Chairman Frank Pledges Fix on NRSRO Language

February 26, 2010 by · Leave a Comment
Filed under: Bond Regulation, The Rating Agencies 

NRSRO — the shorthand for credit rating agencies registered with the SEC — is currently in dispute, specifically with regards to the second letter. Until recently, the acronym stood for Nationally Recognized Statistical Rating Organization. But the Wall Street Reform and Consumer Protection Act, HR 4173, officially changed the second word from Recognized to Registered every place it appears in the Securities Act and Exchange Act.

Opponents of the change argue that it puts thousands of contracts in default and upsets many federal and state regulations.

Advocates, who include Chairman Barney Frank, support the change because they believe it prompts investors to employ a degree of judgment and not rely solely on ratings agencies.

Acknowledging that a considerable number of states and private institutions have the old language in their statues, Frank is meeting with various state and agencies to find a legislative fix.

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