SEBI Notifies Measures for Strengthening Firewall between CRAs and the Non-Rating Units

On 21st September 2022, the Securities and Exchange Board of India (SEBI), through Notification – SEBI/HO/DDHS/DDHS-RACPOD2/P/CIR/2022/121, notified All Credit Rating Agencies (CRAs) registered under SEBI to ensure Firewall between Credit Rating Agencies and their Affiliates. The SEBI (Credit Rating Agencies) Regulations, 1999, also referred to as the CRA Regulations, state principle-based regulation for CRAs which focuses on the inter alia of preventing any “conflict of interests”. The CRAs have to abide by the Code of Conduct as stated in the Third Schedule in accordance with Regulation 13 of the SEBI (Credit Rating Agencies) Regulations, 1999.

The SEBI has now mandated all Credit Rating Agencies to formulate policies on firewall practices with non-rating entities and to maintain detailed documents regarding the same in their Internal Operational Manuals. The Policies are also required to be ratified by the Board of Directors of the CRAs.