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Sebi directs credit rating agencies to up firewall with non-rating entities

Mumbai, September 21, 2022

The monitoring of the circular will be required to be done through half-yearly internal audits

The Securities and Exchange Board of India (Sebi), on Wednesday, directed credit rating agencies (CRAs) to strengthen the firewall between them and their non-rating affiliates.

CRAs will now be required to formulate a policy on separation with non-rating entities and document the same in their internal operational manuals. Further, the nature and extent of sharing of infrastructure, employees, and resources between the CRA and the non-rating entity will be required to be specified.

Also, Sebi will ensure the independence of its credit-rating process in view of any such arrangements and provide guidance on sharing of resources by avoiding conflict of interest.

The markets regulator has said the new rules will come into effect from January 1, 2023. CRAs will have to report on their compliance within one quarter from the date of applicability of the circular.

The monitoring of the circular will be required to be done through half-yearly internal audits.

[The Business Standard]

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