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The Credit Rating Agency Reform Act of 2006 (Public Law 109-291, 120 Stat. 1327-1339) amends the Securities Exchange Act of 1934 to require nationally recognized statistical rating organizations (NRSROs) to register with the Securities and Exchange Commission (SEC).

It requires registration applications to include on a confidential basis: (1) a list of the 20 largest securities issuers and subscribers that use the applicant's rating services; and (2) certifications from at least 10 qualified institutional buyers (QIBs) that they have used the ratings for at least the three most recent years, unless the specified exception applies.

It requires the SEC within 90 days of receiving an application to grant such registration or institute proceedings to determine whether to grant such registration.

It requires each NRSRO to certify annually that the application documents (other than the QIB certifications) remain accurate, and to list any material changes that occurred.

It grants the SEC exclusive enforcement authority over any NRSRO that issues credit ratings in material contravention of the procedures included in its registration application.

It prohibits the SEC or any state or local government from regulating the substance of credit ratings or the procedures and methodologies by which a NRSRO determines credit ratings.

It requires SEC rules to be narrowly tailored, and not purport to regulate either the substance of credit ratings or the procedures and methodologies by which NRSROs determine credit ratings.

It provides for censure, denial, suspension, or revocation of NRSRO registration.

It states that it shall be unlawful for: (1) an NRSRO to represent or imply that it has been designated, sponsored, recommended, or approved, or that its abilities or qualifications have in any respect been passed upon, by the United States or any federal agency, officer, or employee; or (2) a credit rating agency that is not registered as a NRSRO under this Act to state that it is so registered.

It requires each NRSRO to establish and enforce written policies and procedures to: (1) prevent the misuse of nonpublic information; and (2) manage conflicts of interest.

It directs the SEC to issue final rules to prohibit specified unfair, coercive, or abusive acts or practices by NRSROs.

It requires an NRSRO to: (1) designate a compliance officer to ensure compliance with securities laws, rules, and regulations; and (2) furnish the SEC with financial statements certified by an independent public accountant.

It makes registration under this Act the sole method of NRSRO registration. It prohibits any credit rating agency treated as an NRSRO before enactment of this Act from relying on no-action relief for continued treatment as an NRSRO in lieu of active registration.

It preempts any state and local law requiring the registration, licensing, or qualification of an NRSRO (or any employee or contractor) as a credit rating agency or an NRSRO. It declares, however, that nothing in this preemption prohibits a state securities commission from investigating and bringing an enforcement action with respect to fraud or deceit against any NRSRO or associated person.

It amends specified Acts to reflect the provisions of this Act.

It amends the Investment Advisers Act of 1940 to exclude any NRSRO from the meaning of investment adviser unless it engages in issuing recommendations as to purchasing, selling, or holding securities or in managing assets, consisting in whole or in part of securities, on behalf of others.

It directs the SEC to report annually to specified congressional committees on: (1) applicants for NRSRO registration; (2) actions taken on such applications; and (3) the views of the SEC on the state of competition, transparency, and conflicts of interest among NRSROs.

It requires the Comptroller General to study and report to certain congressional committees on the impact of this Act upon: (1) the quality of credit ratings issued by NRSROs; (2) the financial markets; (3) competition among credit rating agencies; and (4) the incidence of inappropriate conflicts of interest and sales practices by NRSROs. (Bill: S. 3850)