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TMI BlogEnhanced Standards for Credit Rating Agencies (CRAs)X X X X Extracts X X X X X X X X Extracts X X X X ..... . Functioning and evaluation of Rating Committees/Sub-Committees. V. Disclosure of ratings in case of non-acceptance by an issuer VI. Disclosure in case of delay in periodic review of ratings. VII. Policy in respectofnon-co-operation by the issuer. VIII. Strengthening and enhancing the relevance of Internal Audit of CRAs, viz.appointmentand rotation of auditors and scope of the audit. 3. The CRAs shall effectively implement these guidelines within 60 days from the date of issue of this circular. 4. The CRAs shall at all times observe high standards and fairness in conduct of the business and any act of omission or commission in contravention of the provisions of clauses 12 and/or 23 of Code of Conduct , as specified under Third Schedule of the SEBI (Credit Rating Agencies) Regulations, 1999, in letter or spirit, may result in violation of the provisions of section 12A of the Securities and Exchange Board of India Act,1992 and SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003. 5. This circular is issued in exercise of the powers conferred by Section 11 (1) of Securitiesand Exchange Board of India Act, 199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IV. Press Release, related to rating action, shall provide a reference/ hyperlink tothe specific criteriaapplied for the rating. B. Rating Process and Policies I. CRAsare mandated to have in place a proper rating process and disclosethe same on their website. II. The following shall also be specified in the Operations Manual/ Internal governing document of CRAs: a. Basic Minimum information required for conducting the Rating Exercise b. External entities (bankers, auditors etc.) that need to be contacted c. Mode of seeking information from external entities. CRAs should endeavor to obtain such information/confirmation in writing. d. Policy regarding internal approvals and timelines at each step of the Rating Exercise e. Policy regarding monitoring and reviewof ratings, including the timelines within which such review is to be completed III. Each CRA shall frame detailed guidelines on the following, include them in its Operations Manual/ Internal governing document and disclose the sameon its website: a. General nature of compensation arrangements with rated entities Policy for appeal by Issuers against the Rating being assigned to its instruments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Operations Manual/ Internal governing document.The following shallbe specifically set out in the Operations Manual/ Internal governing documentof each CRA and disclosed on itswebsite I. Eligibility for becoming committee/sub-committee members II. Composition of committee/sub-committee III. Minimum quorum required IV. Duties of committee members V. System of voting and recording of dissent. VI. Managing conflict of interest in the rating committee/sub-committee. B. Persons who have business responsibility shall not be part of the Rating Committee. However, the MD/ CEO may be a member of the Rating Committee if the majority of the Rating Committee members areindependent. ( Independent would mean people not having any pecuniary relationship with the CRA or any of its employees). C. Minutes of each case discussed at the committee shall be maintained and signed (digitally or manually) by the Chairperson. Standard format for the Minutes of Rating Committee Meeting is placed at Annexure-A3. D. The process of discussion of case by circulation must be avoided, unless there is urgency in taking a rating action. E. Chairperson(s) of eachrating commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he CRA for getting the information. V. Hyperlink/ reference to the applicable Criteria VI. Limitations regarding information availability (shallhave a suitable caveat cautioning the investors/lenders /public) VII. Rating History for last three years VIII. Name and contact details of the Rating Analyst(s) D. In case an issuer, having not co-operated with a CRA in the past, approaches another CRA for rating, the new CRA shall, in its Press Release, disclose the aspect of non-co-operation. E. The Rating Agreement, signed between the CRA and its client (issuer/ borrower),shall have an additional clause stating that - The client (issuer/ borrower) agrees to disclose the history and status (non-cooperation, non-payment of fees etc.) of previous rating relation with the earlierCRA(s) to the new CRA along with reasons for non- cooperation,, etc. if applicable. 6. Internal Audit of CRAs: For strengthening and improving the relevance of the internal audit of CRAs, as envisaged under Regulation 22 of the SEBI (Credit Rating Agencies) Regulations, 1999 and Circular SEBI/ MIRSD/CRA/Cir-01/ 2010 dated January 06, 2010, it has been decided to implement the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mplied with the timelines for publication of press release/ rating rationale for the ratings assigned, as set out in its Operations Manual/ Internal governing document. IX. The PressReleases issued are broadly in line with the standard template as placed at Annexure-A2 . X. Verify the rating disclosures made by the CRAs on their website. XI. Comment on the conflict of interest, if any, arising due to composition of the rating committee and participation in the rating committee meetings. D. Action on the Internal Audit Report: I. Upon receipt of the internal audit report, the Compliance Officer of the CRA shall provide detailed comments on each of the observations therein and place the same before the Board of the CRA. II. The final action taken report, including the comments/ recommendations made by Compliance Officer and the Board of the CRAas well as the corrective steps taken by the CRA, shall be submitted to SEBI within 2 months from the date of receipt of the internal audit report or 1 month from the date of Board Meeting of the CRA, whichever is later, in the following format: Sr. No. Observations of the auditor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Short Term Continuously overdrawn for more than 30 days. Non fund-based facilities Letter of credit (LC) Short Term Overdue for more than 30 days from the day of devolvement. Bank Guarantee (BG)(Performance/ Financial) Short Term Amount remaining unpaid from 30 days from invocation of the facility. Other Scenarios When rated instrument is rescheduled: Non-servicing of the debt (principal as well as interest) as per the existing repayment terms in anticipation of a favourable response from the banks of accepting their restructuring application/ proposal shallbe 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Note on complexity levels of the rated instrument: Name and Contact Details of the Rating Analyst(s): About CRA: CRA Disclaimer: Annexure-A3: Summary Record of the Rating Committee Meeting (RCM) A. Preliminary Information Date of the RCM Names of all the persons attending the RCM Name of rating committee members present (only rating committee members will have voting rights) Name of the Chairperson of the meeting Any other special invitees (if any) B. Information Relating to Rating Decision Following information/details of each rating decision shallbe captured: Name of the rated issuer/entity Rating exercise i.e. whether it s a fresh rating or review/surveillance case Rating outcome i.e. rating assigned, along with rating outlook and special rating symbol, if any. Summary of key issues discussed during the rating committee. Dissent (if any) by any RCM member C. Authentication and Maintenance of Rating Committee Summary The summary of the RCM shallbe approved/signed by the Chairperson either ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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