SEBI strengthens the rating process in respect of INC ratings

Jan 06, 2020 | by Avantis RegTech Legal Research Team

Industry Specific Compliance

The Securities and Exchange Board of India (SEBI) on January 03, 2020, issues directions in order to further strengthen the rating process of the CRAs with regard to Issuer not cooperating (INC) ratings. SEBI has revised the No Default Statement (NDS) placed at Annexure A (Page 3) with the requirements of the SEBI Circular no. SEBI/ HO/ MIRSD/ MIRSD4/ CIR/ P/ 2017/ 71 dated June 30, 2017.

The followings are the directions issued by SEBI:-

1. If an issuer has all the outstanding ratings as non-cooperative for more than 6 months, then the CRA shall downgrade the rating assigned to the instrument of such issuer to non-investment grade with INC status. No CRA shall assign any new ratings to such issuer until the issuer resumes cooperation or the rating is withdrawn, if non-cooperation by the issuer continues for further six months. It shall be effective from July 01, 2020.

2. The CRA may withdraw a rating in case of multiple ratings on an instrument, provided the CRA has-

i. rated the instrument continuously for 3 years or 50 per cent of the tenure of the instrument, whichever is higher; and

ii. received No-objection Certificate (NOC) from 75% of bondholders of the outstanding debt for withdrawal of rating; and 

iii. received an undertaking from the issuer that another rating is available on that instrument.

3. CRA shall assign a rating to such instrument and issue a press release mentioning the reasons for withdrawal of rating.

The Circular shall be applicable with immediate effect that is from January 03, 2020.

[SEBI Circular No. SEBI/HO/MIRSD/CRADT/CIR/P/2020/2]


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