Sebi Considers Allowing CRAs to Rate Instruments Beyond Regulatory Boundaries
In a recent move, the Securities and Exchange Board of India (Sebi) has proposed granting credit rating agencies (CRAs) the ability to conduct ratings for instruments outside its regulatory scope. This development aims to expand the operational flexibility of CRAs while ensuring regulatory compliance and investor protection.
Protecting Minimum Net Worth Requirements
Sebi emphasized that the minimum net worth criteria for CRAs, outlined in the CRA Laws, must remain unaffected by activities not overseen by Sebi. To enhance transparency and accountability, CRAs will need to publish a comprehensive list of non-Sebi-regulated activities on their websites. Moreover, a clear disclaimer stating that Sebi’s safeguards do not extend to disputes or grievances related to such activities will be mandatory.
Compliance Assurance
Under the proposed framework, CRAs engaging in non-Sebi-regulated activities must provide an undertaking in their semi-annual internal audit reports, confirming adherence to the prescribed standards. This measure is designed to ensure that CRAs maintain compliance with regulatory requirements even when operating in unregulated domains.
By permitting CRAs to conduct activities outside Sebi’s jurisdiction under specified conditions, Sebi aims to foster a more dynamic environment for credit rating assessments while upholding industry standards and safeguarding investor interests.
