New US regulations for nationally recognized statistical rating organizations (NRSROs)1 took effect earlier this year, with compliance required starting June 2, 2010. Among other changes, the US Securities and Exchange Commission (the SEC) amended rule 17g-53 to facilitate unsolicited ratings from NRSROs that were not hired to rate particular asset backed securities (ABS) and other structured finance products. The amendments (collectively referred to as the Web Site Rules) enable non-hired NRSROs (Accessing NRSROs) to access the same rating related information as NRSROs that are hired (Hired NRSROs).
The Web Site Rules are relevant to any issuer of a structured finance product that is rated by an NRSRO, including non-US issuers and even transactions that have no US investors or other connection to the United States. We will discuss the territorial scope of these rules, the types of products they cover and some basic compliance issues below.
In Europe, the European Commission adopted a proposal on June 2, 2010, which, among other things, amends the existing EU regulation on credit rating agencies to include web site rules modeled on rule 17g-5. This proposal has now been passed to the Council of Ministers and the European Parliament for consideration. If adopted, the EU web site rules are expected to come into force sometime in 2011. We discuss this proposal below after explaining the US Web Site Rules.