Security Rating Law and Legal Definition

Security rating means the system for rating or classifying a security by financial strength, stability, or risk. In this system credit and investment risk of securities issues are evaluated by commercial Rating agencies. Most firms adopt this system to grade securities. It is also called as security grade, security grading, and security rate.

Generally there are three major rating services such as Fitch, Moody, and Standard & Poor. They use AAA as their highest rating and grade down through Bs and Cs. Securities rated AAA, AA, A, and BBB are considered investment-grade. Higher-rated bonds provide lower returns.