A nationally recognised statistical rating organisation (NRSRO) is a credit rating agency registered with the US Securities and Exchange Commission (SEC) for one or more specified classes of credit ratings. In a portfolio report that distinguishes rating sources by registration, the match depends on who issued the credit rating, which class it falls in and when the registration was in effect. The letter grade is a separate field. Securities Exchange Act § 15E(a).
Check the agency and the class
The SEC can grant registration in any of five classes. One covers financial institutions, brokers and dealers. The others cover insurance companies, corporate issuers, issuers of asset-backed securities, and issuers of US government, municipal or foreign government securities. An agency registered for one class can have a different registration scope from another agency on the same list. Exchange Act § 3(a)(62).
Start with the SEC’s current list and match the entity that issued the rating. On its Form NRSRO, Item 1 identifies the filer, Item 3 lists affiliates that issue ratings on its behalf, and Item 7A shows the classes in which it is already registered. Item 6A lists classes applied for. For a historical report, use filings and SEC orders or notices that establish the registration and class as of the relevant date. SEC list and filings, Form NRSRO.
Registration carries ongoing obligations. Agencies file an annual certification, and the SEC’s Office of Credit Ratings examines each NRSRO at least annually, including how it manages conflicts of interest. Individual grades remain the agency’s opinions. Any investment eligibility test comes from the terms of the applicable mandate or rule. Exchange Act § 15E(b), (c), (f) and (p).
Three bonds, two rating sources
A fictional report covers three corporate bonds from nonfinancial companies. Each bond has 10 notional units and one recorded rating. On the report date, Provider A is stipulated to be SEC-registered for corporate issuer ratings and rates two bonds. Provider B rates the third and is stipulated to be SEC-registered only for insurance company ratings. The report groups 20 notional units under sources registered for the corporate issuer class and 10 under sources outside that class. All 30 units have a recorded rating.
The same provider can appear on the SEC list and still fall outside the class used by this report.