Page 216 - DCOM304_INDIAN_FINANCIAL_SYSTEM

Unit 10: Credit Rating and Consumer Finance

(i) a borrower of its promoter; or Notes
(ii) a subsidiary of its promoter; or
(iii) an associate of its promoter, if
(iv) there are common Chairman, Directors between credit rating agency and
these entities;
(v) there are common employees;
(vi) there are common Chairman, Directors, Employees on the rating committee.

(b) No credit rating agency can rate a security issued by its associate or subsidiary, if the
credit rating agency or its rating committee has a Chairman, director or employee
who is also a Chairman, director or employee of any such entity.
Provided that the Credit Rating Agency may, subject to the provisions of sub-regulation rate a
security issued by its associate having a common independent director with it or rating committee
if:
1. such an independent director does not participate in the discussion on rating decisions,
and
2. the Credit Rating Agency makes a disclosure in the rating announcement of such associate
(about the existence of common independent director) on its Board or of its rating
committee, and that the common independent director did not participate in the rating
process or in the meeting of its Board of Directors or in the meeting of the rating committee,
when the securities rating of such associate was discussed.

Notes For the purposes of this sub-regulation the expression 'independent director' means
a director who, apart from receiving remuneration as a director, does not have any other
material pecuniary relationship or transactions with the company, its promoters, its
management or its subsidiaries, which in the judgment of the board of the company, may
affect the independence of the judgment of such director.

Securities Already Rated

Nothing applies to securities whose rating has been already done by a credit rating agency
before the commencement of these regulations, and such securities may, subject to the provisions
of the other Chapters of these regulations, continue to be rated, without the need to comply with
the restrictions imposed by the regulations contained in this chapter.

10.1.13 Procedure for Inspection and Investigation

The Board may appoint one or more persons as inspecting officers, to undertake inspection or
investigation of the books of account, records and documents of the credit rating agencies.
The purposes referred to in sub-regulation may be the following, namely:

1. to ascertain whether the books of account, records and documents are being maintained
properly;
2. to ascertain whether the provisions of the Act and these regulations are being complied
with;

LOVELY PROFESSIONAL UNIVERSITY 211