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SEC Removes References to NRSRO Ratings in Certain Rules and Forms

by   |   January 4, 2014

The SEC has adopted amendments (here and here) to eliminate references in certain of its rules and forms to credit ratings by nationally recognized statistical rating organizations, or NRSROs.

The changes were required by the Dodd-Frank Wall Street Reform and Consumer Protection Act and remove credit rating references from:

  • Rule 5b-3 under the Investment Company Act — a rule that permits funds to look through repurchase agreements to the underlying collateral securities for certain counterparty limitation and diversification purposes provided the collateral meets certain credit quality standards
  • Forms N-1A, N-2, and N-3 — forms that contain requirements for funds to report information about their activities to shareholders, including information about the credit quality of their portfolios
  • Rule 15c3-1 (and certain appendices) under the Securities Exchange Act of 1934 — a rule that requires broker-dealers to maintain more than a dollar of highly liquid assets for each dollar of liabilities, which helps ensure that if the broker-dealer fails, it will have sufficient liquid assets to cover its liabilities
  • Rule 15c3-3 under the Securities Exchange Act of 1934 — a rule that prohibits broker-dealers from using customer securities and cash to finance the firm’s own business.  By segregating customer securities and cash from the firm’s proprietary business activities, the rule increases the likelihood that customer assets will be readily available to be returned to customers if the broker-dealer fails.
  • Rule 10b-10 under the Securities Exchange Act of 1934 — the SEC’s confirmation rule that generally requires broker-dealers effecting transactions for customers in securities other than U.S. savings bonds or municipal securities to provide those customers with written notification of the terms of the transaction at or before the completion of the transaction.

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