Sebi chief 'unhappy with rating agencies'

This follows within days of the watchdog tightening the disclosure norms for the credit rating agencies (CRAs) amid concerns about delayed rating action regarding debt-ridden firms.

"We are bringing out a discussion paper within a month," Tyagi said in reply to a question on how would Sebi deal with the situation if the rating agencies fail to adhere to the new set of stricter norms.

Tyagi further said the regulator will look at the views from all stakeholders before taking a final call.

"We are not happy with the current state of affairs at the credit rating agencies," the Sebi chairman said in a strong message for the CRAs which have been facing a lot of flak lately, especially with regard to limited warning from their side about defaults by companies on bonds.

Last week, Sebi asked the CRAs to proactively monitor financial health, including share price movement, of companies to provide timely and accurate ratings on their debts.

The decision followed several instances of the CRAs not taking cognisance of delays in servicing debt obligations by the issuers they rate, even though the information has already been discounted by the market.

Besides, the Securities and Exchange Board of India (Sebi) has increased disclosure requirements for the CRAs and want them to monitor the exchange websites for disclosures made by the issuers.

Sebi asked the rating agencies to carry out a review of the ratings upon the "occurrence of or announcement/news of material events", including financial results, any significant decline in share/bond prices of the issuer or group companies if it is not in line with the overall market movement and any attachment or prohibitory orders against the company.

Besides, the rating agencies would have to seek a 'No Default Statement' from the issuer at the end of each month.

In the rating action, disclosure report by the CRAs would include key financial indicators and ratios for the issuer for the last and current financial year, in tabular form, as well as any other significant information relevant to the issuer and its sector, the regulator said.

Sebi has also asked the CRAs to make disclosures in case of considerable delay in providing information by the issuer.

"If the issuer does not share information sought by the CRA within seven days of seeking such information from the issuer, even after repeated reminders... the CRA shall take appropriate rating action depending upon the severity of information risk...," it said.

Rating agencies have to accept an appeal from the issuer with regard to review of rating within five working days.

"In case rating is not accepted by the issuer within a month of communication of rating by the CRA to the issuer, the same shall be disclosed as 'Non Accepted Rating' on the CRA's website," Sebi said.

The CRAs have been advised to refrain from giving indicative ratings without having a written agreement in place.

"In case such indicative ratings are provided by the CRA, it shall be considered as aiding and abetting the issuer in suppression of material information by the CRA," Sebi said.

Separately, Sebi plans to soon come out with a detailed discussion paper on CRAs as it seeks to check the menace of rating shopping and pick-and-choose approach in their actions.

Sebi has also asked Debenture Trustees to have adequate systems to ascertain the status of payment of interest or principal by issuer companies on due dates in a timely manner and efficiently share such information with the CRAs.

The National Stock Exchange (NSE) may have to re-file papers for its Rs 10,000-crore IPO after addressing issues related to alleged preferential access given to some brokers, watchdog Sebi's Chairman Ajay Tyagi on Monday said, terming the co-location case as "a serious matter".

The leading stock exchange had submitted to Sebi its draft prospectus for the public offer in December, but the approval has been hanging fire due to issues surrounding the ongoing probe into the NSE co-location case where some brokers allegedly got preferential access to the exchange's systems.

A probe is under way to quantify any unlawful gains made by the brokers, allegedly in connivance with some NSE officials, due to this preferential access. To a query on whether NSE will have to file a revised financial statements and DRHP, Tyagi said, "That is for them to decide... It is a serious matter. If I was an issuer, I will see that these are addressed and then only go back to DRHP." Asked whether it is regulatory requirement to file a revised DRHP (Draft Red Herring Prospectus), the Sebi chief said, "I think they themselves will do it."

Tyagi was speaking to reporters on the sidelines of an event organised here by the Standing Conference of Public Enterprises (SCOPE). In the high-profile NSE co-location case, Sebi wants its forensic audit to quantify unlawful gains made by some brokers, even as the exchange is trying to reach a settlement of the case through consent mechanism.

Regulatory sources had earlier said Sebi decided to get an independent forensic audit done to quantify the alleged unlawful gains as probes conducted by the NSE itself and through an exchange-appointed auditor have failed to answer some very important points. The regulator will also engage with various shareholders of the exchange as well as the government and other major stakeholders in the capital market, given the enormity of the case. The Securities and Exchange Board of India is looking to complete its probe at the earliest on the matter, which was first brought to its notice in 2015 by a whistleblower, but the investigation gathered pace only in recent months.

The case relates to some brokers allegedly getting preferential access through co-location facility at the NSE, early login and dark fibre, which can allow a trader a split- second faster access to data feed of an exchange. Even a split-second faster access is considered to result in huge gains for a trader.

Pending investigations, Sebi has directed that all revenues emanating from co-location facility, including the transaction charges on the trades executed through such facility, be placed in a separate bank account.

Shanghai: China on Monday opened up its $10 trillion bond market to foreign investors, in the latest liberalisation move by Beijing as it seeks to draw in more fund flows as it battles slowing economic growth.

The new conduit comes via Hong Kong, where "qualified investors" will be able to buy debt in China -- the world's third-largest bond market after the United States and Japan.

Qualified investors include central banks, sovereign wealth funds, and other major financial institutions, according to the People's Bank of China (PBoC) and the Hong Kong Monetary Authority. Their statement said the "bond connect" arrangement between the Hong Kong and mainland Chinese markets went into "experimental operation" from Monday. The new bond connect scheme currently only allows foreign investors to buy Chinese debt.