Congress Reconsiders Securities Act Expert Liability Rule for Rating Agencies

April 21, 2011
U.S. Rep. Steve Stivers (R-Oh) recently introduced a bill to repeal Section 939G of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Section 939G repealed Rule 436(g) of the Securities Act of 1933, which had shielded nationally recognized statistical rating organizations whose ratings were disclosed in a registration statement from potential exposure to “expert liability” under Section 11 of the Securities Act of 1933. If H.R. 1539 is enacted, NRSRO ratings can again be disclosed in registration statements without fear of exposing the agencies to expert liability under the Securities Act. This update examines the bill and its potential effects on ratings agencies.