This paper gives an overview of the regulatory reforms in the US credit rating

industry, most notably through the Credit Rating Agency Reform Act of 2006. The
paper first explicates the developments that accelerated the regulatory reform in
the credit rating industry and puts them in the broader context of the Sarbanes–
Oxley Act of 2002. Next, the paper explains that the no-action letter NRSRO
designation process has been replaced by a voluntary registration process that no
longer has as essential criterion that a credit rating agency must be ‘nationally
recognized’. The Securities and Exchange Commission (SEC) aims to improve the
quality and integrity of the credit rating industry foremost by increasing competition
between credit rating agencies, be it among existing credit rating agencies or be it
through de novo entrants. Moreover, the SEC has been equipped with enforcement
powers, which include the suspension and revocation of the NRSRO status. These
powers may be put into effect, for example, when a credit rating agency does not
comply with procedures regarding the prevention of the misuse of material non-
public information, certain (prohibited) conflicts of interest, and other abusive
practices. In addition, credit rating agencies are subject to (onsite) examination and
extensive documentation retention and management progMarkets: The Credit
Rating Agencies

Lawrence J. Whiterammes. While important barriers to de novo entry into the credit
rating industry have been eliminated, it remains to be seen whether and to what
extent increased competition in the credit rating industry will be realised and will
have the desired effect of improving the quality and integrity of the credit rating
industry. Given the influence of credit rating agencies in the capital markets and
their regulatory responsibility as private-sector watchdogs, increased oversight of
the credit rating industry is a necessary and laudable development. Credit rating
agencies currently remain prominently in the spotlight of national, federal, and
international securities regulators.