SEBI has issued a circular addressing the disclosure of information on issuers not cooperating with credit rating agencies (CRAs). The circular titled ‘Disclosure of Information on Issuers Not Cooperating (INC) with CRAs’ highlights the obligations of CRAs to carry out periodic reviews of ratings and the need for disclosures when issuers are non-cooperative.
Under the SEBI (Credit Rating Agencies) Regulations, 1999, CRAs are required to conduct periodic reviews of published ratings. However, in cases where issuers do not cooperate, CRAs must rely on the best available information for reviews and disclose that the ratings are based on such information. The circular acknowledges the increasing number of non-cooperative issuers, particularly unlisted and small entities.
To enhance transparency and provide information to stakeholders, market participants, and investors, the circular introduces the requirement for CRAs to disclose two separate lists of non-cooperative issuers. The lists should distinguish between securities listed or proposed to be listed on recognized stock exchanges and other ratings. The disclosure format includes the name of the issuer, date of categorization as non-cooperative, and a link to the issuer’s press releases.
CRAs must update these lists on a daily basis to ensure the information remains current. The circular will be applicable from July 15, 2023, and CRAs must report their compliance within one quarter from the effective date. Monitoring of compliance will be conducted through half-yearly internal audits as mandated by CRA Regulations.
Full text of the Circular is as below-
Securities and Exchange Board of India
Circular No. SEBI/HO/DDHS/DDHS-POD2/P/CIR/2023/105 Dated: June 27, 2023
To
All Credit Rating Agencies (CRAs) registered with SEBI
Dear Sir/ Madam,
Sub: Disclosure of Information on Issuers Not Cooperating (INC) with CRAs
I. SEBI (Credit Rating Agencies) Regulations, 1999 (“CRA Regulations”) inter-alia require every CRA to carry out periodic reviews of all published ratings during the lifetime of the securities, unless the rating is withdrawn. However, in case a client does not cooperate with the CRA, the CRA is required to carry out the review on the basis of best available information or in the manner specified by SEBI. Further, in such cases, CRAs are required to disclose that such ratings have been assigned based on the best available information.
II. Over time, the number of issuers that are non-cooperative with CRAs have increased, with a vast majority of INC issuers being unlisted and small entities. In this regard, to provide enhanced transparency and information regarding non-cooperative issuers to various stakeholders, market participants and investors, the following is being prescribed:
A. A CRA shall disclose two lists of issuers who are non-cooperative with the CRA, separately for:
i. Securities that are listed, or proposed to be listed, on a recognized stock exchange, and
ii. Other ratings
B. The aforementioned lists shall be disclosed in the following format:
| S. No. | Name of Non-cooperative issuer | Date of categorization of issuer as non- cooperative |
Link to the webpage hosting the issuer’s press releases |
C. The above disclosure shall be updated on a daily basis.
III. Applicability: The circular shall be applicable with effect from July 15, 2023, and CRAs shall report on their compliance with this circular (as ratified by their respective board of directors) to SEBI within one quarter from the date of applicability of this circular.
IV. Monitoring: Monitoring of this circular shall be done in terms of the half-yearly internal audit for CRAs, mandated under Regulation 22 of the CRA Regulations and circulars issued thereunder.
V. This circular is issued with the approval of competent authority, in exercise of the powers conferred by Section 11 (1) of Securities and Exchange Board of India Act, 1992 read with the provisions of Regulation 20 of CRA Regulations to protect the interest of investors in securities and to promote the development of, and to regulate, the securities market.
Yours faithfully,
Ritesh Nandwani
Deputy General Manager
Department of Debt and Hybrid Securities
Tel No.022-2644-9696
Email ID – [email protected]
