TMI BlogMaster Circular for Credit Rating AgenciesX X X X Extracts X X X X X X X X Extracts X X X X ..... applicable provisions of existing circulars issued by other Departments of SEBI relevant to CRAs. Yours faithfully, Surabhi Gupta Deputy General Manager Phone No.: 022 - 26449315 Email ID: surabhig@sebi.gov.in Table of Contents SECTION 1: REGISTRATION REQUIREMENTS 1.1 Online Registration Mechanism for Securities Market Intermediaries 1.2 Digital Mode of Payment 1.3 Grant of Prior approval for change in control to Credit Rating Agencies 1.4 Surrender of Certificate of Registration SECTION 2: RATING OPERATIONS 2.1 Standardization of Rating Symbols and Definitions 2.2 Operations Manual/ Internal governing document 2.3 Rating Process 2.4 Monitoring and Review of Ratings 2.5 Standardization of Press Release for Rating Actions 2.6 Rating Agreement between the Issuer and the CRA 2.7 Dealing with Conflict of interest 2.8 Unsolicited Credit Ratings 2.9 Policy in respect of non-co-operation by the issuer 2.10 Withdrawal of ratings 2.11 Sharing of information regarding issuer companies between Debenture Trustees and Credit Rating Agencies 2.12 Rating of instruments other than securities SECTION 3: REPORT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 26449364 or may write at portalhelp@sebi.gov.in. 1.2 Digital Mode of Payment SEBI Circular SEBI/HO/GSD/T A/CIR/P/2017/42 dated May 16, 2017 1.2.1. SEBI has notified the SEBI (Payment of Fees and Mode of Payment) (Amendment) Regulations, 2017 on March 06, 2017 to enable digital mode of payment (RTGS/NEFT/IMPS etc.) of fees/penalties/remittance/other payments etc. 1.2.2. Pursuant to above, SEBI has been receiving direct credit of amounts from various intermediaries / other entities. 1.2.3. In order to identify and account such direct credit in the SEBI account, it has been decided that the various intermediaries / other entities shall provide the information as mentioned in Annexure to SEBI once the payment is made. 1.2.4. The above information should be emailed to the respective department(s) as well as to Treasury Accounts division at tad@sebi.gov.in. Annexure Date Department of SEBI Name of Intermediary/ Other Entities Type of Intermediary SEBI Registration Number (if any) PAN Amount (in `) Purpose of Payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he first proviso to Regulation 33B of Securities and Exchange Board of India (Intermediaries) Regulations, 2008 in the prescribed format placed as Annexure. 1.4.3 In all cases of transfer of business or client accounts to another registered intermediary, the clients shall not be subjected to any additional cost. Annexure Letter of Representation for Credit Rating Agency To, Securities and Exchange Board of India Dear Sir, Sub: Surrender of Certificate of Registration as Credit Rating Agency, Registration No. ___________ . 1. We hereby surrender our certificate of registration as Credit Rating Agency. 2. We enclose the original certificate of registration (or indemnity in case the certificate is lost or stolen) for cancellation. 3. We hereby confirm that: a. no complaint /disciplinary proceeding is pending against us; b. no investigation / inquiry by SEBI is pending against us with respect to our activities as a Credit Rating Agency; c. as on date of application, we have paid all fees; d. we shall continue to be liable for all liabilities/obligations (including monetary penalties, if any) for violations, if any, of the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch cases, apart from following all the applicable requirements in case of non-structured ratings, the following additional requirements shall also be complied with: Circular No. CIR/MIRSD/ CRA/ 6/ 2010 May 3, 2010 a. The rating symbols shall clearly indicate that the ratings are for structured finance products. b. The CRA shall include all the assumptions/ covenants made while carrying out the review of such products in the Press Release. Circular No. SEBI/ HO/ MIRSD/ MIRSD4/ CIR/ P/ 2017/ 71 dated June 30, 2017 2.1.6. For structured products/ market linked debentures, the credit rating shall bear a prefix PP-MLD denoting Principal Protected Market Linked Debentures, followed by the standardized rating symbols for long/ short term debt on the lines specified below. Cir. /IMD/DF/17/2011 dated September 28, 2011 ANNEXURE 1 Rating Symbols and Definitions for Long Term Debt Instruments Long term debt instruments: The instruments with original maturity exceeding one year Rating symbols should have CRA s first name as prefix AAA - Instruments with this rating are considered to have the highest degree of safety regarding timely servicing o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efault or expected to be in default on maturity. Modifier { + (plus)} can be used with the rating symbols for the categories A1 to A4. The modifier reflects the comparative standing within the category. ANNEXURE 3 Rating Symbols and Definitions for Long Term Structured Finance Instruments Long term structured finance instruments: The instruments with original maturity exceeding one year Rating symbols should have CRA s first name as prefix AAA (SO) - Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk. AA (SO) - Instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk. A (SO) - Instruments with this rating are considered to have adequate degree of safety regarding timely servicing of financial obligations. Such instruments carry low credit risk. BBB (SO) - Instruments with this rating are considered to have moderate degree of safety regarding timely servicing of financial obligations. Such instrument ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es with this rating are considered to have the highest degree of safety regarding timely receipt of payments from the investments that they have made. AAmfs Schemes with this rating are considered to have the high degree of safety regarding timely receipt of payments from the investments that they have made. Amfs Schemes with this rating are considered to have the adequate degree of safety regarding timely receipt of payments from the investments that they have made. BBBmfs - Schemes with this rating are considered to have the moderate degree of safety regarding timely receipt of payments from the investments that they have made. BBmfs - Schemes with this rating are considered to have moderate risk of default regarding timely receipt of payments from the investments that they have made. Bmfs - Schemes with this rating are considered to have high risk of default regarding timely receipt of timely receipt of payments from the investments that they have made. Cmfs - Schemes with this rating are considered to have very high risk of default regarding timely receipt of timely receipt of payments from the investments that they have made. Modifiers { + ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which such review is to be completed 2.2.4. Rating Criteria : At the least, the following rating criteria shall be formulated by each CRA and should be reviewed periodically: Criteria on: a. Default recognition and post-default curing period (Instrument-wise definition of default to be followed by all CRAs is provided in the Annexure) b. Financial ratios (Explaining how a CRA analyses various financial ratios including adjustments made to financial statements for the interpretation of financial ratios) c. Consolidation of companies d. Parent support/group/government support e. Manufacturing, trading companies, and services sector f. Banks and financial institutions g. Securitization transactions h. Public finance i. Infrastructure ratings 2.2.5. Rating Process and Policies : Each CRA shall frame detailed guidelines on the following: a. General nature of compensation arrangements with rated entities b. Policy for appeal by Issuer against the rating being assigned to its instruments c. Policy for placing ratings on credit watch d. Guidelines on what constitutes non-cooperation. e. Gift policy f. Confidentiality policy g. P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se from the banks of accepting their restructuring application/ proposal shall be considered as a default. Rescheduling of the debt instrument by the lenders prior to the due date of payment will not be treated as default, unless the same is done to avoid default or bankruptcy. Curing Period 90 Days for Default to Speculative Grade and generally 365 Days for Default to Investment Grade. *For bank loan ratings, default recognition will need to be in line with the RBI guidance. 2.2.6. Accountability of Rating Analysts of CRAs: a. Roles and responsibilities of the rating analysts of CRAs shall be clearly laid out in the CRA s Operations Manual/ Internal governing document. b. Analysts shall be responsible for undertaking the rating process and adhering to the timelines as specified in the Operations Manual/ Internal governing document. 2.2.7. Functioning and Evaluation of Rating Committees/Sub-Committees a. Each CRA shall define the obligations, responsibilities, areas of conflict of interest, etc. of rating committee members in its Operations Manual/ Internal governing document. The fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Maintenance of Rating Committee Summary The summary of the RCM shall be approved/ signed by the Chairperson, either manually or digitally. The approved/ signed summary shall be maintained either manually or electronically. 2.3 Rating Process Circular No. CIR/MIRSD/CRA/6/2010 dated May 3, 2010 2.3.1. A CRA shall keep the following records in support of each credit rating and review/ surveillance thereof: a. The important factors underlying the credit rating and sensitivity of such credit rating to changes in these factors, b. Summary of discussions with the issuer, its management, auditors and bankers which have a bearing on the credit rating, c. Decisions of the rating committee(s), including voting details and notes of dissent, if any, by any member of the rating committee, and d. If a quantitative model is a substantial component of the credit rating process, the rationale for any material difference between the credit rating implied by the model and the credit rating actually assigned. e. These records should be maintained till five years after maturity of instruments and be made available to auditors and regulatory bodies when sought by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vi. Losses, sharp revenue de-growth etc. based on publicly disclosed financial statements, which are not in line with CRA s earlier estimates vii. Granting, withdrawal, surrender, cancellation or suspension of key licenses or regulatory approvals. viii. Disruption/ commencement/ postponement of operations of any unit or division of the listed entity. ix. Any attachment or prohibitory orders against the Issuer x. Any rating action taken by an International Rating Agency with respect to rating assigned to the Issuer/ Instruments issued by the Issuer. 2.4.3. No Default Statement to be sought from the Issuer on a monthly basis: a. In order to enable timely recognition of default by the CRA, the CRA shall seek a No Default Statement (NDS) from the Issuer at the end of each month, which shall be provided to the CRA by the Issuer on the first working day of the next month. b. The NDS shall require the Issuer to explicitly confirm to the CRA that it has not delayed on any payment of interest/ principal in the previous month. c. A standardized format of the NDS is provided as Annexure. Annexure: Standard Template for No Default Statement (Minimum Informatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /MIRSD4/CIR/P/2017/28 dated March 31, 2017 a. Short term ratings b. Ratings in the C and D categories c. Ratings on watch d. Ratings of securitization transactions backed by pool of loans, as CRAs are already mandated to disclose at least once in every six months the performance of the rated pool, as per the provision at paragraph 3.2.1.4. e. Credit quality ratings of mutual fund schemes, provided surveillance of the fund s holdings is carried out by the CRAs on a monthly basis. 2.5.5. Press Release related to review of rating shall also carry the rating transition/ history of all instruments of that issuer, rated by the CRA in the past 3 years, irrespective of whether the instrument is currently outstanding or not. Annexure: Standard Template for Press Release (Minimum Information be disclosed) Name of the Company Date of Press Release Details of Instrument(s) Name of the instrument Date of issuance Coupon rate Maturity Date Size of the issue Rating assigned, along with Rating Outlook ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etails may not be provided under the head Details of Instrument(s) : Circular No. SEBI/HO/MIRSD/MIRSD4/CIR/P/2017/28 dated March 31, 2017 i. Interest rate/ coupon rate for all types of bank loan facilities. ii. Maturity details for working capital facilities (including cash credit facilities). iii. Tranche-wise interest rate and maturity details for money market instruments such as Commercial Papers, Certificate of Deposit and short-term NCDs which are reissued frequently. However, the range of duration of these instruments (e.g. 7 - 90 days) shall be provided in the press release. 2.6 Rating Agreement between the Issuer and the CRA Circular No. SEBI/ HO/ MIRSD/ MIRSD4/ CIR/ P/ 2017/ 71 dated June 30, 2017 2.6.1. Rating Agreement to be signed between Issuer and CRA prior to commencement of rating exercise: 2.6.1.1. Regulation 14 of SEBI (CRA) Regulations, 1999 requires CRAs to enter into a written agreement with each client whose securities it proposes to rate. 2.6.1.2. In this regard, it has come to the notice that in some instances, CRAs have provided indicative ratings to Issuers without entering into a written agreement with such Issuers and ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Coupon Payment Dates Terms of Redemption Redemption date Name and contact details of Debenture Trustee Details of top 10 investors c. The client (Issuer/ borrower) undertakes to provide the CRA a No Default Statement on a monthly basis wherein the Issuer shall explicitly confirm that it has not delayed on any payment of interest/ principal in the previous month. Such statement shall be provided to the CRA on the first working day of the next month. 2.7 Dealing with Conflict of interest Circular No. CIR/MIRSD/CRA/6/2010 dated May 3, 2010 2.7.1. A CRA shall formulate the policies and internal codes for dealing with the conflict of interest. 2.7.2. A CRA shall ensure: a. that its analysts do not participate in any kind of marketing and business development including negotiations of fees with the issuer whose securities are being rated, b. that the employees involved in the credit rating process and their dependants do not have ownership of the shares of the issuer. c. prompt review of the credit ratings of the securities as and when any of its employees joins the respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he CRA for such prior approval. The CEO/Compliance Officer shall ensure that there is no conflict of interest while considering the request for prior approval. Such approvals, if granted, shall be valid for 7 working days from the date of approval. iv. Disclosures : Any person, who becomes an employee of the CRA, shall submit a statement of holding of all securities in respect of persons mentioned at 2.7.4 (b) above to the Compliance officer or Chief Executive, as the case may be, within 7 working days of joining CRA. All employees of CRA including the Access Persons shall submit the following details to the CEO/Compliance Officer, as the case may be: o Details of purchase or sale transactions effected within 7 working days from the date of transaction. o A consolidated statement of holding of all securities within 30 working days from the end of the Financial Year. The members of the Rating Committee shall upfront declare / disclose their interest, if any, to the Chief Executive Officer or Compliance Officer, as per the policy of the CRA, in the securities /instruments/ facilities that are considered for rating / grading by the CRA. v. Restr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the new CRA shall, in its Press Release, disclose the aspect of non-co-operation. 2.10 Withdrawal of ratings Circular No. SEBI/HO/MIRSD/MIRSD4/CIR/P/2017/28 dated March 31, 2017 2.10.1. Bank loans/ facilities generally being non-transferable in nature and their only user being banks, withdrawal of ratings is permitted. All norms/ standards prescribed in this regard at paragraph 2.12 shall continue to apply. 2.10.2. Open ended Mutual Fund schemes being perpetual in nature and having no specified maturity, withdrawal of rating of such schemes is permitted. However, as units of such schemes are held by many investors, such ratings shall be placed on notice of withdrawal for at least 30 days, which shall be publicly available on the CRA s website. 2.10.3. Ratings of the aforementioned facilities/ securities can be withdrawn after receiving request for withdrawal from the Asset Management Company (AMC) in case of mutual funds; or request for withdrawal from the Borrower along with No Objection from the lending bank(s) in case of Bank facilities. 2.10.4. At the time of withdrawal, the CRA shall assign a rating to such facility/ security and issue a press release as p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii. Details of redemption of the issue. iv. Any default committed including the default in payment of interest or redemption of debentures or delay in creation of security. v. Any change or restructuring of the terms of the issue. vi. Periodic reports from lead banks about the progress of the project for which funds have been raised through debentures and certificate from issuer's auditors in respect of utilization of funds. vii. Details of grievances filed by debenture-holders and action taken to resolve them. viii. Non-cooperation by the issuer with respect to furnishing required reports/ certificates/ information. Information pertaining to points iii. to viii. above shall be shared as and when available. 2.12 Rating of instruments other than securities Circular No. CIR/MIRSD/3/2012 dated March 01, 2012 2.12.1. According to SEBI (Credit Rating Agencies) Regulations, 1999, CRA has been defined as a body corporate which is engaged in the business of rating of securities offered by way of public or rights issues. The term securities has been defined in Clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956. 2.12.2. However ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of issuers which defaulted over the three-year period / No. of issuers outstanding at the beginning of the three-year period. 3.1.3. For the above purposes, the following terms shall have the meaning as under: a. Static Pool Non-defaulted ratings that were outstanding at the beginning of any period. b. Default: Non-payment of interest or principal amount in full on the pre-agreed date. A CRA shall recognize default at the first instance of delay in servicing of interest or principal on the rated debt instrument. c. Default Rate: The number of defaults among rated entities in the static pool as a percentage of the total number of entities in the static pool. d. Averaging: All averaging across static pools for default rate computations must be based on the weighted average method where the weights are the number of ratings in each static period. 3.2 Periodic Disclosures 3.2.1. A CRA shall make all the disclosures stipulated below on their websites. In case of listed securities, the CRA shall also make disclosures to the stock exchanges as specified in the SEBI (Credit Ratings) Regulations, 1999. For ratings assigned and their periodic reviews, the CRA shall is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bute 10% or more of total revenue of the CRA and its subsidiaries. 3.2.1.4. Structured Finance Products a. While publishing the ratings of structured finance products and their movements, a CRA apart from following all the applicable requirements in case of non-structured ratings shall also disclose the track record of the originator and details of nature of underlying assets while assigning the credit rating. The track record shall include a brief description of the financials of the originator, rating migrations to speculative categories and defaults. b. A CRA shall also disclose at least once in every six months, the performance of the rated pool, i.e., collection efficiency, delinquencies. A CRA shall also provide a detailed description of the underlying pools including ageing, Credit enhancements such as liquidity supports, first and second loss guarantee provided shall also be disclosed. 3.2.1.5. Unsolicited Credit Ratings a. While publishing unsolicited ratings and their movements, a CRA apart from following all the applicable requirements in case of solicited ratings shall make the following disclosures: i. the extent of participation by the issuer, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rities and Exchange Board of India Act, 1992 and SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 by the CRA. 3.3.4. Upon the occurrence of or announcement/ news of material events, as elaborated at paragraph 2.4.2, CRAs shall publish on their website press release regarding the rating action (including reiteration of existing rating), if warranted, immediately, but not later than 7 days of occurrence of the said event. 3.3.5. In case there have been delays in the payment of interest/ principal by the Issuer, the Issuers shall state the same in this statement and the CRA shall promptly conduct a rating review and disseminate the rating action through Press Release within 2 days of receipt of such statement. 3.3.6. Timelines of review and Press Releases a. In order to enable CRAs to disseminate information on ratings promptly through press releases as per requirements of Regulation 15 and 16 of SEBI (CRA) Regulations, following is clarified: i. Initial Rating: Scenario Timelines immediately but not later than Acceptance of Rating/ Appeal for Rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose on its website details of all ratings assigned by them, irrespective of whether the rating is accepted by the issuer or not, even in case of non-public issues. Details disclosed shall include the name of the issuer, name/ type of instrument, size of the issue, rating and outlook assigned, etc. 3.3.9. Disclosures in case of delay in periodic review a. Each CRA shall promptly disclose on its website details of all such ratings where the review became due but was not completed by the due date, as per the timelines specified in the CRA s Operations Manual/ Internal governing document. Details disclosed shall include the name of the issuer, name/ type of instrument, size of the issue, date of last review, reasons for delay in periodic review, hyperlink to the last Press Release, etc. 3.3.10. Disclosure of guidelines for dealing with Conflict of Interest: SEBI Circular No. CIR/MIRSD/6/2013 dated August 28, 2013 a. The policies adopted by the CRAs for effective implementation of guidelines for dealing with Conflict of Interest for investment/ trading by CRAs, Access Persons and other employees, shall be disclosed on the CRAs website. ANNEXURE I to VIII An ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. 2. Rating prior to revision- AA category 1. 2. Rating prior to revision- A category 1. 2. Rating prior to revision- BBB category 1. 2. Rating prior to revision- BB category 1. 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rating prior to default- B category 1. 2. Rating prior to default- C category 1. 2. Annexure VI B Short Term Scale Rating Movement by more than one notch between Apr-Sep/ Oct -Mar S. No. Name of the Issuer Initial rating Date of Initial Rating Date of Default Recognition Rating prior to default- A1 category 1. 2. Rating prior to default- A2 category 1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... * If in a particular financial year, a rating has subsequently been changed, then that shall also be disclosed Solicited Credit Ratings assigned to those issuers mentioned in the table above in the last financial year** S. No. Name of the Issuer Rating assigned ** Any subsequent revision of the rating in the same year shall also be disclosed 3.4 Rating Criteria, Rating Process and their Disclosure Circular No. SEBI/HO/MIRSD/MIRSD4/CIR/P/2016/119 dated November 1, 2016 3.4.1 Rating 'Criteria a. Each CRA shall frame detailed rating criteria, include the same in its Operations Manual/ Internal governing document and disclose the same on its website. b. Periodicity of review shall be disclosed on the CRA's website. While disclosing the revised criteria on their website, CRAs shall also provide a reference/ hyperlink to the original criteria (before revision), so as to enable investors to discern the changes made to the same. c. The criteria shall be placed on the CRA s website in a user-friendly manner in order to facilitate e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Name of the CRA Credit Rating Date of Credit Rating iii. Earlier rating and date of rating (if any): Name of the CRA Credit Rating Date of Credit Rating Date of Rating change 3.6.3. Information providers : a. The issuers shall provide the ISIN details to the CRAs, along with the reference number and date of the rating letter, pursuant to issue of instruments for review/ updation of credit ratings by CRAs in the database, within 2 days after allotment of ISIN. b. CRAs shall be provided secure logins by the depositories for verification and updation of the requisite information in the database on an ongoing basis. c. CRAs shall access the database and shall update the credit rating provided by the agency and the subsequent rating migrations, within the time stipulated below: Sr. No. Activity Remarks 1 Verification of ini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /P/2016/119 dated November 1, 2016 4.2.1 Eligibility of Auditors for conducting the Internal Audit of the CRA a. The audit firm shall have a minimum experience of three years in the financial sector. b. The internal auditor of a CRA shall declare that i. The firm has not been employed by other CRAs for any other services (such as statutory audit, taxation, consultancy/ retainership etc.) in the past two years, and ii. The partners/ firm do not have any association with any other CRA. c. The audit team must be composed of, at least, a Chartered Accountant (ACA/FCA) and a Certified Information Systems Auditor (CISA). 4.2.2 Rotation of Internal Auditors : An auditor shall be appointed for a maximum term of five years, with a cooling-off period of two years. 4.2.3 Scope of the Internal Audit : The scope of the internal audit shall be expanded to include the following additional checks: a. CRA and its employees, who are associated directly or indirectly with the rating business, have complied with the regulations and code of conduct. b. CRA has defined processes for operations that have been followed during the rating exercise. c. Rating analysts h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Board Meeting of the CRA, whichever is later, in the following format: Sr. No. Observations of the auditor Remarks by the Compliance Officer Comments of the Board of the CRA Corrective actions taken SECTION 5: REDRESSAL OF INVESTOR GRIEVANCES 5.1 Designated e-mail ID for regulatory communication with SEBI SEBI Circular No. MIRSD/ DPSIII/ Cir-21/ 08 dated July 7, 2008. 5.1.1. SEBI has been communicating with the registered market intermediaries through circulars, letters, directions etc. In order to facilitate the issuance of digitally signed circulars, all registered intermediaries are required to create a designated email id for regulatory communications. This email id shall be an exclusive email id only for the above purpose and should not be a person centric email id. 5.1.2. The Designated e-mail ID shall be communicated to SEBI by emailing a file to intermediary@se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... redit Rating Agencies for receiving SCORES user id and password from SEBI has to be preferably a corporate email id and necessarily a permanent one. Failure by any SEBI registered Credit Rating Agency to obtain the SCORES user ID and password would not only be deemed as non-redressal of investor grievances but also indicate willful avoidance of the same. 5.2.4. The SEBI registered Credit Rating Agencies shall submit the details in hard copy (Form - B) to the Department/ Division of SEBI which has granted them registration to operate in the securities market. SCORES user id and password of the Credit Rating Agencies shall be created only after receiving approval from the concerned Department/ Division of SEBI. 5.2.5. All SEBI registered Credit Rating Agencies shall review their investors grievances redressal mechanism so as to further strengthen it and correct the existing shortcomings, if any. The SEBI registered Credit Rating Agencies to whom complaints are forwarded through SCORES, shall take immediate efforts on receipt of a complaint, for its resolution, within thirty days. The SEBI registered Credit Rating Agencies shall keep the complainant duly informed of the action ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the concerned Department/Division of Securities and Exchange Board of India, Plot No. C4-A, 'G' Block, Bandra Kurla Complex, Mumbai - 400 051 Important: Please note that SCORES has the provision for updating SEBI registered Credit Rating Agency s details by the Credit Rating Agency itself. Any field (except the e-mail id which is permanent) such as registered office address, name/ details of the compliance officer, telephone numbers, etc. should be changed by the SEBI registered Credit Rating Agency immediately when warranted. 5.3 Information regarding Grievance Redressal Mechanism Circular No. CIR/MIRSD/3/2014 dated August 28, 2014 5.3.1. For information of all investors who deal/ invest/ transact in the market, it has now been decided that the information as provided below shall be prominently displayed in the offices of the CRAs: Dear Investor, In case of any grievance / complaint against the Credit Rating Agency: Please contact Compliance Officer of the Credit Rating Agency (Name and Address) / email-id (xxx.@email.com) and Phone No. - 91-XXXXXXXXXX. You may also approach CEO / Partner / Proprietor (Name) / ema ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de the assessment of whether and how those activities can be appropriately outsourced. The Board / partners (as the case may be) {hereinafter referred to as the the Board } of the intermediary shall have the responsibility for the outsourcing policy and related overall responsibility for activities undertaken under that policy. 1.1 The policy shall cover activities or the nature of activities that can be outsourced, the authorities who can approve outsourcing of such activities, and the selection of third party to whom it can be outsourced. For example, an activity shall not be outsourced if it would impair the supervisory authority s right to assess, or its ability to supervise the business of the intermediary. The policy shall be based on an evaluation of risk concentrations, limits on the acceptable overall level of outsourced activities, risks arising from outsourcing multiple activities to the same entity, etc. 1.2 The Board shall mandate a regular review of outsourcing policy for such activities in the wake of changing business environment. It shall also have overall responsibility for ensuring that all ongoing outsourcing decisions taken by the intermediary and the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all review the financial and operational capabilities of the third party in order to assess its ability to continue to meet its outsourcing obligations. 3. The intermediary shall ensure that outsourcing arrangements neither diminish its ability to fulfill its obligations to customers and regulators, nor impede effective supervision by the regulators. 3.1 The intermediary shall be fully liable and accountable for the activities that are being outsourced to the same extent as if the service were provided in-house. 3.2 Outsourcing arrangements shall not affect the rights of an investor or client against the intermediary in any manner. The intermediary shall be liable to the investors for the loss incurred by them due to the failure of the third party and also be responsible for redressal of the grievances received from investors arising out of activities rendered by the third party. 3.3 The facilities / premises / data that are involved in carrying out the outsourced activity by the service provider shall be deemed to be those of the registered intermediary. The intermediary itself and Regulator or the persons authorized by it shall have the right to access the same at a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovides for the continuous monitoring and assessment by the intermediary of the third party so that any necessary corrective measures can be taken up immediately, i.e., the contract shall enable the intermediary to retain an appropriate level of control over the outsourcing and the right to intervene with appropriate measures to meet legal and regulatory obligations; e) includes, where necessary, conditions of sub-contracting by the third-party, i.e. the contract shall enable intermediary to maintain a similar control over the risks when a third party outsources to further third parties as in the original direct outsourcing; f) has unambiguous confidentiality clauses to ensure protection of proprietary and customer data during the tenure of the contract and also after the expiry of the contract; g) specifies the responsibilities of the third party with respect to the IT security and contingency plans, insurance cover, business continuity and disaster recovery plans, force majeure clause, etc.; h) provides for preservation of the documents and data by third party ; i) provides for the mechanisms to resolve disputes arising from implementation of the outsourcing contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s systems. 7. The intermediary shall take appropriate steps to require that third parties protect confidential information of both the intermediary and its customers from intentional or inadvertent disclosure to unauthorized persons. 7.1 An intermediary that engages in outsourcing is expected to take appropriate steps to protect its proprietary and confidential customer information and ensure that it is not misused or misappropriated. 7.2 The intermediary shall prevail upon the third party to ensure that the employees of the third party have limited access to the data handled and only on a need to know basis and the third party shall have adequate checks and balances to ensure the same. 7.3 In cases where the third party is providing similar services to multiple entities, the intermediary shall ensure that adequate care is taken by the third party to build safeguards for data security and confidentiality. 8. Potential risks posed where the outsourced activities of multiple intermediaries are concentrated with a limited number of third parties. 8.1. In instances, where the third party acts as an outsourcing agent for multiple intermediaries, it is the duty of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ails to do so, he/ she shall be deemed to have violated the various provisions contained in SEBI Act/ Rules/ Regulations etc. and shall be liable for action. The Compliance Officer shall also be held liable for breach of duty in this regard. Circular No. CIR/ISD/2/2011 dated March 24, 2011 6.3 General Guidelines for dealing with Conflicts of Interest of Credit Rating Agencies and their Associated Persons in Securities Market SEBI Circular No. CIR/ MIRSD/ 5/ 2013 dated August 27, 2013 6.3.1. All intermediaries, recognised stock exchanges, recognised clearing corporations and depositories (hereinafter collectively referred to as such entities ) are presently governed by the provisions for avoidance of conflict of interest as mandated in the respective regulations read with relevant circulars issued from time to time by SEBI. On the lines of Principle 8 of the International Organisation of Securities Commissions (IOSCO) Objectives and Principles of Securities Regulations, it has been decided to put in place comprehensive guidelines to collectively cover such entities and their associated persons, for elimination of their conflict of interest, as detailed hereunder. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... btained as a result of their dealings, for their personal interest; 6.3.5. The Boards of such entities shall put in place systems for implementation of this circular and provide necessary guidance enabling identification, elimination or management of conflict of interest situations. The Boards shall review the compliance of this circular periodically. 6.3.6. The said guidelines shall be in addition to the provisions, if any, contained in respective regulations/ circulars issued by the Board from time to time regarding dealing with conflict of interest, in respect of such entities SCHEDULE: List of Circulars 1. Circular No. SEBI/MIRSD/DR-2/SRP/Cir - 2/ 2005 dated January 4, 2005. 2. Circular No. MIRSD/ DPSIII/ Cir-21/ 08 dated July 7, 2008. 3. Circular No. SEBI/MIRSD/CRA/Cir-01/2010 dated January 06, 2010 4. Circular No. CIR/MIRSD/CRA/6/2010 dated May 3, 2010 5. Circular No. CIR/ISD/1/2011 dated March 23, 2011 6. Circular No. CIR/ISD/2/2011 dated March 24, 2011 7. Circular No. CIR/MIRSD/4/2011 dated June 15, 2011 8. Circular No. CIR/MIRSD/8/2011 dated June 17, 2011 9. Circular No. CIR/MIRSD/14/2011 dated August 02, 2011 10. Circular No. Cir ..... X X X X Extracts X X X X X X X X Extracts X X X X
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