TaxTMI 
TaxTMI 
Master Circular for Credit Rating Agencies
X X X X Extracts X X X X
X X X X Extracts X X X X
....elevant to CRAs. Yours faithfully, Surabhi Gupta Deputy General Manager Phone No.: 022 - 26449315 Email ID: [email protected] Table of Contents SECTION 1: REGISTRATION REQUIREMENTS 1.1 Online Registration Mechanism for Securities Market Intermediaries 1.2 Digital Mode of Payment 1.3 Grant of Prior approval for change in control to Credit Rating Agencies 1.4 Surrender of Certificate of Registration SECTION 2: RATING OPERATIONS 2.1 Standardization of Rating Symbols and Definitions 2.2 Operations Manual/ Internal governing document 2.3 Rating Process 2.4 Monitoring and Review of Ratings 2.5 Standardization of Press Release for Rating Actions 2.6 Rating Agreement between the Issuer and the CRA 2.7 Dealing with Conflict of interest 2.8 Unsolicited Credit Ratings 2.9 Policy in respect of non-co-operation by the issuer 2.10 Withdrawal of ratings 2.11 Sharing of information regarding issuer companies between Debenture Trustees and Credit Rating Agencies 2.12 Rating of instruments other than "securities" SECTION 3: REPORTING AND DISCLOSURES 3.1 Default Studies 3.2 Periodic Disclosures 3.3 Continuous Disclosures and Reporting 3.4 Rating Criteria, Rating Process....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ment) (Amendment) Regulations, 2017 on March 06, 2017 to enable digital mode of payment (RTGS/NEFT/IMPS etc.) of fees/penalties/remittance/other payments etc. 1.2.2. Pursuant to above, SEBI has been receiving direct credit of amounts from various intermediaries / other entities. 1.2.3. In order to identify and account such direct credit in the SEBI account, it has been decided that the various intermediaries / other entities shall provide the information as mentioned in Annexure to SEBI once the payment is made. 1.2.4. The above information should be emailed to the respective department(s) as well as to Treasury & Accounts division at [email protected]. Annexure Date Department of SEBI Name of Intermediary/ Other Entities Type of Intermediary SEBI Registration Number (if any) PAN Amount (in `) Purpose of Payment (including the period for which payment was made e.g. quarterly, annually) Bank name and Account number from which payment is remitted UTR No. 1.3 Grant of Prior approval for change in control to Credit Rating Agencies SEBI Circular CIR/MIRSD/14/2011 dated August 02, 2011. 1.3.1. All registered CRAs are required to obtain prior approval of SEBI in case of chan....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ub: Surrender of Certificate of Registration as Credit Rating Agency, Registration No. ___________ . 1. We hereby surrender our certificate of registration as Credit Rating Agency. 2. We enclose the original certificate of registration (or indemnity in case the certificate is lost or stolen) for cancellation. 3. We hereby confirm that: a. no complaint /disciplinary proceeding is pending against us; b. no investigation / inquiry by SEBI is pending against us with respect to our activities as a Credit Rating Agency; c. as on date of application, we have paid all fees; d. we shall continue to be liable for all liabilities/obligations (including monetary penalties, if any) for violations, if any, of the provisions of the SEBI Act and the SEBI (Credit Rating Agency) Regulations, 1999 that have taken place before our surrender of certificate of registration; e. all our current assignments as a Credit Rating Agency have been either duly terminated or transferred to another registered Credit Rating Agency _____ with registration no.___ ; f. we have issued a public notice in a widely circulated national and a vernacular daily dated________ informing surrender of our registrat....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 30, 2017 2.1.6. For structured products/ market linked debentures, the credit rating shall bear a prefix 'PP-MLD' denoting Principal Protected Market Linked Debentures, followed by the standardized rating symbols for long/ short term debt on the lines specified below. Cir. /IMD/DF/17/2011 dated September 28, 2011 ANNEXURE 1 Rating Symbols and Definitions for Long Term Debt Instruments Long term debt instruments: The instruments with original maturity exceeding one year Rating symbols should have CRA's first name as prefix AAA - Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk. AA - Instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk. A - Instruments with this rating are considered to have adequate degree of safety regarding timely servicing of financial obligations. Such instruments carry low credit risk. BBB - Instruments with this rating are considered to have moderate degree of safety regarding timely servicing of financial ob....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ations. Such instruments carry lowest credit risk. AA (SO) - Instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk. A (SO) - Instruments with this rating are considered to have adequate degree of safety regarding timely servicing of financial obligations. Such instruments carry low credit risk. BBB (SO) - Instruments with this rating are considered to have moderate degree of safety regarding timely servicing of financial obligations. Such instruments carry moderate credit risk. BB(SO) - Instruments with this rating are considered to have moderate risk of default regarding timely servicing of financial obligations. B(SO) - Instruments with this rating are considered to have high risk of default regarding timely servicing of financial obligations. C (SO) - Instruments with this rating are considered to have very high likelihood of default regarding timely payment of financial obligations. D (SO) - Instruments with this rating are in default or are expected to be in default soon. Modifiers {"+" (plus) / "-"(minus)} can be used with the rating....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e considered to have moderate risk of default regarding timely receipt of payments from the investments that they have made. Bmfs - Schemes with this rating are considered to have high risk of default regarding timely receipt of timely receipt of payments from the investments that they have made. Cmfs - Schemes with this rating are considered to have very high risk of default regarding timely receipt of timely receipt of payments from the investments that they have made. Modifiers {"+" (plus) / "-"(minus)} can be used with the rating symbols for the categories AAmfs to Cmfs. The modifiers reflect the comparative standing within the category. ANNEXURE 6 Rating Symbols and Definitions for Short Term Debt Mutual Fund Schemes Short term debt mutual fund schemes: The debt mutual fund schemes that have an original maturity of upto one year. Rating symbols should have CRA's first name as prefix A1mfs - Schemes with this rating are considered to have very strong degree of safety regarding timely receipt of payments from the investments that they have made. A2mfs - Schemes with this rating are considered to have strong degree of safety regarding timely receipt o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ance i. Infrastructure ratings 2.2.5. Rating Process and Policies: Each CRA shall frame detailed guidelines on the following: a. General nature of compensation arrangements with rated entities b. Policy for appeal by Issuer against the rating being assigned to its instruments c. Policy for placing ratings on credit watch d. Guidelines on what constitutes non-cooperation. e. Gift policy f. Confidentiality policy g. Policy on outsourcing of activities h. Policy on provisional ratings i. FAQs on ratings j. Disclosure on managing conflict of interest Annexure: Instrument-wise definition of default Facilities Rating Scale Proposed Definition of Default Fund-based facilities & Facilities with pre-defined repayment schedule Term Loan Long Term A delay of 1 day even of 1 rupee (of principal or interest) from the scheduled repayment date. Working Capital Term Loan Working Capital Demand Loan (WCDL) Debentures/Bonds Certificate of Deposits (CD)/ Fixed Deposits (FD) Short Term/ Long term Commercial Paper Short term Packing Credit (pre-shipment credit) Short Term Overdue/unpaid for more than 30 days. Buyer's Credit Short Term Continuously overdra....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l not be part of the Rating Committee. However, the MD/ CEO may be a member of the Rating Committee if the majority of the Rating Committee members are independent. ("Independent" would mean people not having any pecuniary relationship with the CRA or any of its employees). c. Minutes of each case discussed at the committee shall be maintained and signed (digitally or manually) by the Chairperson. Standard format for the Minutes of Rating Committee Meeting is placed at the Annexure below. d. The process of discussion of case by circulation must be avoided, unless there is urgency in taking a rating action. e. Chairperson(s) of each rating committee/sub-committee of the CRA shall, on an annual basis, undertake a review of the decisions taken by the Committees in that year, which would, inter alia, include: i. Ratings assigned by the rating committees/ sub-committees including ratings assigned based on best available information in cases of non-cooperation by the issuer. ii. Sharp changes in ratings. The review report thereof shall be placed before the Board of the CRA. Annexure: Summary Record of the Rating Committee Meeting (RCM) A. Preliminary Information ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o Securities Market) Regulations, 2003. Circular No. SEBI/ HO/ MIRSD/ MIRSD4/ CIR/ P/ 2016/ 119 dated November 1, 2016 2.4 Monitoring and Review of Ratings Circular No. SEBI/ HO/ MIRSD/ MIRSD4/ CIR/ P/ 2017/ 71 dated June 30, 2017 2.4.1. Monitoring of repayment schedules: a. CRAs have to be proactive in early detection of defaults/ delays in making payments. In this regard, CRAs are required to track the servicing of debt obligations for each instrument rated by them, ISIN-wise, and look for potential deterioration in financials which might lead to defaults/ delays, particularly before/ around the due date(s) for servicing of debt obligations, on the basis of monitoring of indicators including, but not restricted to, the following: i. Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) not being sufficient to meet even the interest payments for last 3 years ii. Deterioration in liquidity conditions of the Issuer iii. Abnormal increase in borrowing cost of the Issuer iv. Any other information indicating deterioration in credit quality/ debt servicing capability of the Issuer. b. The CRA shall also monitor the Exchange website for disclosures made b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing power sanctioned by the bank for a period of more than 30 consecutive days in case of bank facilities which do not have scheduled maturity/repayment dates. 6. Details of delay/ default/ rescheduling of interest or principal as on date/ in the month ended , in any of the above case (if any): Name of the Instrument ISIN Amount to be paid Due Date of Payment Actual Date of Payment Remarks Thanking You, Yours faithfully, 2.5 Standardization of Press Release for Rating Actions Circular No. SEBI/HO/MIRSD/MIRSD4/CIR/P/2016/119 dated November 1, 2016 2.5.1. CRAs are mandated to issue a Press Release after assigning a rating. With a view to harmonizing the format of the Press Release, it has been decided that all CRAs shall follow a standardised template, which is attached as Annexure. It may be noted that this template specifies the minimum information that must be covered in the Press Release. CRAs can include additional information, while maintaining the basic format of the Press Release. 2.5.2. While the Press release for the initial rating of bonds, debentures, etc. shall disclose information about the rated amount of the instrument, the subsequent Press Releases shall ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ating History for last three years: S. No. Name of Instrument (NCD/ Bank Loan/ Non-Fund based facilities/ Commercial Paper etc.) Current Rating (Year T) Chronology of Rating History for the past 3 years (Rating Assigned and Press Release Date) along with Outlook/ Watch, if applicable Type (long term/ Short term) Amount Outstanding (` Crores) Rating Date(s) & Rating(s) assigned in Year T-1 Date(s) & Rating(s) assigned in Year T-2 Date(s) & Rating(s) assigned in Year T-3 1 2 Note on complexity levels of the rated instrument: Name and Contact Details of the Rating Analyst(s): About CRA: CRA Disclaimer: Note: Considering the nature of instruments, following details may not be provided under the head "Details of Instrument(s)": Circular No. SEBI/HO/MIRSD/MIRSD4/CIR/P/2017/28 dated March 31, 2017 i. Interest rate/ coupon rate for all types of bank loan facilities. ii. Maturity details for working capital facilities (including cash credit facilities). iii. Tranche-wise interest rate and maturity details for money market instruments such as Commercial Papers, Certificate of Deposit and short-term NCDs which are reissued frequently. However, the range of duration of thes....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rmation and may result in violation of the provisions of section 12A of the Securities and Exchange Board of India Act, 1992 and SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003" b. "The client (issuer/ borrower) agrees to inform the CRA details about the instrument in the format below immediately, but not later than 7 days from the date of placing the debt security. For instruments already listed, the information will be provided at the time of signing the agreement." Instrument type ISIN Issue Size (` cr) Coupon Rate Coupon Payment Dates Terms of Redemption Redemption date Name and contact details of Debenture Trustee Details of top 10 investors c. "The client (Issuer/ borrower) undertakes to provide the CRA a No Default Statement on a monthly basis wherein the Issuer shall explicitly confirm that it has not delayed on any payment of interest/ principal in the previous month. Such statement shall be provided to the CRA on the first working day of the next month." 2.7 Dealing with Conflict of interest Circular No. CIR/MIRSD/CRA/6/2010 dated May 3, 2010 2.7.1. A CRA shall formulate the policies and inter....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... any price sensitive information that they may have about any company. iii. Access Persons to seek prior approval for transactions: * An Access Person shall apply to the Compliance Officer for prior approval of transactions for purchase or sale of securities of the companies which have been rated or graded by the CRA or whose securities / instruments /facilities have been rated or graded by the CRA. * The Compliance Officer of the CRA shall apply to the Chief Executive of the CRA for such prior approval. * The CEO/Compliance Officer shall ensure that there is no conflict of interest while considering the request for prior approval. * Such approvals, if granted, shall be valid for 7 working days from the date of approval. iv. Disclosures: * Any person, who becomes an employee of the CRA, shall submit a statement of holding of all securities in respect of persons mentioned at 2.7.4 (b) above to the Compliance officer or Chief Executive, as the case may be, within 7 working days of joining CRA. * All employees of CRA including the Access Persons shall submit the following details to the CEO/Compliance Officer, as the case may be: o Details of purchase or sale transac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....-up done by the CRA for getting the information. e. Hyperlink/ reference to the applicable "Criteria" f. Limitations regarding information availability (shall have a suitable caveat cautioning the investors/lenders /public) g. Rating History for last three years h. Name and contact details of the Rating Analyst(s) 2.9.4. In case an issuer, having not co-operated with a CRA in the past, approaches another CRA for rating, the new CRA shall, in its Press Release, disclose the aspect of non-co-operation. 2.10 Withdrawal of ratings Circular No. SEBI/HO/MIRSD/MIRSD4/CIR/P/2017/28 dated March 31, 2017 2.10.1. Bank loans/ facilities generally being non-transferable in nature and their only user being banks, withdrawal of ratings is permitted. All norms/ standards prescribed in this regard at paragraph 2.12 shall continue to apply. 2.10.2. Open ended Mutual Fund schemes being perpetual in nature and having no specified maturity, withdrawal of rating of such schemes is permitted. However, as units of such schemes are held by many investors, such ratings shall be placed on notice of withdrawal for at least 30 days, which shall be publicly available on the CRA's website. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... adequate to ensure asset cover for the debentures or if there is any breach of the terms of creation of the security. This information shall be shared on half yearly basis. ii. Funds transferred to Debenture Redemption Reserve (DRR), depletion of the DRR/invocation of guarantee which could affect the payment of debenture obligations. This information shall be shared annually. iii. Details of redemption of the issue. iv. Any default committed including the default in payment of interest or redemption of debentures or delay in creation of security. v. Any change or restructuring of the terms of the issue. vi. Periodic reports from lead banks about the progress of the project for which funds have been raised through debentures and certificate from issuer's auditors in respect of utilization of funds. vii. Details of grievances filed by debenture-holders and action taken to resolve them. viii. Non-cooperation by the issuer with respect to furnishing required reports/ certificates/ information. Information pertaining to points iii. to viii. above shall be shared as and when available. 2.12 Rating of instruments other than "securities" Circular No. CIR/MIRSD/3/2012 dated Ma....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he 5-year period. b. Cumulative Default Rate: The cumulative default rate (CDR) represents the likelihood of an entity that was rated at the beginning of any multi-year period defaulting at any time during the multi-year period. Three-year cumulative default rate shall be computed as: Three-year CDR for rating category X = No. of issuers which defaulted over the three-year period / No. of issuers outstanding at the beginning of the three-year period. 3.1.3. For the above purposes, the following terms shall have the meaning as under: a. Static Pool Non-defaulted ratings that were outstanding at the beginning of any period. b. Default: Non-payment of interest or principal amount in full on the pre-agreed date. A CRA shall recognize default at the first instance of delay in servicing of interest or principal on the rated debt instrument. c. Default Rate: The number of defaults among rated entities in the static pool as a percentage of the total number of entities in the static pool. d. Averaging: All averaging across static pools for default rate computations must be based on the weighted average method where the weights are the number of ratings in each static period. 3....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ceipt from rating services and non-rating services, ii. issuer wise percentage share of non-rating income of the CRA and its subsidiary to the total revenue of the CRA and its subsidiary from that issuer, and iii. names of the rated issuers who along with their associates contribute 10% or more of total revenue of the CRA and its subsidiaries. 3.2.1.4. Structured Finance Products a. While publishing the ratings of structured finance products and their movements, a CRA apart from following all the applicable requirements in case of non-structured ratings shall also disclose the track record of the originator and details of nature of underlying assets while assigning the credit rating. The track record shall include a brief description of the financials of the originator, rating migrations to speculative categories and defaults. b. A CRA shall also disclose at least once in every six months, the performance of the rated pool, i.e., collection efficiency, delinquencies. A CRA shall also provide a detailed description of the underlying pools including ageing, Credit enhancements such as liquidity supports, first and second loss guarantee provided shall also be disclosed. 3.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e considered as aiding and abetting the Issuer in suppression of material information by the CRA which would be in contravention of Clause 12 of Code of Conduct of CRAs and may result in violation of the provisions of section 12A of the Securities and Exchange Board of India Act, 1992 and SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 by the CRA. 3.3.4. Upon the occurrence of or announcement/ news of material events, as elaborated at paragraph 2.4.2, CRAs shall publish on their website press release regarding the rating action (including reiteration of existing rating), if warranted, immediately, but not later than 7 days of occurrence of the said event. 3.3.5. In case there have been delays in the payment of interest/ principal by the Issuer, the Issuers shall state the same in this statement and the CRA shall promptly conduct a rating review and disseminate the rating action through Press Release within 2 days of receipt of such statement. 3.3.6. Timelines of review and Press Releases a. In order to enable CRAs to disseminate information on ratings promptly through press releases as per requirements of Regulation 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lic issues. Details disclosed shall include the name of the issuer, name/ type of instrument, size of the issue, rating and outlook assigned, etc. 3.3.9. Disclosures in case of delay in periodic review a. Each CRA shall promptly disclose on its website details of all such ratings where the review became due but was not completed by the due date, as per the timelines specified in the CRA's Operations Manual/ Internal governing document. Details disclosed shall include the name of the issuer, name/ type of instrument, size of the issue, date of last review, reasons for delay in periodic review, hyperlink to the last Press Release, etc. 3.3.10. Disclosure of guidelines for dealing with Conflict of Interest: SEBI Circular No. CIR/MIRSD/6/2013 dated August 28, 2013 a. The policies adopted by the CRAs for effective implementation of guidelines for dealing with Conflict of Interest for investment/ trading by CRAs, Access Persons and other employees, shall be disclosed on the CRAs' website. ANNEXURE I to VIII Annexure I - Details of new credit ratings assigned during last six-months New Ratings assigned between Apr-Sep / Oct - Mar S. No Name of the Issuer Instrument Type Issue....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g Date of Initial Rating Date of Default Recognition Rating prior to default- A1 category 1. 2. Rating prior to default- A2 category 1. 2. Rating prior to default- A3 category 1. 2. Rating prior to default- A4 category 1. 2. Annexure VII - Average Default Rates for the last 5-Financial Year Period Annexure VII A- STRUCTURED INSTRUMENTS Rating Category 1-Year Default Rate 3-Year Cumulative Default Rate AAA AA A BBB BB B C Annexure VII B- NON - STRUCTURED INSTRUMENTS Rating Category 1-Year Default Rate 3-Year Cumulative Default Rate AAA AA A BBB BB B C ANNEXURE VIII Unsolicited Credit rating* S. No. Name of the Issuer Rating assigned Financial Year 1 Financial Year 2 Financial Year 3 * If in a particular financial year, a rating has subsequently been changed, then that shall also be disclosed Solicited Credit Ratings assigned to those issuers mentioned in the table above in the last financial year** S. No. Name of the Issuer Rating assigned ** Any subsequent revision of the rating in the same year shall also be disclosed 3.4 Rating Criteria, Rating Process and their Disclosure Circular No. SEBI/HO/MIRSD/MIRSD4/CIR/P/2016/1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....able in demat form for public dissemination. Both the depositories, viz. NSDL and CDSL, jointly, made the repository of information pertaining to the corporate bonds/ debentures. 3.6.2. Contents of Database: The various data fields for which the information has to be made available in the centralized database of bonds/ debentures by CRAs in first phase are as under: a. Credit Rating with name of Credit Rating Agency and Date of Credit Rating: i. Current rating (if rated by multiple Credit Rating Agencies, include all such ratings): ii. Name of the CRA Credit Rating Date of Credit Rating iii. Earlier rating and date of rating (if any): Name of the CRA Credit Rating Date of Credit Rating Date of Rating change 3.6.3. Information providers: a. The issuers shall provide the ISIN details to the CRAs, along with the reference number and date of the rating letter, pursuant to issue of instruments for review/ updation of credit ratings by CRAs in the database, within 2 days after allotment of ISIN. b. CRAs shall be provided secure logins by the depositories for verification and updation of the requisite information in the database on an ongoing basis. c. CRAs shall ac....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 4.2 Requirements related to Internal Audit of CRAs Circular No. SEBI/HO/MIRSD/MIRSD4/CIR/P/2016/119 dated November 1, 2016 4.2.1 Eligibility of Auditors for conducting the Internal Audit of the CRA a. The audit firm shall have a minimum experience of three years in the financial sector. b. The internal auditor of a CRA shall declare that i. The firm has not been employed by other CRAs for any other services (such as statutory audit, taxation, consultancy/ retainership etc.) in the past two years, and ii. The partners/ firm do not have any association with any other CRA. c. The audit team must be composed of, at least, a Chartered Accountant (ACA/FCA) and a Certified Information Systems Auditor (CISA). 4.2.2 Rotation of Internal Auditors: An auditor shall be appointed for a maximum term of five years, with a cooling-off period of two years. 4.2.3 Scope of the Internal Audit: The scope of the internal audit shall be expanded to include the following additional checks: a. CRA and its employees, who are associated directly or indirectly with the rating business, have complied with the regulations and code of conduct. b. CRA has defined processes for operations that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ternal audit report or 1 month from the date of Board Meeting of the CRA, whichever is later, in the following format: Sr. No. Observations of the auditor Remarks by the Compliance Officer Comments of the Board of the CRA Corrective actions taken SECTION 5: REDRESSAL OF INVESTOR GRIEVANCES 5.1 Designated e-mail ID for regulatory communication with SEBI SEBI Circular No. MIRSD/ DPSIII/ Cir-21/ 08 dated July 7, 2008. 5.1.1. SEBI has been communicating with the registered market intermediaries through circulars, letters, directions etc. In order to facilitate the issuance of digitally signed circulars, all registered intermediaries are required to create a designated email id for regulatory communications. This email id shall be an exclusive email id only for the above purpose and should not be a person centric email id. 5.1.2. The Designated e-mail ID shall be communicated to SEBI by emailing a file to [email protected] , as per the format prescribed below: a. The file should be an excel file. b. The name of the file and the subject of the email shall specify the type of intermediary and the name of the intermediary. For example - "Credit Rating Agency - ABC ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ranted them registration to operate in the securities market. SCORES user id and password of the Credit Rating Agencies shall be created only after receiving approval from the concerned Department/ Division of SEBI. 5.2.5. All SEBI registered Credit Rating Agencies shall review their investors' grievances redressal mechanism so as to further strengthen it and correct the existing shortcomings, if any. The SEBI registered Credit Rating Agencies to whom complaints are forwarded through SCORES, shall take immediate efforts on receipt of a complaint, for its resolution, within thirty days. The SEBI registered Credit Rating Agencies shall keep the complainant duly informed of the action taken thereon. 5.2.6. The SEBI registered Credit Rating Agencies shall update the ATR along with supporting documents, if any, electronically in SCORES. ATR in physical form need not be sent to SEBI. The proof of dispatch of the reply of the SEBI registered Credit Rating Agencies to the concerned investor should also be uploaded in SCORES and preserved by the SEBI registered intermediary, for future reference. 5.2.7. Action taken by the SEBI registered Credit Rating Agencies will not be considered as ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nformation as provided below shall be prominently displayed in the offices of the CRAs: Dear Investor, In case of any grievance / complaint against the Credit Rating Agency: * Please contact Compliance Officer of the Credit Rating Agency (Name and Address) / email-id ([email protected]) and Phone No. - 91-XXXXXXXXXX. * You may also approach CEO / Partner / Proprietor (Name) / email-id ([email protected]) and Phone No. - 91-XXXXXXXXXX. * If not satisfied with the response of the CRA you can lodge your grievances with SEBI at http://scores.gov.in or you may also write to any of the offices of SEBI. For any queries, feedback or assistance, please contact SEBI Office on Toll Free Helpline at 1800 22 7575 / 1800 266 7575.56 SECTION 6: OTHERS 6.1 Guidelines on Outsourcing of Activities by Credit Rating Agencies SEBI Circular No. CIR/MIRSD/24/2011dated December 15, 2011. 6.1.1. SEBI Regulations for various intermediaries require that they shall render at all times high standards of service and exercise due diligence and ensure proper care in their operations. 6.1.2. It has been observed that often intermediaries resort to outsourcing with a view to reduce costs, and at times, for st....
X X X X Extracts X X X X
X X X X Extracts X X X X
....outsourcing multiple activities to the same entity, etc. 1.2 The Board shall mandate a regular review of outsourcing policy for such activities in the wake of changing business environment. It shall also have overall responsibility for ensuring that all ongoing outsourcing decisions taken by the intermediary and the activities undertaken by the third-party, are in keeping with its outsourcing policy. 2. The intermediary shall establish a comprehensive outsourcing risk management programme to address the outsourced activities and the relationship with the third party. 2.1 An intermediary shall make an assessment of outsourcing risk which depends on several factors, including the scope and materiality of the outsourced activity, etc. The factors that could help in considering materiality in a risk management programme include- a) The impact of failure of a third party to adequately perform the activity on the financial, reputational and operational performance of the intermediary and on the investors / clients; b) Ability of the intermediary to cope up with the work, in case of non-performance or failure by a third party by having suitable back-up arrangements; c) Regulatory....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 3.3 The facilities / premises / data that are involved in carrying out the outsourced activity by the service provider shall be deemed to be those of the registered intermediary. The intermediary itself and Regulator or the persons authorized by it shall have the right to access the same at any point of time. 3.4 Outsourcing arrangements shall not impair the ability of SEBI/SRO or auditors to exercise its regulatory responsibilities such as supervision/inspection of the intermediary. 4. The intermediary shall conduct appropriate due diligence in selecting the third party and in monitoring of its performance. 4.1 It is important that the intermediary exercises due care, skill, and diligence in the selection of the third party to ensure that the third party has the ability and capacity to undertake the provision of the service effectively. 4.2 The due diligence undertaken by an intermediary shall include assessment of: a) third party's resources and capabilities, including financial soundness, to perform the outsourcing work within the timelines fixed; b) compatibility of the practices and systems of the third party with the intermediary's requirements and objectives; c) m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ver, business continuity and disaster recovery plans, force majeure clause, etc.; h) provides for preservation of the documents and data by third party ; i) provides for the mechanisms to resolve disputes arising from implementation of the outsourcing contract; j) provides for termination of the contract, termination rights, transfer of information and exit strategies; k) addresses additional issues arising from country risks and potential obstacles in exercising oversight and management of the arrangements when intermediary outsources its activities to foreign third party. For example, the contract shall include choice-of-law provisions and agreement covenants and jurisdictional covenants that provide for adjudication of disputes between the parties under the laws of a specific jurisdiction; l) neither prevents nor impedes the intermediary from meeting its respective regulatory obligations, nor the regulator from exercising its regulatory powers; and m) provides for the intermediary and /or the regulator or the persons authorized by it to have the ability to inspect, access all books, records and information relevant to the outsourced activity with the third party. 6.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re the outsourced activities of multiple intermediaries are concentrated with a limited number of third parties. 8.1. In instances, where the third party acts as an outsourcing agent for multiple intermediaries, it is the duty of the third party and the intermediary to ensure that strong safeguards are put in place so that there is no co-mingling of information /documents, records and assets. 6.2 Unauthenticated news circulated by SEBI Registered Market Intermediaries through various modes of communication Circular No. CIR/ISD/1/2011 dated March 23, 2011 6.2.1. It has been observed by SEBI that unauthenticated news related to various scrips are circulated in blogs/ chat forums/ e-mail etc. by employees of Broking Houses/ Other Intermediaries without adequate caution as mandated in the Code of Conduct for Stock Brokers and respective Regulations of various intermediaries registered with SEBI 6.2.2. Further, in various instances, it has been observed that the Intermediaries do not have proper internal controls and do not ensure that proper checks and balances are in place to govern the conduct of their employees. Due to lack of proper internal controls and poor training, employee....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ations, it has been decided to put in place comprehensive guidelines to collectively cover such entities and their associated persons, for elimination of their conflict of interest, as detailed hereunder. 6.3.2. Such entities shall adhere to these guidelines for avoiding or dealing with or managing conflict of interest. They shall be responsible for educating their associated persons for compliance of these guidelines. 6.3.3. For the purpose of these guidelines "intermediaries" and "associated persons" have the same meaning as defined in Securities and Exchange Board of India Certification of Associated Persons in the Securities Markets) Regulations, 2007. 6.3.4. Such entities and their associated persons shall, a. lay down, with active involvement of senior management, policies and internal procedures to identify and avoid or to deal or manage actual or potential conflict of interest, develop an internal code of conduct governing operations and formulate standards of appropriate conduct in the performance of their activities, and ensure to communicate such policies, procedures and code to all concerned; b. at all times maintain high standards of integrit....