Sebi issues guidelines for credit rating agencies

The move comes in the wake of cancellation of licence of Brickwork Ratings India.

Last week, Sebi had directed Brickwork Ratings to wind down its operations within six month and also barred it from adding new clients from the date of the order. The punitive regulatory action came after the regulator observed the credit rating agency failed to follow proper rating process and exercise due diligence while providing ratings.

The regulator said on and from the date of the order, or the date of submission of request for surrender of licence, the concerned credit rating agency should prominently disclose in its website the order or the request.

It will also have to communicate the same to its clients within 15 days of the order or the request. It should not take any fresh mandates and allow its clients to withdraw any assignment given to it, without any additional cost to such clients. The rating agency should facilitate an orderly migration of assignments as desired by clients to other credit rating agencies (CRA).

It should continue to comply with all the rules till the time it holds the licence. It should also cooperate with Sebi on sharing of information and payment of fees, the regulator said in a circular.

In case of cancellation of licence, the credit ratings assigned by the credit rating agency would be valid till such time the client withdraws the assignment or migrates the assignment to other rating agency or the CRA is wound-up, whichever is earlier, Sebi said.