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Solari Report - Notes on
Wall Street Reform and Consumer Protection Act
of 2009 (HR 4173)
Existing requirements that refer to “furnishing” documents to the SEC are changed
to reflect “filing” with the SEC.
The SEC is to examine credit ratings issued by and policies, procedures and
methodologies employed by NRSROs to determine whether
• NRSRO has established and documented system of internal controls, due
diligence and implementation of methodologies for determining ratings taking
into considerations factors the SEC may prescribe by rule
• NRSRO adheres to the system
• Public disclosures of NRSRO required about its credit ratings, methodologies
and procedures are consistent with the system
NRSROs must make available records for SEC to make these determinations.
SEC rules and regs required by this section for structured securities must:
• Specify information required to be disclosed by sponsors, issuers and
underwriters on the underlying collateral
• Establish and implement procedures to collect and disclose information about
processes used by underwriters, sponsors and issuers to assess accuracy and
integrity of their data and fraud detection
• Require NRSRO to establish and maintain a central database on a publicly
accessible Internet cite to disclose historical default rates of all classes of
financial products rated by the NRSRO
Generally, ratings agencies must make information about their methodologies,
performance, symbols, etc. readily available to investors on a publicly accessible
website. SEC rules must require disclosures that are comparable among NRSROs so
that investors can compare performance across rating agencies over a period of
years. Each NRSRO must include an attestation with any rating affirming that no
part of the rating is influenced by any other business activities, that it is based solely
on merits of instruments being rating, that the rating is an independent evaluation of
risk and merits of the instrument.
Requires consistency in applying quantitative and qualitative methodologies and
inputs in accordance with their established procedures and that major changes to
procedures and methodologies and quantitative inputs are applied consistently to all
credit ratings to which they apply. Reasons for change must be publicly disclosed.
NRSROs must notify persons with access to ratings, whether or not they are for a
fee, of the procedure or methodology used for the particular rating, of any changes
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