SEBI Ciruclar: SEBI/HO/MIRSD/MIRSD4/CIR/P/2016/119 dated November 1, 2016
1. SEBI constituted a committee on “Strengthening the Guidelines and Raising Industry Standards for Credit Rating Agencies (CRAs)”, which included representatives from all the CRAs. The objective of the Committee was to deliberate upon measures and guidelines to bring about greater transparency in the policies of the CRAs, enhance the standards followed by the industry and,thereby, facilitate ease of understanding of the ratings by the investors.
2. With a view to implementing the recommendations of the said Committee, the guidelines as annexed to this Circular are being issued. These guidelines cover the following broad areas:
I. Formulation of Rating Criteria and rating processes and public disclosure of the same.
II. Accountability of Rating Analysts
III. Standardisation of Press Release for rating actions.
IV. Functioning and evaluation of Rating Committees/Sub-Committees.
V. Disclosure of ratings in case of non-acceptance by an issuer
VI. Disclosure in case of delay in periodic review of ratings.
VII. Policy in respectofnon-co-operation by the issuer.
VIII. Strengthening and enhancing the relevance of Internal Audit of CRAs, viz. appointment and rotation of auditors and scope of the audit.
3. The CRAs shall effectively implement these guidelines within 60 days from the date of issue of this circular.
4. The CRAs shall at all times observe high standards and fairness in conduct of the business and any act of omission or commission in contravention of the provisions of clauses 12 and/or 23 of Code of Conduct, as specified under Third Schedule of the SEBI (Credit Rating Agencies) Regulations, 1999, in letter or spirit, may result in violation of the provisions of section 12A of the Securities and Exchange Board of India Act,1992 and SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003.
5. This circular is issued in exercise of the powers conferred by Section 11 (1) of Securities and Exchange Board of India Act, 1992 read with the provisions of Regulation 20 of SEBI (Credit Rating Agencies) Regulations, 1999 to protect the interest of investors in securities and to promote the development of, and to regulate, the securities market.
The Annexures of this circular can be downloaded from here - link