Editor: David Reiss
Brooklyn Law School

November 19, 2012

SEC 2012 Report on NRSROs

By David Reiss

This SEC staff report has some interesting findings that relate to asset-backed securitizations.  Highlights include

  • The pie charts on page 6 that indicate the overall market share of NRSROs as well as their share by sector.  It is interesting to see that Fitch does significantly better rating Asset-Backed Securities (20%) than it does overall (13%).
  • “In some structured finance rating files, the Staff found incomplete rating recommendations relating to the final tranches and were unable to ascertain what the committee ultimately approved. In some instances, there was no rationale recorded for why the final rating recommendation deviated from the original.” (14)
  • “The Staff found that [one large] NRSRO placed certain European residential mortgage-backed securities tranches on watch for potential downgrades for over two years and failed to review the watch within the timetable specified in its policies. In doing so, the NRSRO failed to follow its policies and procedures with regard to the use of rating watch status and the timeliness of reviews conducted on the rating watch status. The NRSRO also failed to apply new criteria to these transactions within the time period required by its policies.”  (13)
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