Brief History of the Regulations
The Securities and Exchange Board of India (SEBI) has passed the SEBI (Credit Rating Agencies) Regulations, 1999 by the powers given under Section 30 read with Section 11 of the SEBI Act, 1992 on 07th July, 1999.
List of Amendments
SEBI (Investment Advice by Intermediaries) (Amendment) Regulations, 2001
SEBI (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002
SEBI (Credit Rating Agencies) (Amendment) Regulations, 2003
SEBI (Credit Rating Agencies) (Second Amendment) Regulations, 2003
SEBI India (Criteria for Fit and Proper Person) Regulations, 2004
SEBI (Intermediaries) Regulations, 2008
SEBI (Credit Rating Agencies) (Amendment) Regulations, 2010
SEBI (Credit Rating Agencies) (Amendment) Regulations, 2011
SEBI (Credit Rating Agencies) (Second Amendment) Regulations, 2011
SEBI (Change in Conditions of Registration of Certain Intermediaries) (Amendment) Regulations, 2011
SEBI (Payment of Fees) (Amendment) Regulations, 2014
SEBI (Change in Conditions of Registration of Certain Intermediaries) (Amendment) Regulations, 2016
SEBI (Payment of Fees and Mode of Payment) (Amendment) Regulations, 2017
SEBI (Credit Rating Agencies) (Amendment) Regulations, 2018
Significant Definitions
Associate in respect of a credit rating agency that comprises a person who directly or indirectly, personally, or along with relatives, owns or possesses shares not less than 10% of the voting rights of the credit rating agency, or with regard to whom the credit rating agency, directly or indirectly, by itself, or together with other persons, owns or possesses shares having not less than ten percent of the voting rights, or most of the directors of which, own or control shares carrying not less than ten percent of the voting rights of the credit rating agency, or whose director, officer or employee is also a director, officer or employee of the credit rating agency.
Certificate means a certificate pertaining to registration given by the Board under these regulations or conditions.
Change in Control with regard to a credit rating agency as a body corporate, implying that, if its shares are listed on any authorized stock exchange, change in control as explained under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 and in any other case, alteration in the controlling interest in the body corporate. Controlling interest in this context means an interest, direct or indirect, of minimum 51% of voting rights in the body corporate.
Client implies any person whose securities are rated by a credit rating agency.
Credit Rating Agency is a body corporate involved in the function of rating of securities given through public or rights issues.
Economic Offence is an offence to which the Economic Offences (Inapplicability of Limitations) Act, 1974 is applicable.
Fraud has the meaning similar to given under the Indian Contract Act, 1872.
Issuer happens to be a person whose securities are supposed to be rated by a credit rating agency.
Net Worth happens to be the total value of the paid up equity capital and free reserves (not including reserves carved out of revaluation), minus the cumulative value of accumulated losses and deferred expenditure not written off, comprising several expenses that have not been written off.
Rating is an opinion concerning securities, explained by way of standard symbols or in any other specified way, tasked by a credit rating agency and used by the issuer of such securities, to adhere to the condition mentioned by these regulations.
Rating Committee is a committee created by a credit rating agency to give rating to a security.
2. Registration of Credit Rating Agencies
2.1 Usual Process
1. Any person wanting to start any task as a credit rating agency on or post the date of beginning of these regulations has to apply in writing to the Board for the issuance of a certificate of registration for the same.
2. The Board will not entertain an application unless the applicant is backed by a person from any of the following categories, which are a public financial institution, as mentioned under the Companies Act, 2013, a scheduled commercial bank included for the time being in the Second Schedule to the Reserve Bank of India Act, 1984, a foreign bank functioning in India with the stamp of the Reserve Bank of India, a foreign credit rating agency incorporated in a Financial Action Task Force (FATF) Member jurisdiction and recognized under their law, possessing at least 5 years experience in rating securities or any company or a body corporate, with regular total worth of at least INR 100 crores as per its audited annual accounts for the last 5 years before filing of the application with the Board for the issuance of certificate under these regulations.
Any application regarding a certificate, which is incomplete in every way or does not follow the requisite regulation or instructions given in Form A can be rejected by the Board. Prior to the rejection, the applicant should be provided a chance to do away with, within 30 days of the date of receipt of relevant communication, from the Board such objections as mentioned by the Board. The Board may, after giving adequate reason, extend the time for eliminating the objections by such further time, not exceeding 30 days, as the Board may deem fit to assist the applicant to do away with such objections.
3. The Board might want the applicant to provide such further information or clarification as the Board might consider fit, for the sake of processing the application.
4. The Board, if it feels like, might direct the applicant or its authorised representative to be present before the Board, for personal representation with regard to the grant of a certificate.
5. The Board, after finding the applicant to be eligible, needs to grant a certificate of registration in Form B and has to dispatch an intimation to the applicant. The certificate of registration granted will be in force till it is revoked or annulled by the Board.
6. The credit rating agency which has already been given certificate of registration by the Board, before the commencement of the SEBI(Change in Condition of Registration of Certain Intermediaries) (Amendment) Regulations, 2016 has to be deemed to have been granted a certificate of registration.
7. The grant of a certificate of registration totally hinges on registration fee payment as mentioned under Part A of Second Schedule in the way given in Part B.
In case, after looking into an application given, the Board feels that a certificate of registration cannot be given, it may, after providing the applicant a good chance of being heard, reject the application.
8. The Board’s decision of not giving a certificate of initial or permanent registration, as the case may be, has to be intimated by the Board to the applicant within 30 days of such decision, specifying reason for the same.
9. Any applicant unhappy with the decision of the Board to reject the application may, within a period of 30 days from the date of receipt by him of the intimation of rejection, apply to the Board in writing to consider the decision again.
10. When an application for reconsideration is given, the Board has to look at the application and inform the applicant its decision in writing, as early as possible.
2.2 Eligibility Aspects
1. The applicant is established and registered as a company under the Companies Act, 2013.
2. The applicant has, in its memorandum of association, mentioned rating activity as one of its chief objects.
3. The applicant must have at least net worth of INR 25 crores.
4. The applicant has sufficient infrastructure, to help it to offer rating services as per the provisions of the Act and these regulations.
5. The applicant and the promoters of the applicant, have professional ability, financial strength and good degree of fairness and honesty in business dealings, to the satisfaction of the Board.
6. Neither the applicant, nor its promoter, nor any director of the applicant or its promoter, should be involved in any legal proceeding regarding the securities market, which might have a negative effect on the interests of the investors.
7. Neither the applicant, nor its promoters, nor any director, of its promoter has at any time before been convicted of any offence regarding moral turpitude or any economic offence.
8.The applicant has employed persons with enough professional and other concerned experience to the contentment of the Board.
9. Neither the applicant, nor any person directly or indirectly linked with the applicant has before been rejected by the Board a certificate following these regulations or subjected to any proceedings for a contravention of the Act or of any rules or regulations made under the Act. For the sake of this clause, the expression directly or indirectly linked person implies any person who happens to be an associate, subsidiary, inter-connected or group company of the applicant or a company under the same management as the applicant.
10. The applicant, in every respect, has to be a healthy and proper person for the issuance of a certificate.
11. Certificate issued to the applicant has to be in sync with the interest of investors and the securities market.
12. The promoter of the credit rating agency, has a least shareholding of 26% in the credit rating agency.
2.3 Conditions Pertaining to Certificate of Registration
1. The credit rating agency must follow the provisions of the Act, the regulations created thereunder and the rules, directives, circulars and instructions given by the Board from time to time on the subject of credit rating.
2. Where any information or particulars given to the Board by a credit rating agency is turn out to be untrue or misleading in any material particular or has gone through a change later to its furnishing during the application for a certificate, the credit rating agency has to intimate the same to the Board in writing.
3. Where the credit rating agency seeks change in control, it should get beforehand approval of the Board for remaining to act similarly post the change.
4. The credit rating agency must, at every time keep a least cumulative worth of INR 25 crores (Given that a credit rating agency already registered with the Board under SEBI (Credit Rating Agencies) Regulations, 1999, having a collective worth of less than INR 25 crores, has to spike its net worth to the required amount within a period of 3 years from the date of notification of the SEBI (Credit Rating Agencies) (Amendment) Regulations 2018.
5. The promoter of the credit rating agency, has to have at least shareholding of 26% in the credit rating agency for a minimum period of 3 years from the date of issuance of registration by the Board.
6. A credit rating agency is not supposed to perform any activity other than the rating of securities provided via public or rights issue. Nothing in these regulations can bar a credit rating agency from involving in any other activity in so far as it may be needed by a financial sector regulator as specified under the Insolvency and Bankruptcy Code, 2016. In case a credit rating agency is into tasks other than the ones meant for a financial sector regulator, such activity has to be classified as a different entity within a period of 2 years from the date of notification of SEBI (Credit Rating Agencies) (Amendment) Regulations 2018.
3. General Obligations of Credit Rating Agencies
1. All credit rating agencies have to follow the Code of Conduct in the Third Schedule.
Every credit rating agency has to get into a written agreement with every client whose securities it seeks to rate, and all such agreements have to contain the rights and liabilities of each party with regard to the rating of securities in a specified form, the fee levied by the credit rating agency, the client must agree to a periodic review of the rating by the credit rating agency during the period of the rated instrument, the client must cooperate with the credit rating agency to enable the latter to ascertain, and upkeep, a genuine rating of the client’s securities and has to, especially provide to the latter, true, sufficient and timely information for the aim, the credit rating agency has to reveal the client, the rating given to the securities of the latter via usual procedures of dissemination, notwithstanding the acceptance of rating by the client, the client must agree to reveal, in the offer document, the rating given to the client’s listed securities by any credit rating agency in the last 3 years and any rating provided with regard to the client’s securities by any other credit rating agency, which was not accepted by the client and the client must acquire a rating for any issue of debt securities as per the concerned regulations.
2. Every credit rating agency must, during the lifetime of securities rated by it, regularly track the rating of such securities, till the rating is revoked.
3. Every credit rating agency must provide information related to freshly allotted ratings, and changes in previous rating precisely through press releases and websites, and, with regard to case of securities issued by listed companies, such information has to also be offered simultaneously to the relevant regional stock exchange and to every stock exchanges where the concerned securities are listed.
4. Every credit rating agency must perform periodic reviews of all published ratings during the validity of the securities, till the rating gets withdrawn.
If the client refuses to cooperate with the credit rating agency to enable the credit rating agency to follow its obligations, the credit rating agency must perform the review in line with the best available information or in the way as clarified by the Board from time to time. If due to lack of cooperation, a rating has been as per the best available information, the credit rating agency has to divulge the same to the investors.
5. A credit rating agency is not supposed to withdraw a rating till the obligations as per the security rated by it are outstanding, except where the company whose security is rated is closed or merged with another company, or as may be specified by the Board from time to time.
6. Every credit rating agency must draft apt procedures and systems for tracking the security trading by its employees in the securities of its clients, to avoid violating the SEBI (Insider Trading) Regulations, 1992, SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to the Securities Market) Regulations, 1995 and other laws concerning trading of securities.
7. Every credit rating agency must publicize the contours of the relevant rating, along with the symbol and has to mention that the ratings do not signify suggestions to purchase, hold or sell any securities.
8. Every credit rating agency must provide to the general public, information regarding the reason of the ratings, which must encompass an evaluation of the several factors validating a favourable assessment, and factors prompting a risk.
If any information is sought for by the Board from a credit rating agency regarding these regulations, including any report related to its activities, the credit rating agency must furnish the information to the Board within a particular time mentioned by the Board or in case the period is not specified, then within a reasonable time.
9. Every credit rating agency must, at the end of each accounting period, provide to the Board copies of its balance sheet and profit and loss account.
10. Every credit rating agency must follow such guidelines, directives, circulars and instructions issued by the Board from time to time, on the subject of credit rating.
11. Every credit rating agency must elect a compliance officer who will be tasked with tracking the compliance of the Act, rules and regulations, notifications, guidelines, instructions etc. given by the Board or the Central Government.
12. The compliance officer must quickly and independently report to the Board, any violation seen by him
13. Every credit rating agency must maintain, for at least 5 years, the books of accounts, records and documents, which must have a copy of its balance sheet, as on the conclusion of each accounting period, a copy of its profit and loss account for every accounting period, a copy of the auditor’s report on its accounts for each accounting period, a copy of the agreement entered into, with each client, information provided by every client, correspondence with each client, ratings given to various securities such as upgradation and downgradation (if any) of the ratings so allotted, rating notes looked at by the rating committee, record of decisions of the rating committee, letter allotting rating and details of fees levied for rating and such other records as the Board may specify from time to time.
14. Every credit rating agency must inform the Board, the location where the books of account, records and documents needed to be kept as per these regulations are being maintained.
15. Every credit rating agency must, within 2 months from the date of the auditor’s report, take measures to correct the flaws if any, occurred in the auditor’s report, insofar as they relate to the activity pertaining to the rating of securities.
16. Every credit rating agency has to consider, as confidential, information given to it by the client and no credit rating agency should divulge the same to anyone, except in cases such disclosure is needed or allowed under or any law for the time being in force.
17. Every credit rating agency must specify the rating method, file a copy of the same with the Board for record and file with the Board any changes or inclusions made therein from time to time.
18. Every credit rating agency must, in every case, adhere to a good rating method.
19. Every credit rating agency should have professional rating committees with members, who are sufficiently qualified and aware to provide a rating.
20.All rating decisions, including the ones pertaining to changes in rating, have to be made by the rating committee.
21. Every credit rating agency must have analysts capable to perform a rating assignment.
22. Every credit rating agency must intimate the Board about new rating instruments or symbols brought in by it.
23. Every credit rating agency must, while rating a security, be fully aware to make sure that the rating provided by the credit rating agency is fair and apt.
24. A credit rating agency is not allowed to rate securities issued by it.
Rating definition, and the form for a particular rating product, cannot be altered by a credit rating agency, without informing the Board in advance.
25. A credit rating agency has to disclose to the concerned stock exchange through press releases and websites for general investors, the rating assigned to the securities of a client, after periodic review, including changes in rating, if any.
26. A credit rating agency is not supposed to, directly or indirectly, hold 10% or more shareholding and/ or voting rights in any other credit rating agency or represent the Board of any other credit rating agency. A credit rating agency may, with the beforehand accent of the Board, obtain shares and/ or voting rights beyond 10% in any other credit rating agency only if such procurement leads to change in control in the credit rating agency whose shares are being bought over. According to the prior approval sought by the acquirer, the Board may consent to the acquisition keeping in mind the interest of investors, market integrity and stability.
27. A shareholder with 10% or more shares and/ or voting rights in a credit rating agency is not supposed to hold 10% or more shares and/ or voting rights, directly or indirectly, in any other credit rating agency. The said limitation is not meant for holdings by Pension Funds, Insurance Schemes and Mutual Fund Schemes.
4. Limitation pertaining to Securities’ rating Given by Promoters or Certain Other Persons
No credit rating agency is allowed to rate security issued by its promoter.
If the promoter happens to be a lending institution, its Chairman, director or employee cannot be a Chairman, director or employee of the credit rating agency or its rating committee.
No credit rating agency is permitted to rate a security issued by an enterprise, which happens to be a borrower of its promoter or a subsidiary of its promoter or an associate of its promoter, if there are similar Chairman, Directors between credit rating agency and these entities or there are common employees or common Chairman, Directors, Employees on the rating committee.
No credit rating agency is supposed to rate a security issued by its associate or subsidiary, in case the credit rating agency or its rating committee has a Chairman, director or employee who is also a Chairman, director or employee of any such entity. The credit rating agency may, rate a security issued by its associate with a usual independent director with it or rating committee only if the independent director in question is not a participant in the discussion on rating decisions and the credit rating agency reveals in the rating announcement of such associate (regarding the presence of common independent director) on its Board or of its rating committee, and that the common independent director has not participated in the rating procedure or in the meeting of its Board of Directors or in the meeting of the rating committee, when the securities rating of such associate was deliberated upon.
These prohibitions will not apply to securities whose rating has been already performed by a credit rating agency prior to the enactment of these regulations, and such securities may, depending on the provisions of these regulations, remain to be rated, without the need of following the limitations enforced by the regulations contained here.
5. Powers vested with the Board
Power to issue certificate of registration to a credit rating agency.
Power to not issue a certificate of registration to a credit rating agency.
Power to elect inspecting officers to perform enquiries and inspections.
Power to issue and give notice prior inspection or probe.
Power to take action in line with enquiry, inspection or investigation report.
Power to punish a credit rating agency for contravention.
6. Schedule I
Form A
Application for Grant of Certificate of Registration
Applicant’s Name
CONTACT NAME:
TELEPHONE NO:
FAX NO:
INSTRUCTIONS FOR FILLING UP FORM
Applicants must present to the Board, a finished application form along with relevant documents. The Supporting documents has to be duly attested by a notary public.
This application form must be filled as per the regulations.
Application for registration will be entertained, provided it is complete.
All answers must be keyed in.
Information to be given in detail may be provided on different sheets which should be attached to the application form.
All signatures on the application must be original.
All pages in the form and every additional sheet has to be signed by the authorised signatory of the applicant.
DETAILS OF THE APPLICANT
Name, address of the registered office, address for correspondence, telephone numbers, fax numbers and names of the contact person of the company. Address of branch offices, if any.
Date of incorporation of the Applicant company (enclose certificate of incorporation and memorandum and articles of association). Mention Objects (Main & Ancillary) of the Applicant company, Authorized, issued, subscribed and paid up capital.
Category regarding the Applicant company: Limited company – Private/Public or Unlimited company.
If listed, names of Stock Exchanges and latest share price to be given.
Category pertaining to the Applicant company ie. Company already in the business of performing rating activities or Company wanting to take up rating activities for the first time.
ELIGIBILITY CRITERIA
Category regarding promoters of the Applicant company.
Name of the promoters and their shareholding in the company.
Enclose a Chartered Accountant’s certificate notifying the regular net worth of INR 100 crores for 5 years, in case the promoter.
Total worth of the company according to last audited accounts not before 3 months from the date of application.
Enclose a Chartered Accountant’s certificate specifying the same.
Details OF DIRECTORS/ KEY PERSONNEL
Particulars of Directors of the company, which must have name, qualification, experience, shareholding in the company and directorship in other companies.
Particulars of Chief Personnel of the company, which must have name, designation in the company, qualification, past positions held, experience, date of appointment in the company and functional zones.
INFRASTRUCTURE
Details pertaining to infrastructure such as computing facilities, provisions for research and databases available with the company and whether the current infrastructure is sufficient to sustain the rating activities said to be undertaken by the company. Any more plan for additional/ improved infrastructure must be indicated.
MAJOR SHAREHOLDERS
List of major shareholders (holding 5% and above of applicant directly or along with associates) Shareholding as on: ______________
| Name of Shareholder | Number of Shares Held | Percentage of Total Paid Up Capital of the Company |
ASSOCIATE CONCERNS
Details of associate companies/concerns which must contain name, address, kind of activity tackled, kind of interest of the Applicant company in the associate, nature of inclination of promoters of the applicant in the associate.
If the Board has given/ refused registration as a credit rating agency to any associate of the applicant. Give particulars such as date of application, date of refusal/registration, reasons for refusal etc.
BUSINESS INFO REGARDING THE COMPANY
History, major events and current activities. Particulars of Exposure in Credit Rating jobs and other related activities.
If the company is planning to involve in credit rating activities for the first time, the business plan of the company with estimated volume of activities and revenue for which registration is sought to be specifically given.
Securities Rating activities handled during the last three years as per the table below-
| Name of Client | Type of Security | Size of Issue | Year of Issue | Security/ Instrument Rated | Listed/ Unlisted |
FINANCIAL INFORMATION ABOUT THE APPLICANT
Net Worth (INR in Lakhs)
| Items | Year before the Preceding Year of the Current Year | Preceding Year | Current Year |
| (a) Paid- up Capital | |||
| (b) Free Reserves (Excluding Revaluation Reserves) | |||
| Total (a)+(b) | |||
| (c) Accumulated Losses | |||
| (d) Deferred Revenue Expenditure Not Written Off | |||
| Net Worth (a)+(b)-(c)-(d) | |||
1. Please attach audited annual accounts for the last 3 years. Where unaudited reports are given, provide reasons. If the least net worth criteria has been obliged after last audited annual accounts, audited statement of accounts of a later date has to be submitted.
Name and Address of the Principal bankers of the Applicant company.
Name and address of the Auditors.
OTHER INFORMATION
Particulars of all pending litigations against the applicant company, directors and employees.
Kind of dispute, name of the party and status.
Accusation or involvement in any fraud or economic offences by the applicant or any of its Directors, or Key Managerial Personnel, in the last 3 years.
DECLARATION
Give the following declarations signed by two directors:
I/We hereby apply for registration.
I/We warrant that I/We have sincerely and entirely answered the questions above and given all the information which might reasonably be considered relevant for the purposes of my registration. I/We declare that the information supplied in the application form is complete and correct.
For and on behalf of
(Name of Applicant)
Director Director
Name in Block Letters Name in Block Letters
Date Date
Form B
Certificate of Registration
In exercise of the powers conferred by sub-section (1) of Section 12 of the Securities and Exchange Board of India Act, 1992 made thereunder the Board hereby grants a certificate of registration to ___as a credit rating agency in accordance with and subject to the conditions in the regulations to carry out the activity of the credit rating agency.
Registration Code for the credit rating agency is CRA/ / /
This certificate of registration is valid unless it is suspended or cancelled by the Board.
Place:
Date:
By
Order
Sd/-
For and behalf of
Securities and Exchange Board of India
7. Schedule II
Fees
Part A
Amount to be Paid as Fees
| 1. | Application Fee for Grant of Registration | INR 50,000 |
| 2. | Registration Fee | INR 26,66,700 |
| 3. | Recurring Registration Fee (For Every 3 Years) | INR 15,00,000 |
PART B
A credit rating agency which has been given a certificate of registration, needs to pay fees, as mentioned under Part A, within 15 days from the date of receipt of intimation from the Board.
A credit rating agency which has been given certificate of registration, to maintain its registration, must pay fee as specified in Part A, for every 3 years from the sixth year of the date of grant of certificate of registration or of the date of grant of certificate of initial registration given before the commencement of the SEBI (Change in Conditions of Registration of Certain Intermediaries) (Amendment) Regulations, 2016, as the case be.
The fee mentioned above, must be paid by directly crediting in the bank account via NEFT/RTGS/IMPS or any other mode permitted by the Reserve Bank of India or through a bank draft in favour of Securities and Exchange Board of India payable at Mumbai.
8. Schedule III
Model of Conduct
1. A credit rating agency must go the whole hog to protect the interests of investors.
2. A credit rating agency, while carrying out its business, must observe high standards of honesty, sincerity and fairness in the performance of its business.
3. A credit rating agency must meet its conditions promptly, ethically and professionally.
4. A credit rating agency must follow due diligence, ensure good care and portray independent professional judgment to accomplish and upkeep objectivity and independence in the rating procedure.
5. A credit rating agency must have adequate knowledge to rate. It has to also maintain records to back its calls.
6. A credit rating agency must have a rating process that meets global rating standards and should be consistent.
7. A credit rating agency cannot involve in any kind of unethical business practice or can it take away the clients of any other rating agency by promising a higher rating.
A credit rating agency must monitor all critical changes regarding the client companies and has to build efficient and responsive systems to get timely and accurate ratings. Also, a credit rating agency has to also observe closely all concerned factors that might dent the creditworthiness of the issuers.
8. A credit rating agency has to reveal its rating procedure to clients, users and the public.
9. A credit rating agency must, wherever required, divulge to the clients, possible point of conflict of duties and interests, which can damage its capacity to give fair, objective and unbiased ratings. It has to weed out any conflict of interest existing between any member of its rating committee taking part in the rating evaluation, and that of its client.
10. A credit rating agency is not allowed to give any boisterous statement, whether oral or written, to the client either regarding its qualification or its ability to provide certain services or its achievements related to the services given to other clients.
11. A credit rating agency should not provide any false statement, conceal any material fact or make any manipulations in any documents, reports, papers or information given to the Board, stock exchange or public at large.
12. A credit rating agency has to make sure that the Board is properly intimated about any action, legal proceedings etc., taken against it alleging any material breach or non-compliance of any law, rules, regulations and directions of the Board or of any other regulatory body.
13. A credit rating agency must have good knowledge and ability, and follow the provisions of the Act, regulations and circulars, which may be applicable and relating to the activities performed by the credit rating agency. The credit rating agency has to also follow the award of the Ombudsman passed under the SEBI (Ombudsman) Regulations, 2003.
14. A credit rating agency must ensure the avoidance of misuse of any classified information including advance knowledge of rating decisions or changes .
15. A credit rating agency or any of his employees cannot is not supposed to provide, directly or indirectly any investment suggestion regarding any security in the publicly accessible media. A credit rating agency should not provide fee-oriented services to the rated entities, beyond credit ratings and research.
16. A credit rating agency must make sure any modification in registration status/any penal action taken by the Board or any material change in financials which may drastically affect the interests of clients/investors is properly communicated to the clients and any business remaining outstanding is transferred to another registered person as per any instructions of the affected clients/investors.
17. A credit rating agency should detach ties between its credit rating activity and any other activity.
18. A credit rating agency must draft its own internal code of conduct for looking after its internal operations and prescribe its protocols regarding proper conduct for its employees and officers in performing their duties inside the credit rating agency and as a part of the industry. Such a code should be expanded to the upkeep of professional integrity and standards, confidentiality, objectivity, avoidance of conflict of interests, disclosure of shareholdings and interests, etc. Such a code must make provisions for procedures and guidelines regarding the set up and conduct of rating committees and duties of the officers and employees serving on such committees.
19. A credit rating agency must offer enough freedom and authority to its compliance officer to perform his duties ably.
20. A credit rating agency must ensure that the senior management, especially decision makers get all concerned information regarding the business in a timely manner.
21. A credit rating agency must enforce excellent corporate policies and governance
22. A credit rating agency should not generally usually and especially regarding issue of securities rated by it, be party to or make efforts to create fake market, price fixing or manipulation or disclosing any yet to be published price sensitive information with regard to securities which are listed and proposed to be listed in any stock exchange, unless needed, as reason for the rating provided.