Introduction
In a significant move aimed towards enhancing operational efficiency and transparency in India’s Credit Rating Activities (CRA) and fostering an environment conducive to business ease, the Securities and Exchange Board of India (SEBI) has introduced modifications to Chapter III of the Master Circular for Credit Rating Agencies vide SEBI/HO/DDHS/DDHSPOD3/P/CIR/2024/47 dated May 16, 2024.
The key changes and their implications for CRAs operating in India are as follows:-
i. Timelines for Rating Actions: One of the pivotal updates involves specific timelines for various stages of the rating process;
ii. Communication of Ratings: Para 28.3.3 of the Master Circular now mandates CRAs to communicate the rating decision to the issuer within 1(one) working day of the Rating Committee meeting ;aiming to provide clarity to issuers promptly.
iii. Appeals and Reviews: In response to appeals initiated by issuers regarding rating actions following periodic surveillance, CRAs are now required to address these within 3(three) working days of the Rating Committee meeting; to ensures a timely and efficient appeals process, thereby enhancing transparency and accountability.
iv. Dissemination of Information: The dissemination of Press Releases on the CRA’s website and intimation to Stock Exchanges/Debenture Trustees must occur within 7 (seven) working days of the Rating Committee meeting; to ensures that the stakeholders are promptly informed about any updates in ratings, facilitating informed decision-making.
v. Disclosure Requirements:
a) SEBI has streamlined disclosure requirements for CRAs, mandating the maintainance of an archive of all disclosures, including ratings press releases, for at least 10 years as per Para 31.1.2. Specific disclosures such as lists of non-cooperative issuers (daily), ratings not accepted by an issuer (12 months), and delays in periodic review (12 months) will follow tailored timelines as per the Master Circular.
b) These disclosures will continue to be accessible through the issuer-specific Press Releases or Rating Rationale sections on the CRAs’ websites, ensuring transparency and accessibility of information..
vi. Implementation and Monitoring: The circular will come into effect from August 01, 2024, providing CRAs with a transitional period to adapt their operational processes accordingly. SEBI will monitor adherence through half-yearly internal audits mandated under Regulation 22 of the CRA Regulations to ensure effectiveness.
Conclusion
This regulatory update underscores SEBI's commitment to safeguarding investor interests and fostering a robust securities market. By setting clear timelines and enhancing disclosure norms, SEBI aims to strengthen governance standards within the CRA sector while promoting greater ease of doing business. CRAs are encouraged to swiftly implement these changes and proactively engage with stakeholders to ensure seamless compliance with the revised guidelines.
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