Number: RS22519
Title: Credit Rating Agency Reform Act of 2006
Authors: Michael V. Seitzinger, American Law Division 
Abstract: P.L. 109-291, the Credit Rating Agency Reform Act of 2006, was enacted to correct the perceived problems created by the absence of statutory regulation of credit rating agencies. Credit ratings have become an important component of the financial reputation of a rated company. However, especially since the bankruptcies of Enron and WorldCom, whose debt had been rated investment grade, there has been concern that perhaps credit rating agencies should be regulated. P.L. 109-291 requires a credit rating agency which wishes to be considered a "nationally recognized statistical rating organization" to file an application with the Securities and Exchange Commission. The application must disclose detailed information about the agency and about its methodology used in granting credit ratings. This type of full and accurate disclosure underlies the philosophy behind all of the major federal securities laws.
Pages: 5
Date: October 11, 2006