TaxTMI 
TaxTMI 
TaxTMI 
Securities and Exchange Board of India (Credit Rating Agencies) (Amendment) Regulations, 2023
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.... these regulations, except chapters II, III, and IV, shall be applicable to ESG rating providers: Provided that any reference to a "credit rating agency" under chapters I, V, VI and VII shall also be construed as a reference to an "ESG rating provider", as may be applicable: Provided further that the provisions of this Chapter shall only be applicable to ESG rating providers covered in the Fourth Schedule. Definitions 28B. (1) In this chapter, unless the context otherwise requires: - (a) "client" means any person who avails or proposes to avail the services of an ESG rating provider; (b) "environmental, social, and governance ratings", or "ESG ratings" means the rating products that are marketed as opinions about an issuer or a security, regarding its ESG profile or characteristics or exposure to ESG risk, governance risk, social risk, climatic or environmental risks, or impact on society, climate and the environment, that are issued using a defined ranking system of rating categories, whether or not these are explicitly labelled as "ESG ratings"; (c) "ESG rating provider" means a person which is engaged in, or proposes to engage in, the business of issuing ESG rating....
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....following criteria namely, -- (a) the applicant shall be incorporated as a company under the Companies Act, 2013 (18 of 2013); (b) the applicant shall have specified ESG rating activity, as the main object in its Memorandum of Association; (c) the applicant shall have submitted, to the Board, its business plan pertaining to providing ESG ratings, along with the following information, namely - (i) a target breakeven date; (ii) target revenue and the targeted number of clients it plans to service, within two years of obtaining a certificate; and (iii) cumulative cash losses that the applicant projects to incur until the targeted breakeven date, along with the activities or areas in which such losses shall be incurred; Explanation. - The targets mentioned in clause (c) of this regulation shall: A. be set by the applicants themselves; B. be limited to their operations in securities markets, i.e. related to issuers that are listed, or proposed to be listed, or whose securities are listed or proposed to be listed, on a recognized stock exchange; and C. be reasonable; (d) the applicant shall have submitted a declaration that it does not and shall not undertake any ac....
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...., in case it is seeking registration under Category I, satisfied the following additional criteria, namely - (i) the applicant is a subsidiary of an intermediary registered with the Board, or of ESG rating provider incorporated in a Financial Action Task Force (FATF) member jurisdiction and recognized under their respective law, having a minimum experience of five years in ESG rating of securities or companies; (ii) the promoter of the applicant is: A. a person regulated by any of the financial sector regulators namely, the Board, the Reserve Bank of India, the Insurance Regulatory and Development Authority of India or the Pension Fund Regulatory and Development Authority, subject to the receipt of the relevant approval(s) from the concerned regulator or authority; or B. a foreign ESG rating provider incorporated in the jurisdiction of a member of the Financial Action Task Force (FATF) and recognized under their respective law, having a minimum experience of five years in the business of providing ESG rating of securities or companies; or C. a body corporate with a continuous net worth of minimum rupees one hundred crores, as per its audited annual accounts for the previo....
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.... be drawn down in terms of the business plan submitted at the time of application for certificate, subject to compliance with these regulations; (ii) the applicant shall have at least two employees specialized across the following areas, at all times: A. governance, B. sustainability, C. social impact or social responsibility, and D. data analytics. Explanation. - For the purposes of this regulations, one employee may be treated as a specialist in at most two of the above areas. A person shall be considered as specialized in an area if such person possesses any of the following: (a) has relevant work experience of not less than five years in the specified area; or (b) a professional qualification in the specified area from a university or an institution recognized by the Central Government or any State Government or a foreign university; or (c) any other qualification as may be specified by the Board; (o) any other criteria, as may be specified by the Board, from time to time. Furnishing of further information, clarification and personal representation 28F. (1) The Board may require the applicant to furnish any such further information or clarification regar....
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.... contribute additional capital or take other remedial measures, as appropriate and as may be specified by the Board, within six months of the date of the corresponding target date, or other such period as may be specified by the Board; (g) the ESG rating provider does not undertake any activity or offer any product or service, except services related to ESG ratings in accordance with these regulations or such other products, services or activities as may be specified by the Board or activities incidental to such activities. Procedure where certificate is not granted 28I. (1) If, after considering an application made under this Chapter, the Board is of the opinion that a certificate should not be granted, it may, after giving the applicant a reasonable opportunity of being heard, reject the application. (2) The decision of the Board, not to grant certificate under sub-regulation (1), shall be communicated by the Board to the applicant within a period of thirty days of such decision, stating the grounds of the decision. (3) Any applicant aggrieved by the decision of the Board rejecting his application under sub-regulation (1) may, within a period of thirty days from the dat....
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....ESG rating transition rate on its respective website, in a manner as may be specified by the Board; (j) disclose, on its website, the general nature of compensation arrangements with clients and whether the ESG ratings assigned were solicited or unsolicited; (k) take other measures that the Board may consider material for a true and fair understanding of the ESG rating; (l) identify, disclose, and to the extent possible, avoid or appropriately mitigate potential conflicts of interest; (m) formulate policies and internal codes of conduct for dealing with conflicts of interest and prominently disclose the policies on its website; (n) identify, disclose and, to the extent possible, mitigate potential conflict of interest that may arise between ESG rating provider and its clients or client groups, or between multiple clients, or between the rated issuer or issuer whose securities are being rated and other clients or client groups, or between the ESG Rating Provider and any other sources; (o) ensure that ESG ratings are not affected by any existing or potential business relationship between the ESG rating provider or its associates and any person for which it provides ESG ra....
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....t ESG rating report with the rated issuer or the issuer whose securities are being rated, before publication of the same: Provided that the ESG rating provider shall grant an opportunity of appeal and representation, if requested for by the issuer. (2) The ESG rating provider shall continuously monitor the rating of a client, unless the rating is withdrawn in such manner as may be specified by the Board. Procedure for review of ESG rating 28M. (1) The ESG rating provider shall annually, or if required, more frequently, review each of the published ESG ratings, unless the ESG rating is withdrawn in accordance with these regulations. (2) The ESG rating provider shall not withdraw an ESG rating except in cases where the rated issuer, or the issuer whose security is rated, is wound up or merged or amalgamated with another company, or except in cases as may be specified by the Board from time to time. (3) The ESG rating provider shall withdraw an ESG rating as per its documented policies, subject to sub-regulation (2), which shall also be disclosed on its website. (4) If the rated issuer or the issuer whose securities are rated by the ESG rating provider refuses co-operate....
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.... financial statements as on the end of each accounting period; (b) a copy of the auditor's report on its accounts for each accounting period; (c) a copy of the agreement entered into with each client, if applicable; (d) information supplied by each of the clients, if applicable; (e) correspondence with each client; (f) ESG ratings assigned to various issuers or securities including up- gradation and down gradation (if any) of the ratings so assigned; (g) ESG rating notes and other documents which state the rationale or form the basis for assigning an ESG rating; (h) letter or reports or press releases or disclosures assigning ESG ratings; (i) particulars of fees charged for ESG ratings; and (j) such other records as the Board may specify from time to time. (2) Every ESG rating provider shall intimate to the Board the place where the books of account, records and documents, required to be maintained under these regulations, are being maintained. Steps on auditor's report 28S. Every ESG rating provider shall, within two months from the date of the report of the auditor, take steps to rectify the deficiencies, if any, made out in such report, in so far as they ....
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....moter; or (b) there are common employees between the ESG rating provider and the borrower or the subsidiary or the associate of the promoter. (2) No ESG rating provider shall, rate an issuer or securities of any issuer, which is its promoter; (3) An ESG rating provider shall neither assign any ESG rating to an issuer promoted by it or its associates, nor rate securities of such issuers. (4) No ESG rating provider shall rate an issuer or securities of such issuer, if the ESG rating provider has a Chairperson, director or employee who is also a Chairperson, director or employee of the issuer: Provided that the ESG rating provider may, subject to the provisions of sub-regulation (1) rate an entity having a common independent director if, - (a) the independent director does not participate in the discussions on ESG rating decisions, and (b) the ESG rating provider makes a disclosure in the ESG rating announcement of such issuer (about the existence of common independent director) on its Board, and that the common independent director did not participate in the rating process or in the meeting of its board of directors, when the rating of such associate was discussed. Ex....
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.... 1.1. Name, address of the registered office, address for correspondence, mobile number(s), email address of the Applicant. Address of branch offices, if any. 1.2. Name, mobile number and email address of the contact person. 1.3. Category of ESG rating provider for which the application is made. 1.4. If the application is for Category I, please provide the following information, as applicable: 1.4.1. Details of the intermediary registered with the Board, of which the applicant is a subsidiary, or of ESG rating provider registered with any foreign regulatory authority in a Financial Action Task Force (FATF) member jurisdiction and recognized under their law. 1.4.2. Details of the promoters of the applicant. 1.5. Please provide the following information regarding the applicant's operations pertaining to its business of providing ESG ratings: 1.5.1. business plan, and 1.5.2. a target breakeven date, and 1.5.3. target revenue, and target number of clients it plans to service, within two years of obtaining a certificate, and 1.5.4. cumulative cash losses that the applicant projects to incur until the target breakeven date, along with the activities or areas where....
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....appointment in the applicant and functional areas. 4. INFRASTRUCTURE 4.1. Details of infrastructure including computing facilities, office space, equipment, manpower, facilities for research and database available with the company and whether the existing infrastructure is adequate to carry on the rating activities proposed to be undertaken by the applicant. 4.2. Any further plan for additional/ improved infrastructure, and if applicable, declaration of remote work environment, if any, to be indicated. 5. MAJOR SHAREHOLDERS 5.1. List of major shareholders (holding five per cent. or more shareholding in the applicant, directly or along with associates) in the format provided below: Shareholding as on: Name of shareholder No. of Shares held %age of total paid up capital of the company 6. ASSOCIATE CONCERNS 6.1. Particulars of associate companies/concerns which shall include name, address, type of activity handled, nature of interest of the applicant in the associate, nature of interest of promoter(s) of the applicant in the associate. 6.2. Whether the Board has granted or refused registration as ESG rating provider to any associate of the applicant alo....
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....the Board, please provide relevant details of the same. 10. DECLARATION 10.1. Give the following declarations signed by two directors: I/We hereby apply for a certificate. I/We warrant that I/We have truthfully and fully answered the questions above and provided 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 Name in Block Letters Director Name in Block Letters Date Date FORM - B Certificate of Registration as an ESG rating provider I. In exercise of the powers conferred by sub-section (1) of section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), read with the rules and regulations made thereunder, the Board hereby grants a certificate of registration to _______________________________________________ as an Environmental, Social, and Governance (ESG) rating provider, under Category-___________, in accordance with and subject to the conditions in the regulations to carry out the activity of the ESG rating provider: - II. Registration Code....
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....it induce or induct the clients of any other ESG rating provider on assurance of higher or lower ESG rating. 8. An ESG rating provider shall keep track of all important changes relating to the issuers or securities it rates and shall develop efficient and responsive systems to yield timely and accurate ratings. 9. An ESG rating provider shall also monitor closely all relevant factors that might affect the environmental, social or governance characteristics of the rated issuers or their securities. 10. An ESG rating provider shall, wherever necessary, disclose to the client, all possible sources of conflict of duties and interests, which could impair its ability to make fair, objective and unbiased ratings. 11. An ESG rating provider shall ensure that no conflict of interest exists between any member participating in the rating analysis, and that of the person who is being rated or whose securities are being rated. 12. An ESG rating provider shall not make any exaggerated statement, whether oral or written, to the client either about its qualification or its capability to render any services or its achievements with regard to the services rendered to other clients. 13. A....
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....rating process. 21. An ESG rating provider shall provide adequately empower its compliance officer to enable him or her to effectively discharge his duties. 22. An ESG rating provider shall ensure that the senior management, particularly decision makers, have access to all relevant information about its business on a timely basis. 23. An ESG rating provider shall ensure that good corporate policies and corporate governance are adopted and followed. 24. ESG rating provider shall not, generally and particularly, in respect of issuers or securities rated by it, be party to or instrumental for-- (a) creation of false market; (b) price rigging or manipulation; or (c) dissemination of any unpublished price sensitive information in respect of securities which are listed and proposed to be listed in any stock exchange, unless required, as part of rationale for the rating accorded." BABITHA RAYUDU, Executive Director [ADVT.-III/4/Exty./246/2023-24 Footnote: 1. The Securities and Exchange Board of India (Credit Rating Agencies) Regulations, 1999 were issued under S.O. No. 547 (E) dated July 7, 1999 published in the Gazette of India. 2. The Securities and Exchange Board of ....