SEBI issue a notification on the Firewall between Credit Rating Agencies and their Affiliates

Sep 21, 2022 | by TeamLease RegTech Legal Research Team

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Secretarial ComplianceThe Securities Exchange Board of India (SEBI) on September 21, 2022, issue a notification on the Firewall between Credit Rating Agencies and their Affiliates

The  following  measures  are  mandated  to  strengthen  the firewall between SEBI-registered CRAs and their non-rating entities:

CRAs shall formulate a policy on separation or firewall practices with the non-rating entities and document the same in their internal operational manuals or governing documents. Such policy, and revisions thereto, shall be ratified by the Board of Directors of the CRAs and the policy may cover inter alia the following:

i.Nature  and  extent of  sharing  of infrastructure, officials/employees resources,  if  any,  between  the  CRA  and the-rating  entity, including specification on whether such arrangement is temporary. 

ii.Measures  taken  by  CRA  to  ensure the  independence  of  its credit rating process in view of the above arrangement with the non-rating entity. 

iii. Guidance to employees on sharing of information or  resources,  if any, between  the  CRA  and the non-rating entity in order to  mitigate  any potential or actual conflict of interest.

The  circular  shall be applicable with  effect from  January 1,  2023, and  CRAs  shall  report  on  their  compliance  with  this  circular  to  SEBI  within  one  quarter  from  the  date  of applicability of this circular.

[Notification No. SEBI/HO/DDHS/DDHS-RACPOD2/P/CIR/2022/ 121]


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