ABSTRACT
The term nationally recognized statistical rating organization (NRSRO) originally was adopted by the commission solely for purposes of distinguishing different grades of debt securities under its net capital rule, Exchange Act rule 15c3-l. However, the use of certain debt ratings by NRSROs, as the basis for awarding benefits that otherwise are not available to securities that are unrated or rated in a lower rating category, has expanded well beyond the original intended use of the concept in the net capital rule. The Multijurisdictional Disclosure (MJDS) rules are one example. Any proposed package of amendments to the net capital rule should of course first define the term NRSRO. The adoption of amendments to the net capital rule is necessary to make sure that the use of ratings in the commission's rules and regulations continues: to enhance the financial safety and soundness of regulated entities, to promote investor protection, and to serve as a proxy of market liquidity and efficiency.
