SEC Commissioner Aguilar Issues Statement Warning the Rating Agencies That Received Exemptive Orders

SEC Commissioner Aguilar issued a statement regarding the recent exemptive orders for Morningstar Credit Ratings and Kroll Bond Rating Agency, both registered Nationally Recognized Statistical Rating Organizations ("NRSROs"), regarding Exchange Act Rule 17g-5(c)(1) ("Conflicts of Interest").

In his statement, Commissioner Aguilar noted that this is the third exemptive order that has been granted to both companies, explaining that "exemptive relief from compliance of the law should not be granted in perpetuity." He went on to state that when an exemptive order is granted, it comes with an expectation that companies "must take steps to comply with the law as soon as possible."

Commissioner Aguilar stated that the exemptive orders do not provide a clear and concrete timetable indicating when each NRSRO will comply with the rule. However, he expects the companies will make "good faith" efforts to come into full compliance with the rule over the next two years, and that the Orders' limitation on the maximum percentage of net revenues that each NRSRO may earn from a single client will be lowered as a condition for granting any necessary future relief.

See: Commissioner Aguilar's Statement.Related news: SEC Grants Two Rating Agencies Temporary Exemptions from Conflicts of Interest Rule (January 2, 2013); SEC Order Extending Temporary Conditional Exemption for Nationally Recognized Statistical Rating Organizations (November 22, 2013) SEC Issues Annual Staff Reports on Credit Rating Agencies (December 24, 2013) SEC Removes References to NRSRO Ratings in Certain Rules and Forms (with Lofchie Comment) (December 27, 2013).