SEBI issues enhanced governance norms for credit rating agencies

Nov 05, 2019 | by Avantis RegTech Legal Research Team

The Securities Exchange Board of India (SEBI) on November 04, 2019, issues norms in order to enhance governance and accountability of Credit Rating Agencies (CRAs) under the provisions of the SEBI (Credit Rating Agencies) Regulations, 1999. 

SEBI has decided to modify its Circular No. SEBI/HO/MIRSD/MIRSD4/CIR/P/2016/119 dated November 01, 2016 regarding MD/CEO being a member of rating committee, namely:-

1. MD/CEO of a CRA shall not be a member of rating committees of the CRA. 

2. Rating committees of a CRA shall report to a Chief Ratings Officer (CRO).

3. One third of the board of a CRA shall comprise of independent directors. In case the board of the CRA is chaired by an executive director, half of the board shall comprise of independent directors.

4. The board of a CRA shall constitute with Ratings Sub-Committee and Nomination and Remuneration Committee. The Chief Ratings Officer (CRO) shall directly report to the Ratings Sub-Committee of the board of the CRA. The Nomination and Remuneration Committee shall be chaired by an independent director.

5. CRAs shall record minutes of the meeting with issuer management and incorporate it in the rating committee note during the rating process.

6. CRAs shall meet the audit committee of the rated entity, at least once in a year, to discuss issues including related party transactions, internal financial control and other material disclosures made by the management.

[SEBI Circular No. SEBI/HO/MIRSD/CRADT/CIR/P/2019/121]


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