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2013-02-07

CRA cannot offer fee-based services beyond ratings, research: SEBI

Market watchdog SEBI (Securities and Exchange Board of India) has said that a credit rating agency cannot offer any fee-based services other than credit ratings and research to its rated clients, while its regulations would apply to ratings of all kinds o

Market watchdog SEBI (Securities and Exchange Board of India) has said that a credit rating agency cannot offer any fee-based services other than credit ratings and research to its rated clients, while its regulations would apply to ratings of all kinds of securities, bank facilities and services.

Capital markets regulator SEBI, which also regulates credit rating agencies in the country, has expressed its views in this regard in an 'interpretative letter' sought by SME Rating Agency of India Ltd (SMERA) under the regulator's informal guidance scheme.

SEBI in a guidance note said that its CRA (Credit Rating Agency) guidelines, including those pertaining to rating process and methodology and its records, transparency and disclosures, avoidance of conflict of interest and code of conduct, would apply to ratings of all securities, instruments, loans and other bank facilities.

It added that the SEBI guidelines would apply to ratings of all these services even if they are not regulated by SEBI, but are used by other regulators or their regulated entities.

Seeking SEBI's guidance with regard to CRA regulations and their applicability, SMERA had said it provides entity ratings to SMEs, greenfield and brownfield projects, maritime training institutions and micro finance institutions.

SMERA said these ratings are private in nature and were not governed by any regulators in the country including SEBI.

It had further asserted that SMERA also provides services like risk rating of industrial clusters, validation of rating models, code of conduct assessment for various institutions and due diligence exercise, which are consultancy and advisory services and not credit rating of any security issued by them.

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