Mumbai Securities and Exchange Board of India (Sebi) on Thursday outlined a number of steps to be adopted by registered credit rating agencies (CRAs) in case their licenses are suspended, canceled or surrendered on request.
This follows a recent episode where the market regulator canceled the license of Brickwork Ratings due to rating defaults of some of the major issuers including IDFC, Welspun and Adani Rail. SEBI also ordered the closure of the rating agency and barred it from taking on any new customers. Subsequently, many corporates working with Brickwork Ratings are now switching their rating agencies.
After receiving the cancellation order from the regulator or pursuant to the surrender request, the CRA should diligently disclose the said order or request on its official website, and promptly notify the customers within 15 days of the receipt of the order , said a SEBI circular.
“Such rating agency should not take any new clients, but should allow its clients to withdraw any assignment to the CRA at no additional cost to the clients.” Under CRA rules, rating agencies will have to assist in providing a systematic facility. Transfer of assignments to other registered CRAs as desired by the customers. Once the license is canceled or suspended, the agency will have to hand over the canceled registration certificate to SEBI on priority basis. The CRA will also have to ensure that it does not represent itself as a certificate holder while assigning ratings to the customers. The agency should also cooperate with SEBI in the matter of sharing the required information as sought by the regulator, and pay the required fee under the CRA rules. The rating agency will also have to comply with the CRA rules as long as it holds a valid registration certificate, the market watchdog said.
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