1033 
(15 U.S.C. 80b-1 et seq.) and the Commodity Exchange 
Act (7 U.S.C. 1 et seq.).’’. 
SEC. 5009. GAO STUDY. 
(a) STUDY REQUIRED.—The Comptroller General of 
the United States shall carry out a study to assess the 
annual costs on industry members and their investors due 
to the registration requirements and ongoing reporting re-
quirements under this subtitle and the amendments made 
by this subtitle. 
(b) REPORT TO THE CONGRESS.—Not later than the 
end of the 2-year period beginning on the date of the en-
actment of this title, the Comptroller General of the 
United States shall submit a report to the Congress con-
taining the findings and determinations made by the 
Comptroller General in carrying out the study required 
under subsection (a). 
SEC. 5010. EFFECTIVE DATE; TRANSITION PERIOD. 
(a) EFFECTIVE
DATE.—This subtitle, and the 
amendments made by this subtitle, shall take effect with 
respect to investment advisers after the end of the 1-year 
period beginning on the date of the enactment of this title. 
(b) TRANSITION PERIOD.—The Securities and Ex-
change Commission shall prescribe rules and regulations 
to permit an investment adviser who will be required to 
register with the Securities and Exchange Commission by 
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reason of this subtitle with the option of registering with 
the Securities and Exchange Commission before the date 
described under subsection (a). 
SEC. 5011. QUALIFIED CLIENT STANDARD. 
Section 205(e) of the Investment Advisers Act of 
1940 (15 U.S.C. 80b-5(e)) is amended by adding at the 
end the following: ‘‘With respect to any factor used by the 
Commission in making a determination under this sub-
section, if the Commission uses a dollar amount test in 
connection with such factor, such as a net asset threshold, 
the Commission shall, not later than one year after the 
date of the enactment of the Private Fund Investment Ad-
visers Registration Act of 2009, and every 5 years there-
after, adjust for the effects of inflation on such test. Any 
such adjustment that is not a multiple of $1,000 shall be 
rounded to the nearest multiple of $1,000.’’. 
Subtitle 
B—Accountability 
and 
Transparency in Rating Agen-
cies Act 
SEC. 6001. SHORT TITLE. 
This subtitle may be cited as the ‘‘Accountability and 
Transparency in Rating Agencies Act of 2009’’. 
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SEC. 6002. ENHANCED REGULATION OF NATIONALLY REC-
OGNIZED 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’’; 
(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 
examine credit ratings issued by, and the poli-
cies, procedures, and methodologies employed 
by, each nationally recognized statistical rating 
organization to review whether— 
‘‘(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 credit ratings, methodologies, and pro-
cedures 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). 
‘‘(5) DISCLOSURES WITH RESPECT TO STRUC-
TURED SECURITIES.— 
‘‘(A) REGULATIONS REQUIRED.—The rules 
and regulations prescribed by the Commission 
pursuant to this section with respect to nation-
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1038 
ally recognized statistical rating organizations 
shall, with respect to the procedures and meth-
odologies by which any nationally recognized 
statistical rating organization determines credit 
ratings for structured securities— 
‘‘(i) specify the information required 
to be disclosed to such rating organizations 
by the sponsor, issuers, and underwriters 
of such structured securities on the collat-
eral underlying such structured securities; 
and 
‘‘(ii) establish and implement proce-
dures to collect and disclose information 
about the processes used by such sponsor, 
issuers, and underwriters to assess the ac-
curacy and integrity of their data and 
fraud detection. 
‘‘(B) DEFINITION.—For purposes of this 
paragraph, the Commission shall, by rule or 
regulation, define the term ‘structured securi-
ties’ as appropriate in the public interest and 
for the protection of investors. 
‘‘(6) HISTORICAL
DEFAULT
RATE
DISCLO-
SURES.—The rules and regulations prescribed by the 
Commission pursuant to this section with respect to 
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nationally recognized statistical rating organizations 
shall require each nationally recognized statistical 
rating organization to establish and maintain, on a 
publicly accessible Internet site, a facility to disclose, 
in a central database, the historical default rates of 
all classes of financial products rated by such orga-
nization.’’ 
(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 
the following: ‘‘shall censure, fine in accordance 
with section 21B(a), place limitations on the ac-
tivities, functions, or operations of, suspend for 
a period not exceeding 12 months, or revoke the 
registration of any nationally recognized statis-
tical rating organization (or with respect to any 
person who is associated, who is seeking to be-
come associated, or, at the time of the alleged 
misconduct, who was associated or was seeking 
to become associated with a nationally recog-
nized statistical rating organization, the Com-
mission, by order, shall censure, fine in accord-
ance with section 21B(a), place limitations on 
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the activities or functions of such person, sus-
pend for a period not exceeding 12 months, or 
bar such person from being associated with a 
nationally recognized statistical rating organiza-
tion), if the Commission finds, on the record 
after notice and opportunity for hearing, that 
such censure, fine, placing of limitations, bar, 
suspension, or revocation’’; 
(C) in paragraph (2), by striking ‘‘fur-
nished to’’ and inserting ‘‘filed with’’; 
(D) in paragraph (4)— 
(i) by striking ‘‘furnish’’ and inserting 
‘‘file’’; 
(ii) by striking ‘‘or’’ at the end; 
(E) in paragraph (5), by striking the pe-
riod at the end and inserting a semicolon; 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, the rules or regulations thereunder, or any 
rules of the Municipal Securities Rulemaking Board 
if such other person is subject to his or her super-
vision, except that no person shall be deemed to have 
failed reasonably to supervise any other person 
under this paragraph, if— 
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‘‘(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 
‘‘(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.— 
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‘‘(A) IN GENERAL.—Each nationally recog-
nized statistical rating organization or its ulti-
mate holding company shall have a board of di-
rectors. 
‘‘(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 
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-
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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; 
‘‘(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-
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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-
ally recognized statistical rating organization, includ-
ing rules regarding— 
‘‘(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 busi-
ness relationships, ownership interests, and af-
filiations of nationally recognized statistical rat-
ing organization board members with obligors, 
or any other financial or personal interests be-
tween a nationally recognized statistical rating 
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organization, or any person associated with 
such nationally recognized statistical rating or-
ganization, and the obligor, or any affiliate of 
the obligor; 
‘‘(C) conflicts of interest relating to any af-
filiation of a nationally recognized statistical 
rating organization, or any person associated 
with such nationally recognized statistical rat-
ing organization, with any person who under-
writes securities, money market instruments, or 
other instruments that are the subject of a 
credit rating; 
‘‘(D) 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 
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year for providing services and products 
other than credit rating services to each 
person who paid for a credit rating; and 
‘‘(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; 
‘‘(E) the establishment of a system of pay-
ment for credit ratings issued by each nation-
ally recognized statistical rating organization 
that requires that payments are structured in a 
manner designed to ensure that the nationally 
recognized statistical rating organization con-
ducts accurate and reliable surveillance of credit 
ratings over time, as applicable, and that incen-
tives for reliable credit ratings are in place; 
‘‘(F) 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 
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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 
earned by the nationally recognized statistical 
rating organization in the preceding 2 fiscal 
years attributable to the person being rated and 
its affiliates; and 
‘‘(G) 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-
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tion and participated in any capacity in deter-
mining credit ratings for the person or the se-
curities or money market instruments during 
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 
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conflict of interest policy of each nationally 
recognized statistical rating organization— 
‘‘(I) not less frequently than an-
nually; and 
‘‘(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 person associated with such orga-
nization within the previous 5 years obtains em-
ployment with any obligor, issuer, underwriter, 
or sponsor of a security or money market in-
strument for which the organization issued a 
credit rating during the 12-month period prior 
to such employment, if such employee— 
‘‘(i) was a senior officer of such orga-
nization; 
‘‘(ii) participated in any capacity in 
determining credit ratings for such obligor, 
issuer, underwriter, or sponsor; or 
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