Page 498

124 STAT. 1872 PUBLIC LAW 111–203—JULY 21, 2010

Subtitle C—Improvements to the

Regulation of Credit Rating Agencies

15 USC 78o–7 SEC. 931. FINDINGS. note. Congress finds the following: (1) Because of the systemic importance of credit ratings and the reliance placed on credit ratings by individual and institutional investors and financial regulators, the activities and performances of credit rating agencies, including nationally recognized statistical rating organizations, are matters of national public interest, as credit rating agencies are central to capital formation, investor confidence, and the efficient performance of the United States economy. (2) Credit rating agencies, including nationally recognized statistical rating organizations, play a critical ‘‘gatekeeper’’ role in the debt market that is functionally similar to that of securi- ties analysts, who evaluate the quality of securities in the equity market, and auditors, who review the financial state- ments of firms. Such role justifies a similar level of public oversight and accountability. (3) Because credit rating agencies perform evaluative and analytical services on behalf of clients, much as other financial ‘‘gatekeepers’’ do, the activities of credit rating agencies are fundamentally commercial in character and should be subject to the same standards of liability and oversight as apply to auditors, securities analysts, and investment bankers. (4) In certain activities, particularly in advising arrangers of structured financial products on potential ratings of such products, credit rating agencies face conflicts of interest that need to be carefully monitored and that therefore should be addressed explicitly in legislation in order to give clearer authority to the Securities and Exchange Commission. (5) In the recent financial crisis, the ratings on structured financial products have proven to be inaccurate. This inaccuracy contributed significantly to the mismanagement of risks by financial institutions and investors, which in turn adversely impacted the health of the economy in the United States and around the world. Such inaccuracy necessitates increased accountability on the part of credit rating agencies.

SEC. 932. ENHANCED REGULATION, ACCOUNTABILITY, AND TRANS- PARENCY OF NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATIONS. (a) IN GENERAL.—Section 15E of the Securities Exchange Act of 1934 (15 U.S.C. 78o–7) is amended— (1) in subsection (b)— (A) in paragraph (1)(A), by striking ‘‘furnished’’ and inserting ‘‘filed’’ and by striking ‘‘furnishing’’ and inserting ‘‘filing’’; (B) in paragraph (1)(B), by striking ‘‘furnishing’’ and inserting ‘‘filing’’; and (C) in the first sentence of paragraph (2), by striking

LAWS ‘‘furnish to’’ and inserting ‘‘file with’’; (2) in subsection (c)— (A) in paragraph (2)—PUBLIC with on anorris VerDate Nov 24 2008 00:49 Aug 26, 2010 Jkt 089139 PO 00203 Frm 00498 Fmt 6580 Sfmt 6581 E:\PUBLAW\PUBL203.111 GPO1 PsN: PUBL203