The Securities Exchange Board of India (SEBI) on October 13, 2022, issued a circular regarding the Suspension, Cancellation, or Surrender of the Certificate of Registration of a Credit Rating Agency.
The following are hereby prescribed, subject to the requirements of the corresponding cancellation, in order to facilitate orderly migration of credit ratings of listed or proposed to be listed non-convertible securities, securitized debt instruments, security receipts, municipal debt securities or commercial paper, and other regulated products following cancellation, suspension, or surrender of the certificate of registration of a CRA to another SEBI-registered CRA:
• On and from the date of the Order, or the date of submission of a request for surrender of the certificate of registration (“the Request”) to SEBI, as applicable, the concerned CRA shall:
o disclose prominently on its website, the Order, or the Request, as the case may be, and communicate the same to its clients within 15 days of the Order or the Request;
o not take any new clients or fresh mandates;
o allow its clients to withdraw any assignment given to the CRA, without any additional cost to such clients;
o facilitate an orderly migration of assignments as desired by clients to other CRA(s) holding a certificate of registration under CRA Regulations;
o continue to comply with the provisions of the CRA Regulations and circulars thereunder, till the time the CRA holds the certificate of registration;
o continue to co-operate with SEBI with regard to sharing of information when requested and payment of fees as required under CRA Regulations;
o take such other action including providing any records or documents within the time period and in the manner, as may be required under the CRA regulations or as may be directed by SEBI.
• The CRA, on and from the date of acceptance of the Request, or when it is commencing the winding-up process, shall –
o return the certificate of registration so canceled to SEBI,
o not represent itself to be a holder of a certificate for carrying out the activity for which such certificate had been granted;
o suspend undertaking activity for which such certificate had been granted;
o until it is wound up, continue to cooperate with SEBI on matters pertaining to the activities of the CRA undertaken by it till it held the certificate of registration under CRA Regulations;
o make provisions as regards liability incurred or assumed by it;
o until it is wound up, take such other action including providing any records or documents within the time period and in the manner, as may be required under the CRA regulations or as may be directed by SEBI
• Additionally, in case of suspension of the certificate of registration, the CRA, during such period of suspension, shall –
o suspend undertaking activity for which such certificate of registration had been granted;
o continue to cooperate with SEBI on matters pertaining to the activities of the CRA undertaken by it under CRA Regulations;
o make provisions as regards liability incurred or assumed by it;
o take such other action including providing any records or documents within the time period and in the manner, as may be required under the CRA regulations or as may be directed by SEBI.
Upon cancellation or surrender or suspension of the certificate of registration of a CRA, the concerned CRA’s services cannot be used by listed entities or issuers for compliance with requirements of various SEBI regulations which require credit ratings from a CRA registered with SEBI.
The Listed entities or issuers who have obtained credit rating from a CRA whose registration is canceled or suspended or surrendered, desirous of obtaining credit rating for regulatory purposes, shall obtain credit rating(s) from another SEBI-registered CRA(s) holding a valid certificate of registration under CRA Regulations.
[Circular No. SEBI/HO/DDHS/DDHS-RACPOD2/P/CIR/2022/ 140]
