Ratings Disclosures in Registered Offerings
July 21, 2010
One immediate effect of the Dodd-Frank Wall Street Reform and Consumer Protection Act is to repeal Securities Act Rule 436(g). Under that rule, an issuer that referred to credit ratings in a Securities Act registration statement or a prospectus for a registered offering did not need to file the consent of the rating agency. Beginning tomorrow, disclosure of ratings may, depending on the circumstances, require the filing of rating agency consent. The principal rating agencies are currently unwilling to provide such consents, and many issuers have information concerning their credit ratings in existing base prospectuses on file with the SEC or in Exchange Act filings that are incorporated by reference into their prospectuses.
To assist issuers in complying with the consent requirement, Cleary Gottlieb and a group of other firms have agreed, after consultation with the SEC staff, on a common interpretation of how the revised rule should be applied in various situations (not including asset-backed securities offerings). That guidance is summarized in the attached outline, but we also understand that the SEC staff is considering issuing interpretations addressing this subject in the very near future.
Issuers preparing to file reports on Form 10-Q or 6-K or preparing for an offering should consider carefully any ratings references in their upcoming filings and whether they will require a consent from the relevant rating agency.