[1] Prior to 1975, the SEC did not adopt specific standards for determining which credit rating agencies were "nationally recognized", and instead addressed the question on a case-by-case basis.
[3] In February 2009, the SEC promulgated amended regulations designed to address concerns about the integrity of the process by which NRSROs rate structured finance products, particularly mortgage-related securities.
Conversely, the predominance of the issuer-pays model has led to concerns that a CRA will be tempted to artificially inflate its rating to retain a valued customer.
These smaller CRAs argue that such a business model makes them less reliant on the good will of the issuers they rate, thereby eliminating one major potential conflict of interest.
[citation needed] The ratings agencies were heavily involved in the markets that enabled the subprime credit bubble of 2000-2008 and the subsequent financial crisis.
[9] By 2000, the NRSROs were making substantial profits from rating collateralized debt obligations (CDOs), residential mortgage-backed securities, and other varieties of structured finance connected to the subprime lending industry.
Buyers, like pension funds, university endowments, and local governments (Narvik Municipality, Norway lost the equivalent of US$36 million[10]), relied on these ratings in their decisions to purchase CDOs and other structured finance products.
The activities of the ratings agencies have been detailed in many books, including The Big Short by Michael Lewis, Confidence Game by Christine S. Richard, All The Devils are Here by Bethany McClean and Joe Nocera.
Janet Tavakoli, author of Structured Finance and Collateralized Debt Obligations, has suggested that these agencies lose their NRSRO status in relation to certain financial products.