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3:38 am - Tuesday January 23, 2018

SEBI raises eligibility criteria for Credit rating Agencies

Agencies, New Delhi

Market regulator Securities and Exchange Board of India (SEBI) has enhanced the eligibility criteria for Credit rating Agencies (CRAs) from the existing Rs 5 crore to Rs 25 crore.

The move is aimed at augmenting the governance of CRAs registered with the SEBI and mitigate the issues of conflict of interest, a SEBI statement said. While approving amendments to the SEBI (Credit Rating Agencies) Regulations, 1999 and SEBI (Listing Obligations and Disclosure Requirements), 2015, the SEBI board has also made it clear that the promoter of a CRA will maintain a minimum shareholding of 26% in the CRA for a minimum period of three years from the date of grant of registration by the Board.

The amendments also set new guideline for promoting a foreign CRA in India. According to new rules the foreign CRA will be incorporated in a Financial Action Task Force (FATF) member jurisdiction and registered under their law only will be eligible to promote a CRA in India, SEBI said in press release on Thursday.

The market regulator has proposed a slew of measures for tightening the financial and operational eligibility of the promoters of CRAs, besides greater disclosure requirements for them. The regulator has also decided that no CRA should, directly or indirectly, hold more than 10 per cent of shareholding and/ or voting rights in another CRA and would not have representation on the board of the other CRA.

“Sebi’s prior approval would be needed for acquisition of shares or voting rights in a CRA that result in change in control,” the release added.“A shareholder holding 10 per cent or more shares and/ or voting rights in a registered CRA shall not hold 10 per cent or more shares and/ or voting rights, directly or indirectly, in any other CRA,” the regulator said.

SEBI said that credit rating agencies will be permitted to “withdraw the ratings subject to the CRA having rated the instrument continuously for a stipulated period of time and in the manner as may be specified by it from time to time”.

Besides, any activity, other than the rating of financial instruments and economic or financial research, should be hived off by the CRA into a separate entity.

As part of enhanced disclosure framework, SEBI has proposed that the agencies should disclose annual consolidated financial results, statement of profit and loss on a quarterly and year-to-date basis and statement of assets and liabilities/ balance sheet on a half-yearly basis.

Posted in: Business

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