S.Amdt. 3972

SA 3972. Mr. LEVIN (for himself and Mr. Kaufman) submitted an
amendment intended to be proposed to amendment SA 3739 proposed by Mr.
Reid (for Mr. Dodd (for himself and Mrs. Lincoln)) to the bill S. 3217,
to promote the financial stability of the United States by improving
accountability and transparency in the financial system, to end ``too
big to fail'', to protect the American taxpayer by ending bailouts, to
protect consumers from abusive financial services practices, and for
other purposes; which was ordered to lie on the table; as follows:

On page 1006, strike line 17 and all that follows through
page 1007, line 2, and insert the following:
(A) by striking paragraph (2) and inserting the following:
``(2) Standards and oversight.--The Commission shall set
standards and exercise oversight of the procedures and
methodologies, including qualitative and quantitative data
and models, used by nationally recognized statistical rating
organizations, to ensure that the credit ratings issued by
the nationally recognized statistical rating organizations
have a reasonable foundation in fact and analysis. Nothing in
this paragraph may be construed to afford a defense against
any action or proceeding brought by the Commission to enforce
the antifraud provisions of the securities laws.''; and
On page 1019, line 14, strike ``with respect to'' and all
that follows through ``organization'' on line 18 and insert
``to ensure that the qualitative and quantitative data and
models used by nationally recognized statistical rating
organizations produce credit ratings that have a reasonable
foundation in fact and analysis. The rules prescribed under
this subsection shall require each nationally recognized
statistical rating organization''.
On page 1020, line 25, strike ``and''.
On page 1021, line 15, strike the period at the end and
insert the following: ``; and
``(4) to assign relatively greater credit risk to a
financial product or transaction for which--
``(A) the rating organization lacks adequate historical
performance data;
``(B) the assets are provided by persons with a history of
providing poorly performing assets;
``(C) income from the assets will not be directly
contributed to the securitization, product, or transaction;
``(D) publicly available information, including trading
information, indicates that a prior rating misjudged the
credit risk of the product or transaction;
``(E) the product or transaction is of sufficient
complexity or novelty that the performance of the product or
transaction cannot be reliably evaluated; or
``(F) there is any other feature that the Commission may
specify.
On page 1023, line 5, strike ``(A)'' and insert the
following:
``(A) Basic information.--Each nationally recognized
statistical rating organization shall disclose at the
beginning of the form developed under paragraph (1) basic
information about each of the credit ratings that is the
subject of the disclosure, including--
``(i) the latest rating provided for the product or
transaction that is the subject of the disclosure;
``(ii) the date upon which the rating described in clause
(i) was issued;
``(iii) whether that rating described in clause (i) was
intended to be effective for less or more than 1 year after
the date of issuance of the rating;
``(iv) the type of asset to which the rating described in
clause (i) applies;
``(v) the history and date of any prior rating with respect
to the product or transaction during the 5-year period
preceding the date of the disclosure; and
``(vi) any other basic information, as the Commission may
require.
``(B)
On page 1025, line 19, strike ``(B)'' and insert ``(C)''.
On page 1028 between lines 4 and 5 insert the following:
``(E) No reliance on inadequate report.--A nationally
recognized statistical rating organization may not rely on a
third-party due diligence report if the nationally recognized
statistical rating organization has reason to believe that
the report is inadequate.
On page 1042, strike line 15 and all that follows through
page 1043, line 9, and insert the following:

SEC. 939B. ELIMINATING CONFLICTS OF INTEREST THROUGH
INTERMEDIATION.

(a) Intermediation Proposal.--Not later than 180 days after
the date of enactment of this Act, the Commission, through
the Office of Credit Ratings, shall issue a notice of
proposed rulemaking--

[[Page S3565]]

(1) to establish a system that--
(A) allows an intermediary to handle the fees provided by
issuers to obtain credit ratings from nationally recognized
statistical rating organizations, in order to avoid conflicts
of interest that arise when an issuer pays for a credit
rating with respect to a financial product or transaction
that the issuer plans to sell or execute; and
(B) enables such intermediary to receive fees from issuers,
direct fees to nationally recognized statistical rating
organizations, and create incentives to reward accurate
ratings; and
(2) that directs or facilitates the formation of, or
identifies, an intermediary to carry out the system described
in paragraph (1).
On page 1044, between lines 2 and 3, insert the following:

SEC. 939D. STRENGTHENING THE ENFORCEMENT AUTHORITY OF THE
COMMISSION OVER NATIONALLY RECOGNIZED
STATISTICAL RATING ORGANIZATIONS.

(a) Requirement to File Applications and Reports With
Commission.--Section 15E of the Securities Exchange Act of
1934 (15 U.S.C. 78o-7) is amended--
(1) in subsection (a)--
(A) in paragraph (1)(A), by striking ``furnish to'' and
inserting ``file with''; and
(B) in paragraph (2), by striking ``furnished to'' each
place that term appears and inserting ``filed with'';
(2) in subsection (b)--
(A) in paragraph (1)(A), by striking ``furnished'' and
inserting ``filed'';
(B) in paragraph (2), in the matter preceding subparagraph
(A), by striking ``furnish to'' and inserting ``file with'';
and
(C) by striking ``furnishing'' each place that term appears
and inserting ``filing'';
(3) in subsection (d)(1), as so redesignated by this Act--
(A) in subparagraph (B), by striking ``furnished to'' and
inserting ``filed with''; and
(B) in subparagraph (D), by striking ``furnish'' and
inserting ``file'';
(4) in subsection (e)(1), by striking ``furnishing a
written notice of withdrawal to the Commission'' and
inserting ``filing a written notice of withdrawal with the
Commission'';
(5) in subsection (k), by striking ``furnish to'' and
inserting ``file with'';
(6) in subsection (l)(2)(A)(i), by striking ``furnished''
and inserting ``filed''; and
(7) in subsection (m)(2), by striking ``furnished'' and
inserting ``filed''.
(b) Authority to Sanction Associated Persons.--Section
15E(d)(1) of the Securities Exchange Act of 1934 (15 U.S.C.
78o-7), as amended by this Act, is amended--
(1) by inserting after ``or revoke the registration of any
nationally recognized statistical rating organization'' the
following: ``, or take enforcement action against or sanction
any person who is or was associated, or is or was seeking to
become associated, with a nationally recognized statistical
rating organization,''; and
(2) by inserting ``bar,'' after ``placing of limitations,
suspension,''.
______