[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 3850 Enrolled Bill (ENR)]
S.3850
One Hundred Ninth Congress
of the
United States of America
AT THE SECOND SESSION
Begun and held at the City of Washington on Tuesday,
the third day of January, two thousand and six
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 Congresses, 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
importance, 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
markets, 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.
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
institutional 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 associated 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 functions), any person
directly or indirectly controlling, controlled by, or under common
control with a nationally recognized statistical rating
organization, or any employee of a nationally recognized
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--
(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 following 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
Commission 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
registration under this section shall contain information
regarding--
``(i) credit ratings performance measurement statistics
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 implemented
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
services of the applicant, by amount of net revenues
received therefrom in the fiscal year immediately preceding
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 concerning
the applicant and any person associated with such applicant
as the Commission, by rule, may prescribe 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
qualified institutional buyers, none of which is affiliated
with the applicant;
``(ii) may address more than one category of obligors
described in any of clauses (i) through (v) of section
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
institutional buyer under section 3(a)(64); and
``(II) has used the credit ratings of the applicant
for at least the 3 years immediately preceding 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 institutional
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 consents) 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 subparagraph
(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 registration is
furnished to the Commission under paragraph (1).
``(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 materially
comply with the procedures and methodologies disclosed
under paragraph (1)(B) and with subsections (g), (h),
(i), and (j); or
``(II) if the applicant were so registered, its
registration would be subject to suspension or
revocation under subsection (d).
``(3) Public availability of information.--Subject to section
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 accessible 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 registration
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 amendment 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--
``(A) certifying that the information and documents in the
application for registration of such nationally recognized
statistical rating organization (other than the certifications
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 statistical rating
organization, if such nationally recognized statistical rating
organization issues credit ratings in material contravention of
those procedures relating to such nationally recognized statistical
rating organization, including procedures relating to the
prevention of misuse of nonpublic information and conflicts of
interest, that such nationally recognized statistical 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 organizations.
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 statistical 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, suspend for a period not
exceeding 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 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 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 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--
``(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
subsection (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 conditions
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 represent 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 statistical 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 recognized
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 establish,
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 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 establish,
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
services by a nationally recognized statistical rating
organization, or any person associated with such nationally
recognized 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 abusive, 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 person associated with
such nationally recognized statistical 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 procedures 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
individual 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 condition, 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 statistical
rating organization pursuant to the Commission rule at section
240.15c3-1 of title 17, Code of Federal Regulations, 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
``(ii) on and after the date of approval of its
application 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,
privilege, 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
thereunder.
``(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
nationally recognized statistical rating organization shall apply
to any nationally recognized statistical rating organization or
person 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
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 ``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 organization, 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 Securities 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 Committee on
Banking, Housing, and Urban Affairs of the Senate and the Committee on
Financial Services of the House of Representatives 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 RECOGNIZED
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 recognized
statistical rating organization; and
(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 paragraphs
(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.
Speaker of the House of Representatives.
Vice President of the United States and
President of the Senate.