The credit rating industry is highly concentrated. As of April 2015, there were 10 registered NRSROs. In fiscal year 2013, the 3 largest NRSROs accounted for 95 percent of the year’s total reported NRSRO revenue and as of December 2014, they issued 96 percent of all outstanding ratings. These 3 firms also employed 88 percent of the approximately 4,500 credit rating analysts who work at NRSROs (see table 1). Other firms that do not describe themselves as rating agencies and firms that are not registered with SEC also conduct credit rating-type analyses. According to SEC, the agency does not collect data on this group of firms. A credit rating is an assessment of the creditworthiness of an obligor as an entity or with respect to specific securities or money market instruments. These assessments reflect a variety of quantitative and qualitative factors that vary based on sector and NRSRO. To determine an appropriate rating, analysts use publicly available information and market and economic data, and may hold discussions and obtain nonpublic information from the issuer. Commonly, analysts then present their proposed rating to a ratings committee in their agency, and the committee discusses and evaluates the data before voting on a decision. The decision of the ratings committee then is communicated to the issuer seeking the rating and a final rating is issued. Issuers seek credit ratings to improve the marketability or pricing of their securities or to satisfy investors, lenders, or counterparties. Institutional investors may use credit ratings as one of several inputs to internal credit assessments and investment analyses, or to facilitate the trading of securities. Broker-dealers also use ratings to recommend and sell securities to clients or determine acceptable counterparties and collateral levels for outstanding credit exposures. An NRSRO can be registered in one or more of five classes of credit ratings: (1) financial institutions, brokers, or dealers; (2) insurance companies; (3) corporate issuers; (4) issuers of asset-backed securities; and (5) issuers of government securities, municipal securities, or securities issued by a foreign government. Five NRSROs are registered with SEC to rate in five classes, while others are registered in fewer. Since the early 2000s, Congress has taken measures to reform the credit rating industry. In 2006, Congress passed the Credit Rating Agency Reform Act, to improve ratings quality by fostering accountability, transparency, and competition in the credit rating industry. The Credit Rating Agency Reform Act added section 15E to the Exchange Act, which established SEC oversight over NRSROs. Section 15E also requires SEC to conduct examinations at least annually of each NRSRO to monitor compliance with statutory and regulatory requirements. Each examination must include a review of areas including, among other things, whether the NRSRO conducts business in accordance with its policies, procedures, and methodologies, as well as the management of conflicts of interest by and internal supervisory controls of the NRSRO. The performance of the three largest NRSROs in rating subprime residential mortgage-backed securities (RMBS) and related securities renewed questions about the accuracy of their credit ratings generally, the integrity of the ratings process, and investor reliance on NRSRO ratings for investment decisions. Since the 2007–2009 financial crisis, the United States has put in place additional regulation of credit rating agencies. The Dodd-Frank Act required that SEC establish the Office of Credit Ratings (OCR) to administer SEC rules with respect to the practices NRSROs use in determining credit ratings. SEC established the office in June 2012; OCR has since assumed responsibility for oversight activities, such as the annual examinations of NRSROs to assess their compliance with SEC rules. The Dodd-Frank Act also required SEC to issue regulations imposing new requirements on NRSROs related to qualification standards for credit rating analysts. SEC issued new rules, which became effective in June 2015, containing the following requirements: Each NRSRO must establish, maintain, enforce, and document standards of training, experience, and competence for its credit analysts. In the required standards, each NRSRO must include a requirement for periodic testing of its credit analysts on their knowledge of the NRSRO’s procedures and methodologies used to determine credit ratings. The standards also must include a requirement that at least one individual with an “appropriate level of experience in performing credit analysis, but not less than 3 years” participates in the determination of a credit rating. These standards apply to all individuals who participate in the determination of credit ratings, including individuals at NRSROs and credit rating affiliates located in other countries. Before SEC issued the new rules, there were no regulatory requirements for training and testing of credit rating analysts in the United States. Regulatory requirements also exist internationally for credit rating agencies. For example, in 2009, the European Union (EU) established rules for credit rating agencies in the EU. These rules include basic requirements that all staff involved in the ratings process have appropriate knowledge and experience to complete their assigned duties, but do not specify training and competence standards for analysts or require testing. Similar to OCR in the United States, the European Commission established the European Securities and Markets Authority—the EU financial regulatory institution and European Supervisory Authority—in January 2011 to provide exclusive registration and supervision of credit rating agencies in the EU. In 2008, the leaders of the Group of 20 (G20) pledged to strengthen oversight of credit rating agencies. Specifically, as part of the G20 declaration at its November 2008 summit, regulators were charged with taking steps to ensure that credit rating agencies met IOSCO—an international standard-setting body for the securities sector—standards, avoided conflicts of interest, and had the right incentives and appropriate oversight to enable them to provide unbiased information and assessments. Subsequently, several countries’ regulators took additional steps to increase oversight of these agencies. For example, regulatory authorities in Hong Kong, Singapore, and Saudi Arabia established licensing regimes for credit rating analysts. Many credit rating agencies around the world voluntarily comply with IOSCO’s Code of Conduct Fundamentals for Credit Rating Agencies (Code). The Code includes standards about implementing and enforcing procedures for methodologies analysts must use, ethical practices they should follow, and conflicts of interest they should avoid. Additionally, a March 2015 revision includes a new provision that analysts undergo formal ongoing training at reasonably timed intervals, including education on the agency’s code of conduct, methodologies, and on policies and laws that govern the agency. Most NRSROs voluntarily comply with and adhere to a code of conduct that is consistent with some or all of the IOSCO Code. Generally, independent professional organizations are established to help protect the integrity of a specific profession and provide safeguards for stakeholders, such as investors, and the public. Professional organizations are membership-based. The specific responsibilities of professional organizations may evolve over time, but the primary responsibilities of these organizations generally include the following: educating members, which often includes promoting knowledge sharing among members and engaging in research related to the profession; developing standards to govern the profession (including codes of overseeing member compliance with the standards; registering or providing certification or examination for members in the profession, or both; and engaging in public education, outreach, or (in some cases) advocacy about the profession. Key elements of these organizations vary depending on the type and purpose of the organization, including membership requirements (mandatory versus voluntary and institutional versus individual), funding, and the role of government. In addition, professional organizations take various measures to safeguard their independence, including consideration of the composition of their governing board and their funding source. Views varied on the merits of a professional organization for credit rating analysts of nationally recognized statistical rating organizations, but most concluded it was too early to tell if one was needed. Professional organizations, including a professional organization for credit rating analysts, can improve the reputation of the industry where the professionals work, promote collaboration and sharing to enhance quality, and supplement existing oversight. However, all analysts with whom we spoke as well as representatives of NRSROs; a few experts and stakeholders (including academics, investors, advocacy groups, and international regulators); and SEC officials told us that such an organization for credit rating analysts could duplicate existing professional standards, codes of ethical conduct, and oversight of credit rating analysts. More importantly, in light of SEC’s new standards to help ensure the training, experience, and competence of credit rating analysts, some representatives and a few analysts and experts and stakeholders said that it was too early to determine what role a professional organization would play, or whether a professional organization was needed at all. Professional organizations can help to improve an industry’s reputation, enhance quality, and supplement existing regulatory oversight. Improved reputation. According to some professional organization representatives with whom we spoke, professional organizations can increase the public’s trust in an industry by developing shared professional standards and oversight processes to help ensure the quality of the work. For example, shared standards can help define a minimum baseline for skills that professionals need, promote ethical behaviors in the profession, and provide a process for identifying and removing bad actors. A few analysts and one NRSRO representative explained that a professional organization for credit rating analysts could improve the reputation of NRSROs and credit rating analysts. Enhanced quality. Professional organizations facilitate sharing and collaboration among professionals to enhance the quality of the work they perform. Specifically, a few representatives of professional organizations, analysts, and experts and stakeholders told us that one advantage of an organization would be the forum it could provide for professionals to network and share and develop best practices or standards. In addition, most NRSRO representatives and all analysts with whom we spoke told us that analysts usually learn the skills necessary to issue ratings from internal training programs and on-the- job experience. According to a few experts and stakeholders, an analyst, and one NRSRO representative, an organization could be beneficial for all credit rating analysts, regardless of employer, because they would receive similar information and training that could play a quality control function. Supplemented oversight.