House Legislation Change to Nationally Registered Statistical Rating Organizations Could Engender Future Legislative Fix

Nationally Recognized Statistical Rating Organizations are currently those credit rating agencies that are registered with the SEC and, therefore, regulated. Most often, the phrase is shortened to its initials, NRSRO. However, in formal contracts and statutes, the words are spelled out and each word matters. The Wall Street Reform and Consumer Protection Act, HR 4173, changes the term to Nationally Registered Statistical Rating Organization every place it appears in the Securities Act and the Exchange Act (Section 6005). This was done to indicate that these rating agencies are merely registered and have no nationally recognized seal of approval.

Rep. Kanjorski attempted to change the language back to ``nationally recognized’’ with a floor amendment, noting that the change would put thousands of contracts in default and upset numerous federal and state regulations. The amendment was defeated. Chairman Frank supports the change to ``nationally registered’’ because the purpose of the name change is to tell investors to use their own judgment rather than completely relying on the rating agencies. Chairman Frank acknowledged that a number of states and private institutions have imbedded in their statutes the old language. He pledged to meet with various State agencies and pension funds to see if there is some legislative fix.

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