Page 248 - DMGT512_FINANCIAL_INSTITUTIONS_AND_SERVICES

Unit 17: Credit Rating

17.1.12 Restriction on Rating of Securities issued by Promoters or by Notes
certain other Persons

Definitions

In this chapter, unless the context otherwise requires:
1. "associate" , in relation to a promoter, includes a body corporate in which the promoter
holds ten percent or more, of the share capital;
2. "promoter" means a person who holds ten percent or more, of the shares of the credit
rating agency.

Securities issued by Promoter

1. No credit rating agency can rate a security issued by its promoter.
2. In case promoter is a lending institution, its Chairman, director or employee cannot be a
Chairman, director or employee of credit rating agency or its rating committee.
Securities issued by certain Entities, Connected with a Promoter or Rating Agency not
to be Rated

1. No credit rating agency can, rate a security issued by an entity, which is:
(a) a borrower of its promoter; or
(b) a subsidiary of its promoter; or

(c) an associate of its promoter; if
(i) there are common Chairman, Directors between credit rating agency and
these entities;
(ii) there are common employees;

(iii) there are common Chairman, Directors, Employees on the rating committee.
2. 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.

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