SEC Denies Rating Agency's Bid to Expand NRSRO Status

The SEC denied a credit rating agency's application to register as a Nationally Recognized Statistical Rating Organization for two additional classes of credit ratings, asset-backed and government securities, classes for which its registration was revoked in 2013 for material misstatements.

The Commission found that (i) the firm submitted buyer certifications meant to show that qualified institutional buyers had used its ratings for three years, but the certifications were materially inaccurate, since buyers claimed to have considered the firm's asset-backed ratings as early as December 2019 and March 2020, before the firm says it began issuing them in 2020; (ii) the firm failed to promptly correct this inaccuracy as Exchange Act Rule 17g-1 ("Application for registration as a nationally recognized statistical rating organization") requires; and (iii) the certifications, covering three-year periods ending in December 2022 and March 2023, were stale by the time of the January 2026 application.

The SEC rejected the firm's argument that the statute only requires certifications spanning any three-year period before the certification date, reasoning that certifications must be current enough to inform the Commission's review of the application.

On that basis, the SEC found the stale certifications failed to satisfy Exchange Act Section 15E ("Registration of nationally recognized statistical rating organizations").

The SEC entered an order denying the firm's application to add the two classes. Because this was a registration review rather than an enforcement action, no monetary penalties or disgorgement were imposed. Commissioners Hester Peirce and Mark Uyeda decided the matter without dissent; Chair Paul Atkins abstained.