upon, by the United States or any agen-
cy or any officer thereof. 
‘‘(2) STATEMENT OF REGISTRATION UNDER SE-
CURITIES EXCHANGE ACT OF 1934 PROVISIONS.—No 
provision of paragraph (1) shall be construed to pro-
hibit a statement that a statistical rating organiza-
tion is a nationally registered statistical rating orga-
nization under the Securities Exchange Act of 1934,
if such statement is true in fact and if the effect of 
such registration is not misrepresented. 
‘‘(g) PREVENTION OF MISUSE OF NONPUBLIC IN-
FORMATION.—Each statistical rating organization subject 
to this section shall establish, maintain, and enforce writ-
ten policies and procedures reasonably designed, taking 
into consideration the nature of such statistical rating or-
ganization’s business, to prevent the misuse in violation 
of this title, or the rules or regulations thereunder, of ma-
terial, nonpublic information by such statistical rating or-
ganization or any person associated with such statistical 
rating organization. The Commission, as it deems nec-
essary or appropriate in the public interest or for the pro-
tection of investors, shall adopt rules or regulations to re-
quire specific policies or procedures reasonably designed 
to prevent misuse in violation of this title (or the rules 
or regulations thereunder) of material, nonpublic informa-
tion. 
‘‘(h) MANAGEMENT OF CONFLICTS OF INTEREST.— 
Each statistical rating organization subject to this section 
shall establish, maintain, and enforce written policies and 
procedures reasonably designed, taking into consideration 
the nature of the business of such statistical rating organi-
zation and affiliated persons and affiliated companies of 
such statistical rating organization, to address and man-
age the conflicts of interest that can arise from such busi-
ness. The Commission, as it deems necessary or appro-
priate in the public interest or for the protection of inves-
tors, shall adopt rules or regulations to require specific 
policies or procedures reasonably designed to address and 
manage such conflicts of interest. 
‘‘(i) PROHIBITION
ON ANTI-COMPETITIVE PRAC-
TICES.—The Commission shall adopt rules or regulations 
to prohibit specific anti-competitive practices common to 
the statistical rating organization industry. 
‘‘(j) ELIMINATION
OF COMMISSION DESIGNATION 
PROCESS
FOR NATIONALLY RECOGNIZED STATISTICAL 
RATING ORGANIZATIONS.— 
‘‘(1) CESSATION OF DESIGNATION.—Within 30 
days after the enactment of the Credit Rating Agen-
cy Duopoly Relief Act of 2005, the Commission shall 
cease to designate persons and companies as nation-
ally recognized statistical rating organizations, as 
that term is used under rule 15c3–1 of the Commis-
sion’s rules (17 C.F.R. 240.15c3–1). 
‘‘(2) PROHIBITION ON RELIANCE ON NO-ACTION 
RELIEF.—The no-action relief that the Commission 
has granted with respect to the designation of na-
tionally recognized statistical rating organizations, 
as that term is used under rule 15c3–1 of the Com-
mission’s rules (17 C.F.R. 240.15c3–1), shall be 
void and of no force or effect. 
‘‘(3) NOTICE TO OTHER AGENCIES.—Within 30 
days after the date of enactment of the Credit Rat-
ing Agency Duopoly Relief Act of 2005, the Com-
mission shall give notice to the Federal agencies 
which employ the term ‘nationally recognized statis-
tical rating organization’ (as that term is used under 
rule 15c3–1 of the Commission’s rules (17 C.F.R. 
240.15c3–1)) in their rules and regulations regard-
ing the actions undertaken pursuant to paragraphs 
(1) and (2).’’. 
(b) CONFORMING
AMENDMENTS
TO
THE
1934 
ACT.— 
(1) Section 3(a)(41) of the Securities Exchange 
Act of 1934 (15 U.S.C. 78c(a)(41)) is amended by 
striking ‘‘recognized’’ and inserting ‘‘registered’’. 
(2) Section 3(a)(53)(A) of such Act is amended 
by striking ‘‘recognized’’ and inserting ‘‘registered’’. 
(3) Section 15(b)(4)(B)(ii) of such Act (15 
U.S.C. 78o(b)(4)(B)(ii)) is amended by inserting 
‘‘statistical rating organization,’’ after ‘‘transfer 
agent,’’.
(4) Section 15(b)(4)(C) of such Act is amended 
by inserting ‘‘statistical rating organization,’’ after 
‘‘transfer agent,’’. 
(5) Section 21B(a) of such Act (15 U.S.C. 78u- 
2(a)) is amended by inserting ‘‘15E,’’ after ‘‘15C,’’. 
(c) OTHER CONFORMING AMENDMENTS.— 
(1) Section 5136A(a)(3)(A)(i) of the Revised 
Statutes 
of 
the 
United 
States 
(12 
U.S.C. 
24a(a)(3)(A)(i)) is amended by striking ‘‘recog-
nized’’ and inserting ‘‘registered’’. 
(2) Section 28(d)(4)(A) of the Federal Deposit 
Insurance Act (12 U.S.C. 1831e(d)(4)(A)) is amend-
ed by striking ‘‘recognized’’ and inserting ‘‘reg-
istered’’. 
(3) Section 1319 of the Housing and Commu-
nity Development Act of 1992 (12 U.S.C. 4519) is 
amended by striking ‘‘effectively’’ and all that fol-
lows through ‘‘broker-dealers’’ and inserting ‘‘that is 
a nationally registered statistical rating organiza-
tion, as such term is defined in section 3(a) of the 
Securities Exchange Act of 1934’’. 
(4) Section 6(a)(5)(A)(iv)(I) of the Investment 
Company 
Act 
of 
1940 
(15 
U.S.C. 
80a– 
6(a)(5)(A)(iv)(I)) is amended by striking ‘‘recog-
nized’’ and inserting ‘‘registered’’.