DBRS Responds to Canadian Regulatory Proposal for Designated Rating Organizations

DBRS has commented on the Proposed National Instrument 25-101 Designated Rating Organizations (the Proposed Instrument), Related Policies and Consequential Amendments (collectively referred to as the Proposed Materials)* issued by the Canadian Securities Administrators (CSA).

At present, credit rating agencies or credit rating organizations (CROs) are not subject to formal securities regulatory oversight in Canada. The CSA proposes to develop and implement a securities regulatory regime for CROs that wish to have their credit ratings eligible for use in places where credit ratings are referred to in Canadian securities legislation that is consistent with international standards and developments. The CSA has recognized that CROs have a significant impact on financial markets and play a critical role in the capital markets.

As a global CRO, DBRS is regulated in other jurisdictions such as the United States** and in the European Union.*** DBRS believes that a transparent regulatory framework serves to drive commitment to high standards, facilitates ongoing regulatory dialogue and supports investor and market education.

On the whole, DBRS believes that the CSA’s Proposed Materials set the appropriate groundwork for regulating CROs in Canada. The Proposed Instrument includes the IOSCO Code of Conduct Fundamentals for Credit Rating Agencies (IOSCO Code) as its central tenet, with additional requirements for conflicts of interest, confidential information, compliance and governance. The Consequential Amendments require issuers to publicly disclose certain ratings information. DBRS’s comment letter is available on www.dbrs.com under Regulatory Affairs.

DBRS has its headquarters in Toronto, with offices in Chicago, London and New York, and covers entities worldwide.

Notes:
* Includes the following, collectively referred to as the Proposed Materials:
– National Instrument 25-101 Designated Rating Organizations (the Proposed Instrument)
– Companion Policy 25-101CP to National Instrument 25-101 Designated Rating Organizations (the Proposed Companion Policy)
– Consequential amendments to National Instrument 41-101 General Prospectus Requirements
– Consequential amendments to National Instrument 44-101 Short Form Prospectus Distributions
– Consequential amendments to National Instrument 51-102 Continuous Disclosure Obligations
– National Policy 11-205 Process for Designation as a Designated Rating Organization in Multiple Jurisdictions (the Proposed NP 11-205)

** DBRS is registered with the U.S. Securities and Exchange Commission (SEC) as a Nationally Recognized Statistical Rating Organization (NRSRO) pursuant to the Credit Rating Agency Reform Act of 2006 (CRA Reform Act) and the rules adopted thereunder. Prior to the implementation of the CRA Reform Act, DBRS was designated as an NRSRO by the staff of the SEC’s Division of Market Regulation.

*** Regulation (EC) No 1060/2009 of the European Parliament and of the Council on Credit Rating Agencies came into effect in December 2009 (EU CRA Regulation). As an existing CRO with regulatory recognition as an external credit assessment institution (ECAI), DBRS was required to apply for registration under the EU CRA Regulation by September 7, 2010.

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