In the Matter of Kroll Bond Rating Agency, LLC
Admin. Proc. File No. 3-20097

On September 29, 2020, the Commission instituted and simultaneously settled public administrative and cease-and-desist proceedings (the “Order”) against Kroll Bond Rating Agency, LLC (“KBRA” or the “Respondent”) in connection with its rating of certain collateralized loan obligation (“CLO”) combination notes (“Combo Notes”). The Commission found that from at least November 2018, KBRA, a Nationally Recognized Statistical Rating Organization, failed to establish, maintain, enforce and document certain policies and procedures reasonably designed to assess the probability that an issuer of CLO Combo Notes will default, fail to make timely payments, or otherwise not make payments to investors in accordance with the terms of the security, as required by Rule 17g-8(b)(1) of the Exchange Act. As a result, KBRA issued and maintained ratings of CLO Combo Notes that departed from the objectives set forth in Rule 17g-8(b)(1). The Commission ordered the Respondent to pay disgorgement of $160,000.00, prejudgment interest of $4,836.33, and civil penalties of $600,000.00. The Commission created a Fair Fund (the “Fair Fund”) pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, so the penalties, along with the disgorgement and prejudgment interest, could be distributed to the investors harmed by the Respondent’s violations as described in the Order. See the Commission’s Order: Release No. 34-90037.

On September 29, 2020, the Commission also issued an order directing the disbursement of $164,094.87 of the Fair Fund to the CLO” Combo Note issuers that paid for the credit ratings and were harmed by KBRA’s violations as described in the Order. The Commission further ordered that any amounts remaining in the Fair Fund after completion of the distribution and the payment of any tax related obligations that are infeasible to return to the issuers shall be transferred to the general fund of the U.S. Treasury, subject to Section 21F(g)(3) of the Exchange Act. See the Commission’s Order: Release No. 34-90038.

On November 5, 2020, the Commission issued an order appointing Miller Kaplan Arase LLP as the Tax Administrator of the Fair Fund. See the Commission’s Order: Release No. 34-90348.

In accordance with the order directing disbursement, the Commission distributed $164,094.87 of the Fair Fund to the CLO Combo Note issuers that paid for the credit ratings and were harmed by KBRA’s violations. The distribution is complete.