Credit_Rating_Agencies_Apr17

Credit_Rating_Agencies_Apr17_2020
3 (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 8 registration for thepurpose.
4 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 CompaniesAct, 1956 (1 of 1956);(b) a scheduled commercial bank included for the time being in the secondschedule 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 ofIndia;(d)12[a foreign credit rating agency incorporated in a Financial Action TaskForce (FATF) member jurisdiction and recognised under their law, havinga minimum of five years experience in rating securities ;](e) any company or a body corporate, having continuous net worth ofminimum rupees one hundred crores as per its audited annual accountsfor the previous five years prior to filing of the application with the Boardfor the grant of certificate under these regulations.agency, shall make an application to the Board for the grant of a certificate within a period of three monthsfrom such date:Provided that the Board may, where it is of the opinion that it is necessary to do so, for reasons to be recordedin writing, extend the said period upto a maximum of six months form such date. Conditions Of Registration Of Certain Intermediaries) (Amendment) Regulations, 2016 .Intermediaries) (Amendment) Regulations, 2016 . Prior to omission sub-regulation (4) readas under : (4) Any person referred to in sub-regulation (2) who fails to make an application for the grant of a certificatewithin the period specified in that sub-regulation shall cease to carry on rating activity. to its substitution, it read as a foreign credit rating agency recognised by or under any law for the time beingin force in the country of its incorporation, having at least five years experience in rating securities ;
5 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 CompaniesAct, 1956;(b) the applicant has, in its Memorandum of Association, specified ratingactivity as one of its main objects;(c) 13[the applicant has a minimum net worth of rupees twenty five crore;](d) the applicant has adequate infrastructure, to enable it to provide ratingservices in accordance with the provisions of the Act and these regulations ;(e) the applicant and the promoters of the applicant , referred to in regulation 4have professional competence, financial soundness and generalreputation of fairness and integrity in business transactions, to thesatisfaction of the Board;(f) neither the applicant , nor its promoter, nor any director of the applicant orits promoter, is involved in any legal proceeding connected with thesecurities market, which may have an adverse impact on the interests ofthe investors;(g) neither the applicant , nor its promoters, nor any director, of its promoterhas at any time in the past been convicted of any offence involving moralturpitude or any economic offence;(h) the applicant has, in its employment, persons having adequateprofessional and other relevant experience to the satisfaction of the Board;(i) neither the applicant , nor any person directly or indirectly connected withthe applicant has in the past been (i) refused by the Board a certificate under these regulations orto its substitution, it read as under: 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 ofless than rupees five crores, shall be deemed to have satisfied this condition, if it increases its net worth to thesaid minimum within a period of three years of such commencement. (ii) subjected to any proceedings for a contravention of the Act or of anyrules or regulations made under the Act.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 grantof a certificate;(k) grant of certificate to the applicant is in the interest of investors and thesecurities market;14[(l) the promoter of the credit rating agency, in terms of regulation 4, has a
5A For the purpose of determining whether an applicant or the credit rating agency is a fit and proper person the Board may take into account the criteria specified in Schedule II of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008.]
6 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
10 (1) A credit rating agency , if it desires renewal of the certificate granted to it, shall make to the Board an application for the renewal of the certificate of registration. 18 [(1A) An application for renewal of certificate of registration made under sub-regulation (1) shall be as far as may be, shall be dealt with in the same manner as if it were an application for the grant of accompanied by a non-refundable application fee as specified in the Second Schedule.]
10 (2) Such application shall be made not less than three months before expiry of the period of validity of the certificate, specified in sub-regulation (2) of regulation 9. (3) The application for renewal made under sub-regulation (1) (a) shall be accompanied by a renewal fee as specified in the second schedule and(b)a fresh certificate under regulation 3. 34 Substituted by the Securities and Exchange Board of India (Change In Conditions Of Registration OfCertain Intermediaries) (Amendment) Regulations, 2016 . Prior to substitution it read asunder: (1) If, after considering an application made under regulation 3 or 34[regulation 8A ] as the casemay be, the Board is of the opinion that a certificate 34[of initial or permanent registration should not begranted], as the case may be, it may, after giving the applicant a reasonable opportunity of being heard, rejectthe application. Also the words regulation 8A substituted the words regulation 10 ; and the words of initial or permanentregistration should not be granted substituted the words should not be granted or renewed substituted bythe SEBI (Credit Rating Agencies) (Amendment) Regulations, 2011 (Amendment) Regulations, 2011 .the Board shall consider the application and communicate to the applicant its
7 (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.
7 (2) The Board, if it so desires, may ask the applicant or its authorised representative to appear before the Board, for personal representation in
8 (1) The Board , on being satisfied that the applicant is eligible for the grant of a certificate of registration, shall grant a certificate in Form B .
8 (2) The grant of certificate of registration shall be subject to the payment of the registration fee specified in Part A of the Second Schedule, in the manner prescribed in Part B thereof. Registration Of Certain Intermediaries) (Amendment) Regulations, 2016 . Registration Of Certain Intermediaries) (Amendment) Regulations, 2016 . 19 Substituted bye the Securities and Exchange Board of India (Change In Conditions Of Registration Of Certain Intermediaries) (Amendment) Regulations, 2016 . Prior to substitution sub- regulation (2) read as under:
8 (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).]
8 (4) The grant of a certificate of 21 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 22 India (2) The certificate of initial registration granted under sub-regulation (1) shall be valid for a period of five years from the date of its issue to the applicant . 20 Substituted by the Securities and Exchange Board of India (Change In Conditions Of Registration Of Certain Intermediaries) (Amendment) Regulations, 2016 . Prior to substitution sub- regulation (3) read as under: (3) The credit rating agency who has already been granted a certificate of registration by the Board, prior to the commencement of the Securities and Exchange Board of (Credit Rating Agencies) (Amendment) Regulations, 2011, and has not completed a period of three years, shall be deemed to have been granted a certificate of initial registration for a period of five years from the date of its certificate of registration, subject to payment of fee for the remaining period of two years, as specified under Part A of Second Schedule, in the manner prescribed in Part B thereof. Registration Of Certain Intermediaries) (Amendment) Regulations, 2016 . Intermediaries) (Amendment) Regulations, 2016 . 2011 read as under: 8A. Grant of certificate of permanent registration.(1) The credit rating agency who has been granted or deemed to have been granted a certificate of initialregistration under regulation 8, may, three months before the expiry of the period of certificate of initialregistration, make an application for grant of a certificate of permanent registration in Form A.
8 (2) The credit rating agency who has already been granted a certificate of registration by the Board and hascompleted a period of five years, on the date of commencement of the Securities and Exchange Board ofIndia (Credit Rating Agencies) (Amendment) Regulations, 2011, may, three months before the expiry ofvalidity of certificate of registration or before, make an application for grant of a certificate of permanentregistration in Form A.
8 (3) An application under sub-regulation (1) or sub-regulation (2) shall be accompanied by non-refundableapplication fee as specified in the Second Schedule.
8 (4) The application for grant of a certificate of permanent registration shall be accompanied by details of thechanges that have taken place in the information that was submitted to the Board while seeking initialregistration or renewal, as the case may be, and a declaration stating that no changes other than those asmentioned in such details have taken place.
8 (5) The application for permanent registration made under sub-regulation (1) or (2) shall be dealt with inthe same manner as if it were a fresh application for grant of a certificate of initial registration.
8 (6) The Board, on being satisfied that the applicant is eligible, shall grant a certificate of permanentregistration in Form B and shall send an intimation to the applicant .
8 (7) On the grant of a certificate of permanent registration the credit rating agency shall be liable to pay the fee
9 24 The certificate granted under regulation 8 25[or 8A ] shall be, subject to 23 the following conditions, namely:(a) the credit rating agency shall comply with the provisions of the Act, theregulations made there under and the guidelines, directives, circulars andinstructions issued by the Board from time to time on the subject of creditrating.(b) 26 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 theapplication for a certificate;the credit rating agency shall forthwith inform the Board in writing 27[;]28 29[(c) where the credit rating agency proposes 30[change in control], it shallobtain prior approval of the Board for continuing to act as such after thechange.]31[(d) the credit rating agency shall at all times maintain a minimum net worth ofrupees twenty five crore.Provided that a credit rating agency already registered with the Boardas specified in the Second Schedule of these regulations. 2011
11 34[(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 theapplication.
11 (2) The decision of the Board, not to grant 35[certificate of initial or permanentregistration, as the case may be,] under sub-regulation (1) shall becommunicated by the Board to the applicant within a period of thirty days of suchdecision, stating the grounds of the decision.
11 (3) Any applicant aggrieved by the decision of the Board rejecting his applicationunder sub-regulation (1) may, within a period of thirty days from the date ofreceipt by him of the communication referred to in sub-regulation (2) apply to theBoard in writing for reconsideration of such decision.
12 (1) 36[ A credit rating agency whose application for grant of a certificate of permanent registration has been refused by the Board, on and from the date of the receipt of the communication, shall cease to undertake any credit rating activity.]
12 (2) The decision of the Board , not to grant certificate of registration 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.
12 (3) If the Board is satisfied that it is in the interest of the investors , it may permit the credit rating agencyreferred to under sub-regulation (1) or (2) to complete the rating assignments already entered into by it,during the pendency of the application or period of validity of the certificate.
12 (4) The Board may, in order to protect the interests of investors , issue directions with regard to the transfer ofrecords, documents or reports relating to the activities of a credit rating agency, whose application for thegrant 36[of a certificate of permanent registration] has been rejected.
12 (5) The Board may, in order to protect the interests of investors, appoint any person to take charge of therecords, documents or reports relating to the rating activities of a credit rating agency referred to in sub-regulation (4) and for this purpose also determine the terms and conditions of such appointment. (Amendment) Regulations, 2011 . Prior to its substitution, sub-regulation (1) read as under: An applicant referred to in sub-regulation (1) of regulation 11 whose application for the grant of a certificate has been rejected under regulation 11, shall not undertake any rating activity. Of Registration Of Certain Intermediaries) (Amendment) Regulations, 2016 . Prior tosubstitution it read as under: (2) An applicant referred to in sub-regulation (2) of regulation 3, whose application for the grantof a certificate has been rejected by the Board under regulation 11, shall, on and from the date of the receiptof the communication under sub-regulation (2) of regulation 11, cease to carry on any rating activity. (a) the rights and liabilities of each party in respect of the rating of securitiesshall be defined;(b) the fee to be charged by the credit rating agency shall be specified;(c) 37[the client shall co-operate with the credit rating agency in order toenable the latter to carry out periodic review of the rating during thetenure of the rated instrument;](d) the client shall 38[] co-operate with the credit rating agency in order toenable the latter to arrive at, and maintain, a true and accurate rating ofthe 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 tothe 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 39[] 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.40[(g) the client shall 41[ **] obtain a rating for any issue of debt securities inaccordance with the relevant regulations.]42[(h) The client shall provide explicit consent to the credit rating agency toobtain the details related to their existing and/or future borrowing of anyto its substitution the clause read as under:
13 Every credit rating agency shall abide by the Code of Conduct contained in the Third Schedule.
14 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:- Intermediaries) (Amendment) Regulations, 2016 . Prior to omission regulation 12 read as under:
h) the issuer may make reservation for its employees along with rights issue subject to the condition that value of allotment to any employee shall not exceed one lakh rupees. book-building process has been made available in case of issue of idrs. 30 percent of the total idr issued has to be reserved for retail individual investors (rii) and in case of under subscription in rii category, spill over to other categories to the extent of under subscription is also allowed.j) k) the financial information in the offer documents shall be certified by only those auditors who have subjected themselves to the peer review process of the institute of chartered accountants of india (icai) and hold a valid certificate issued by the ‘peer review board’ of the icai. in case where the financial statements of an issuer were audited by an auditor who had not been subjected to peer review process of icai, all financial information offer document must be re-audited for one full financial year and the sub-period, by the auditor certifying them.l) m) an issuer making further public offer through fast track mode has 1382. 3. been enabled to make alternate financial disclosure subject to fulfillment of certain conditions:n) alternate method of book-building has been introduced in case of further public offers.sebi (issue of capital and disclosure requirements) regulations, 2009 were further amended on january 1, 2010 to provide that in all public issues and rights issues, wherever only one payment option is available, the issuer shall provide the facility of asba, in accordance with the procedure and eligibility criteria specified by sebi. further, asba investors have been allowed to revise their bids by this amendment. sebi (issue of capital and disclosure requirements) regulations, 2009 were further amended on january 8, 2010 to bring out certain changes in the alternate method of book-building process. the changes are as follows:- a) the issuer may mention the floor price in the red herring prospectus or if the floor price is not mentioned in the red herring prospectus, the issuer shall announce the floor price at least one working day before opening of the bid in all the newspapers in which the pre-issue advertisement was released.b) qualified institutional buyers may bid at any price above the floor price.c) allotment shall be on price priority basis for qualified institutional buyers.d) allotment to retail individual part four: regulatory changeshis turnover (rs.2.5 per crore) in case of interest rate derivatives contracts.ix. amendment to the sebi (credit rating agencies) regulations, 1999b) sebi (credit rating agencies) regulations, 1999 were amended on march 19, 2010 to provide for the following: a) where the credit rating agency proposes to change its status or constitution, it shall obtain prior approval of sebi for continuing to act as such after the change. the change of status or constitution in relation to a credit rating agency means any change in its status or constitution of whatsoever nature including amalgamation, demerger, consolidation or any other kind of corporate restructuring falling within the scope of section 391 of the companies act, 1956, change in its managing director or whole-time director, any change in control over the body corporate.c) the change in control in relation to a credit rating agency shall means –• change in control as defined under the sebi (substantial acquisition of shares and takeovers) regulations, 1997 if its shares are listed on any recognised stock exchange; or• in any other case, change in the controlling interest.x. amendment to the sebi (employees’ service) regulations, 2001 sebi (employees’ service) regulations, 2001 were amended on january 14, 2010 to provide that the recruitment in sebi may investors, non-institutional investors and employees of the issuer shall be made proportionately.e) retail individual investors, non-institutional investors and employees shall be allotted specified securities at the floor price provided that if employees are being allotted securities at a price less than floor price (as allowed by the regulations) then the difference between the floor price and the allotment price shall not exceed 10 percent of the floor price.f) the issuer may:-• place a cap either in terms of number of specified securities or percentage of issued capital of the issuer that may be allotted to a single bidder;• decide whether a bidder be allowed to revise the bid upwards or downwards in terms of price and/or quantity;• decide whether a bidder be allowed single or multiple bids.
15 43[(1) Every credit rating agency shall, during the lifetime of securities rated by it continuously monitor the rating of such securities, unless the rating is withdrawn, subject to the provisions of regulation 16(3).
15 (2) Every credit rating agency shall disseminate information regarding newlyassigned ratings , and changes in earlier rating promptly through press releasesand websites, and, in the case of securities issued by listed companies, suchinformation shall also be provided simultaneously to the concerned regional stockexchange and to all the stock exchanges where the said securities are listed.
16 44[(1) Every credit rating agency shall carry out periodic reviews of all published ratings during the lifetime of the securities, unless the rating is withdrawn, subject to the provisions of regulation 16(3).]
16 (2) If the client does not co-operate with the credit rating agency so as toenable the credit rating agency to comply with its obligations under regulation 15of these regulations, the credit rating agency shall carry out the review on theto the substitution, it read as (1) Every credit rating agency shall, during the lifetime of securities rated by itcontinuously monitor the rating of such securities . to the substitution, it read as (1) Every credit rating agency shall carry out periodic reviews of all published rating s during the lifetime of the securities . to the substitution, it read as (2) If the client does not co-operate with the credit rating agency so as to enablethe 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 informationProvided that if owing to such lack of co-operation, a rating has been based on the best availableinformation, the credit rating agency shall disclose to the investors the fact that the rating is so based. basis of the best available information or in the manner as specified by the Boardfrom time to time.Provided that if owing to such lack of co-operation, a rating has been basedon the best available information, the credit rating agency shall disclose to the investors the fact that the rating is so based.]
16 (3) A credit rating agency shall not withdraw a rating so long as the obligationsunder the security rated by it are outstanding, except where the company whosesecurity is rated is wound up or merged or amalgamated with another company ,or as may be specified by the Board from time to time.]
17 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 andUnfair Trade Practices relating to the Securities Market) Regulations,1995; and(c) other laws relevant to trading of securities.
18 (1) Every credit rating agency (a) shall make public the definitions of the concerned rating, along with thesymbol and,(b) shall also state that the ratings do not constitute recommendations to buy,hold or sell any securities.
18 (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 to the substitution, it read as (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 . of the various factors justifying a favourable assessment, as well as factors
19 (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.
19 (2) Every credit rating agency shall, at the close of each accounting period,
20 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
20A 20A. Appointment of Compliance Officer(1) Every credit rating agency shall appoint a compliance officer who shall beresponsible for monitoring the compliance of the Act, rules and regulations,notifications, guidelines, instructions etc. issued by the Board or the Central Government.
20A (2) The compliance officer shall immediately and independently report to theBoard any non-compliance observed by him.]
21 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;
22 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 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 (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 Boardany modifications or additions made therein from time to time.
24 (2) Every credit rating agency shall, in all cases, follow a proper rating process.
24 (3) Every credit rating agency shall have professional rating committees, comprising members who are adequately qualified and knowledgeable to assign a rating.
24 (4) All rating decisions, including the decisions regarding changes in rating, shall be taken by the rating committee.
24 (5) Every credit rating agency shall be staffed by analysts qualified to carry out a rating assignment.
24 (6) Every credit rating agency shall inform the Board about new rating instruments or symbols introduced by it.
24 (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.
24 (8) A credit rating agency shall not rate securities issued by it.
24 (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.
24 (10) A credit rating agency shall disclose to the concerned stock exchange through press release and websites for general investors , the rating assigned to
24A (1) A credit rating agency shall not:(a) directly or indirectly, hold 10 per cent or more shareholding and/ or votingrights in any other credit rating agency , or(b) have representation on the Board of any other credit rating agency .Provided that a credit rating agency may, with the prior approval of the Board,acquire shares and/ or voting rights exceeding 10 per cent in any other creditrating agency only if such acquisition results in change in control in the creditrating agency whose shares are being acquired. On the basis of the priorapproval sought by the acquirer, the Board may approve the acquisition in theinterest of investors , market integrity and stability.
24A (2) A shareholder holding 10 per cent or more shares and/ or voting rights in a credit rating agency shall not hold 10 per cent or more shares and/ or voting rights, directly or indirectly, in any other credit rating agency . Provided that the said restriction shall not apply to holdings by Pension Funds,
25 In this Chapter, unless the context otherwise requires;-(a) "associate" , in relation to a promoter, includes a body corporate in whichthe promoter holds ten percent or more, of the share capital;(b) "promoter" means a person who holds ten percent or more, of the sharesof the credit rating agency .
26 (1) No credit rating agency shall rate a security issued by its promoter.
26 (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 ratingcommittee.Provided that sub-regulation (2) shall come into force within three monthsfrom commencement of these regulations.Securities issued by certain entities, connected with a promoter, or rating
27 (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 agencyand these entities.(ii) there are common employees.(iii) there are common Chairman, Directors, Employees on the ratingcommittee.
27 (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 suchentity.49[Provided that the Credit Rating Agency may, subject to the provisions ofsub-regulation (1), rate a security issued by its associate having a commonindependent director with it or rating committee if,-(i) such an independent director does not participate in the discussion onrating decisions, and(ii) the Credit Rating Agency makes a disclosure in the rating announcementof such associate (about the existence of common independent director)on its Board or of its rating committee, and that the common independentdirector 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 thesecurities rating of such associate was discussed. independent director means a director who, apart from receiving remunerationas a director, does not have any other material pecuniary relationship ortransactions with the company , its promoters, its management or its subsidiaries,which in the judgment of the board of the company , may affect the independence
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
29 (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).
29 (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 arebeing maintained properly;(b)to ascertain whether the provisions of the Act and these regulations arebeing complied with;(c) to investigate into complaints received from investors , clients or any otherperson on any matter having a bearing on activities of the credit ratingagency;(d) in the interest of the securities market or in the interest of investors .
29 (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.
29 (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.
29 (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
30 (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.
30 (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.
30 (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. Obligations of credit rating agency on inspection or investigation by the
31 (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.
31 (2) The credit rating agency shall (a) allow the inspecting officer to have reasonable access to the premisesoccupied by such credit rating agency or by any other person on its behalf;(b) extend to the inspecting officer reasonable facility for examining anybooks, 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 theinspecting officer, are relevant for the purposes of the inspection orinvestigation, as the case may be.
31 (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 orinvestigation.
31 (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
32 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 interimreport.
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 51[Chapter V of the Securities and Exchange
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
35 to 42. 53 50 Substituted by the SEBI (Procedure for Holding Enquiry by Enquiry officer and Imposing Penalty) Regulation, 2002 . Prior to its substitution, regulation 33 read as under: 33. Communication of Findings etc. to the Credit Rating Agency. (1) The Board shall, after consideration of the inspection report or the interim report referred to in regulation 32, communicate the findings of the inspecting officer to the credit rating agency and give it a reasonable opportunity of being heard in the matter.
35 (2) On receipt of the explanation, if any, from the credit rating agency, the Board may call upon the creditrating agency to take such measures as the Board may deem fit in the interest of the securities market and fordue compliance with the provisions of the Act and these regulations. Enquiry by Enquiry officer and Imposing Penalty) Regulations, 2002 by the SEBI (Intermediaries)Regulations, 2008, 52 Substituted, ibid. Prior to its substitution, regulation 34 as amended by the SEBI (Procedure forHolding Enquiry by Enquiry officer and Imposing Penalty) Regulation, 2002, , read as under: 34. Liability for action in case of default. (1) A credit rating agency which (a) fails to comply with any condition subject to which a certificate has been granted; or(b) contravenes any of the provisions of the Act or these regulations or any other regulations madeunder the Act ;shall be dealt with in the manner provided under the Securities and Exchange Board of India(Procedure for holding Enquiry by Enquiry officer and Imposing penalty) Regulations, 2002. Imposing Penalty) Regulation, 2002, . Prior to omission, regulations35 to 42 read as follows::35. Suspension of registration. A penalty of suspension of the certificate of registration of a credit
36 Cancellation of Registration. (1) A penalty of cancellation of certificate of registration of a credit rating agency may be imposed by the Board, if:(a) the credit rating agency is guilty of fraud, or has been convicted of an offence involvingmoral turpitude or an economic offence; or(b) in case of repeated defaults of the nature mentioned in sub-regulation (1) of regulation 34. (c) the creditrating agency is declared insolvent or wound up;
37 Manner of Making Order of Suspension and Cancellation. No order of suspension or of cancellation of the certificate of registration, shall be passed by the Board, except after holding an enquiry in accordance with the procedure specified in regulation 38. Provided that the holding of such an enquiry shall not be necessary in cases where: (a) the credit rating agency is declared insolvent or is wound up; or(b) the credit rating agency fails to pay to the Board registration fees or renewal fee as per theseregulations.Provided further that an opportunity of hearing shall be given before any action against the credit
38 Manner of Holding enquiry before Suspension or Cancellation. (1) For the purpose of holding an enquiry under regulation 37, the Board may appoint one or more enquiry officers.
38 (2) The enquiry officer shall issue to the credit rating agency a notice at the registered office or the principalplace of business of the credit rating agency, setting out the grounds on which action is proposed to betaken against it and calling upon it to show cause against such action within a period of fourteen days from thedate of receipt of such notice.
38 (3) The credit rating agency , may, within fourteen days from the date of receipt of such notice, furnish to theenquiry officer a written reply, together with copies of documentary or other evidence relied on by it orsought by the Board from the credit rating agency .
38 (4) The enquiry officer shall give a reasonable opportunity of hearing to the credit rating agency, toenable it to make its submission in support of its reply made under sub-regulation (3).
38 (5) Before the enquiry officer, the credit rating agency may either appear in person or through any person dulyauthorised on this behalf.Provided that no lawyer or advocate shall be permitted to represent the credit rating agency at theenquiry;Provided further that where a lawyer or an advocate has been appointed by the board as a presentingofficer under sub-regulation (6), it shall be lawful for the credit rating agency topresent his case through a lawyer or advocate.
38 (6) If it is considered necessary, the enquiry officer may request the Board to appoint a presenting officer topresent its case.
38 (7) The enquiry officer shall, after taking into account all relevant facts and submissions made by the creditrating agency, submit a report to the Board and recommend the penalty, if any tobe imposed upon the credit rating agency as also the grounds on the basis of which the
39 Show-cause notice and order. (1) On receipt of the report from the enquiry officer, the Board shall consider the same and issue a show-cause notice to the credit rating agency , as to why the penalty as proposed by the enquiry officer should not be imposed.
39 (2) The credit rating agency shall, within fourteen days of the date of receipt of the show-causenotice, send a reply to the Board.
39 (3) The Board, after considering the reply of the credit rating agency to the show-cause notice, shall as soonas possible pass such order as it deems fit.
39 (4) Every order passed by the Board under sub-regulation (3) shall be self- contained and shall give reasonsfor the conclusions stated therein, including justification of the penalty if anyimposed by that order.
40 Effect of suspension and cancellation of registration of credit rating agency. (1) On and from the date of suspension of the certificate of registration, the credit rating agency shall cease to carry on any rating activity during the period of suspension and shall be subject to such directions of the Board with regard to any records, documents securities or reports that may be connected with in its rating activities, as the Board may specify.
43 (1) The Board may, exempt any person or class of persons from the operation of all or any of the provisions of these regulations for a period as may be specified but not exceeding twelve months, for furthering innovation in technological aspects relating to testing new products, processes, services, business models, etc. in live environment of regulatory sandbox in the securities markets .
43 (2) Any exemption granted by the Board under sub-regulation (1) shall be subject to the applicant satisfying such conditions as may be specified by the Board including conditions to be complied with on a continuous basis. a live testing environment where new products, processes, services, business(2) On and from the date of cancellation of the certificate of registration, the credit rating agency shall: -(a) cease to carry in any rating activity and(b) shall be subject to such directions of the Board with regard to the transfer of records, documents, securitiesor reports connected with its rating activities which may be in its custody or control as the Board may specify.
43 (3) Notwithstanding the suspension or cancellation of certificate of a credit rating agency, if the Board is
41 Publication of Order of Suspension or Cancellation. The order of suspension or cancellation of certificate of registration, passed under sub-regulation (3) of regulation (39) shall be published by the
42 Appeal to the Central Government. Any person aggrieved by an order of the Board under these Regulations;(a) Suspending a certificate of registration; (b) Cancelling certificate of registration,may prefer an appeal to the Central Government against such order, in accordance with theSecurities and Exchange Board of India (Appeal to Central Government) Rules, 1993]. models, etc. may be deployed on a limited set of eligible customers for a specifiedperiod of time, for furthering innovation in the securities market, subject to such

Credit_Rating_Agencies_Apr17_2020

3 (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 8 registration for thepurpose.

4 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 CompaniesAct, 1956 (1 of 1956);(b) a scheduled commercial bank included for the time being in the secondschedule 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 ofIndia;(d)12[a foreign credit rating agency incorporated in a Financial Action TaskForce (FATF) member jurisdiction and recognised under their law, havinga minimum of five years experience in rating securities ;](e) any company or a body corporate, having continuous net worth ofminimum rupees one hundred crores as per its audited annual accountsfor the previous five years prior to filing of the application with the Boardfor the grant of certificate under these regulations.agency, shall make an application to the Board for the grant of a certificate within a period of three monthsfrom such date:Provided that the Board may, where it is of the opinion that it is necessary to do so, for reasons to be recordedin writing, extend the said period upto a maximum of six months form such date. Conditions Of Registration Of Certain Intermediaries) (Amendment) Regulations, 2016 .Intermediaries) (Amendment) Regulations, 2016 . Prior to omission sub-regulation (4) readas under : (4) Any person referred to in sub-regulation (2) who fails to make an application for the grant of a certificatewithin the period specified in that sub-regulation shall cease to carry on rating activity. to its substitution, it read as a foreign credit rating agency recognised by or under any law for the time beingin force in the country of its incorporation, having at least five years experience in rating securities ;

5 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 CompaniesAct, 1956;(b) the applicant has, in its Memorandum of Association, specified ratingactivity as one of its main objects;(c) 13[the applicant has a minimum net worth of rupees twenty five crore;](d) the applicant has adequate infrastructure, to enable it to provide ratingservices in accordance with the provisions of the Act and these regulations ;(e) the applicant and the promoters of the applicant , referred to in regulation 4have professional competence, financial soundness and generalreputation of fairness and integrity in business transactions, to thesatisfaction of the Board;(f) neither the applicant , nor its promoter, nor any director of the applicant orits promoter, is involved in any legal proceeding connected with thesecurities market, which may have an adverse impact on the interests ofthe investors;(g) neither the applicant , nor its promoters, nor any director, of its promoterhas at any time in the past been convicted of any offence involving moralturpitude or any economic offence;(h) the applicant has, in its employment, persons having adequateprofessional and other relevant experience to the satisfaction of the Board;(i) neither the applicant , nor any person directly or indirectly connected withthe applicant has in the past been (i) refused by the Board a certificate under these regulations orto its substitution, it read as under: 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 ofless than rupees five crores, shall be deemed to have satisfied this condition, if it increases its net worth to thesaid minimum within a period of three years of such commencement. (ii) subjected to any proceedings for a contravention of the Act or of anyrules or regulations made under the Act.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 grantof a certificate;(k) grant of certificate to the applicant is in the interest of investors and thesecurities market;14[(l) the promoter of the credit rating agency, in terms of regulation 4, has a

5A For the purpose of determining whether an applicant or the credit rating agency is a fit and proper person the Board may take into account the criteria specified in Schedule II of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008.]

6 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

10 (1) A credit rating agency , if it desires renewal of the certificate granted to it, shall make to the Board an application for the renewal of the certificate of registration. 18 [(1A) An application for renewal of certificate of registration made under sub-regulation (1) shall be as far as may be, shall be dealt with in the same manner as if it were an application for the grant of accompanied by a non-refundable application fee as specified in the Second Schedule.]

10 (2) Such application shall be made not less than three months before expiry of the period of validity of the certificate, specified in sub-regulation (2) of regulation 9. (3) The application for renewal made under sub-regulation (1) (a) shall be accompanied by a renewal fee as specified in the second schedule and(b)a fresh certificate under regulation 3. 34 Substituted by the Securities and Exchange Board of India (Change In Conditions Of Registration OfCertain Intermediaries) (Amendment) Regulations, 2016 . Prior to substitution it read asunder: (1) If, after considering an application made under regulation 3 or 34[regulation 8A ] as the casemay be, the Board is of the opinion that a certificate 34[of initial or permanent registration should not begranted], as the case may be, it may, after giving the applicant a reasonable opportunity of being heard, rejectthe application. Also the words regulation 8A substituted the words regulation 10 ; and the words of initial or permanentregistration should not be granted substituted the words should not be granted or renewed substituted bythe SEBI (Credit Rating Agencies) (Amendment) Regulations, 2011 (Amendment) Regulations, 2011 .the Board shall consider the application and communicate to the applicant its

7 (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.

7 (2) The Board, if it so desires, may ask the applicant or its authorised representative to appear before the Board, for personal representation in

8 (1) The Board , on being satisfied that the applicant is eligible for the grant of a certificate of registration, shall grant a certificate in Form B .

8 (2) The grant of certificate of registration shall be subject to the payment of the registration fee specified in Part A of the Second Schedule, in the manner prescribed in Part B thereof. Registration Of Certain Intermediaries) (Amendment) Regulations, 2016 . Registration Of Certain Intermediaries) (Amendment) Regulations, 2016 . 19 Substituted bye the Securities and Exchange Board of India (Change In Conditions Of Registration Of Certain Intermediaries) (Amendment) Regulations, 2016 . Prior to substitution sub- regulation (2) read as under:

8 (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).]

8 (4) The grant of a certificate of 21 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 22 India (2) The certificate of initial registration granted under sub-regulation (1) shall be valid for a period of five years from the date of its issue to the applicant . 20 Substituted by the Securities and Exchange Board of India (Change In Conditions Of Registration Of Certain Intermediaries) (Amendment) Regulations, 2016 . Prior to substitution sub- regulation (3) read as under: (3) The credit rating agency who has already been granted a certificate of registration by the Board, prior to the commencement of the Securities and Exchange Board of (Credit Rating Agencies) (Amendment) Regulations, 2011, and has not completed a period of three years, shall be deemed to have been granted a certificate of initial registration for a period of five years from the date of its certificate of registration, subject to payment of fee for the remaining period of two years, as specified under Part A of Second Schedule, in the manner prescribed in Part B thereof. Registration Of Certain Intermediaries) (Amendment) Regulations, 2016 . Intermediaries) (Amendment) Regulations, 2016 . 2011 read as under: 8A. Grant of certificate of permanent registration.(1) The credit rating agency who has been granted or deemed to have been granted a certificate of initialregistration under regulation 8, may, three months before the expiry of the period of certificate of initialregistration, make an application for grant of a certificate of permanent registration in Form A.

8 (2) The credit rating agency who has already been granted a certificate of registration by the Board and hascompleted a period of five years, on the date of commencement of the Securities and Exchange Board ofIndia (Credit Rating Agencies) (Amendment) Regulations, 2011, may, three months before the expiry ofvalidity of certificate of registration or before, make an application for grant of a certificate of permanentregistration in Form A.

8 (3) An application under sub-regulation (1) or sub-regulation (2) shall be accompanied by non-refundableapplication fee as specified in the Second Schedule.

8 (4) The application for grant of a certificate of permanent registration shall be accompanied by details of thechanges that have taken place in the information that was submitted to the Board while seeking initialregistration or renewal, as the case may be, and a declaration stating that no changes other than those asmentioned in such details have taken place.

8 (5) The application for permanent registration made under sub-regulation (1) or (2) shall be dealt with inthe same manner as if it were a fresh application for grant of a certificate of initial registration.

8 (6) The Board, on being satisfied that the applicant is eligible, shall grant a certificate of permanentregistration in Form B and shall send an intimation to the applicant .

8 (7) On the grant of a certificate of permanent registration the credit rating agency shall be liable to pay the fee

9 24 The certificate granted under regulation 8 25[or 8A ] shall be, subject to 23 the following conditions, namely:(a) the credit rating agency shall comply with the provisions of the Act, theregulations made there under and the guidelines, directives, circulars andinstructions issued by the Board from time to time on the subject of creditrating.(b) 26 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 theapplication for a certificate;the credit rating agency shall forthwith inform the Board in writing 27[;]28 29[(c) where the credit rating agency proposes 30[change in control], it shallobtain prior approval of the Board for continuing to act as such after thechange.]31[(d) the credit rating agency shall at all times maintain a minimum net worth ofrupees twenty five crore.Provided that a credit rating agency already registered with the Boardas specified in the Second Schedule of these regulations. 2011

11 34[(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 theapplication.

11 (2) The decision of the Board, not to grant 35[certificate of initial or permanentregistration, as the case may be,] under sub-regulation (1) shall becommunicated by the Board to the applicant within a period of thirty days of suchdecision, stating the grounds of the decision.

11 (3) Any applicant aggrieved by the decision of the Board rejecting his applicationunder sub-regulation (1) may, within a period of thirty days from the date ofreceipt by him of the communication referred to in sub-regulation (2) apply to theBoard in writing for reconsideration of such decision.

12 (1) 36[ A credit rating agency whose application for grant of a certificate of permanent registration has been refused by the Board, on and from the date of the receipt of the communication, shall cease to undertake any credit rating activity.]

12 (2) The decision of the Board , not to grant certificate of registration 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.

12 (3) If the Board is satisfied that it is in the interest of the investors , it may permit the credit rating agencyreferred to under sub-regulation (1) or (2) to complete the rating assignments already entered into by it,during the pendency of the application or period of validity of the certificate.

12 (4) The Board may, in order to protect the interests of investors , issue directions with regard to the transfer ofrecords, documents or reports relating to the activities of a credit rating agency, whose application for thegrant 36[of a certificate of permanent registration] has been rejected.

12 (5) The Board may, in order to protect the interests of investors, appoint any person to take charge of therecords, documents or reports relating to the rating activities of a credit rating agency referred to in sub-regulation (4) and for this purpose also determine the terms and conditions of such appointment. (Amendment) Regulations, 2011 . Prior to its substitution, sub-regulation (1) read as under: An applicant referred to in sub-regulation (1) of regulation 11 whose application for the grant of a certificate has been rejected under regulation 11, shall not undertake any rating activity. Of Registration Of Certain Intermediaries) (Amendment) Regulations, 2016 . Prior tosubstitution it read as under: (2) An applicant referred to in sub-regulation (2) of regulation 3, whose application for the grantof a certificate has been rejected by the Board under regulation 11, shall, on and from the date of the receiptof the communication under sub-regulation (2) of regulation 11, cease to carry on any rating activity. (a) the rights and liabilities of each party in respect of the rating of securitiesshall be defined;(b) the fee to be charged by the credit rating agency shall be specified;(c) 37[the client shall co-operate with the credit rating agency in order toenable the latter to carry out periodic review of the rating during thetenure of the rated instrument;](d) the client shall 38[**] co-operate with the credit rating agency in order toenable the latter to arrive at, and maintain, a true and accurate rating ofthe 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 tothe 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 39[**] 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.40[(g) the client shall 41[ **] obtain a rating for any issue of debt securities inaccordance with the relevant regulations.]42[(h) The client shall provide explicit consent to the credit rating agency toobtain the details related to their existing and/or future borrowing of anyto its substitution the clause read as under:

13 Every credit rating agency shall abide by the Code of Conduct contained in the Third Schedule.

14 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:- Intermediaries) (Amendment) Regulations, 2016 . Prior to omission regulation 12 read as under:

h) the issuer may make reservation for its employees along with rights issue subject to the condition that value of allotment to any employee shall not exceed one lakh rupees. book-building process has been made available in case of issue of idrs. 30 percent of the total idr issued has to be reserved for retail individual investors (rii) and in case of under subscription in rii category, spill over to other categories to the extent of under subscription is also allowed.j) k) the financial information in the offer documents shall be certified by only those auditors who have subjected themselves to the peer review process of the institute of chartered accountants of india (icai) and hold a valid certificate issued by the ‘peer review board’ of the icai. in case where the financial statements of an issuer were audited by an auditor who had not been subjected to peer review process of icai, all financial information offer document must be re-audited for one full financial year and the sub-period, by the auditor certifying them.l) m) an issuer making further public offer through fast track mode has 1382. 3. been enabled to make alternate financial disclosure subject to fulfillment of certain conditions:n) alternate method of book-building has been introduced in case of further public offers.sebi (issue of capital and disclosure requirements) regulations, 2009 were further amended on january 1, 2010 to provide that in all public issues and rights issues, wherever only one payment option is available, the issuer shall provide the facility of asba, in accordance with the procedure and eligibility criteria specified by sebi. further, asba investors have been allowed to revise their bids by this amendment. sebi (issue of capital and disclosure requirements) regulations, 2009 were further amended on january 8, 2010 to bring out certain changes in the alternate method of book-building process. the changes are as follows:- a) the issuer may mention the floor price in the red herring prospectus or if the floor price is not mentioned in the red herring prospectus, the issuer shall announce the floor price at least one working day before opening of the bid in all the newspapers in which the pre-issue advertisement was released.b) qualified institutional buyers may bid at any price above the floor price.c) allotment shall be on price priority basis for qualified institutional buyers.d) allotment to retail individual part four: regulatory changeshis turnover (rs.2.5 per crore) in case of interest rate derivatives contracts.ix. amendment to the sebi (credit rating agencies) regulations, 1999b) sebi (credit rating agencies) regulations, 1999 were amended on march 19, 2010 to provide for the following: a) where the credit rating agency proposes to change its status or constitution, it shall obtain prior approval of sebi for continuing to act as such after the change. the change of status or constitution in relation to a credit rating agency means any change in its status or constitution of whatsoever nature including amalgamation, demerger, consolidation or any other kind of corporate restructuring falling within the scope of section 391 of the companies act, 1956, change in its managing director or whole-time director, any change in control over the body corporate.c) the change in control in relation to a credit rating agency shall means –• change in control as defined under the sebi (substantial acquisition of shares and takeovers) regulations, 1997 if its shares are listed on any recognised stock exchange; or• in any other case, change in the controlling interest.x. amendment to the sebi (employees’ service) regulations, 2001 sebi (employees’ service) regulations, 2001 were amended on january 14, 2010 to provide that the recruitment in sebi may investors, non-institutional investors and employees of the issuer shall be made proportionately.e) retail individual investors, non-institutional investors and employees shall be allotted specified securities at the floor price provided that if employees are being allotted securities at a price less than floor price (as allowed by the regulations) then the difference between the floor price and the allotment price shall not exceed 10 percent of the floor price.f) the issuer may:-• place a cap either in terms of number of specified securities or percentage of issued capital of the issuer that may be allotted to a single bidder;• decide whether a bidder be allowed to revise the bid upwards or downwards in terms of price and/or quantity;• decide whether a bidder be allowed single or multiple bids.

15 43[(1) Every credit rating agency shall, during the lifetime of securities rated by it continuously monitor the rating of such securities, unless the rating is withdrawn, subject to the provisions of regulation 16(3).

15 (2) Every credit rating agency shall disseminate information regarding newlyassigned ratings , and changes in earlier rating promptly through press releasesand websites, and, in the case of securities issued by listed companies, suchinformation shall also be provided simultaneously to the concerned regional stockexchange and to all the stock exchanges where the said securities are listed.

16 44[(1) Every credit rating agency shall carry out periodic reviews of all published ratings during the lifetime of the securities, unless the rating is withdrawn, subject to the provisions of regulation 16(3).]

16 (2) If the client does not co-operate with the credit rating agency so as toenable the credit rating agency to comply with its obligations under regulation 15of these regulations, the credit rating agency shall carry out the review on theto the substitution, it read as (1) Every credit rating agency shall, during the lifetime of securities rated by itcontinuously monitor the rating of such securities . to the substitution, it read as (1) Every credit rating agency shall carry out periodic reviews of all published rating s during the lifetime of the securities . to the substitution, it read as (2) If the client does not co-operate with the credit rating agency so as to enablethe 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 informationProvided that if owing to such lack of co-operation, a rating has been based on the best availableinformation, the credit rating agency shall disclose to the investors the fact that the rating is so based. basis of the best available information or in the manner as specified by the Boardfrom time to time.Provided that if owing to such lack of co-operation, a rating has been basedon the best available information, the credit rating agency shall disclose to the investors the fact that the rating is so based.]

16 (3) A credit rating agency shall not withdraw a rating so long as the obligationsunder the security rated by it are outstanding, except where the company whosesecurity is rated is wound up or merged or amalgamated with another company ,or as may be specified by the Board from time to time.]

17 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 andUnfair Trade Practices relating to the Securities Market) Regulations,1995; and(c) other laws relevant to trading of securities.

18 (1) Every credit rating agency (a) shall make public the definitions of the concerned rating, along with thesymbol and,(b) shall also state that the ratings do not constitute recommendations to buy,hold or sell any securities.

18 (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 to the substitution, it read as (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 . of the various factors justifying a favourable assessment, as well as factors

19 (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.

19 (2) Every credit rating agency shall, at the close of each accounting period,

20 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

20A 20A. Appointment of Compliance Officer(1) Every credit rating agency shall appoint a compliance officer who shall beresponsible for monitoring the compliance of the Act, rules and regulations,notifications, guidelines, instructions etc. issued by the Board or the Central Government.

20A (2) The compliance officer shall immediately and independently report to theBoard any non-compliance observed by him.]

21 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;

22 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 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 (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 Boardany modifications or additions made therein from time to time.

24 (2) Every credit rating agency shall, in all cases, follow a proper rating process.

24 (3) Every credit rating agency shall have professional rating committees, comprising members who are adequately qualified and knowledgeable to assign a rating.

24 (4) All rating decisions, including the decisions regarding changes in rating, shall be taken by the rating committee.

24 (5) Every credit rating agency shall be staffed by analysts qualified to carry out a rating assignment.

24 (6) Every credit rating agency shall inform the Board about new rating instruments or symbols introduced by it.

24 (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.

24 (8) A credit rating agency shall not rate securities issued by it.

24 (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.

24 (10) A credit rating agency shall disclose to the concerned stock exchange through press release and websites for general investors , the rating assigned to

24A (1) A credit rating agency shall not:(a) directly or indirectly, hold 10 per cent or more shareholding and/ or votingrights in any other credit rating agency , or(b) have representation on the Board of any other credit rating agency .Provided that a credit rating agency may, with the prior approval of the Board,acquire shares and/ or voting rights exceeding 10 per cent in any other creditrating agency only if such acquisition results in change in control in the creditrating agency whose shares are being acquired. On the basis of the priorapproval sought by the acquirer, the Board may approve the acquisition in theinterest of investors , market integrity and stability.

24A (2) A shareholder holding 10 per cent or more shares and/ or voting rights in a credit rating agency shall not hold 10 per cent or more shares and/ or voting rights, directly or indirectly, in any other credit rating agency . Provided that the said restriction shall not apply to holdings by Pension Funds,

25 In this Chapter, unless the context otherwise requires;-(a) "associate" , in relation to a promoter, includes a body corporate in whichthe promoter holds ten percent or more, of the share capital;(b) "promoter" means a person who holds ten percent or more, of the sharesof the credit rating agency .

26 (1) No credit rating agency shall rate a security issued by its promoter.

26 (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 ratingcommittee.Provided that sub-regulation (2) shall come into force within three monthsfrom commencement of these regulations.Securities issued by certain entities, connected with a promoter, or rating

27 (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 agencyand these entities.(ii) there are common employees.(iii) there are common Chairman, Directors, Employees on the ratingcommittee.

27 (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 suchentity.49[Provided that the Credit Rating Agency may, subject to the provisions ofsub-regulation (1), rate a security issued by its associate having a commonindependent director with it or rating committee if,-(i) such an independent director does not participate in the discussion onrating decisions, and(ii) the Credit Rating Agency makes a disclosure in the rating announcementof such associate (about the existence of common independent director)on its Board or of its rating committee, and that the common independentdirector 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 thesecurities rating of such associate was discussed. independent director means a director who, apart from receiving remunerationas a director, does not have any other material pecuniary relationship ortransactions with the company , its promoters, its management or its subsidiaries,which in the judgment of the board of the company , may affect the independence

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

29 (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).

29 (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 arebeing maintained properly;(b)to ascertain whether the provisions of the Act and these regulations arebeing complied with;(c) to investigate into complaints received from investors , clients or any otherperson on any matter having a bearing on activities of the credit ratingagency;(d) in the interest of the securities market or in the interest of investors .

29 (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.

29 (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.

29 (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

30 (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.

30 (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.

30 (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. Obligations of credit rating agency on inspection or investigation by the

31 (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.

31 (2) The credit rating agency shall (a) allow the inspecting officer to have reasonable access to the premisesoccupied by such credit rating agency or by any other person on its behalf;(b) extend to the inspecting officer reasonable facility for examining anybooks, 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 theinspecting officer, are relevant for the purposes of the inspection orinvestigation, as the case may be.

31 (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 orinvestigation.

31 (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

32 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 interimreport.

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 51[Chapter V of the Securities and Exchange

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

35 to 42. 53 50 Substituted by the SEBI (Procedure for Holding Enquiry by Enquiry officer and Imposing Penalty) Regulation, 2002 . Prior to its substitution, regulation 33 read as under: 33. Communication of Findings etc. to the Credit Rating Agency. (1) The Board shall, after consideration of the inspection report or the interim report referred to in regulation 32, communicate the findings of the inspecting officer to the credit rating agency and give it a reasonable opportunity of being heard in the matter.

35 (2) On receipt of the explanation, if any, from the credit rating agency, the Board may call upon the creditrating agency to take such measures as the Board may deem fit in the interest of the securities market and fordue compliance with the provisions of the Act and these regulations. Enquiry by Enquiry officer and Imposing Penalty) Regulations, 2002 by the SEBI (Intermediaries)Regulations, 2008, 52 Substituted, ibid. Prior to its substitution, regulation 34 as amended by the SEBI (Procedure forHolding Enquiry by Enquiry officer and Imposing Penalty) Regulation, 2002, , read as under: 34. Liability for action in case of default. (1) A credit rating agency which (a) fails to comply with any condition subject to which a certificate has been granted; or(b) contravenes any of the provisions of the Act or these regulations or any other regulations madeunder the Act ;shall be dealt with in the manner provided under the Securities and Exchange Board of India(Procedure for holding Enquiry by Enquiry officer and Imposing penalty) Regulations, 2002. Imposing Penalty) Regulation, 2002, . Prior to omission, regulations35 to 42 read as follows::35. Suspension of registration. A penalty of suspension of the certificate of registration of a credit

36 Cancellation of Registration. (1) A penalty of cancellation of certificate of registration of a credit rating agency may be imposed by the Board, if:(a) the credit rating agency is guilty of fraud, or has been convicted of an offence involvingmoral turpitude or an economic offence; or(b) in case of repeated defaults of the nature mentioned in sub-regulation (1) of regulation 34. (c) the creditrating agency is declared insolvent or wound up;

37 Manner of Making Order of Suspension and Cancellation. No order of suspension or of cancellation of the certificate of registration, shall be passed by the Board, except after holding an enquiry in accordance with the procedure specified in regulation 38. Provided that the holding of such an enquiry shall not be necessary in cases where: (a) the credit rating agency is declared insolvent or is wound up; or(b) the credit rating agency fails to pay to the Board registration fees or renewal fee as per theseregulations.Provided further that an opportunity of hearing shall be given before any action against the credit

38 Manner of Holding enquiry before Suspension or Cancellation. (1) For the purpose of holding an enquiry under regulation 37, the Board may appoint one or more enquiry officers.

38 (2) The enquiry officer shall issue to the credit rating agency a notice at the registered office or the principalplace of business of the credit rating agency, setting out the grounds on which action is proposed to betaken against it and calling upon it to show cause against such action within a period of fourteen days from thedate of receipt of such notice.

38 (3) The credit rating agency , may, within fourteen days from the date of receipt of such notice, furnish to theenquiry officer a written reply, together with copies of documentary or other evidence relied on by it orsought by the Board from the credit rating agency .

38 (4) The enquiry officer shall give a reasonable opportunity of hearing to the credit rating agency, toenable it to make its submission in support of its reply made under sub-regulation (3).

38 (5) Before the enquiry officer, the credit rating agency may either appear in person or through any person dulyauthorised on this behalf.Provided that no lawyer or advocate shall be permitted to represent the credit rating agency at theenquiry;Provided further that where a lawyer or an advocate has been appointed by the board as a presentingofficer under sub-regulation (6), it shall be lawful for the credit rating agency topresent his case through a lawyer or advocate.

38 (6) If it is considered necessary, the enquiry officer may request the Board to appoint a presenting officer topresent its case.

38 (7) The enquiry officer shall, after taking into account all relevant facts and submissions made by the creditrating agency, submit a report to the Board and recommend the penalty, if any tobe imposed upon the credit rating agency as also the grounds on the basis of which the

39 Show-cause notice and order. (1) On receipt of the report from the enquiry officer, the Board shall consider the same and issue a show-cause notice to the credit rating agency , as to why the penalty as proposed by the enquiry officer should not be imposed.

39 (2) The credit rating agency shall, within fourteen days of the date of receipt of the show-causenotice, send a reply to the Board.

39 (3) The Board, after considering the reply of the credit rating agency to the show-cause notice, shall as soonas possible pass such order as it deems fit.

39 (4) Every order passed by the Board under sub-regulation (3) shall be self- contained and shall give reasonsfor the conclusions stated therein, including justification of the penalty if anyimposed by that order.

40 Effect of suspension and cancellation of registration of credit rating agency. (1) On and from the date of suspension of the certificate of registration, the credit rating agency shall cease to carry on any rating activity during the period of suspension and shall be subject to such directions of the Board with regard to any records, documents securities or reports that may be connected with in its rating activities, as the Board may specify.

43 (1) The Board may, exempt any person or class of persons from the operation of all or any of the provisions of these regulations for a period as may be specified but not exceeding twelve months, for furthering innovation in technological aspects relating to testing new products, processes, services, business models, etc. in live environment of regulatory sandbox in the securities markets .

43 (2) Any exemption granted by the Board under sub-regulation (1) shall be subject to the applicant satisfying such conditions as may be specified by the Board including conditions to be complied with on a continuous basis. a live testing environment where new products, processes, services, business(2) On and from the date of cancellation of the certificate of registration, the credit rating agency shall: -(a) cease to carry in any rating activity and(b) shall be subject to such directions of the Board with regard to the transfer of records, documents, securitiesor reports connected with its rating activities which may be in its custody or control as the Board may specify.

43 (3) Notwithstanding the suspension or cancellation of certificate of a credit rating agency, if the Board is

41 Publication of Order of Suspension or Cancellation. The order of suspension or cancellation of certificate of registration, passed under sub-regulation (3) of regulation (39) shall be published by the

42 Appeal to the Central Government. Any person aggrieved by an order of the Board under these Regulations;(a) Suspending a certificate of registration; (b) Cancelling certificate of registration,may prefer an appeal to the Central Government against such order, in accordance with theSecurities and Exchange Board of India (Appeal to Central Government) Rules, 1993]. models, etc. may be deployed on a limited set of eligible customers for a specifiedperiod of time, for furthering innovation in the securities market, subject to such