Credit-rating agencies asked to disclose entities not sharing information for ratings or their review

According to the market regulator, the number of issuers that are non-cooperative with CRAs have increased.

Credit rating agencies (CRAs) have been asked to disclose listed or to-be listed companies who are not not providing the agencies with information required for rating the securities or reviewing the rating of the securities.

A circular from the Securities and Exchange Board of India (Sebi) will be applicable from July 15, 2023. CRAs have been asked to report compliance to Sebi one quarter from the date of applicability of the circular.

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The circular stated, “SEBI (Credit Rating Agencies) Regulations, 1999 (“CRA Regulations”) interalia 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CRA to carry out periodic reviews of all published ratings during the lifetime of the securities, unless the rating is withdrawn.”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,” it added.

According to the market regulator, the number of issuers that are non-cooperative with CRAs has increased, and a “vast majority” of these non-cooperative issuers are unlisted and small entities. Therefore, “to provide enhanced transparency and information regarding non-cooperative issuers to various stakeholders, market participants and investors”, the CRAs have been asked to provide two lists of entities who are being non-cooperative by withholding information.

The first list will have entities whose securities are listed or proposed to be listed on a recognised stock exchange, and the second list will have ratings of the other non-cooperative entities.

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The details that need to be provided include the name of the non-cooperative issuer, the date of categorisation as non-cooperative and the link to the webpage hosting the issuer’s press releases.

The implementation of this circular will be monitored through the half-yearly mandatory internal audit for CRAs, added the Sebi circular.