Mumbai: The Securities and Exchange Board of India (Sebi) on Wednesday proposed to allow credit rating agencies (CRA) to rate financial products regulated by other financial sector regulators (FSR). It said CRAs may be allowed to rate unlisted securities, even if no rating related guidelines may have been issued by the relevant FSR.
CRAs would only be able to undertake rating activities that are fee-based and non-fund based. They would also have to set up a new unit within six months, which is segregated by a chinese wall and ring-fenced from other Sebi regulated activities, it said.
“It has been represented that since rating of said products or entities is adjacent to the current business of CRAs, permitting the same may lead to significant synergies, while also addressing a gap in the industry,” Sebi said in a discussion paper. The regulator said before undertaking any activities which are not regulated by Sebi, rating agencies should provide upfront written disclosure to clients, beneficiaries and counterparties.
