2006-09-29 SEC Press pdf 225 KB 1,351 chars

2014 SUMMARY REPORT OF COMMISSION STAFF’S EXAMINATIONS OF

Exhibit of SEC Issues Annual Staff Reports on Credit Rating Agencies

summary

The 2014 SEC Staff examination of nine of ten registered NRSROs—including S&P, Moody’s, and Fitch—found widespread failures in conflict-of-interest management, methodology adherence, recordkeeping, and cybersecurity, prompting targeted remedial recommendations without imposing penalties.

paragraph

The SEC Staff’s 2014 examination of nine NRSROs revealed systemic deficiencies in compliance with Rules 17g-1 through 17g-7, including improper handling of material nonpublic information via personal email, inadequate documentation of rating methodologies, and insufficient separation between business and analytical functions. Several firms failed to meet Rule 17g-2’s recordkeeping requirements and violated Rule 17g-6 by conditioning ratings on ancillary services, while also lacking robust IT and cybersecurity controls. Although no final material violations were cited, the Staff issued targeted recommendations for enhanced internal controls, independent DCO oversight, compliance staffing, and mandatory post-employment review protocols.

narrative

The 2014 SEC Staff report summarized examinations of nine of the ten registered Nationally Recognized Statistical Rating Organizations (NRSROs), including major firms like S&P, Moody’s, and Fitch, as well as smaller entities such as KBRA and Morningstar. The review focused on compliance with Section 15E and Rules 17g-1 through 17g-7, explicitly avoiding evaluation of rating substance, in accordance with statutory prohibitions. Widespread deficiencies were identified, including inconsistent application of methodologies, improper use of personal email for material nonpublic information, inadequate documentation, and failure to separate business and analytical functions. Several NRSROs violated Rule 17g-2’s recordkeeping mandates and Rule 17g-6’s prohibition on conditioning ratings on ancillary services, while also lacking sufficient cybersecurity measures and independent DCO oversight. Compliance training, board governance, and post-employment review protocols were found to be underdeveloped across multiple firms. Although no formal enforcement actions or material violations were cited, the Staff issued detailed, targeted recommendations for corrective actions, including enhanced internal controls, independent audits, improved training, and mandatory documentation of post-employment look-backs. The report underscored persistent structural weaknesses in NRSRO oversight despite regulatory reforms enacted since 2006.

Enriched metadata

Scheme: accounting-fraud (80%)

Classified accounting-fraud(confidence 80%). EDGAR detection: forms 10-K/10-Q/8-K/NT 10-K· recall 80% / precision 48%. detection rule →

Extracted insights

Entities 3

person george w. bush
person president george w. bush
organization Securities and Exchange Commission

Triples 1

President George W. Bush Signed Into Law The Credit Rating Agency Reform Act of 2006

PDF

2014 SUMMARY REPORT OF COMMISSION STAFF’S EXAMINATIONS OF · Source