Enhanced Standards for Credit Rating Agencies (CRAs)

CIRCULAR

SEBI/HO/MIRSD/MIRSD4/CIR/P/2016/119

November 1, 2016

To

All Credit Rating Agencies Registered with SEBI Dear

Sir/ Madam,

Sub: Enhanced Standards for Credit Rating Agencies (CRAs)

1. SEBI constituted a committee on “Strengthening the Guidelines and Raising Industry Standards for Credit Rating Agencies (CRAs)”, which included representatives from all the CRAs. The objective of the Committee was to deliberate upon measures and guidelines to bring about greater transparency in the policies of the CRAs, enhance the standards followed by the industry and,thereby, facilitate ease of understanding of the ratings by the investors.

2. With a view to implementing the recommendations of the said Committee, the guidelines as annexed to this Circular are being issued. These guidelines cover the following broad areas:

I. Formulation of Rating Criteria and rating processes and public disclosure of the same.

II. Accountability of RatingAnalysts

III. Standardisationof Press Releasefor rating actions.

IV. 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. Page 2 of 14

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, 1992 read with the provisions of Regulation 20of SEBI (Credit Rating Agencies) Regulations, 1999 to protect the interest of investors in securities and to promote the development of, and toregulate, the securities market.

Yours faithfully,

Surabhi Gupta

Deputy General Manager

Market Intermediaries Regulation and Supervision Department

Tel. No: 022-26449315

Email id: surabhig@sebi.gov.in

Please refer to the attached file for details