Sebi lists rules for suspended CRAs

1 min read . Updated: 14 Oct 2022, 01:46 AM IST Priyanka Gawande

The agency must cooperate with Sebi in terms of sharing necessary information. HT

This follows the recent episode where the market regulator cancelled the licence of Brickwork Ratings

MUMBAI : The Securities and Exchange Board of India (Sebi) on Thursday outlined multiple steps to be followed by registered credit rating agencies (CRA) in case their licence is suspended, cancelled or surrendered on request.

This follows the recent episode where the market regulator cancelled the licence of Brickwork Ratings over lapses in rating some large issuers including IDFC, Welspun and Adani Rail. Sebi also ordered shutting down the rating agency and prohibited it from taking on any new clients. Following this, a number of corporates which were working with Brickwork Ratings are now changing their rating agencies.

After receiving a cancellation order from the regulator or while pursuing a surrender request, the CRA should diligently disclose the said order or request on its official website, and it should be promptly communicated to the clients within 15 days of receipt of the order, a Sebi circular said.

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“Such rating agency should not take any new clients but should allow its clients to withdraw any assignment to the CRA without any additional cost to the clients," it said. Under the CRA regulations, the rating agencies will have to aid in facilitating an orderly migration of assignments as desired by clients to other registered CRAs. Once the licence is cancelled or suspended, the agency on priority has to handover the cancelled registration certificate to Sebi. The CRA also has to ensure that it does not represent itself as holder of certificate while providing ratings to clients. The agency must also cooperate with Sebi in terms of sharing necessary information as asked by the regulator, and pay the required fees under CRA regulations. The rating agency also has to comply with the CRA regulations so long as it holds a valid registration certificate, the market watchdog said.

ABOUT THE AUTHOR

Priyanka Gawande

Priyanka Gawande is a senior legal correspondent at Mint. She has worked as legal reporter for four years with both television and digital mediums. Based in Mumbai, she reports on disputes across sectors including banking, corporates and finance. This also includes insolvency and bankruptcy cases and intellectual property rights (IPR) litigation. Her focus also comprises tracking capital markets and disputes relating to securities law. Previously, Priyanka worked with Informist Media for 2.5 years covering major insolvency and bankruptcy cases and corporate developments. She started her career in journalism with Business Television India (BTVi) where she reported on primary markets, banking, finance and insurance companies.