2006-09-29 SEC Press pdf 212 KB 1,240 chars

2013 SUMMARY REPORT OF COMMISSION STAFF’S EXAMINATIONS OF

Exhibit of SEC Issues Annual Staff Reports on Credit Rating Agencies

summary

In 2013, the SEC Staff found persistent compliance failures among NRSROs—including inadequate conflict-of-interest management, poor recordkeeping, and flawed governance—leading to an enforcement settlement with Egan-Jones Ratings Company involving an 18-month bar and remediation requirements.

paragraph

The 2013 SEC Staff report on NRSROs revealed systemic deficiencies in compliance with Section 15E and Rules 17g-2, 17g-5, and 17g-6, including failures to separate business and analytical functions, inadequate documentation of rating decisions, and weak oversight of material non-public information. Multiple rating agencies, both large and small, lacked robust internal controls, missed surveillance timelines, and failed to disclose revenue sources or methodologies transparently. The SEC resolved one such case with Egan-Jones Ratings Company, which agreed to an 18-month bar from acting as an NRSRO and implemented remedial measures following misrepresentations in its registration.

narrative

The 2013 SEC Staff report, issued under Section 15E(p)(3) of the Securities Exchange Act, examined all ten registered NRSROs and identified widespread and persistent deficiencies in compliance with regulatory requirements. Key failures included inadequate management of conflicts of interest, poor documentation of rating methodologies and decisions, insufficient separation between business and analytical functions, and weak internal audit and governance structures. Several NRSROs allowed analysts to discuss fees, bypassed managerial approvals, and failed to maintain proper records or disclose revenue sources, violating Rules 17g-2, 17g-5, and 17g-6. The report noted that while improvements had been made since 2010 in training and compliance culture, systemic weaknesses remained, especially among smaller agencies. The SEC took enforcement action against Egan-Jones Ratings Company, which settled in 2013 with an 18-month bar from NRSRO status and mandatory remediation measures stemming from misrepresentations in its registration. The Staff urged all NRSROs to strengthen independent DCO roles, enhance board oversight, improve post-employment policies, and implement more rigorous internal controls. The report emphasized that while the SEC cannot regulate the substance of ratings, it is mandated to enforce procedural and ethical compliance under Dodd-Frank and the Credit Rating Agency Reform Act.

Enriched metadata

Scheme: financial-fraud (80%)
Outcome: settled

Classified financial-fraud(confidence 80%). EDGAR detection: forms 10-K/10-Q/8-K/NT 10-K· recall 67% / precision 23%. detection rule →

Extracted insights

Entities 2

person george w. bush
person president george w. bush

Triples 1

President George W. Bush Signed into law The Credit Rating Agency Reform Act of 2006

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2013 SUMMARY REPORT OF COMMISSION STAFF’S EXAMINATIONS OF · Source