Solicited vs. Unsolicited Rating

A solicited rating is one the issuer formally requests, providing access to financial data and often paying a fee. An unsolicited rating is assigned by an agency without issuer participation or consent. The distinction affects disclosure, data quality, publication, and perceived independence.

The solicited rating: standard practice for debt issuers

When a corporation issues a bond or a municipality borrows, the issuer typically contacts a rating agency and requests a formal assessment. The issuer then provides audited financial statements, loan covenants, management presentations, and confidential business forecasts. The agency runs its methodology, issues a draft grade, and often discusses the rationale with the issuer’s finance team. Once finalized, the rating is published in the agency’s database and regulatory filings.

This is the market standard. For most bond offerings, a solicited rating from at least one major agency is nearly mandatory. Investors expect it, compliance teams require it, and the issuer needs it to price the debt competitively. The issuer pays the agency a fee—often 0.10 to 0.50 basis points of the bond’s face value—making the rating a direct cost of market access.

Solicited ratings account for the vast majority of published grades. They are perceived as thorough because agencies have seen the issuer’s internal records, spoken to management, and understood forward guidance. But the fee arrangement also creates a conflict of interest: the agency is hired and paid by the entity it is rating. This has long troubled critics who note that an issuer dissatisfied with a draft grade might shop among agencies or threaten to withdraw the request, potentially biasing the final conclusion.

The unsolicited rating: the challenger’s perspective

An unsolicited rating is published by an agency without the issuer requesting it or paying a fee. The agency obtains information from public sources—SEC filings, news, regulatory records—and assigns a grade. This occurs for several reasons:

Market pressure. A large firm or sovereign issuer may become too prominent for agencies to ignore. An unsolicited rating establishes the agency’s view of its creditworthiness, even if the issuer declines a formal assessment.

Activist positioning. A hedge fund or investor may commission an unsolicited rating of a rival or target to shape market perception or inform short selling strategies.

Competitive differentiation. A smaller rating agency might issue unsolicited ratings to generate headlines and attract subscriber interest.

Coverage completeness. Some agencies apply unsolicited ratings to all public companies above a certain size, treating it as part of their market research offering.

Unsolicited ratings are always published—they have no confidential equivalent—but they are often flagged as unsolicited in the agency’s database and reports. This disclosure protects the agency by warning users that the issuer did not cooperate and that data quality may be lower.

Data access and analytical depth

The practical consequence of solicitation is access to privileged information. A solicited-rating analyst reviews management’s cash flow projections, management discussion and analysis (MD&A) far more detailed than public disclosures, loan agreements, and confidential strategic plans. For a corporation with a complex business, this depth is material. The analyst can ask the CFO directly about obscure accounting treatments or challenge revenue recognition assumptions.

An unsolicited analyst relies on audited financial statements, quarterly filings, press releases, and analyst reports. For a stable, mature firm with consistent disclosure, this may suffice. For a startup, a turnaround candidate, or a firm with convoluted financial statements, the gaps matter. The unsolicited analyst might misread a temporary dislocation or miss a material covenant clause buried in a debt prospectus.

The tradeoff is objectivity. Because the unsolicited analyst has no fee riding on the issuer’s satisfaction, there is theoretically less pressure to inflate a grade. This argument—that unsolicited ratings are more honest—has intuitive appeal but mixed empirical support. Studies show unsolicited ratings are often more conservative than their solicited equivalents, but this may reflect lower information quality rather than greater integrity.

Publication and market standing

Both solicited and unsolicited ratings are published. Both appear in credit rating databases, influence bond pricing, and are cited in financial disclosures. The key difference is that an unsolicited grade may be prominently labeled as such, signaling to users that it was generated without full issuer cooperation.

In some cases, an issuer objects to an unsolicited rating and may issue a press release contesting the grade or defending its financial position. The agency’s reputation then depends on whether its analysis holds up to rebuttal. A solicited rating rarely triggers public dispute; the issuer has already consented to the process and accepted the outcome.

Regulatory treatment and investor recognition

Under securities law, solicited and unsolicited ratings carry equal regulatory weight. An investor cannot hold an agency liable for an unsolicited rating simply because it lacked issuer input. Both must follow the rating agency methodology standards prescribed by the SEC and Dodd-Frank Act.

However, investors and market participants often perceive unsolicited ratings as secondary or exploratory. Institutional buyers typically rely on solicited ratings from the major agencies because those grades are visible in deal documents, trusted by compliance teams, and embedded in pricing models. An unsolicited rating from a niche agency might be correct but carries less market weight simply because fewer people see it.

The 2008 reckoning

The financial crisis exposed a darker side of solicitation. Mortgage banks and Wall Street underwriters hired agencies specifically to rate mortgage-backed securities and collateralized debt obligations. The issuers (or effectively, their arrangers) could influence which agency was hired, and agencies competed for business by being more aggressive in their ratings. An analyst who wanted her agency to win the next deal had reason to be lenient on the current one.

Unsolicited ratings, meanwhile, were rare in the structured-finance space. Agencies did not rate MBS or CDOs without explicit invitation because the assets were complex and required intimate access to loan-level data. No agency was willing to do that work speculatively. The result: the most dangerous securities in the system had only solicited ratings, and those ratings were inflated due to competitive pressure and misaligned incentives.

Post-2008 reforms—including the Dodd-Frank Act—tried to mitigate this by mandating rating agencies to disclose their methodologies and separating the rating group from business development. The ban on performance-based compensation for raters was also introduced. But the fundamental tension between solicitation (which funds the agency and gives access to data) and independence (which requires no issuer pressure) remains unresolved.

When unsolicited makes sense

Unsolicited ratings are most credible for large, mature, well-documented issuers—governments, multinational corporations, major municipalities. For these entities, public filings are comprehensive and the issuer’s credit profile is stable enough that an outsider’s analysis is reasonably reliable. A hedge fund might commission an unsolicited rating of a Fortune 500 firm and the conclusion, though unlicensed by the issuer, will carry market weight if the agency is reputable.

For smaller or more opaque borrowers, an unsolicited rating is often viewed as incomplete. If a high-yield company declines a formal rating, an agency’s unsolicited grade based on limited data is treated with skepticism.

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