THE GAZETTE OF INDIA
EXTRAORDINARY
PART-II – SECTION 3 – SUB-SECTION (ii)
PUBLISHED BY AUTHORITY
MUMBAI, JULY 7, 1999
SECURITIES AND EXCHANGE BOARD OF INDIA
NOTIFICATION
SECURITIES AND EXCHANGE BOARD OF INDIA
(CREDIT RATING AGENCIES) REGULATIONS, 1999
S.O. 547(E) – In exercise of the powers conferred by section 30 read with section 11 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Securities and Exchange Board of India hereby makes the following regulations, namely:-
CHAPTER I
PRELIMINARY
1. Short title and commencement
(1) These regulations may be called the Securities and Exchange Board of India (Credit Rating Agencies) Regulations, 1999.
(2) They shall come into force on the date of their publication in the Official Gazette. Definitions
2. Definitions
(1) In these regulations, unless the context otherwise requires, –
(a) “Act” means the Securities and Exchange Board of India Act, 1992 (15 of 1992);
(b) “associate”, in relation to a credit rating agency, includes a person –
(i) who, directly or indirectly, by himself, or in combination with relatives, owns or controls shares carrying not less than ten percent of the voting rights of the credit rating agency, or
(ii) in respect of whom the credit rating agency, directly or indirectly, by itself, or in combination with other persons, owns or controls shares carrying not less than ten percent of the voting rights, or
(iii) majority of the directors of which, own or control shares carrying not less than ten percent of the voting rights of the credit rating agency, or
(iv) whose director, officer or employee is also a director, officer or employee of the credit rating agency;
(c) “Board” means the Board as defined in clause (a) of sub-section (1) of section 2 of the Act;
(d) “body corporate” means a body corporate as defined in clause (7) of section 2 of the Companies Act, 1956 (1 of 1956);
(e) “certificate” means a certificate of 12[[***] registration granted] by the Board under these regulations;
3[(ei)4[***]
(eii)―change in control‖, in relation to a credit rating agency being a body corporate, means:—
(i) if its shares are listed on any recognised stock exchange, change in control as defined under the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997;
(ii) in any other case, change in the controlling interest in the body corporate.
Explanation.─ For the purpose of sub-clause (ii), the expression ―controlling interest‖ means an interest, whether direct or indirect, to the extent of at least fifty-one per cent of voting rights in the body corporate;]
(f)”client” means any person whose securities are rated by a credit rating agency;
(g) “company” means a company incorporated under the Companies Act, 1956 (1 of 1956);
(h) “credit rating agency” means a body corporate which is engaged in, or proposes to be engaged in, the business of rating of securities offered by way of public or rights issue;
(i) “economic offence” means an offence to which the Economic Offences (Inapplicability of Limitation) Act, 1974 (12 of 1974), is applicable for the time being;
(j) 5[* * *]
(k)”form” means any of the forms specified in the First Schedule:
(l) “fraud” has the same meaning as is assigned to it by section 17 of the Indian Contract Act, 1872 (9 of 1872);
(m)”group companies” means group companies as defined in the Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969);
(n) “inspecting officer” means any one or more persons appointed by the Board under reregulation 29:
(o) “issuer” means a person whose securities are proposed to be rated by a credit rating agency;
(p) “net-worth” means the aggregate value of the paid up equity capital and free reserves (excluding reserves created out of revaluation), reduced by the aggregate value of accumulated losses and deferred expenditure not written off, including miscellaneous expenses not written of;
(q) “rating” means an opinion regarding securities, expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency and used by the issuer of such securities, to comply with a requirement specified by these regulations;
(r) “rating committee” means a committee constituted by a credit rating agency to assign rating to a security;
(s)”regulation” means a regulation forming part of these regulations;
(t) “relative” means a relative as defined in section 6 of the Companies Act, 1956 (1 of 1956);
(u)”schedule” means any of the schedules appended to these regulations; and
(v)”securities” has the meaning assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956.
(2) Words and expressions used and not defined in these regulations, but defined in the Act, shall have the meanings respectively assigned to them in the Act.
CHAPTER II
REGISTRATION OF CREDIT RATING AGENCIES
3. Application for grant of certificate 6[of 7[***] registration]
(1) Any person proposing to commence any activity as a credit rating agency on or after the date of commencement of these regulations shall make an application to the Board for the grant of a certificate of registration for the purpose.
(2) Any person, who was immediately before the said date carrying on any activity as a credit rating agency, shall make an application to the Board for the grant of a certificate within a period of three months from such date:
Provided that the Board may, where it is of the opinion that it is necessary to do so, for reasons to be recorded in writing, extend the said period upto a maximum of six months form such date.
(3) An application for the grant of a certificate under sub-regulation(1) or sub-regulation(2) shall be made to the Board in Form A of the First Schedule and shall be accompanied by a non–refundable application fee, as specified in Form A of the second Schedule, to be paid in the manner specified in Part B thereof.
(4) Any person referred to in sub-regulation (2) who fails to make an application for the grant of a certificate within the period specified in that sub-regulation shall cease to carry on rating activity.
4. Promoter of credit rating agency
The Board shall not consider an application under regulation (3) unless the applicant is promoted by a person belonging to any of the following categories, namely:
(a) a public financial institution, as defined in section 4 A of the Companies Act, 1956 (1 of 1956);
(b) a scheduled commercial bank included for the time being in the second schedule to the Reserve Bank of India Act, 1934 (2 of 1934);
(c) a foreign bank operating in India with the approval of the Reserve Bank of India;
(d) a foreign credit rating agency recognised by or under any law for the time being in force in the country of its incorporation, having at least five years experience in rating securities;
(e) any company or a body corporate, having continuous net worth of minimum rupees one hundred crores as per its audited annual accounts for the previous five years prior to filing of the application with the Board for the grant of certificate under these regulations.
5. Eligibility criteria
The Board shall not consider an application for the grant of a certificate under regulation 3, unless the applicant satisfies the following conditions, namely:
(a) the applicant is set up and registered as a company under the Companies Act, 1956;
(b) the applicant has, in its Memorandum of Association, specified rating activity as one of its main objects;
(c) the applicant has a minimum net worth of rupees five crores.
Provided that a credit rating agency existing at the commencement of these regulations, with a net worth of less than rupees five crores, shall be deemed to have satisfied this condition, if it increases its net worth to the said minimum within a period of three years of such commencement.
(d) the applicant has adequate infrastructure, to enable it to provide rating services in accordance with the provisions of the Act and these regulations;
(e) the applicant and the promoters of the applicant, referred to in regulation 4 have professional competence, financial soundness and general reputation of fairness and integrity in business transactions, to the satisfaction of the Board;
(f) neither the applicant, nor its promoter, nor any director of the applicant or its promoter, is involved in any legal proceeding connected with the securities market, which may have an adverse impact on the interests of the investors;
(g) neither the applicant, nor its promoters, nor any director, of its promoter has at any time in the past been convicted of any offence involving moral turpitude or any economic offence;
(h)the applicant has, in its employment, persons having adequate professional and other relevant experience to the satisfaction of the Board;
(i) neither the applicant, nor any person directly or indirectly connected with the applicant has in the past been –
(i) refused by the Board a certificate under these regulations or
(ii) subjected to any proceedings for a contravention of the Act or of any rules or regulations made under the Act.
Explanation: For the purpose of this clause, the expression “directly or indirectly connected person” means any person who is an associate, subsidiary, inter-connected or group company of the applicant or a company under the same management as the applicant.
(j) the applicant, in all other respects, is a fit and proper person for the grant of a certificate;
(k) grant of certificate to the applicant is in the interest of investors and the securities market.
12 [Criteria for Fit and Proper Person) Regulations, 2004.
5A. The provisions of the Securities and Exchange Board of India (Criteria for Fit and Proper Person) Regulations, 2004 shall, as far as may be, apply to all applicants or the credit rating agencies under these regulations.
6. Application to conform to the requirements
Any application for a certificate, which is not complete in all respects or does not conform to the requirement of regulation 5 or instructions specified in Form A shall be rejected by the Board:
Provided that, before rejecting any such application, the applicant shall be given an opportunity to remove, within thirty days of the date of receipt of relevant communication, from the Board such objections as may be indicated by the Board.
Provided further, that the Board may, on sufficient reason being shown, extend the time for removal of objections by such further time, not exceeding thirty days, as the Board may consider fit to enable the applicant to remove such objections.
7. Furnishing of information, clarification and personal representation
(1) The Board may require the applicant to furnish such further information or clarification as the Board may consider necessary, for the purpose of processing of the application.
(2) The Board, if it so desires, may ask the applicant or its authorised representative to appear before the Board, for personal representation in connection with the grant of a certificate.
13 [8. Grant of certificate of 14 [***] registration.
(1) The Board, on being satisfied that the applicant is eligible, shall grant a certificate of 15[***] registration in Form B and shall send an intimation to the applicant.
16 [(2) The certificate of registration granted under sub-regulation (1) shall be valid unless it is suspended or cancelled by the Board.]
17 [(3) The credit rating agency who has already been granted certificate of registration by the Board, prior to the commencement of the Securities and Exchange Board of India (Change in Conditions of Registration of Certain Intermediaries) (Amendment) Regulations, 2016 shall be deemed to have been granted a certificate of registration, in terms of sub-regulation (1).]
(4) The grant of a certificate of 18[***] registration shall be subject to payment of the registration fees as specified under Part A of Second Schedule, in the manner prescribed in Part B thereof.]
8A 19[***]
Conditions of certificate 20[***]
9. 21[***] The certificate granted under regulation 8 22[or 8A] shall be, subject to
the following conditions, namely: (a) the credit rating agency shall comply with the provisions of the Act, the regulations made there under and the guidelines, directives, circulars and instructions issued by the Board from time to time on the subject of credit rating.
(b) 23[***] where any information or particulars furnished to the Board by a credit rating agency:
(i) is found to be false or misleading in any material particular ; or
(ii) has undergone change subsequently to its furnishing at the time of the application for a certificate;
the credit rating agency shall forthwith inform the Board in writing 24[;]
25 [***]
26 [(c) where the credit rating agency proposes 27 [change in control], it shall obtain prior approval of the Board for continuing to act as such after the change.]
0. 28[***]
Procedure where certificate is not granted
11. 29[(1) If, after considering an application made under regulation 3, the Board is of the opinion that a certificate of registration 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 30[certificate of initial or permanent registration, as the case may be,] 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 date of receipt by him of the communication referred to in sub-regulation (2) apply to the Board in writing for reconsideration of such decision.
(4) Where an application for re-consideration is made under sub-regulation (3) the Board shall consider the application and communicate to the applicant its decision in writing, as soon as may be.
12. 31[***]
CHAPTER III
GENERAL OBLIGATIONS OF CREDIT RATING AGENCIES
13. Code of Conduct
Every credit rating agency shall abide by the Code of Conduct contained in the Third Schedule.
14. Agreement with the client
Every credit rating agency shall enter into a written agreement with each client whose securities it proposes to rate, and every such agreement shall include the following provisions, namely:-
(a) the rights and liabilities of each party in respect of the rating of securities shall be defined;
(b) the fee to be charged by the credit rating agency shall be specified;
(c) the client shall agree to a periodic review of the rating by the credit rating agency during the tenure of the rated instrument;
(d) the client shall agree to co-operate with the credit rating agency in order to enable the latter to arrive at, and maintain, a true and accurate rating of the clients securities and shall in particular provide to the latter, true, adequate and timely information for the purpose.
(e) the credit rating agency shall disclose to the client the rating assigned to the securities of the latter through regular methods of dissemination, irrespective of whether the rating is or is not accepted by the client;
(f) The client shall agree to disclose, in the offer document;-
(i) the rating assigned to the client’s listed securities by any credit rating agency during the last three years and
(ii) any rating given in respect of the client’s securities by any other credit rating agency, which has not been accepted by the client.
(g) the client shall agree to obtain a rating from at least two different rating agencies for any issue of debt securities whose size is equal to or exceeds, rupees one hundred crores.
15. Monitoring of ratings
(1) Every credit rating agency shall, during the lifetime of securities rated by it continuously monitor the rating of such securities.
(2) Every credit rating agency shall disseminate information regarding newly assigned ratings, and changes in earlier rating promptly through press releases and websites, and, in the case of securities issued by listed companies, such information shall also be provided
simultaneously to the concerned regional stock exchange and to all the stock exchanges where the said securities are listed.
16. Procedure for review of rating
(1) Every credit rating agency shall carry out periodic reviews of all published ratings during the lifetime of the securities.
(2)If the client does not co-operate with the credit rating agency so as to enable the credit rating agency to comply with its obligations under regulation 15 of this regulation, the credit rating agency shall carry out the review on the basis of the best available information.
Provided that if owing to such lack of co-operation, a rating has been based on the best available information, the credit rating agency shall disclose to the investors the fact that the rating is so based.
(3)A credit rating agency shall not withdraw a rating so long as the obligations under the security rated by it are outstanding, except where the company whose security is rated is wound up or merged or amalgamated with another company.
17.Internal procedures to be framed
Every credit rating agency shall frame appropriate procedures and systems for monitoring the trading of securities by its employees in the securities of its clients, in order to prevent contravention of –
(a) the Securities and Exchange Board of India (Insider Trading) Regulations, 1992;
(b) the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to the Securities Market) Regulations, 1995; and
(c) other laws relevant to trading of securities.
18. Disclosure of Rating Definitions and Rationale
(1) Every credit rating agency –
(a) shall make public the definitions of the concerned rating, along with the symbol and,
(b) shall also state that the ratings do not constitute recommendations to buy, hold or sell any securities
(2) Every credit rating agency shall make available to the general public information relating to the rationale of the ratings, which shall cover an analysis of the various factors justifying a favourable assessment, as well as factors constituting a risk.
19. Submission of information to the Board
(1) Where any information is called for by the Board from a credit rating agency for the purposes of these regulations, including any report relating to its activities, the credit rating agency shall furnish such information to the Board –
(a) within a period specified by the Board or
(b) if no such period is specified, then within a reasonable time.
(2) Every credit rating agency shall, at the close of each accounting period, furnish to the Board copies of its balance sheet and profit and loss account.
20. Compliance with circulars etc., issued by the Board
Every credit rating agency shall comply with such guidelines, directives, circulars and instructions as may be issued by the Board from time to time, on the subject of credit rating.
33[120A. Appointment of Compliance Officer
(1) Every credit rating agency shall appoint a compliance officer who shall be responsible for monitoring the compliance of the Act, rules and regulations, notifications, guidelines, instructions etc issued by the Board or the Central Government.
(2) The compliance officer shall immediately and independently report to the Board any noncompliance observed by him.]
21. Maintenance of Books of Accounts records, etc.
Every credit rating agency shall keep and maintain, for a minimum period of five years, the following books of accounts, records and documents, namely:
(a) copy of its balance sheet, as on the end of each accounting period;
(b) a copy of its profit and loss account for each accounting period;
(c)a copy of the auditor’s report on its accounts for each accounting period.
(d) a copy of the agreement entered into, with each client;
(e) information supplied by each of the clients;
(f) correspondence with each client;
(g) ratings assigned to various securities including upgradation and down gradation (if any) of the ratings so assigned.
(h) rating notes considered by the rating committee;
(i) record of decisions of the rating committee; (i) letter assigning rating;
(k) particulars of fees charged for rating and such other records as the Board may specify from time to time.
(2) Every credit rating agency 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.
22. Steps on auditor’s report
Every credit rating agency shall, within two month’s from the date of the auditor’s report, take steps to rectify the deficiencies if any, made out in the auditor’s report, insofar as they relate to the activity of rating of securities.
23. Confidentiality
Every credit rating agency shall treat, as confidential, information supplied to it by the client and no credit rating agency shall disclose the same to any other person, except where such disclosure is required or permitted by under or any law for the time being in force.
24. Rating process
(1) Every credit rating agency shall –
(a) specify the rating process;
(b) file a copy of the same with the Board for record; and file with the Board any modifications or additions made therein from time to time.
(2) Every credit rating agency shall, in all cases, follow a proper rating process.
(3) Every credit rating agency shall have professional rating committees, comprising members who are adequately qualified and knowledgeable to assign a rating.
(4) All rating decisions, including the decisions regarding changes in rating, shall be taken by the rating committee.
(5) Every credit rating agency shall be staffed by analysts qualified to carry out a rating assignment.
(6) Every credit rating agency shall inform the Board about new rating instruments or symbols introduced by it.
(7) Every credit rating agency, shall, while rating a security, exercise due diligence in order to ensure that the rating given by the credit rating agency is fair and appropriate.
(8) A credit rating agency shall not rate securities issued by it.
(9) Rating definition, as well as the structure for a particular rating product, shall not be changed by a credit rating agency, without prior information to the Board.
(10) A credit rating agency shall disclose to the concerned stock exchange through press release and websites for general investors, the rating assigned to the securities of a client, after periodic review, including changes in rating, if any.
CHAPTER IV
RESTRICTION ON RATING OF SECURITIES ISSUED BY PROMOTERS OR BY CERTAIN OTHER PERSONS
25. Definitions
In this Chapter, unless the context otherwise requires;-
(a) “associate” , in relation to a promoter, includes a body corporate in which the promoter holds ten percent or more, of the share capital;
(b) “promoter” means a person who holds ten percent or more, of the shares of the credit rating agency.
26. Securities issued by promoter
(1) No credit rating agency shall rate a security issued by its promoter.
(2) In case promoter is a lending institution, its Chairman, director or employee shall not be a Chairman, director or employee of credit rating agency or its rating committee.
Provided that sub-regulation (2) shall come into force within three months from commencement of these regulations.
27. Securities issued by certain entities, connected with a promoter, or rating agency not to be rated
(1) No credit rating agency shall, rate a security issued by an entity, which is;-
(a) a borrower of its promoter; or
(b) a subsidiary of its promoter; or
(c) an associate of its promoter, if
(i) there are common Chairman, Directors between credit rating agency and these entities.
(ii) there are common employees.
(iii) there are common Chairman, Directors, Employees on the rating committee.
(2) No credit rating agency shall rate a security issued by its associate or subsidiary, if the credit rating agency or its rating committee has a Chairman, director or employee who is also a Chairman, director or employee of any such entity.
34[Provided that the Credit Rating Agency may, subject to the provisions of sub-regulation (1), rate a security issued by its associate having a common independent director with it or rating committee if,-
(i) such an independent director does not participate in the discussion on rating decisions, and
(ii) the Credit Rating Agency makes a disclosure in the rating announcement of such associate (about the existence of common independent director) on its Board or of its rating committee, and that the common independent director did not participate in the rating process or in the meeting of its Board of Directors or in the meeting of the rating committee, when the securities rating of such associate was discussed.
Explanation.─(1) For the purposes of this sub-regulation the expression ‗independent director‘ means a director who, apart from receiving remuneration as a director, does not have any other material pecuniary relationship or transactions with the company, its promoters, its management or its subsidiaries, which in the judgment of the board of the company, may affect the independence of the judgment of such director.
Securities already rated 28. Nothing in this Chapter shall apply to securities whose rating has been already done by a credit rating agency before the commencement of these regulations, and such securities may, subject to the provisions of the other Chapters of these regulations, continue to be rated, without the need to comply with the restrictions imposed by the regulations contained in this chapter.
CHAPTER V
PROCEDURE FOR INSPECTION AND INVESTIGATION
29. Board’s right to inspect
(1) The Board may appoint one or more persons as inspecting officers, to undertake inspection or investigation of the books of account, records and documents of the credit rating agencies, for any of the purposes specified in sub- regulation (2).
(2) The purposes referred to in sub-regulation (1) shall be the following, namely:
(a) to ascertain whether the books of account, records and documents are being maintained properly;
(b) to ascertain whether the provisions of the Act and these regulations are being complied with;
(c) to investigate into complaints received from investors, clients or any other person on any matter having a bearing on activities of the credit rating agency;
(d) in the interest of the securities market or in the interest of investors.
(3) The inspections ordered by the Board under sub-regulation (1) shall not ordinarily go into an examination of the appropriateness of the assigned ratings on the merits. (4) Inspections to judge the appropriateness of the ratings may be ordered by the Board, only in case of complaints which are serious in nature. (5) Inspections referred to in sub-regulation (4) shall be carried out either by the officers of the Board or independent experts, with relevant experience or combination of both.
30. Notice before inspection or investigation
(1) Before ordering an inspection or investigation under regulation 29, the Board shall give not less than ten days written notice to the credit rating agency for that purpose.
(2) Notwithstanding anything contained in sub-regulation (1) where the Board is satisfied that in the interest of the investors, no such notice should be given, it may, by an order in writing, direct that the inspection or investigation of the affairs of the credit rating agency be taken up without such notice.
(3) During the course of an inspection or investigation, the credit rating agency against whom the inspection or investigation is being carried out shall be bound to discharge all its obligations as provided in regulation 31.
31. Obligations of credit rating agency on inspection or investigation by the Board
(1) It shall be the duty of every credit rating agency whose affairs are being inspected or investigated, and of every director, officer or employee thereof, to produce to the inspecting or investigating officer such books, accounts and other documents in its or his custody or control and furnish him with such statements and information relating to its rating activities, as the inspecting officer may require within such reasonable period as may be specified by the said officer.
(2) The credit rating agency shall –
(a) allow the inspecting officer to have reasonable access to the premises occupied by such credit rating agency or by any other person on its behalf;
(b) extend to the inspecting officer reasonable facility for examining any books, records, documents and computer data in the possession of the credit rating agency; and
(c) provide copies of documents or other materials which, in the opinion of the inspecting officer, are relevant for the purposes of the inspection or investigation, as the case may be.
(3) The inspecting officer, in the course of inspection or investigation, shall be entitled to examine, or record the statements, of any officer, director or employee of the credit rating agency for the purposes connected with the inspection or investigation.
(4) Every director, officer or employee of the credit rating agency shall be bound to render to the inspecting officer all assistance in connection with the inspection or investigation which the inspecting officer may reasonably require.
32. Submission of Report to the Board
The inspecting officer shall, as soon as possible, on completion of the inspection or investigation, submit a report to the Board.
Provided that if directed to do so by the Board, he may submit an interim report.
35[Action on inspection or investigation report
33. The Board or the Chairman shall after consideration of inspection or investigation report take such action as the Board or Chairman may deem fit and appropriate including action under 36[Chapter V of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008.]
CHAPTER VI
PROCEDURE FOR ACTION IN CASE OF DEFAULT
37[Liability for action in case of default
34. A credit rating agency which contravenes any of the provisions of the Act, Rules, or Regulations framed thereunder shall be liable for one or more actions specified therein including the action under Chapter V of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008.]
35. to 42. 38[***]
FIRST SCHEDULE FORM A
SECURITIES AND EXCHANGE BOARD OF INDIA (CREDIT RATING AGENCIES) REGULATIONS, 1999 [39[REGULATION 3(3)]]
40
[APPLICATION FOR GRANT OF CERTIFICATE OF
REGISTRATION]
NAME OF APPLICANT
CONTACT NAME:
TELEPHONE NO:
FAX NO:
INSTRUCTIONS FOR FILLING UP FORM –
1. Applicants must submit to the Board a completed application form together with appropriate supporting documents. Supporting documents should be attested as true by a notary public.
2. This application form should be filled in accordance with the regulations.
3. Application for registration will be considered, only if it is complete in all respects.
4. All answers must be typed.
5. Information which needs to be supplied in more detail may be given on separate sheets which should be attached to the application form.
6. All signatures on the application must be original.
7. Every page of the form as well as every additional sheet must be initialed by the authorised signatory of the applicant.
1.0 PARTICULARS OF THE APPLICANT
1.1 Name, address of the registered office, address for correspondence, telephone number(s), fax number(s) and name of the contact person of the company. Address of branch offices, if any.
1.2 Date of incorporation of the Applicant company (enclose certificate of incorporation and memorandum and articles of association). Specify the following:
(a) Objects (Main & Ancillary) of the Applicant company
(b) Authorised, issued, subscribed and paid up capital
1.3 Category to which the Applicant company belongs to:]
(a) Limited company – Private/Public.
(b) Unlimited company.
If listed, names of Stock Exchanges and latest share price to be given.
1.4 Category to which the Applicant company belongs to (refer regulation 3)
(a) Company already in the business of undertaking rating activities
(b) Company proposing to undertake rating activities for the first time.
2.0 ELIGIBILITY CRITERIA
2.1 Category to which the promoter(s) of the Applicant company belong to (refer regulation 4).
2.2 Name the promoters and indicate their shareholding in the company.
2.3 Enclose a Chartered Accountant‘s certificate certifying the continuous net worth of Rs.100 crores for five years, in case the promoter referred to in regulation 4(e).
2.4 Net worth of the company as per the last audited accounts not earlier than three months from the date of application [refer regulation 5 (c)]. Enclose a Chartered Accountant‘s certificate certifying the same.
3.0 PARTICULARS OF DIRECTORS/KEY PERSONNEL
3.1 Particulars of Directors of the company, which shall include name, qualification, experience, shareholding in the company and directorship in other companies.
3.2 Particulars of Key Personnel of the company, which shall include name, designation in the company, qualification, previous positions held, experience, date of appointment in the company and functional areas.
4.0 INFRASTRUCTURE
4.1 Details of infrastructure including computing facilities, 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 company. Any further plan for additional/ improved infrastructure to be indicated.
5.0 MAJOR SHAREHOLDERS
5.1 List of major shareholders (holding 5% and above of applicant directly or along with associates) Shareholding as on:
| Name of shareholder | No. of Shares held | % age of total paid up capital of the company |
6.0 ASSOCIATE CONCERNS
6.1 Particulars of associate companies/concerns which shall include name, address, type of activity handled, nature of interest of the Applicant company in the associate, nature of interest of promoter(s) of the applicant in the associate.
6.2 Whether the Board has granted/ refused registration as credit rating agency to any associate of the applicant. Give the details like date of application, date of refusal/registration, reasons for refusal etc.
7.0 BUSINESS INFORMATION OF THE COMPANY
7.1 History, major events and present activities. Details of Experience in Credit Rating activities and other related activities
7.2 If the company is proposing to engage in credit rating activities for the first time, business plan of the company with projected volume of activities and income for which registration is sought to be specifically given.
7.3 Securities Rating activities handled during the last three years as per the table below:
| Name of Client | Type of security | Size of issue | Year of Issue | Security/ Instrument rated | listed / unlisted |
7.4 Details of other rating activities undertaken during last three years.
7.5 Any other information considered relevant to the nature of services rendered by the applicant.
8.0 FINANCIAL INFORMATION ABOUT THE APPLICANT
8.1 Net worth
(Rs. In Lacs)
| Items | Year prior to the preceding year of the current year | Preceding year | Current year |
| (a) Paid-up capital | |||
| (b) Free reserves (excluding revaluation reserves) | |||
| Total (a) + (b) | |||
| (c) Accumulated losses | |||
| (d) Deferred revenue expenditure not written off | |||
| Net worth (a)+(b)-(c)-(d) |
8.2 Please enclose audited annual accounts for the last three years. Where unaudited reports are submitted, give reasons. If minimum networth requirement has been met after last audited annual accounts, audited statement of accounts of a later date also be submitted.
8.3 Name and Address of the Principal bankers of the Applicant company .
8.4 Name and address of the Auditors.
9.0 OTHER INFORMATION
9.1 Details of all pending litigations against the applicant company, directors and employees:
| Nature of dispute | Name of the party | Status |
9.2 Indictment or involvement in any fraud or economic offences by the applicant or any of its Directors, or key managerial Personnel, in the last three years.
10.0 DECLARATION
10.1 Give the following declarations signed by two directors:
I/We hereby apply for registration.
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
Date
FORM B
SECURITIES AND EXCHANGE BOARD OF INDIA
(CREDIT RATING AGENCIES) REGULATIONS, 1999
[REGULATION 8 (1)]
CERTIFICATE OF REGISTRATION
I. In exercise of the powers conferred by sub-section (1) of section 12 of the Securities and Exchange Board of India Act, 1992, read with the rules and regulations made thereunder the Board hereby grants a certificate of registration to ___________________________ as a credit rating agency in accordance with and subject to the conditions in the regulations to carry out the activity of the credit rating agency:-
II. Registration Code for the credit rating agency is CRA/ / /
III. This certificate shall be valid from _____________ to _________ and may be renewed as specified in regulation 10 of Securities and Exchange Board of India (Credit Rating Agencies) Regulations, 1999.
Place :
Date
By Order
Sd/-
For and on behalf of
Securities and Exchange Board of India
1SECOND SCHEDULE
SECURITIES AND EXCHANGE BOARD OF INDIA
(CREDIT RATING AGENCY) REGULATIONS, 1999
[REGULATION 3 (3), 8(2), 10(3)]
FEES
PART A
Amount to be paid as fees
Application fee (Rs) 50, 000/-
Registration fee for grant of certificate (Rs) 5, 00, 000/-
Renewal fee (Rs.) 10, 00, 000/-
PART B
1 The fees specified above shall be paid by way of a bank draft in favour of “Securities and Exchange Board of India” payable at Mumbai.
1THIRD SCHEDULE
THIRD SCHEDULE
SECURITIES AND EXCHANGE BOARD OF INDIA
CODE OF CONDUCT FOR CREDIT RATING AGENCIES
(REGULATION 13)
SECURITIES AND EXCHANGE BOARD OF INDIA (CREDIT
RATING AGENCIES) REGULATIONS, 1999
[Regulation 13]
CODE OF CONDUCT
1. A credit rating agency shall make all efforts to protect the interests of investors.
2. A credit rating agency, in the conduct of its business, shall observe high standards of integrity, dignity and fairness in the conduct of its business.
3. A credit rating agency shall fulfill its obligations in a prompt, ethical and professional manner.
4. A credit rating agency shall at all times exercise due diligence, ensure proper care and exercise independent professional judgment in order to achieve and maintain objectivity and independence in the rating process.
5. A credit rating agency shall have a reasonable and adequate basis for performing rating evaluations, with the support of appropriate and in depth rating researches. It shall also maintain records to support its decisions.
6. A credit rating agency shall have in place a rating process that reflects consistent and international rating standards.
7. A credit rating agency shall not indulge in any unfair competition nor shall it wean away the clients of any other rating agency on assurance of higher rating.
8. A credit rating agency shall keep track of all important changes relating to the client companies and shall develop efficient and responsive systems to yield timely and accurate ratings. Further a credit rating agency shall also monitor closely all relevant factors that might affect the creditworthiness of the issuers.
9. A credit rating agency shall disclose its rating methodology to clients, users and the public.
10. A credit rating agency shall, wherever necessary, disclose to the clients, possible sources of conflict of duties and interests, which could impair its ability to make fair, objective and unbiased ratings. Further it shall ensure that no conflict of interest exists between any member of its rating committee participating in the rating analysis, and that of its client.
11. A credit rating agency shall not make any exaggerated statement, whether oral or written, to the client either about its qualification or its capability to render certain services or its achievements with regard to the services rendered to other clients.
12. A credit rating agency shall not make any untrue statement, suppress any material fact or make any misrepresentation in any documents, reports, papers or information furnished to the board, stock exchange or public at large.
13. A credit rating agency shall ensure that the Board is promptly informed about any action, legal proceedings etc., initiated against it alleging any material breach or non-compliance by it, of any law, rules, regulations and directions of the Board or of any other regulatory body.
14. A credit rating agency shall maintain an appropriate level of knowledge and competence and abide by the provisions of the Act, regulations and circulars, which may be applicable and relevant to the activities carried on by the credit rating agency. The credit rating agency shall also comply with award of the Ombudsman passed under the Securities and Exchange Board of India (Ombudsman) Regulations, 2003.
15. A credit rating agency shall ensure that there is no misuse of any privileged information including prior knowledge of rating decisions or changes.
16. (a) A credit rating agency or any of his employees shall not render, directly or indirectly any investment advice about any security in the publicly accessible media.
(b) A credit rating agency shall not offer fee-based services to the rated entities, beyond credit ratings and research.
17. A credit rating agency shall ensure that any change in registration status/any penal action taken by board or any material change in financials which may adversely affect the interests of clients/investors is promptly informed to the clients and any business remaining outstanding is transferred to another registered person in accordance with any instructions of the affected clients/investors.
18. A credit rating agency shall maintain an arm’s length relationship between its credit rating activity and any other activity.
19. A credit rating agency shall develop its own internal code of conduct for governing its internal operations and laying down its standards of appropriate conduct for its employees and officers in the carrying out of their duties within the credit rating agency and as a part of the industry. Such a code may extend to the maintenance of professional excellence and standards, integrity, confidentiality, objectivity, avoidance of conflict of interests, disclosure of shareholdings and interests, etc. Such a code shall also provide for procedures and guidelines in relation to the establishment and conduct of rating committees and duties of the officers and employees serving on such committees.
20. A credit rating agency shall provide adequate freedom and powers to its compliance officer for the effective discharge of his duties.
21. A credit rating agency shall ensure that the senior management, particularly decision makers have access to all relevant information about the business on a timely basis.
22. A credit rating agency shall ensure that good corporate policies and corporate governance are in place.
23. A credit rating agency shall not, generally and particularly in respect of issue of 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.
