Mumbai: The Securities and Exchange Board of India has cancelled the certificate of registration of rating agency Brickwork Ratings India with immediate effect and directed the rating agency to wind down operations within six months on account of violation of provisions of Sebi Credit Rating Agency Regulation (CRA) and code of conduct.
Passing an order on Thursday, the Sebi said, "The Noticee shall wind down its operations (including intimating its client about closure of its operations) within a period of six months from the date of this Order. The Noticee shall not take any new clients/fresh mandates from the date of this Order."
Brickwork Ratings was founded in 2008-09 by bankers, credit rating professionals, former regulators and academicians with Canara Bank as its promoter and strategic partner.
The Sebi had started probing the credit rating agency in 2020 and undertook a joint inspection with the Reserve Bank of India.
As per the show cause notice issued by Sebi, "the Noticee (Brickwork) allegedly failed to follow a proper rating process and also failed to exercise due diligence while providing ratings through its failure to take into account information with regard to peer analysis, financial projections, site visits, discussion with the company's management and interaction with bankers, and failure to review rating criteria in light of regulatory changes and changes in market dynamics."
"The repeated lapses, noticed across multiple inspections conducted by Sebi, shows that governance changes recommended in earlier inspections, and monetary penalties imposed have not proved effective or deterred the Noticee in addressing very basic requirements of running a CRA," said the Sebi order by its whole time member Ashwani Bhatia.
Enquiry report by the Sebi had identified three instances where there was a delay in conducting the annual review of ratings assigned by Brickwork, in cases of IKF, Entry India and Capital First Home Finance.
The order also described two instances of delay in recognizing default in cases of Sintex and RCL.
Brickwork had earlier contended cancellation of certificate of registration alleging, "it had conducted over 9,000 credit ratings and the Enquiry Report has made observations only on 15 cases. Most of the deficiencies observed were with respect to non-material procedural issues or clerical errors.”
