Municipal Bond Fairness Act - Amends the Securities Exchange Act of 1934 to direct the Securities and Exchange Commission (SEC) to require each registered nationally recognized statistical rating organization (NSRO) (credit rating agency) to establish, maintain, and enforce written policies and procedures reasonably designed to: (1) establish and maintain credit ratings with respect to securities and money market instruments designed to assess the risk that investors in such instruments may not receive payment in accordance with their terms of issuance; and (2) define clearly any rating symbol and apply it consistently.
Permits an NSRO to use or consider the following when assessing the risk that an investor in a security or money market instrument will not receive repayment in accordance with the terms of issuance: (1) additional credit factors that it has documented and disclosed; (2) credit factors that are unique to municipal securities that are not backed by the issuer's full faith and credit; or (3) an additional credit rating symbol to distinguish ratings of a certain type of security or money market instrument from ratings of any other types.
Prohibits the SEC from imposing any requirement that prevents an NSRO from establishing ratings that are complementary to such mandatory ratings and that are created to measure a discrete aspect of risk.
Directs the SEC to establish performance measures to consider when deciding whether to initiate a review concerning whether an NSRO has failed to adhere to its procedures and methodologies for issuing ratings.
[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2549 Introduced in House (IH)]
111th CONGRESS
1st Session
H. R. 2549
To ensure uniform and accurate credit rating of municipal bonds and
provide for a review of the municipal bond insurance industry.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
May 21, 2009
Mr. Capuano (for himself, Mr. Maffei, Mr. Kanjorski, Mr. Frank of
Massachusetts, Mr. Cleaver, Mr. Baca, Mr. Moran of Virginia, Mr.
Andrews, and Mr. Connolly of Virginia) introduced the following bill;
which was referred to the Committee on Financial Services
_______________________________________________________________________
A BILL
To ensure uniform and accurate credit rating of municipal bonds and
provide for a review of the municipal bond insurance industry.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Municipal Bond Fairness Act''.
SEC. 2. PRESERVATION OF AUTHORITY TO PREVENT DISCRIMINATION.
Section 15E of the Securities Exchange Act of 1934 (15 U.S.C. 78o-
7) is amended--
(1) by redesignating subsection (p) as subsection (q); and
(2) by inserting after subsection (o) the following new
subsection:
``(p) Ratings Clarity and Consistency.--
``(1) Commission obligation.--Subject to paragraphs (2) and
(3), the Commission shall require each nationally recognized
statistical rating organization that is registered under this
section to establish, maintain, and enforce written policies
and procedures reasonably designed--
``(A) to establish and maintain credit ratings with
respect to securities and money market instruments
designed to assess the risk that investors in
securities and money market instruments may not receive
payment in accordance with the terms of issuance of
such securities and instruments;
``(B) to define clearly any rating symbol used by
that organization; and
``(C) to apply such rating symbol in a consistent
manner for all types of securities and money market
instruments.
``(2) Additional credit factors.--Nothing in paragraph
(1)(A), (B), or (C)--
``(A) prohibits a nationally recognized statistical
rating organization from using additional credit
factors that are documented and disclosed by the
organization and that have a demonstrated impact on the
risk an investor in a security or money market
instrument will not receive repayment in accordance
with the terms of issuance;
``(B) prohibits a nationally recognized statistical
rating organization from considering credit factors
that are unique to municipal securities that are not
backed by the issuer's full faith and credit in its
assessment of the risk an investor in a security or
money market instrument will not receive repayment in
accordance with the terms of issuance; or
``(C) prohibits a nationally recognized statistical
rating organization from using an additional symbol
with respect to the ratings described in paragraph
(1)(A) for the purpose of distinguishing the ratings of
a certain type of security or money market instrument
from ratings of any other types of securities or money
market instruments.
``(3) Complementary ratings.--The Commission shall not
impose any requirement under paragraph (1) that prevents
nationally recognized statistical rating organizations from
establishing ratings that are complementary to the ratings
described in paragraph (1)(A) and that are created to measure a
discrete aspect of the security's or instrument's risk.
``(4) Review.--
``(A) Performance measures.--The Commission shall,
by rule, establish performance measures that the
Commission shall consider when deciding whether to
initiate a review concerning whether a nationally
recognized statistical rating organization has failed
to adhere to such organization's stated procedures and
methodologies for issuing ratings on securities or
money market instruments.
``(B) Consideration of evidence.--Performance
measures the Commission may consider in initiating a
review of an organization's ratings in each of the
categories described in clauses (i) through (v) of
section 3(a)(62)(B) during an appropriate interval (as
determined by the Commission) include the transition
and default rates of its in discrete asset classes.''.
SEC. 3. IMPLEMENTATION.
The Securities and Exchange Commission shall prescribe rules to
implement the amendments made by section 101 within 270 days after the
date of enactment of this Act.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Financial Services.
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