By Cydney Posner

Here is another rule amendment by the SEC designed to implement the DFA.  More specifically, this amendment implements DFA Section 939B, which requires that the SEC amend Reg FD to remove the specific exemption for disclosures made to nationally recognized statistical rating organizations and credit rating agencies, such as Moody's or S&P, for the purpose of determining or monitoring credit ratings. (Mechanically, the amendment removes Rule 100(b)(2)(iii) of Reg FD and re-designates Rule 100(b)(2)(iv) as Rule 100(b)(2)(iii).) Prior to the amendment, the rule provided that companies did not need to make public (pursuant to Reg FD) material nonpublic information that was disclosed to a credit rating agency that made its credit ratings publicly available or that was made pursuant to Rule 17g-5(a)(3) to an NRSRO. The rule change eliminating this exception will become effective upon publication in the Federal Register.

The SEC's action in amending Reg FD is, however, not terribly significant. Reg FD applies to communications to certain market participants, including investment advisers. Although at one point, most rating agencies were investment advisers registered with the SEC and would have been subject to Reg FD, but for the exception, subsequently, the major credit rating agencies terminated their registration as investment advisers and qualified instead as nationally recognized statistical rating organizations (NRSROs). As a result, it is unlikely that they would still be among the enumerated persons that trigger FD violations. That means that the exception for credit rating agencies was largely no longer necessary and that elimination of the exception is unlikely to have any real impact at this point.

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