<P> As part of the Sarbanes--Oxley Act of 2002, Congress ordered the U.S. SEC to develop a report, titled "Report on the Role and Function of Credit Rating Agencies in the Operation of the Securities Markets" detailing how credit ratings are used in U.S. regulation and the policy issues this use raises . Partly as a result of this report, in June 2003, the SEC published a "concept release" called "Rating Agencies and the Use of Credit Ratings under the Federal Securities Laws" that sought public comment on many of the issues raised in its report . Public comments on this concept release have also been published on the SEC's website . </P> <P> In December 2004, the International Organization of Securities Commissions (IOSCO) published a Code of Conduct for CRAs that, among other things, is designed to address the types of conflicts of interest that CRAs face . All of the major CRAs have agreed to sign on to this Code of Conduct and it has been praised by regulators ranging from the European Commission to the US SEC . </P> <P> Regulatory authorities and legislative bodies in the United States and other jurisdictions rely on credit rating agencies' assessments of a broad range of debt issuers, and thereby attach a regulatory function to their ratings . This regulatory role is a derivative function in that the agencies do not publish ratings for that purpose . Governing bodies at both the national and international level have woven credit ratings into minimum capital requirements for banks, allowable investment alternatives for many institutional investors, and similar restrictive regulations for insurance companies and other financial market participants . </P> <P> The use of credit ratings by regulatory agencies is not a new phenomenon . In the 1930s, regulators in the United States used credit rating agency ratings to prohibit banks from investing in bonds that were deemed to be below investment grade . In the following decades, state regulators outlined a similar role for agency ratings in restricting insurance company investments . From 1975 to 2006, the U.S. Securities and Exchange Commission (SEC) recognized the largest and most credible agencies as Nationally Recognized Statistical Rating Organizations, and relied on such agencies exclusively for distinguishing between grades of creditworthiness in various regulations under federal securities laws . The Credit Rating Agency Reform Act of 2006 created a voluntary registration system for CRAs that met a certain minimum criteria, and provided the SEC with broader oversight authority . </P>

Most rating services rate which of the following