Page 213 - DCOM304_INDIAN_FINANCIAL_SYSTEM

Indian Financial System

Notes 10.1.5 Monitoring of Ratings

Every credit rating agency has to, during the lifetime of securities rated by it continuously
monitor the rating of such securities.
Every credit rating agency has to shall disseminate information regarding newly assigned
ratings, and changes in earlier rating promptly through press releases and websites, and, in the
case of securities issued by listed companies, such information shall also be provided
simultaneously to the concerned regional stock exchange and to all the stock exchanges where
the said securities are listed.

10.1.6 Procedure for Review of Rating

Every credit rating agency has to carry out periodic reviews of all published ratings during the
lifetime of the securities. If the client does not cooperate with the credit rating agency so as to
enable the credit rating agency to comply with its obligations, the credit rating agency shall
carry out the review on the basis of the best available information.
Provided that if owing to such lack of cooperation, a rating has been based on the best available
information, the credit rating agency shall disclose to the investors the fact that the rating is so based.
A credit rating agency cannot withdraw a rating so long as the obligations under the security
rated by it are outstanding, except where the company whose security is rated is wound up or
merged or amalgamated with another company.

10.1.7 Internal procedures to be framed

Every credit rating agency has to frame appropriate procedures and systems for monitoring the
trading of securities by its employees in the securities of its clients, in order to prevent
contravention of:

1. the Securities and Exchange Board of India (Insider Trading) Regulations, 1992;
2. the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade
Practices Relating to the Securities Market) Regulations, 1995; and

3. other laws relevant to trading of securities.
10.1.8 Disclosure of Rating Definitions and Rationale

Every credit rating agency:
1. has to make public the definitions of the concerned rating, along with the symbol and,
2. has to also state that the ratings do not constitute recommendations to buy, hold or sell
any securities.
Every credit rating agency has to make available to the general public information relating to
the rationale of the ratings, which shall cover an analysis of the various factors justifying a
favourable assessment, as well as factors constituting a risk.
Where any information is called for by the Board from a credit rating agency for the purposes of
these regulations, including any report relating to its activities, the credit rating agency has to
furnish such information to the Board:
1. within a period specified by the Board or

2. if no such period is specified, then within a reasonable time.

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