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The Securities and Exchange Board of India (Credit Rating Agencies) Regulations, 1999 were enacted to provide the procedure for credit rating agencies.
Brief History of the Regulations
The Securities and Exchange Board of India (SEBI) has enacted the SEBI (Credit Rating Agencies) Regulations, 1999 by the powers conferred under Section 30 read with Section 11 of the SEBI Act, 1992 on 07th July, 1999.
List of Amendments
- SEBI (Investment Advice by Intermediaries) (Amendment) Regulations, 2001
- SEBI (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002
- SEBI (Credit Rating Agencies) (Amendment) Regulations, 2003
- SEBI (Credit Rating Agencies) (Second Amendment) Regulations, 2003
- SEBI India (Criteria for Fit and Proper Person) Regulations, 2004
- SEBI (Intermediaries) Regulations, 2008
- SEBI (Credit Rating Agencies) (Amendment) Regulations, 2010
- SEBI (Credit Rating Agencies) (Amendment) Regulations, 2011
- SEBI (Credit Rating Agencies) (Second Amendment) Regulations, 2011
- SEBI (Change in Conditions of Registration of Certain Intermediaries) (Amendment) Regulations, 2011
- SEBI (Payment of Fees) (Amendment) Regulations, 2014
- SEBI (Change in Conditions of Registration of Certain Intermediaries) (Amendment) Regulations, 2016
- SEBI (Payment of Fees and Mode of Payment) (Amendment) Regulations, 2017
- SEBI (Credit Rating Agencies) (Amendment) Regulations, 2018
Table of Contents
1. Important Definitions
Associate in relation to a credit rating agency includes a person who directly or indirectly, by himself, or in combination with relatives, owns or controls shares carrying not less than 10% of the voting rights of the credit rating agency, or in respect of whom the credit rating agency, directly or indirectly, by itself, or in combination with other persons, owns or controls shares carrying not less than ten percent of the voting rights, or majority of the directors of which, own or control shares carrying not less than ten percent of the voting rights of the credit rating agency, or whose director, officer or employee is also a director, officer or employee of the credit rating agency.
Certificate means a certificate of registration granted by the Board under these regulations.
Change in Control in relation to a credit rating agency being a body corporate, means, if its shares are listed on any recognised stock exchange, change in control as defined under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 and in any other case, change in the controlling interest in the body corporate. Controlling interest for the present purpose means an interest, whether direct or indirect, to the extent of at least 51% of voting rights in the body corporate.
Client means any person whose securities are rated by a credit rating agency.
Credit Rating Agency means a body corporate which is engaged in the business of rating of securities offered by way of public or rights issue.
Economic Offence means an offence to which the Economic Offences (Inapplicability of Limitation) Act, 1974 is applicable.
Fraud has the same meaning as assigned under the Indian Contract Act, 1872.
Issuer means a person whose securities are proposed to be rated by a credit rating agency.
Net Worth means the aggregate value of the paid up equity capital and free reserves (excluding reserves created out of revaluation), reduced by the aggregate value of accumulated losses and deferred expenditure not written off, including miscellaneous expenses not written off.
Rating means an opinion regarding securities, expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency and used by the issuer of such securities, to comply with a requirement specified by these regulations.
Rating Committee means a committee constituted by a credit rating agency to assign rating to a security.
2. Registration of Credit Rating Agencies
2.1 General Procedure
- Any person proposing to commence any activity as a credit rating agency on or after the date of commencement of these regulations has to make an application to the Board for the grant of a certificate of registration for the purpose.
- The Board cannot consider an application unless the applicant is promoted by a person belonging to any of the following categories, which are a public financial institution, as defined under the Companies Act, 2013, a scheduled commercial bank included for the time being in the Second Schedule to the Reserve Bank of India Act, 1934, a foreign bank operating in India with the approval of the Reserve Bank of India, a foreign credit rating agency incorporated in a Financial Action Task Force (FATF) Member jurisdiction and recognised under their law, having a minimum of 5 years experience in rating securities or any company or a body corporate, having continuous net worth of minimum INR 100 crores as per its audited annual accounts for the previous 5 years prior to filing of the application with the Board for the grant of certificate under these regulations.
- Any application for a certificate, which is not complete in all respects or does not conform to the requirement of Regulation 5 or instructions specified in Form A has to be rejected by the Board. Before rejecting any such application, the applicant has to be given an opportunity to remove, within 30 days of the date of receipt of relevant communication, from the Board such objections as may be indicated by the Board. The Board may, on sufficient reason being shown, extend the time for removal of objections by such further time, not exceeding 30 days, as the Board may consider fit to enable the applicant to remove such objections.
- The Board may require the applicant to furnish such further information or clarification as the Board may consider necessary, for the purpose of processing of the application.
- The Board, if it so desires, may ask the applicant or its authorised representative to appear before the Board, for personal representation in connection with the grant of a certificate.
- The Board, on being satisfied that the applicant is eligible, has to grant a certificate of registration in Form B and has to send an intimation to the applicant. The certificate of registration granted is valid unless it is suspended or cancelled by the Board.
- The credit rating agency who has already been granted certificate of registration by the Board, prior to the commencement of the SEBI (Change in Conditions of Registration of Certain Intermediaries) (Amendment) Regulations, 2016 has to be deemed to have been granted a certificate of registration.
- The grant of a certificate of registration is subject to payment of the registration fees as specified under Part A of Second Schedule, in the manner prescribed in Part B.
- If, after considering an application made, the Board is of the opinion that a certificate of registration should not be granted, it may, after giving the applicant a reasonable opportunity of being heard, reject the application.
- The decision of the Board, not to grant certificate of initial or permanent registration, as the case may be, has to be communicated by the Board to the applicant within a period of 30 days of such decision, stating the grounds of the decision.
- Any applicant aggrieved by the decision of the Board rejecting his application may, within a period of 30 days from the date of receipt by him of the communication of rejection, apply to the Board in writing for reconsideration of such decision.
- When an application for reconsideration is made, the Board has to consider the application and communicate to the applicant its decision in writing, as soon as possible.
2.2 Eligibility Criteria
- The applicant is set up and registered as a company under the Companies Act, 2013.
- The applicant has, in its memorandum of association, specified rating activity as one of its main objects.
- The applicant has a minimum net worth of INR 25 crores.
- The applicant has adequate infrastructure, to enable it to provide rating services in accordance with the provisions of the Act and these regulations.
- The applicant and the promoters of the applicant, have professional competence, financial soundness and general reputation of fairness and integrity in business transactions, to the satisfaction of the Board.
- Neither the applicant, nor its promoter, nor any director of the applicant or its promoter, is involved in any legal proceeding connected with the securities market, which may have an adverse impact on the interests of the investors.
- Neither the applicant, nor its promoters, nor any director, of its promoter has at any time in the past been convicted of any offence involving moral turpitude or any economic offence.
- The applicant has, in its employment, persons having adequate professional and other relevant experience to the satisfaction of the Board.
- Neither the applicant, nor any person directly or indirectly connected with the applicant has in the past been refused by the Board a certificate under these regulations or subjected to any proceedings for a contravention of the Act or of any rules or regulations made under the Act. For the purpose of this clause, the expression directly or indirectly connected person means any person who is an associate, subsidiary, inter-connected or group company of the applicant or a company under the same management as the applicant.
- The applicant, in all other respects, is a fit and proper person for the grant of a certificate.
- Grant of certificate to the applicant is in the interest of investors and the securities market.
- The promoter of the credit rating agency, has a minimum shareholding of 26% in the credit rating agency.
2.3 Conditions of Certificate of Registration
- The credit rating agency has to comply with the provisions of the Act, the regulations made thereunder and the guidelines, directives, circulars and instructions issued by the Board from time to time on the subject of credit rating.
- Where any information or particulars furnished to the Board by a credit rating agency is found to be false or misleading in any material particular or has undergone change subsequently to its furnishing at the time of the application for a certificate, the credit rating agency has to forthwith inform the Board in writing.
- Where the credit rating agency proposes change in control, it has to obtain prior approval of the Board for continuing to act as such after the change.
- The credit rating agency has to, at all times maintain a minimum net worth of INR 25 crores (Provided that a credit rating agency already registered with the Board under SEBI (Credit Rating Agencies) Regulations, 1999, having a net worth of less than INR 25 crores, has to increase its net worth to the specified amount within a period of 3 years from the date of notification of the SEBI (Credit Rating Agencies) (Amendment) Regulations, 2018.
- The promoter of the credit rating agency, has to maintain a minimum shareholding of 26% in the credit rating agency for a minimum period of 3 years from the date of grant of registration by the Board.
- A credit rating agency cannot carry out any activity other than the rating of securities offered by way of public or rights issue. Nothing in these regulations can prohibit a credit rating agency from engaging in any other activity in so far as it may be required by a financial sector regulator as defined under the Insolvency and Bankruptcy Code, 2016. If a credit rating agency is carrying out activities other than the activity required by a financial sector regulator, such activity has to be segregated to a separate entity within a period of 2 years from the date of notification of SEBI (Credit Rating Agencies) (Amendment) Regulations, 2018.
3. General Obligations of Credit Rating Agencies
- Every credit rating agency has to abide by the Code of Conduct contained in the Third Schedule.
- Every credit rating agency has to enter into a written agreement with each client whose securities it proposes to rate, and every such agreement has to include the rights and liabilities of each party in respect of the rating of securities in a defined form, the fee to be charged by the credit rating agency, the client has to agree to a periodic review of the rating by the credit rating agency during the tenure of the rated instrument, the client has to agree to cooperate with the credit rating agency in order to enable the latter to arrive at, and maintain, a true and accurate rating of the client’s securities and has to, in particular provide to the latter, true, adequate and timely information for the purpose, the credit rating agency has to disclose to the client, the rating assigned to the securities of the latter through regular methods of dissemination, irrespective of whether the rating is or is not accepted by the client, the client has to agree to disclose, in the offer document, the rating assigned to the client’s listed securities by any credit rating agency during the last 3 years and any rating given in respect of the client’s securities by any other credit rating agency, which has not been accepted by the client and the client has to also agree to obtain a rating for any issue of debt securities in accordance with the relevant regulations.
- Every credit rating agency has to, during the lifetime of securities rated by it, continuously monitor the rating of such securities, unless the rating is withdrawn.
- Every credit rating agency has to disseminate information regarding newly assigned ratings, and changes in earlier rating promptly through press releases and websites, and, in the case of securities issued by listed companies, such information has to also be provided simultaneously to the concerned regional stock exchange and to all the stock exchanges where the said securities are listed.
- Every credit rating agency has to carry out periodic reviews of all published ratings during the lifetime of the securities, unless the rating is withdrawn.
- If the client does not cooperate with the credit rating agency so as to enable the credit rating agency to comply with its obligations, the credit rating agency can carry out the review on the basis of the best available information or in the manner as specified by the Board from time to time. If owing to such lack of cooperation, a rating has been based on the best available information, the credit rating agency has to disclose this to the investors.
- A credit rating agency cannot withdraw a rating so long as the obligations under the security rated by it are outstanding, except where the company whose security is rated is wound up or merged or amalgamated with another company, or as may be specified by the Board from time to time.
- Every credit rating agency has to frame appropriate procedures and systems for monitoring the trading of securities by its employees in the securities of its clients, in order to prevent contravention of the SEBI (Insider Trading) Regulations, 1992, SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to the Securities Market) Regulations, 1995 and other laws relevant to trading of securities.
- Every credit rating agency has to make public the definitions of the concerned rating, along with the symbol and has to also state that the ratings do not constitute recommendations to buy, hold or sell any securities.
- Every credit rating agency has to make available to the general public, information relating to the rationale of the ratings, which has to cover an analysis of the various factors justifying a favourable assessment, as well as factors constituting a risk.
- Where any information is called for by the Board from a credit rating agency for the purposes of these regulations, including any report relating to its activities, the credit rating agency has to furnish such information to the Board within a period specified by the Board or if no such period is specified, then within a reasonable time.
- Every credit rating agency has to, at the close of each accounting period, furnish to the Board copies of its balance sheet and profit and loss account.
- Every credit rating agency has to comply with such guidelines, directives, circulars and instructions as may be issued by the Board from time to time, on the subject of credit rating.
- Every credit rating agency has to appoint a compliance officer who will be responsible for monitoring the compliance of the Act, rules and regulations, notifications, guidelines, instructions etc. issued by the Board or the Central Government.
- The compliance officer has to, immediately and independently report to the Board, any non-compliance observed by him.
- Every credit rating agency has to keep and maintain, for a minimum period of 5 years, the following books of accounts, records and documents, which include a copy of its balance sheet, as on the end of each accounting period, a copy of its profit and loss account for each accounting period, a copy of the auditor’s report on its accounts for each accounting period, a copy of the agreement entered into, with each client, information supplied by each of the clients, correspondence with each client, ratings assigned to various securities including upgradation and downgradation (if any) of the ratings so assigned, rating notes considered by the rating committee, record of decisions of the rating committee, letter assigning rating and particulars of fees charged for rating and such other records as the Board may specify from time to time.
- Every credit rating agency has to intimate the Board, the place where the books of account, records and documents required to be maintained under these regulations are being maintained.
- Every credit rating agency has to, within 2 months from the date of the auditor’s report, take steps to rectify the deficiencies if any, made out in the auditor’s report, insofar as they relate to the activity of rating of securities.
- Every credit rating agency has to treat, as confidential, information supplied to it by the client and no credit rating agency can disclose the same to any other person, except where such disclosure is required or permitted by under or any law for the time being in force.
- Every credit rating agency has to specify the rating process, file a copy of the same with the Board for record and file with the Board any modifications or additions made therein from time to time.
- Every credit rating agency has to, in all cases, follow a proper rating process.
- Every credit rating agency has to have professional rating committees which comprises members who are adequately qualified and knowledgeable to assign a rating.
- All rating decisions, including the decisions regarding changes in rating, have to be taken by the rating committee.
- Every credit rating agency has to be staffed by analysts qualified to carry out a rating assignment.
- Every credit rating agency has to inform the Board about new rating instruments or symbols introduced by it.
- Every credit rating agency has to, while rating a security, exercise due diligence in order to ensure that the rating given by the credit rating agency is fair and appropriate.
- A credit rating agency cannot rate securities issued by it.
- Rating definition, as well as the structure for a particular rating product, cannot be changed by a credit rating agency, without prior information to the Board.
- A credit rating agency has to disclose to the concerned stock exchange through press releases and websites for general investors, the rating assigned to the securities of a client, after periodic review, including changes in rating, if any.
- A credit rating agency cannot directly or indirectly, hold 10% or more shareholding and/ or voting rights in any other credit rating agency or have representation on the Board of any other credit rating agency. A credit rating agency may, with the prior approval of the Board, acquire shares and/ or voting rights exceeding 10% in any other credit rating agency only if such acquisition results in change in control in the credit rating agency whose shares are being acquired. On the basis of the prior approval sought by the acquirer, the Board may approve the acquisition in the interest of investors, market integrity and stability.
- A shareholder holding 10% or more shares and/ or voting rights in a credit rating agency cannot hold 10% or more shares and/ or voting rights, directly or indirectly, in any other credit rating agency. The said restriction does not apply to holdings by Pension Funds, Insurance Schemes and Mutual Fund Schemes.
4. Restriction on Rating of Securities Issued by Promoters or by Certain Other Persons
- No credit rating agency can rate a security issued by its promoter.
- In case the promoter is a lending institution, its Chairman, director or employee cannot be a Chairman, director or employee of the credit rating agency or its rating committee.
- No credit rating agency can rate a security issued by an entity, which is a borrower of its promoter or a subsidiary of its promoter or an associate of its promoter, if there are common Chairman, Directors between credit rating agency and these entities or there are common employees or there are common Chairman, Directors, Employees on the rating committee.
- No credit rating agency can rate a security issued by its associate or subsidiary, if the credit rating agency or its rating committee has a Chairman, director or employee who is also a Chairman, director or employee of any such entity. The credit rating agency may, rate a security issued by its associate having a common independent director with it or rating committee only if such an independent director does not participate in the discussion on rating decisions and the credit rating agency makes a disclosure in the rating announcement of such associate (about the existence of common independent director) on its Board or of its rating committee, and that the common independent director did not participate in the rating process or in the meeting of its Board of Directors or in the meeting of the rating committee, when the securities rating of such associate was discussed.
- These prohibitions do not apply to securities whose rating has been already done by a credit rating agency before the commencement of these regulations, and such securities may, subject to the provisions of these regulations, continue to be rated, without the need to comply with the restrictions imposed by the regulations contained here.
5. Powers of the Board
- Power to issue certificate of registration to a credit rating agency.
- Power to reject certificate of registration to a credit rating agency.
- Power to appoint inspecting officers to carry out enquiries and inspections.
- Power to issue and serve notice before inspection or investigation.
- Power to take action on the basis of enquiry, inspection or investigation report.
- Power to penalise a credit rating agency for violations.
6. Schedule I
Application for Grant of Certificate of Registration
Name of Applicant
INSTRUCTIONS FOR FILLING UP FORM
- Applicants must submit to the Board, a completed application form togetherwith appropriate supporting documents. Supporting documents should be attested as true by a notary public.
- This application form should be filled in accordance with the regulations.
- Application for registration will be considered, only if it is complete in all respects.
- All answers must be typed.
- Information which needs to be supplied in more detail may be given on separate sheets which should be attached to the application form.
- All signatures on the application must be original.
- Every page of the form as well as every additional sheet must be initialed by the authorised signatory of the applicant.
PARTICULARS OF THE APPLICANT
- Name, address of the registered office, address for correspondence, telephone numbers, fax numbers and names of the contact person of the company. Address of branch offices, if any.
- Date of incorporation of the Applicant company (enclose certificate of incorporation and memorandum and articles of association). Specify Objects (Main & Ancillary) of the Applicant company, Authorised, issued, subscribed and paid up capital.
- Category to which the Applicant company belongs to which is Limited company – Private/Public or Unlimited company.
- If listed, names of Stock Exchanges and latest share price to be given.
- Category to which the Applicant company belongs to which is Company already in the business of undertaking rating activities or Company proposing to undertake rating activities for the first time.
- Category to which the promoters of the Applicant company belong to.
- Name of the promoters and their shareholding in the company.
- Enclose a Chartered Accountant’s certificate certifying the continuous net worth of INR 100 crores for 5 years, in case the promoter.
- Net worth of the company as per the last audited accounts not earlier than 3 months from the date of application.
- Enclose a Chartered Accountant’s certificate certifying the same.
PARTICULARS OF DIRECTORS/ KEY PERSONNEL
- Particulars of Directors of the company, which has to include name, qualification, experience, shareholding in the company and directorship in other companies.
- Particulars of Key Personnel of the company, which has to include name, designation in the company, qualification, previous positions held, experience, date of appointment in the company and functional areas.
Details of infrastructure including computing facilities, facilities for research and database available with the company and whether the existing infrastructure is adequate to carry on the rating activities proposed to be undertaken by the company. Any further plan for additional/ improved infrastructure to be indicated.
List of major shareholders (holding 5% and above of applicant directly or along with associates)
Shareholding as on: ______________
|Name of Shareholder||Number of Shares Held||Percentage of Total Paid Up Capital of the Company|
- Particulars of associate companies/concerns which has to include name, address, type of activity handled, nature of interest of the Applicant company in the associate, nature of interest of promoters of the applicant in the associate.
- Whether the Board has granted/ refused registration as credit rating agency to any associate of the applicant. Give the details like date of application, date of refusal/registration, reasons for refusal etc.
BUSINESS INFORMATION OF THE COMPANY
- History, major events and present activities. Details of Experience in Credit Rating activities and other related activities.
- If the company is proposing to engage in credit rating activities for the first time, business plan of the company with projected volume of activities and income for which registration is sought to be specifically given.
- Securities Rating activities handled during the last three years as per the table below-
|Name of Client||Type of Security||Size of Issue||Year of Issue||Security/ Instrument Rated||Listed/ Unlisted|
FINANCIAL INFORMATION ABOUT THE APPLICANT
Net Worth (INR in Lakhs)
|Items||Year Prior to the Preceding Year of the Current Year||Preceding Year||Current Year|
|(a) Paid- up Capital|
|(b) Free Reserves (Excluding Revaluation Reserves)|
|(c) Accumulated Losses|
|(d) Deferred Revenue Expenditure Not Written Off|
|Net Worth (a)+(b)-(c)-(d)|
- Please enclose audited annual accounts for the last 3 years. Where unaudited reports are submitted, give reasons. If minimum net worth requirement has been met after last audited annual accounts, audited statement of accounts of a later date also be submitted.
- Name and Address of the Principal bankers of the Applicant company.
- Name and address of the Auditors.
- Details of all pending litigations against the applicant company, directors and employees.
- Nature of dispute, name of the party and status.
- Indictment or involvement in any fraud or economic offences by the applicant or any of its Directors, or Key Managerial Personnel, in the last 3 years.
Give the following declarations signed by two directors:
I/We hereby apply for registration.
I/We warrant that I/We have truthfully and fully answered the questions above and provided all the information which might reasonably be considered relevant for the purposes of my registration.
I/We declare that the information supplied in the application form is complete and correct.
For and on behalf of
(Name of Applicant)
Name in Block Letters Name in Block Letters
Certificate of Registration
- In exercise of the powers conferred by sub-section (1) of Section 12 of the Securities and Exchange Board of India Act, 1992, read with the rules and regulations made thereunder the Board hereby grants a certificate of registration to ___as a credit rating agency in accordance with and subject to the conditions in the regulations to carry out the activity of the credit rating agency.
- Registration Code for the credit rating agency is CRA/ / /
- This certificate of registration is valid unless it is suspended or cancelled by the Board.
For and behalf of
Securities and Exchange Board of India
7. Schedule II
Amount to be Paid as Fees
|1.||Application Fee for Grant of Registration||INR 50,000|
|2.||Registration Fee||INR 26,66,700|
|3.||Recurring Registration Fee (For Every 3 Years)||INR 15,00,000|
- A credit rating agency who has been granted certificate of registration, has to pay fees, as specified under Part A, within 15 days from the date of receipt of intimation from the Board.
- A credit rating agency who has been granted certificate of registration, to keep its registration in force, has to pay fee as specified in Part A, for every 3 years from the sixth year of the date of grant of certificate of registration or of the date of grant of certificate of initial registration granted prior to the commencement of the SEBI (Change in Conditions of Registration of Certain Intermediaries) (Amendment) Regulations, 2016, as the case may be.
- The fee specified above, has to be paid by way of direct credit in the bank account through NEFT/RTGS/IMPS or any other mode allowed by the Reserve Bank of India or by way of a bank draft in favour of Securities and Exchange Board of India payable at Mumbai.
8. Schedule III
Code of Conduct
- A credit rating agency has to make all efforts to protect the interests of investors.
- A credit rating agency, in the conduct of its business, has to observe high standards of integrity, dignity and fairness in the conduct of its business.
- A credit rating agency has to fulfil its obligations in a prompt, ethical and professional manner.
- A credit rating agency has to, at all times exercise due diligence, ensure proper care and exercise independent professional judgment in order to achieve and maintain objectivity and independence in the rating process.
- A credit rating agency has to have a reasonable and adequate basis for performing rating evaluations, with the support of appropriate and in depth rating researches. It has to also maintain records to support its decisions.
- A credit rating agency has to have in place a rating process that reflects consistent and international rating standards.
- A credit rating agency cannot indulge in any unfair competition nor can it wean away the clients of any other rating agency on assurance of higher rating.
- A credit rating agency has to keep track of all important changes relating to the client companies and has to develop efficient and responsive systems to yield timely and accurate ratings. Further a credit rating agency has to also monitor closely all relevant factors that might affect the creditworthiness of the issuers.
- A credit rating agency has to disclose its rating methodology to clients, users and the public.
- A credit rating agency has to, wherever necessary, disclose to the clients, possible sources of conflict of duties and interests, which could impair its ability to make fair, objective and unbiased ratings. It has to also ensure that no conflict of interest exists between any member of its rating committee participating in the rating analysis, and that of its client.
- A credit rating agency cannot make any exaggerated statement, whether oral or written, to the client either about its qualification or its capability to render certain services or its achievements with regard to the services rendered to other clients.
- A credit rating agency cannot make any untrue statement, suppress any material fact or make any misrepresentation in any documents, reports, papers or information furnished to the Board, stock exchange or public at large.
- A credit rating agency has to ensure that the Board is promptly informed about any action, legal proceedings etc., initiated against it alleging any material breach or non-compliance by it, of any law, rules, regulations and directions of the Board or of any other regulatory body.
- A credit rating agency has to maintain an appropriate level of knowledge and competence and abide by the provisions of the Act, regulations and circulars, which may be applicable and relevant to the activities carried on by the credit rating agency. The credit rating agency has to also comply with award of the Ombudsman passed under the SEBI (Ombudsman) Regulations, 2003.
- A credit rating agency has to ensure that there is no misuse of any privileged information including prior knowledge of rating decisions or changes.
- A credit rating agency or any of his employees cannot render, directly or indirectly any investment advice about any security in the publicly accessible media. A credit rating agency cannot offer fee-based services to the rated entities, beyond credit ratings and research.
- A credit rating agency has to ensure that any change in registration status/any penal action taken by the Board or any material change in financials which may adversely affect the interests of clients/investors is promptly informed to the clients and any business remaining outstanding is transferred to another registered person in accordance with any instructions of the affected clients/investors.
- A credit rating agency has to maintain an arm’s length relationship between its credit rating activity and any other activity.
- A credit rating agency has to develop its own internal code of conduct for governing its internal operations and laying down its standards of appropriate conduct for its employees and officers in the carrying out of their duties within the credit rating agency and as a part of the industry. Such a code may extend to the maintenance of professional excellence and standards, integrity, confidentiality, objectivity, avoidance of conflict of interests, disclosure of shareholdings and interests, etc. Such a code has to also provide for procedures and guidelines in relation to the establishment and conduct of rating committees and duties of the officers and employees serving on such committees.
- A credit rating agency has to provide adequate freedom and powers to its compliance officer for the effective discharge of his duties.
- A credit rating agency has to ensure that the senior management, particularly decision makers have access to all relevant information about the business on a timely basis.
- A credit rating agency has to ensure that good corporate policies and corporate governance are in place.
- A credit rating agency cannot, generally and particularly in respect of issue of securities rated by it, be party to or instrumental for creation of false market, price rigging or manipulation or dissemination of any unpublished price sensitive information in respect of securities which are listed and proposed to be listed in any stock exchange, unless required, as part of rationale for the rating accorded.
- A Guide to the SEBI (Collective Investment Schemes) Regulations, 1999 - May 12, 2020
- A Guide to the SEBI (Credit Rating Agencies) Regulations, 1999 - May 12, 2020
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