Committee Reports

Request for Permanent Extraterritoriality Exemption from Rule 17g-5(a)(3) Requirements under the Securities Exchange Act


The Structured Finance Committee (Patrick Dolan, Chair) sent a letter to the Securities and Exchange Commission Office of Credit Ratings requesting that it make permanent the exemption for extraterritorial ratings under Rule 17g-5(a)(3). The Rule requires that when a nationally recognized statistical rating organization (an “NRSRO”) is hired by an arranger to determine an initial credit rating for a structured finance product, the NRSRO must “take certain steps designed to allow an NRSRO that is not hired by the arranger to nonetheless determine an initial credit rating – and subsequently monitor that credit rating – for the structured finance product.”  Since, May 2010, the Commission has issued seven temporary conditional exemptions that exempt NRSROs from compliance with Rule 17g-5(a)(3) with respect to credit ratings where (1) the issuer of the structured finance product is a non-U.S. person, and (2) the NRSRO has a reasonable basis to conclude that the product will be offered and sold upon issuance, and that any arranger linked to the structured finance product will effect transactions of the product after issuance only in transactions outside of the U.S.  The Committee joins other commenters in requesting that the temporary conditional exemption for non-U.S. offered transactions be made permanent.