Credit Rating Agency Reform Act of 2006
PL 109-291 (S.3850), enacted 09/29/2006

120 STAT. 1327
PUBLIC LAW 109–291—SEPT. 29, 2006
Public Law 109–291
109th Congress
An Act
To improve ratings quality for the protection of investors and in the public interest
by fostering accountability, transparency, and competition in the credit rating
agency industry.
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Credit Rating Agency Reform
Act of 2006’’.
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 Committee on Banking, Housing, and Urban
Affairs of the Senate and the Committee on Financial Services
of the House of Representatives during the 108th and 109th Con-
gresses, comment letters to the concept releases and proposed rules
of the Commission, and facts otherwise disclosed and ascertained,
Congress finds that credit rating agencies are of national impor-
tance, in that, among other things—
(1) their ratings, publications, writings, analyses, and
reports are furnished and distributed, and their contracts,
subscription agreements, and other arrangements with clients
are negotiated and performed, by the use of the mails and
other means and instrumentalities of interstate commerce;
(2) their ratings, publications, writings, analyses, and
reports customarily relate to the purchase and sale of securities
traded on securities 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;
(3) the foregoing transactions occur in such volume as
substantially to affect interstate commerce, the securities mar-
kets, the national banking system, and the national economy;
(4) the oversight of such credit rating agencies serves the
compelling interest of investor protection;
(5) the 2 largest credit rating agencies serve the vast
majority of the market, and additional competition is in the
public interest; and
(6) the Commission has indicated that it needs statutory
authority to oversee the credit rating industry.
15 USC 78o–7
note.
Credit Rating
Agency Reform
Act of 2006.
15 USC 78a note.
Sept. 29, 2006
[S. 3850]
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120 STAT. 1328
PUBLIC LAW 109–291—SEPT. 29, 2006
SEC. 3. DEFINITIONS.
(a) SECURITIES EXCHANGE ACT OF 1934.—Section 3(a) of the
Securities Exchange Act of 1934 (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 obligor 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 reasonable fee, but does not include
a commercial credit reporting company;
‘‘(B) employing either a quantitative or qualitative
model, or both, to determine credit ratings; and
‘‘(C) receiving fees from either issuers, investors, or
other market participants, or a combination thereof.
‘‘(62) 
NATIONALLY
RECOGNIZED
STATISTICAL
RATING
ORGANIZATION.—The term ‘nationally recognized statistical
rating organization’ means a credit rating agency that—
‘‘(A) has been in business as a credit rating agency
for at least the 3 consecutive years immediately preceding
the date of its application for registration under section
15E;
‘‘(B) issues credit ratings certified by qualified institu-
tional buyers, in accordance with section 15E(a)(1)(B)(ix),
with respect to—
‘‘(i) financial institutions, brokers, or dealers;
‘‘(ii) insurance companies;
‘‘(iii) corporate issuers;
‘‘(iv) issuers of asset-backed securities (as that
term is defined in section 1101(c) of part 229 of title
17, Code of Federal Regulations, as in effect on the
date of enactment of this paragraph);
‘‘(v) issuers of government securities, municipal
securities, or securities issued by a foreign government;
or
‘‘(vi) a combination of one or more categories of
obligors described in any of clauses (i) through (v);
and
‘‘(C) is registered under section 15E.
‘‘(63) PERSON ASSOCIATED WITH A NATIONALLY RECOGNIZED
STATISTICAL RATING ORGANIZATION.—The term ‘person associ-
ated with’ a nationally recognized statistical rating organization
means any partner, officer, director, or branch manager of
a nationally recognized statistical rating organization (or any
person occupying a similar status or performing similar func-
tions), any person directly or indirectly controlling, controlled
by, or under common control with a nationally recognized statis-
tical rating organization, or any employee of a nationally recog-
nized statistical rating organization.
‘‘(64) QUALIFIED INSTITUTIONAL BUYER.—The term ‘qualified
institutional buyer’ has the meaning given such term in section
230.144A(a) of title 17, Code of Federal Regulations, or any
successor thereto.’’.
(b) APPLICABLE DEFINITIONS.—As used in this Act—
15 USC 78o–7
note.
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120 STAT. 1329
PUBLIC LAW 109–291—SEPT. 29, 2006
(1) the term ‘‘Commission’’ means the Securities and
Exchange Commission; and
(2) the term ‘‘nationally recognized statistical rating
organization’’ has the same meaning as in section 3(a)(62) of
the Securities Exchange Act of 1934, as added by this Act.
SEC. 4. REGISTRATION OF NATIONALLY RECOGNIZED STATISTICAL
RATING ORGANIZATIONS.
(a) AMENDMENT.—The Securities Exchange Act of 1934 is
amended by inserting after section 15D (15 U.S.C. 78o–6) the fol-
lowing new section:
‘‘SEC. 15E. REGISTRATION OF NATIONALLY RECOGNIZED STATISTICAL
RATING ORGANIZATIONS.
‘‘(a) REGISTRATION PROCEDURES.—
‘‘(1) APPLICATION FOR REGISTRATION.—
‘‘(A) IN GENERAL.—A credit rating agency that elects
to be treated as a nationally recognized statistical rating
organization for purposes of this title (in this section
referred to as the ‘applicant’), shall furnish to the Commis-
sion an application for registration, in such form as the
Commission shall require, by rule or regulation issued
in accordance with subsection (n), and containing the
information described in subparagraph (B).
‘‘(B) REQUIRED INFORMATION.—An application for reg-
istration under this section shall contain information
regarding—
‘‘(i) credit ratings performance measurement statis-
tics over short-term, mid-term, and long-term periods
(as applicable) of the applicant;
‘‘(ii) the procedures and methodologies that the
applicant uses in determining credit ratings;
‘‘(iii) policies or procedures adopted and imple-
mented by the applicant to prevent the misuse, in
violation of this title (or the rules and regulations
hereunder), of material, nonpublic information;
‘‘(iv) the organizational structure of the applicant;
‘‘(v) whether or not the applicant has in effect
a code of ethics, and if not, the reasons therefor;
‘‘(vi) any conflict of interest relating to the issuance
of credit ratings by the applicant;
‘‘(vii) the categories described in any of clauses
(i) through (v) of section 3(a)(62)(B) with respect to
which the applicant intends to apply for registration
under this section;
‘‘(viii) on a confidential basis, a list of the 20 largest
issuers and subscribers that use the credit rating serv-
ices of the applicant, by amount of net revenues
received therefrom in the fiscal year immediately pre-
ceding the date of submission of the application;
‘‘(ix) on a confidential basis, as to each applicable
category of obligor described in any of clauses (i)
through (v) of section 3(a)(62)(B), written certifications
described in subparagraph (C), except as provided in
subparagraph (D); and
‘‘(x) any other information and documents con-
cerning the applicant and any person associated with
15 USC 78o–7.
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120 STAT. 1330
PUBLIC LAW 109–291—SEPT. 29, 2006
such applicant as the Commission, by rule, may pre-
scribe as necessary or appropriate in the public interest
or for the protection of investors.
‘‘(C) WRITTEN CERTIFICATIONS.—Written certifications
required by subparagraph (B)(ix)—
‘‘(i) shall be provided from not fewer than 10 quali-
fied institutional buyers, none of which is affiliated
with the applicant;
‘‘(ii) may address more than one category of obli-
gors described in any of clauses (i) through (v) of sec-
tion 3(a)(62)(B);
‘‘(iii) shall include not fewer than 2 certifications
for each such category of obligor; and
‘‘(iv) shall state that the qualified institutional
buyer—
‘‘(I) meets the definition of a qualified institu-
tional buyer under section 3(a)(64); and
‘‘(II) has used the credit ratings of the
applicant for at least the 3 years immediately pre-
ceding the date of the certification in the subject
category or categories of obligors.
‘‘(D) EXEMPTION FROM CERTIFICATION REQUIREMENT.—
A written certification under subparagraph (B)(ix) is not
required with respect to any credit rating agency which
has received, or been the subject of, a no-action letter
from the staff of the Commission prior to August 2, 2006,
stating that such staff would not recommend enforcement
action against any broker or dealer that considers credit
ratings issued by such credit rating agency to be ratings
from a nationally recognized statistical rating organization.
‘‘(E) LIMITATION ON LIABILITY OF QUALIFIED INSTITU-
TIONAL BUYERS.—No qualified institutional buyer shall be
liable in any private right of action for any opinion or
statement expressed in a certification made pursuant to
subparagraph (B)(ix).
‘‘(2) REVIEW OF APPLICATION.—
‘‘(A) INITIAL DETERMINATION.—Not later than 90 days
after the date on which the application for registration
is furnished to the Commission under paragraph (1) (or
within such longer period as to which the applicant con-
sents) the Commission shall—
‘‘(i) by order, grant such registration for ratings
in the subject category or categories of obligors, as
described in clauses (i) through (v) of section
3(a)(62)(B); or
‘‘(ii) institute proceedings to determine whether
registration should be denied.
‘‘(B) CONDUCT OF PROCEEDINGS.—
‘‘(i) CONTENT.—Proceedings referred to in subpara-
graph (A)(ii) shall—
‘‘(I) include notice of the grounds for denial
under consideration and an opportunity for
hearing; and
‘‘(II) be concluded not later than 120 days
after the date on which the application for registra-
tion is furnished to the Commission under para-
graph (1).
Deadline.
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120 STAT. 1331
PUBLIC LAW 109–291—SEPT. 29, 2006
‘‘(ii) DETERMINATION.—At the conclusion of such
proceedings, the Commission, by order, shall grant or
deny such application for registration.
‘‘(iii) EXTENSION
AUTHORIZED.—The Commission
may extend the time for conclusion of such proceedings
for not longer than 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 Commission shall
grant registration under this subsection—
‘‘(i) if the Commission finds that the requirements
of this section are satisfied; and
‘‘(ii) unless the Commission finds (in which case
the Commission shall deny such registration) that—
‘‘(I) the applicant does not have adequate
financial and managerial resources to consistently
produce credit ratings with integrity and to materi-
ally comply with the procedures and methodologies
disclosed under paragraph (1)(B) and with sub-
sections (g), (h), (i), and (j); or
‘‘(II) if the applicant were so registered, its
registration would be subject to suspension or rev-
ocation under subsection (d).
‘‘(3) PUBLIC AVAILABILITY OF INFORMATION.—Subject to sec-
tion 24, the Commission shall, by rule, require a nationally
recognized statistical rating organization, upon the granting
of registration under this section, to make the information
and documents submitted to the Commission in its completed
application for registration, or in any amendment submitted
under paragraph (1) or (2) of subsection (b), publicly available
on its website, or through another comparable, readily acces-
sible means, except as provided in clauses (viii) and (ix) of
paragraph (1)(B).
‘‘(b) UPDATE OF REGISTRATION.—
‘‘(1) UPDATE.—Each nationally recognized statistical rating
organization shall promptly amend its application for registra-
tion under this section if any information or document provided
therein becomes materially inaccurate, except that a nationally
recognized statistical rating organization is not required to
amend—
‘‘(A) the information required to be furnished under
subsection (a)(1)(B)(i) by furnishing information under this
paragraph, but shall amend such information in the annual
submission of the organization under paragraph (2) of this
subsection; or
‘‘(B) the certifications required to be provided under
subsection (a)(1)(B)(ix) by furnishing information under this
paragraph.
‘‘(2) CERTIFICATION.—Not later than 90 days after the end
of each calendar year, each nationally recognized statistical
rating organization shall furnish to the Commission an amend-
ment to its registration, in such form as the Commission,
by rule, may prescribe as necessary or appropriate in the public
interest or for the protection of investors—
Deadline.
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120 STAT. 1332
PUBLIC LAW 109–291—SEPT. 29, 2006
‘‘(A) certifying that the information and documents
in the application for registration of such nationally recog-
nized statistical rating organization (other than the certifi-
cations required under subsection (a)(1)(B)(ix)) continue to
be accurate; and
‘‘(B) listing any material change that occurred to such
information or documents during the previous calendar
year.
‘‘(c) ACCOUNTABILITY FOR RATINGS PROCEDURES.—
‘‘(1) AUTHORITY.—The Commission shall have exclusive
authority to enforce the provisions of this section in accordance
with this title with respect to any nationally recognized statis-
tical rating organization, if such nationally recognized statis-
tical rating organization issues credit ratings in material con-
travention of those procedures relating to such nationally recog-
nized statistical rating organization, including procedures
relating to the prevention of misuse of nonpublic information
and conflicts of interest, that such nationally recognized statis-
tical rating organization—
‘‘(A) includes in its application for registration under
subsection (a)(1)(B)(ii); or
‘‘(B) makes and disseminates in reports pursuant to
section 17(a) or the rules and regulations thereunder.
‘‘(2) LIMITATION.—The rules and regulations that the
Commission may prescribe pursuant to this title, as they apply
to nationally recognized statistical rating organizations, shall
be narrowly tailored to meet the requirements of this title
applicable to nationally recognized statistical rating organiza-
tions. Notwithstanding any other provision of law, neither the
Commission nor any State (or political subdivision thereof)
may regulate the substance of credit ratings or the procedures
and methodologies by which any nationally recognized statis-
tical rating organization determines credit ratings.
‘‘(d) CENSURE, DENIAL, OR
SUSPENSION
OF
REGISTRATION;
NOTICE AND HEARING.—The Commission, by order, shall censure,
place limitations on the activities, functions, or operations of, sus-
pend for a period not exceeding 12 months, or revoke the registra-
tion of any nationally recognized statistical 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 necessary for the protection of investors and in
the public interest and that such nationally recognized statistical
rating organization, or any person associated with such an organiza-
tion, 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 subparagraph (A), (D), (E),
(H), or (G) of section 15(b)(4), has been convicted of any offense
specified in section 15(b)(4)(B), or is enjoined from any action,
conduct, or practice specified in subparagraph (C) of section
15(b)(4), during the 10-year period preceding the date of
commencement of the proceedings under this subsection, or
at any time thereafter;
‘‘(2) has been convicted during the 10-year period preceding
the date on which an application for registration is furnished
to the Commission under this section, or at any time thereafter,
of—
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PUBLIC LAW 109–291—SEPT. 29, 2006
‘‘(A) any crime that is punishable by imprisonment
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;
‘‘(3) is subject to any order of the Commission barring
or suspending the right of the person to be associated with
a nationally recognized statistical rating organization;
‘‘(4) fails to furnish the certifications required under sub-
section (b)(2); or
‘‘(5) fails to maintain adequate financial and managerial
resources to consistently produce credit ratings with integrity.
‘‘(e) TERMINATION OF REGISTRATION.—
‘‘(1) VOLUNTARY
WITHDRAWAL.—A nationally recognized
statistical rating organization may, upon such terms and condi-
tions as the Commission may establish as necessary in the
public interest or for the protection of investors, withdraw
from registration by furnishing a written notice of withdrawal
to the Commission.
‘‘(2) COMMISSION
AUTHORITY.—In addition to any other
authority of the Commission under this title, if the Commission
finds that a nationally 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 registration under this section of such nationally recognized
statistical rating organization.
‘‘(f) REPRESENTATIONS.—
‘‘(1) BAN ON REPRESENTATIONS OF SPONSORSHIP BY UNITED
STATES
OR
AGENCY
THEREOF.—It shall be unlawful for any
nationally recognized statistical rating organization to rep-
resent or imply in any manner whatsoever that such nationally
recognized statistical rating organization has been designated,
sponsored, recommended, or approved, or that the abilities
or qualifications thereof have in any respect been passed upon,
by the United States or any agency, officer, or employee thereof.
‘‘(2) BAN ON REPRESENTATION AS NRSRO OF UNREGISTERED
CREDIT RATING AGENCIES.—It shall be unlawful for any credit
rating agency that is not registered under this section as a
nationally recognized statistical rating organization to state
that such credit rating agency is a nationally recognized statis-
tical rating organization registered under this title.
‘‘(3) STATEMENT
OF
REGISTRATION
UNDER
SECURITIES
EXCHANGE ACT OF 1934 PROVISIONS.—No provision of paragraph
(1) shall be construed to prohibit a statement that a nationally
recognized statistical rating organization is a nationally recog-
nized statistical rating organization under this title, if such
statement is true in fact and if the effect of such registration
is not misrepresented.
‘‘(g) PREVENTION
OF MISUSE
OF NONPUBLIC INFORMATION.—
‘‘(1) ORGANIZATION
POLICIES
AND
PROCEDURES.—Each
nationally recognized statistical rating organization shall estab-
lish, maintain, and enforce written policies and procedures
reasonably designed, taking into consideration the nature of
the business of such nationally recognized statistical rating
organization, to prevent the misuse in violation of this title,
or the rules or regulations hereunder, of material, nonpublic
information by such nationally recognized statistical rating
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120 STAT. 1334
PUBLIC LAW 109–291—SEPT. 29, 2006
organization or any person associated with such nationally
recognized statistical rating organization.
‘‘(2) COMMISSION AUTHORITY.—The Commission shall issue
final rules in accordance with subsection (n) to require specific
policies or procedures that are reasonably designed to prevent
misuse in violation of this title (or the rules or regulations
hereunder) of material, nonpublic information.
‘‘(h) MANAGEMENT OF CONFLICTS OF INTEREST.—
‘‘(1) ORGANIZATION
POLICIES
AND
PROCEDURES.—Each
nationally recognized statistical rating organization shall estab-
lish, maintain, and enforce written policies and procedures
reasonably designed, taking into consideration the nature of
the business of such nationally recognized statistical rating
organization and affiliated persons and affiliated companies
thereof, to address and manage any conflicts of interest that
can arise from such business.
‘‘(2) COMMISSION AUTHORITY.—The Commission shall issue
final rules in accordance with subsection (n) to prohibit, or
require the management and disclosure of, any conflicts of
interest relating to the issuance of credit ratings by a nationally
recognized statistical rating organization, including, without
limitation, conflicts of interest relating to—
‘‘(A) the manner in which a nationally recognized
statistical rating organization is compensated by the
obligor, or any affiliate of the obligor, for issuing credit
ratings or providing related services;
‘‘(B) the provision of consulting, advisory, or other serv-
ices by a nationally recognized statistical rating organiza-
tion, or any person associated with such nationally recog-
nized statistical rating organization, to the obligor, or any
affiliate of the obligor;
‘‘(C) business relationships, ownership interests, or any
other financial or personal interests between a nationally
recognized statistical rating organization, or any person
associated with such nationally recognized statistical rating
organization, and the obligor, or any affiliate of the obligor;
‘‘(D) any affiliation of a nationally recognized statistical
rating organization, or any person associated with such
nationally recognized statistical rating organization, with
any person that underwrites the securities or money
market instruments that are the subject of a credit rating;
and
‘‘(E) any other potential conflict of interest, as the
Commission deems necessary or appropriate in the public
interest or for the protection of investors.
‘‘(i) PROHIBITED CONDUCT.—
‘‘(1) PROHIBITED ACTS AND PRACTICES.—The Commission
shall issue final rules in accordance with subsection (n) to
prohibit any act or practice relating to the issuance of credit
ratings by a nationally recognized statistical rating organization
that the Commission determines to be unfair, coercive, or abu-
sive, including any act or practice relating to—
‘‘(A) conditioning or threatening to condition the
issuance of a credit rating on the purchase by the obligor
or an affiliate thereof of other services or products,
including pre-credit rating assessment products, of the
nationally recognized statistical rating organization or any
Regulations.
Regulations.
Regulations.
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120 STAT. 1335
PUBLIC LAW 109–291—SEPT. 29, 2006
person associated with such nationally recognized statis-
tical rating organization;
‘‘(B) lowering or threatening to lower a credit rating
on, or refusing to rate, securities or money market
instruments issued by an asset pool or as part of any
asset-backed or mortgage-backed securities transaction,
unless a portion of the assets within such pool or part
of such transaction, as applicable, also is rated by the
nationally recognized statistical rating organization; or
‘‘(C) modifying or threatening to modify a credit rating
or otherwise departing from its adopted systematic proce-
dures and methodologies in determining credit ratings,
based on whether the obligor, or an affiliate of the obligor,
purchases or will purchase the credit rating or any other
service or product of the nationally recognized statistical
rating organization or any person associated with such
organization.
‘‘(2) RULE OF CONSTRUCTION.—Nothing in paragraph (1),
or in any rules or regulations adopted thereunder, may be
construed to modify, impair, or supersede the operation of any
of the antitrust laws (as defined in the first section of the
Clayton Act, except that such term includes section 5 of the
Federal Trade Commission Act, to the extent that such section
5 applies to unfair methods of competition).
‘‘(j) DESIGNATION OF COMPLIANCE OFFICER.—Each nationally
recognized statistical rating organization shall designate an indi-
vidual responsible for administering the policies and procedures
that are required to be established pursuant to subsections (g)
and (h), and for ensuring compliance with the securities laws and
the rules and regulations thereunder, including those promulgated
by the Commission pursuant to this section.
‘‘(k) STATEMENTS OF FINANCIAL CONDITION.—Each nationally
recognized statistical rating organization shall, on a confidential
basis, furnish to the Commission, at intervals determined by the
Commission, such financial statements, certified (if required by
the rules or regulations of the Commission) by an independent
public accountant, and information concerning its financial condi-
tion, as the Commission, by rule, may prescribe as necessary or
appropriate in the public interest or for the protection of investors.
‘‘(l) SOLE METHOD OF REGISTRATION.—
‘‘(1) IN GENERAL.—On and after the effective date of this
section, a credit rating agency may only be registered as a
nationally recognized statistical rating organization for any
purpose in accordance with this section.
‘‘(2) PROHIBITION ON RELIANCE ON NO-ACTION RELIEF.—On
and after the effective date of this section—
‘‘(A) an entity that, before that date, received advice,
approval, or a no-action letter from the Commission or
staff thereof to be treated as a nationally recognized statis-
tical rating organization pursuant to the Commission rule
at section 240.15c3–1 of title 17, Code of Federal Regula-
tions, may represent itself or act as a nationally recognized
statistical rating organization only—
‘‘(i) during Commission consideration of the
application, if such entity has furnished an application
for registration under this section; and
Confidential
information.
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PUBLIC LAW 109–291—SEPT. 29, 2006
‘‘(ii) on and after the date of approval of its applica-
tion for registration under this section; and
‘‘(B) the advice, approval, or no-action letter described
in subparagraph (A) shall be void.
‘‘(3) NOTICE TO OTHER AGENCIES.—Not later than 30 days
after the date of enactment of this section, the Commission
shall give notice of the actions undertaken pursuant to this
section to each Federal agency which employs in its rules
and regulations the term ‘nationally recognized statistical
rating organization’ (as that term is used under Commission
rule 15c3–1 (17 C.F.R. 240.15c3–1), as in effect on the date
of enactment of this section).
‘‘(m) RULES OF CONSTRUCTION.—
‘‘(1) NO WAIVER OF RIGHTS, PRIVILEGES, OR DEFENSES.—
Registration under and compliance with this section does not
constitute a waiver of, or otherwise diminish, any right, privi-
lege, or defense that a nationally recognized statistical rating
organization may otherwise have under any provision of State
or Federal law, including any rule, regulation, or order there-
under.
‘‘(2) NO PRIVATE RIGHT OF ACTION.—Nothing in this section
may be construed as creating any private right of action, and
no report furnished by a nationally recognized statistical rating
organization in accordance with this section or section 17 shall
create a private right of action under section 18 or any other
provision of law.
‘‘(n) REGULATIONS.—
‘‘(1) NEW PROVISIONS.—Such rules and regulations as are
required by this section or are otherwise necessary to carry
out this section, including the application form required under
subsection (a)—
‘‘(A) shall be issued by the Commission in final form,
not later than 270 days after the date of enactment of
this section; and
‘‘(B) shall become effective not later than 270 days
after the date of enactment of this section.
‘‘(2) REVIEW
OF
EXISTING
REGULATIONS.—Not later than
270 days after the date of enactment of this section, the
Commission shall—
‘‘(A) review its existing rules and regulations which
employ the term ‘nationally recognized statistical rating
organization’ or ‘NRSRO’; and
‘‘(B) amend or revise such rules and regulations in
accordance with the purposes of this section, as the
Commission may prescribe as necessary or appropriate in
the public interest or for the protection of investors.
‘‘(o) NRSROS SUBJECT TO COMMISSION AUTHORITY.—
‘‘(1) IN GENERAL.—No provision of the laws of any State
or political subdivision thereof requiring the registration,
licensing, or qualification as a credit rating agency or a nation-
ally recognized statistical rating organization shall apply to
any nationally recognized statistical rating organization or per-
son employed by or working under the control of a nationally
recognized statistical rating organization.
‘‘(2) LIMITATION.—Nothing in this subsection prohibits the
securities commission (or any agency or office performing like
functions) of any State from investigating and bringing an
Deadline.
Effective date.
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120 STAT. 1337
PUBLIC LAW 109–291—SEPT. 29, 2006
enforcement action with respect to fraud or deceit against any
nationally recognized statistical rating organization or person
associated with a nationally recognized statistical rating
organization.
‘‘(p) APPLICABILITY.—This section, other than subsection (n),
which shall apply on the date of enactment of this section, shall
apply on the earlier of—
‘‘(1) the date on which regulations are issued in final form
under subsection (n)(1); or
‘‘(2) 270 days after the date of enactment of this section.’’.
(b) CONFORMING AMENDMENTS.—
(1) SECURITIES
EXCHANGE
ACT
OF
1934.—The Securities
Exchange Act of 1934 (15 U.S.C. 78 et seq.) is amended—
(A) in section 15(b)(4) (15 U.S.C. 78o(b)(4))—
(i) in subparagraph (B)(ii), by inserting ‘‘nationally
recognized 
statistical 
rating 
organization,’’ 
after
‘‘transfer agent,’’; and
(ii) in subparagraph (C), by inserting ‘‘nationally
recognized 
statistical 
rating 
organization,’’ 
after
‘‘transfer agent,’’; and
(B) in section 21B(a) (15 U.S.C. 78u–2(a)), by inserting
‘‘15E,’’ after ‘‘15C,’’.
(2) INVESTMENT COMPANY ACT OF 1940.—The Investment
Company Act of 1940 (15 U.S.C. 80a et seq.) is amended—
(A) in section 2(a) (15 U.S.C. 80a–2(a)), by adding
at the end the following new paragraph:
‘‘(53) The term ‘credit rating agency’ has the same meaning
as in section 3 of the Securities Exchange Act of 1934.’’; and
(B) in section 9(a) (15 U.S.C. 80a–9(a))—
(i) in paragraph (1), by inserting ‘‘credit rating
agency,’’ after ‘‘transfer agent,’’; and
(ii) in paragraph (2), by inserting ‘‘credit rating
agency,’’ after ‘‘transfer agent,’’.
(3) INVESTMENT ADVISERS ACT OF 1940.—The Investment
Advisers Act of 1940 (15 U.S.C. 80b et seq.) is amended—
(A) in section 202(a) (15 U.S.C. 80b–2(a)), by adding
at the end the following new paragraph:
‘‘(28) The term ‘credit rating agency’ has the same meaning
as in section 3 of the Securities Exchange Act of 1934.’’;
(B) in section 202(a)(11) (15 U.S.C. 80b–2(a)(11)), by
striking ‘‘or (F)’’ and inserting the following: ‘‘(F) any
nationally recognized statistical rating organization, as that
term is defined in section 3(a)(62) of the Securities
Exchange Act of 1934, unless such organization engages
in issuing recommendations as to purchasing, selling, or
holding securities or in managing assets, consisting in
whole or in part of securities, on behalf of others; or (G)’’;
and
(C) in section 203(e) (15 U.S.C. 80b–3(e))—
(i) in paragraph (2)(B), by inserting ‘‘credit rating
agency,’’ after ‘‘transfer agent,’’; and
(ii) in paragraph (4), by inserting ‘‘credit rating
agency,’’ after ‘‘transfer agent,’’.
(4) HOUSING AND COMMUNITY DEVELOPMENT ACT OF 1992.—
Section 1319 of the Housing and Community Development Act
of 1992 (12 U.S.C. 4519) is amended by striking ‘‘effectively’’
and all that follows through ‘‘broker-dealers’’ and inserting
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PUBLIC LAW 109–291—SEPT. 29, 2006
‘‘that is a nationally recognized statistical rating organization,
as such term is defined in section 3(a) of the Securities
Exchange Act of 1934’’.
(5) HIGHER EDUCATION ACT OF 1965.—Section 439(r)(15)(A)
of the Higher Education Act of 1965 (20 U.S.C. 1087–2(r)(15)(A))
is amended by striking ‘‘means any entity recognized as such
by the Securities and Exchange Commission’’ and inserting
‘‘means any nationally recognized statistical rating organiza-
tion, as that term is defined in section 3(a) of the Securities
Exchange Act of 1934’’.
(6) TITLE 23.—Section 181(11) of title 23, United States
Code, is amended by striking ‘‘identified by the Securities and
Exchange Commission as a nationally recognized statistical
rating organization’’ and inserting ‘‘registered with the Securi-
ties and Exchange Commission as a nationally recognized
statistical rating organization, as that term is defined in section
3(a) of the Securities Exchange Act of 1934’’.
SEC. 5. ANNUAL AND OTHER REPORTS.
Section 17(a)(1) of the Securities Exchange Act of 1934 (15
U.S.C. 78q(a)(1)) is amended—
(1) by inserting ‘‘nationally recognized statistical rating
organization,’’ after ‘‘registered transfer agent,’’; and
(2) by adding at the end the following: ‘‘Any report that
a nationally recognized statistical rating organization is
required by Commission rules under this paragraph to make
and disseminate to the Commission shall be deemed furnished
to the Commission.’’.
SEC. 6. COMMISSION ANNUAL REPORT.
The Commission shall submit an annual report to the Com-
mittee on Banking, Housing, and Urban Affairs of the Senate
and the Committee on Financial Services of the House of Represent-
atives that, with respect to the year to which the report relates—
(1) identifies applicants for registration under section 15E
of the Securities Exchange Act of 1934, as added by this Act;
(2) specifies the number of and actions taken on such
applications; and
(3) specifies the views of the Commission on the state
of competition, transparency, and conflicts of interest among
nationally recognized statistical rating organizations.
SEC. 7. GAO STUDY AND REPORT REGARDING NATIONALLY RECOG-
NIZED STATISTICAL RATING ORGANIZATIONS.
(a) STUDY REQUIRED.—The Comptroller General of the United
States shall conduct a study—
(1) to determine the impact of this Act and the amendments
made by this Act on—
(A) the quality of credit ratings issued by nationally
recognized statistical ratings organizations;
(B) the financial markets;
(C) competition among credit rating agencies;
(D) the incidence of inappropriate conflicts of interest
and sales practices by nationally recognized statistical
rating organizations;
(E) the process for registering as a nationally recog-
nized statistical rating organization; and
15 USC 78o–7
note.
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LEGISLATIVE HISTORY—S. 3850:
SENATE REPORTS: No. 109–326 (Comm. on Banking, Housing, and Urban Af-
fairs).
CONGRESSIONAL RECORD, Vol. 152 (2006):
Sept. 22, considered and passed Senate.
Sept. 27, considered and passed House.
(F) such other matters relevant to the implementation
of this Act and the amendments made by this Act, as
the Comptroller General deems necessary to bring to the
attention of the Congress;
(2) to identify problems, if any, that have resulted from
the implementation of this Act and the amendments made
by this Act; and
(3) to recommend solutions, including any legislative or
regulatory solutions, to any problems identified under para-
graphs (1) and (2).
(b) REPORT REQUIRED.—Not earlier than 3 years nor later than
4 years after the date of enactment of this Act, the Comptroller
General shall submit a report on the results of the study required
by this section to the Committee on Banking, Housing, and Urban
Affairs of the Senate and the Committee on Financial Services
of the House of Representatives.
Approved September 29, 2006.
Deadline.
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