[December 23, 2014] “the Securities and Exchange Commission issued its annual staff report on the findings of examinations of credit rating agencies registered as nationally recognized statistical rating organizations (NRSROs) and submitted a separate report on NRSROs to Congress. “These reports provide the most current and comprehensive picture of the credit rating industry,” said SEC Chair Mary Jo White.  “The SEC’s enhanced oversight of NRSROs, informed by risk assessment, regular examinations and policy considerations, provides increasingly robust and effective oversight of the industry, as reflected by overall improvements in compliance, documentation, and board oversight.” The 2010 Dodd-Frank Act requires the SEC to examine each NRSRO once a year and issue an annual report summarizing the examination findings.  In addition to covering eight areas required by the Dodd-Frank Act, SEC examiners used risk assessment tools to identify specific areas of focus such as information technology, cybersecurity, or certain ratings activities.  During the 2014 examinations, the staff observed improvements concerning:

• Compliance resources, monitoring, and culture
• Documentation and resources for criteria and model validation
• Document retention
• Board of directors or governing committee oversight

The staff made recommendations for improvement in certain areas, including:

• Use of affiliates or third-party contractors in the credit rating process
• Management of conflicts of interest related to the rating business operations
• Adherence to policies and procedures for determining or reviewing credit ratings.”