View or download a PDF of the letter here.

Renee M. Jones
Director of Corporation Finance
Securities and Exchange Commission
100 F St NE
Washington, DC 20502 

January 20, 2022 

The following 10 undersigned organizations and individuals are calling for the Securities and Exchange  Commission (“the Commission”) to hold credit rating agencies responsible for false ratings by reversing the exemptions from legal liability the Commission gave them in 2010. 

Section 939G of Dodd Frank required each NRSRO, such as S&P Global, Moody’s Corporation, and Fitch  Ratings, to consent as an expert to include their credit ratings in the registration statements for rated  securities. Such inclusion would subject them to legal liability under Section 11 of the Securities Act of  1933.1 The Division of Corporation Finance’s no-action letter to Ford Motor Credit Company LLC on  November 23, 2010,2contravened the unambiguous language of Section 939G of Dodd-Frank and  Congress’s clear intent. Due to the Ford Motor Credit no-action letter, NRSROs remain one of the only participants in the financial system that benefit from being exempt from Section 11 liability. 

Section 939G was a specific response to the pervasive failures, profoundly misleading ratings, and  conflicts-of-interest at the credit rating agencies that enabled and helped drive $1 trillion in losses on  residential mortgage loans and related securities between 2006 and 2016.3 Estimates of the full cost of  the Great Financial Crisis of 2008 range between $5 trillion and $15 trillion.4 The Financial Crisis Inquiry  Commission (FCIC) specifically singled out the NRSROs for their responsibility in those losses, calling  them “essential cogs in the wheel of financial destruction.”5 By the end of 2017, around 30% to 35% of residential mortgage backed securities issued over a 10-year period originally rated AAA, the very  highest rating on par with the US government, ended up defaulting.6 

Numerous defendants including Goldman Sachs, Bank of America, J.P. Morgan, Credit Suisse, and  others have paid significant settlements in litigation related to these securities, with  estimates of financial institutions paying an astounding $250 billion since 2009.7 Yet the NRSROs largely  escaped liability from investor lawsuits. 

There are several indications that NRSROs are engaging in similar practices to those that were so  disastrous in the lead up they did to 2008, with commercial considerations driving changes to ratings  criteria.8 

The possibility of private litigation is a vitally important avenue of recourse for investors against  artificially inflated ratings that cause serious harm, and it would aid the transparent and efficient  functioning of capital markets.9 But it is blocked by the Ford Motor Credit no-action letter. 

The Commission should rescind the Ford Motor Credit no-action letter from 2010 and reinstate this  important path to accountability for NRSROs consistent with the intentions of Congress in Dodd-Frank.  

Signed 

Americans for Financial Reform Education Fund 

20/20 Vision 

Better Markets 

CreditSpectrum 

Croatan Institute 

Daniel Cash, Senior Lecturer in Law, Aston Law School 

Dean Leistikow, Professor of Finance, Fordham Gabelli School of Business

Frank Partnoy, Adrian A. Kragen Professor of Law, Berkeley School of Law 

Higher Education Inquirer 

Institute for Agriculture & Trade Policy