IB 
Union Calendar No. 306 
109TH CONGRESS 
2D SESSION 
H. R. 2990 
[Report No. 109–546] 
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 
JULY 7, 2006 
Additional sponsors: Mr. BAKER, Mr. FEENEY, Mr. OXLEY, Mr. AKIN, Mr. 
GARRETT of New Jersey, Mr. DAVIS of Kentucky, Mr. GERLACH, Mr. 
ENGLISH of Pennsylvania, Mr. FOLEY, Mr. BARRETT of South Carolina, 
Ms. HART, Mr. GILLMOR, Mr. CASTLE, Mr. MCHENRY, and Mr. BLUNT 
JULY 7, 2006 
Reported with an amendment, committed to the Committee of the Whole 
House on the State of the Union, and ordered to be printed 
[Strike out all after the enacting clause and insert the part printed in italic] 
[For text of introduced bill, see copy of bill as introduced on June 20, 2005] 
A BILL 
To improve ratings quality by fostering competition, trans-
parency, and accountability in the credit rating agency 
industry. 
VerDate Aug 31 2005 
22:32 Jul 07, 2006
Jkt 049200
PO 00000
Frm 00001
Fmt 6652
Sfmt 6652
E:\BILLS\H2990.RH
H2990
sroberts on PROD1PC70 with BILLS
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 2006’’. 
(b) REFERENCES.—Except as otherwise expressly pro-
vided, whenever in this Act an amendment or repeal is ex-
pressed in terms of an amendment to, or repeal of, a section 
or other provision, the reference shall be considered to be 
made to a section or other provision of the Securities Ex-
change Act of 1934 (15 U.S.C. 78a et seq.). 
SEC. 2. FINDINGS. 
Upon the basis of facts disclosed by the record and re-
port of the Securities and Exchange Commission made pur-
suant to section 702 of the Sarbanes-Oxley Act of 2002 (116 
Stat. 797), hearings before the House Committee on Finan-
cial Services during the 108th and 109th Congresses, com-
ment letters to the concept releases and proposed rules of 
the Securities and Exchange Commission, and facts other-
wise 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-
VerDate Aug 31 2005 
22:32 Jul 07, 2006
Jkt 049200
PO 00000
Frm 00002
Fmt 6652
Sfmt 6203
E:\BILLS\H2990.RH
H2990
sroberts on PROD1PC70 with BILLS
ments, and other arrangements with clients are 
negotiated and performed, by the use of the mails 
and means and instrumentalities of interstate 
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 securi-
ties 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 com-
merce, and securities markets, the national bank-
ing 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 
VerDate Aug 31 2005 
22:32 Jul 07, 2006
Jkt 049200
PO 00000
Frm 00003
Fmt 6652
Sfmt 6203
E:\BILLS\H2990.RH
H2990
sroberts on PROD1PC70 with BILLS
(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 adding 
at the end the following new paragraphs: 
‘‘(60) CREDIT RATING.—The term ‘credit rating’ 
means an assessment of the creditworthiness of an ob-
ligor as an entity or with respect to specific securities 
or money market instruments. 
‘‘(61) CREDIT RATING AGENCY.—The term ‘credit 
rating agency’ means any person— 
‘‘(A) engaged in the business of issuing 
credit ratings on the Internet or through another 
readily accessible means, for free or for a reason-
able fee; 
‘‘(B) employing either a quantitative or 
qualitative model, or both, to determine credit 
ratings; and 
‘‘(C) receiving fees from either issuers, in-
vestors, or other market participants, or a com-
bination thereof. 
‘‘(62) NATIONALLY
RECOGNIZED
STATISTICAL 
RATING ORGANIZATION OR NRSRO.—The term ‘nation-
VerDate Aug 31 2005 
22:32 Jul 07, 2006
Jkt 049200
PO 00000
Frm 00004
Fmt 6652
Sfmt 6203
E:\BILLS\H2990.RH
H2990
sroberts on PROD1PC70 with BILLS
ally recognized statistical rating organization’ means 
a credit rating agency that— 
‘‘(A) has been in business for at least three 
consecutive years; and 
‘‘(B) is registered under section 15E. 
‘‘(63) PERSON ASSOCIATED WITH A NATIONALLY 
RECOGNIZED STATISTICAL RATING ORGANIZATION.— 
The term ‘person associated with a nationally recog-
nized statistical rating organization’ means any part-
ner, officer, director, or branch manager of such na-
tionally recognized statistical rating organization (or 
any person occupying a similar status or performing 
similar functions), any person directly or indirectly 
controlling, controlled by, or under common control 
with such nationally recognized statistical rating or-
ganization, or any employee of such nationally recog-
nized statistical rating organization.’’. 
SEC. 4. REGISTRATION OF NATIONALLY RECOGNIZED STA-
TISTICAL RATING ORGANIZATIONS. 
(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 NATIONALLY RECOGNIZED 
STATISTICAL RATING ORGANIZATIONS. 
‘‘(a) REGISTRATION PROCEDURES.— 
VerDate Aug 31 2005 
22:32 Jul 07, 2006
Jkt 049200
PO 00000
Frm 00005
Fmt 6652
Sfmt 6203
E:\BILLS\H2990.RH
H2990
sroberts on PROD1PC70 with BILLS
‘‘(1) FILING OF APPLICATION FORM.—A credit 
rating agency that elects to be treated as a nationally 
recognized statistical rating organization for the pur-
poses of Federal statutes, rules, and regulations may 
be registered by filing with the Commission an appli-
cation for registration in such form and containing 
such of the following and any other information and 
documents concerning such organization and any per-
sons associated with such organization as the Com-
mission, by rule, may prescribe as necessary or ap-
propriate in the public interest or for the protection 
of investors: 
‘‘(A) any conflicts of interest relating to the 
issuance of credit ratings by a nationally recog-
nized statistical rating organization; 
‘‘(B) the procedures and methodologies such 
nationally recognized statistical rating organiza-
tion uses in determining credit ratings; 
‘‘(C) credit ratings performance measure-
ment statistics over short-term, mid-term, and 
long-term periods of such nationally recognized 
statistical rating organization; 
‘‘(D) policies or procedures adopted and im-
plemented by such nationally recognized statis-
tical rating organization to prevent the misuse 
VerDate Aug 31 2005 
22:32 Jul 07, 2006
Jkt 049200
PO 00000
Frm 00006
Fmt 6652
Sfmt 6203
E:\BILLS\H2990.RH
H2990
sroberts on PROD1PC70 with BILLS
in violation of this title (or the rules and regula-
tions thereunder) of material, non-public infor-
mation; and 
‘‘(E) the organizational structure of such 
nationally recognized statistical rating organiza-
tion. 
‘‘(2) REVIEW OF APPLICATION.— 
‘‘(A) INITIAL DETERMINATION.—Within 90 
days of the date of the filing of such application 
(or within such longer period as to which the ap-
plicant consents) the Commission shall— 
‘‘(i) by order grant such registration; 
or 
‘‘(ii) institute proceedings to determine 
whether registration should be denied. 
‘‘(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 120 
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 ex-
tend the time for conclusion of such proceedings 
for up to 90 days if it finds good cause for such 
VerDate Aug 31 2005 
22:32 Jul 07, 2006
Jkt 049200
PO 00000
Frm 00007
Fmt 6652
Sfmt 6203
E:\BILLS\H2990.RH
H2990
sroberts on PROD1PC70 with BILLS
extension and publishes its reasons for so finding 
or for such longer period as to which the appli-
cant consents. 
‘‘(C) GROUNDS FOR DECISION.—The Com-
mission shall grant such registration if the Com-
mission finds that the requirements of this sec-
tion are satisfied. The Commission shall deny 
such registration if it does not make such a find-
ing or if it finds that if the applicant were so 
registered, its registration would be subject to 
suspension or revocation under subsection (b). 
‘‘(3) PUBLIC AVAILABILITY OF INFORMATION.— 
Subject to section 24, the Commission, by rule, shall 
require a nationally recognized statistical rating or-
ganization, upon the granting of registration under 
this section, to make the information and documents 
filed with the Commission in its application for reg-
istration, or in any amendment filed under subsection 
(b)(1) or (2), publicly available on the website or 
comparable readily accessible means of such nation-
ally recognized statistical rating organization. 
‘‘(b) UPDATE OF REGISTRATION.— 
‘‘(1) UPDATE.—Each nationally recognized sta-
tistical rating organization shall promptly amend its 
application for registration under this section if any 
VerDate Aug 31 2005 
22:32 Jul 07, 2006
Jkt 049200
PO 00000
Frm 00008
Fmt 6652
Sfmt 6203
E:\BILLS\H2990.RH
H2990
sroberts on PROD1PC70 with BILLS
information or documents provided therein become 
materially inaccurate, except that a nationally recog-
nized statistical rating organization is not required to 
amend the information required to be filed under sub-
section (a)(1)(C) by a filing under this paragraph, 
but shall amend such information in such organiza-
tion’s annual filing under paragraph (2) of this sub-
section. 
‘‘(2) CERTIFICATION.—Not later than 90 days 
after the end of each calendar year, each nationally 
recognized statistical rating organization shall file 
with the Commission an amendment to its registra-
tion, in such form as the Commission, by rule, may 
prescribe as necessary or appropriate in the public 
interest or for the protection of investors— 
‘‘(A) certifying that the information and 
documents in the application for registration of 
such nationally recognized statistical rating or-
ganization continue to be accurate; and 
‘‘(B) listing any material changes that oc-
curred to such information or documents during 
the previous calendar year. 
‘‘(c) ACCOUNTABILITY FOR RATINGS PROCEDURES.— 
‘‘(1) AUTHORITY.—The Commission shall have 
the authority under this Act to take action against 
VerDate Aug 31 2005 
22:32 Jul 07, 2006
Jkt 049200
PO 00000
Frm 00009
Fmt 6652
Sfmt 6203
E:\BILLS\H2990.RH
H2990
sroberts on PROD1PC70 with BILLS
any nationally recognized statistical rating organiza-
tion if such nationally recognized statistical rating 
organization issues credit ratings in contravention of 
those procedures, criteria, and methodologies that such 
nationally recognized statistical rating organiza-
tion— 
‘‘(A) includes in its application for reg-
istration under this section; or 
‘‘(B) makes and disseminates in reports 
pursuant to section 17(a) or the rules and regu-
lations thereunder. 
‘‘(2) LIMITATION.—The rules and regulations ap-
plicable to nationally recognized statistical rating or-
ganizations the Commission may prescribe pursuant 
to this Act shall be narrowly tailored to meet the re-
quirements of this Act applicable to nationally recog-
nized statistical rating organizations and shall not 
purport to regulate the substance of credit ratings or 
the procedures and methodologies by which such na-
tionally recognized statistical rating organizations de-
termine credit ratings. 
‘‘(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 exceed-
VerDate Aug 31 2005 
22:32 Jul 07, 2006
Jkt 049200
PO 00000
Frm 00010
Fmt 6652
Sfmt 6203
E:\BILLS\H2990.RH
H2990
sroberts on PROD1PC70 with BILLS
ing 12 months, or revoke the registration of any nationally 
recognized statistical rating organization if the Commission 
finds, on the record after notice and opportunity for hear-
ing, that such censure, placing of limitations, suspension, 
or revocation is in the public interest and that such nation-
ally recognized statistical rating organization, or any per-
son associated with such nationally recognized statistical 
rating organization, whether prior to or subsequent to be-
coming 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 offense 
specified in subparagraph (B) of such paragraph (4) 
within 10 years of the commencement of the pro-
ceedings under this subsection, or is enjoined from 
any action, conduct, or practice specified in subpara-
graph (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 
VerDate Aug 31 2005 
22:32 Jul 07, 2006
Jkt 049200
PO 00000
Frm 00011
Fmt 6652
Sfmt 6203
E:\BILLS\H2990.RH
H2990
sroberts on PROD1PC70 with BILLS
‘‘(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 as-
sociated with a nationally recognized statistical rat-
ing organization. 
‘‘(e) WITHDRAWAL FROM REGISTRATION.—A nation-
ally recognized statistical rating organization registered 
under this section may, upon such terms and conditions 
as the Commission may establish as necessary in the public 
interest or for the protection of investors, withdraw from 
registration by filing a written notice of withdrawal with 
the Commission. If the Commission finds that any nation-
ally recognized statistical rating organization is no longer 
in existence or has ceased to do business as a credit rating 
agency, the Commission, by order, shall cancel the registra-
tion of such nationally recognized statistical rating organi-
zation. 
‘‘(f) REPRESENTATIONS.— 
‘‘(1) REPRESENTATIONS
OF
SPONSORSHIP
BY 
UNITED STATES OR AGENCY THEREOF.—It shall be 
unlawful for any nationally recognized statistical rat-
ing organization registered under this section to rep-
resent or imply in any manner whatsoever that such 
nationally recognized statistical rating organization 
VerDate Aug 31 2005 
22:32 Jul 07, 2006
Jkt 049200
PO 00000
Frm 00012
Fmt 6652
Sfmt 6203
E:\BILLS\H2990.RH
H2990
sroberts on PROD1PC70 with BILLS