Securities and Exchange Board of India sets segregation and disclosure requirements for credit rating agencies rating instruments overseen by other regulators

The Securities and Exchange Board of India issued a circular setting conditions for registered credit rating agencies (CRAs) that rate financial instruments falling under the purview of other financial sector regulators. The framework is designed to separate these activities from SEBI-regulated work and to ensure clear disclosures that SEBI investor protection and grievance or dispute redressal mechanisms are not available for such ratings. CRAs must use separate email IDs for grievances relating to SEBI-regulated activities versus other-regulator activities and maintain separate website pages or sections for related disclosures, while allowing shared resources for the grievance mechanism. Minimum net worth under SEBI’s CRA Regulations must not be affected and any net worth requirements from other regulators are to be met in addition. CRAs must disclose on their website the list of activities undertaken and the regulator for each, keep marketing for other-regulator activities separate, and include prominent statements that SEBI protection and redressal mechanisms do not apply. Rating reports and rating press releases or rationales for such instruments must name the relevant regulator(s) and carry the same disclaimer, with clear segregation and labelling if a common report covers both SEBI-regulated and other-regulator instruments; client-facing requirements include upfront written disclosures in engagement documentation, written client confirmation of understanding, and written intimations to existing clients for ongoing activities and outstanding ratings, followed by confirmation of compliance to SEBI. For other-regulator activities, CRAs must also include a Board-approved compliance undertaking as part of their half-yearly internal audit report. The grievance email ID and website segregation requirement and the client intimation requirement for existing clients take effect after twelve months from issuance of the circular, while the remaining provisions take effect after sixty days from issuance.