SEC Denies Dagong Registration

April 29, 2011 by · Leave a Comment
Filed under: NRSRO, SEC 

China’s largest credit rating firm, Dagong Global Credit Rating Co. was denied status as an officially recognized bond rater in the United States. The Securities and Exchange Commission (SEC) explained that Dagong’s proposal to have China’s securities regulator review all correspondence between the SEC and Dagong would be inconsistent with federal securities law. Dagong argued that it was necessary to have their securities regulator vet and broker correspondence to insure no state secrets were inadvertently released.
The SEC also denied the application because “it does not appear possible at this time for Dagong to comply with the recordkeeping, production, and examination requirements of the federal securities laws.”
Dagong being a foreign agency did not influence the SEC’s decision. Fitch Ratings is a Nationally Recognized Statistical Rating Organization (NRSRO) and they are part of the French company. Likewise, DBRS Inc. is an NRSRO and they are Canadian.
Never before has a firm been denied NRSRO status. An NRSRO designation makes it possible for a firm’s ratings to be used as benchmarks in U.S. laws and regulations.

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