Tuesday, May 11, 2010

Cardin-Grassley Amendment Extends Whistleblower Protections to NRSRO Employees

The Senate has approved an amendment to the financial reform package extending whistleblower protection to employees of credit rating agencies. The Cardin-Grassley Amendment adds whistleblower protections to employees of nationally recognized statistical rating organizations, NRSROs, which issue credit ratings that the SEC permits other financial firms to use for certain regulatory purposes. There are 10 NRSROs at present, including some privately held firms. The NRSROs played a large role in the financial crisis by o verestimating the safety of residential mortgage-backed securities and collateralized debt obligations and then by marking tardy but massive simultaneous downgrades of these securities, thereby contributing to the collapse of the subprime secondary market and the fire sale of assets, exacerbating the financial crisis. Remarks of Senator Cardin, Cong. Record, May 6, 2010, S3349.

According to Senator Dodd, extending whistleblower protection to employees at rating agencies complements provisions in the bill that make rating agencies more transparent, accountable, and accurate. It will also help increase the SEC’s regulatory performance, and reduce investors’ reliance on ratings issued by nationally recognized statistical rating organizations. Cong. Record, May 6, 2010, S3349.


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