Sebi's Big Ask Baffles Credit Rating Agency

Capital market regulators want credit rating agencies (CRAs) to play a bigger role to limit cunning companies to raise funds in the stock market.While rating agencies are willing to share the skills they have acquired in the debt market to protect stock investors and block operators overnight, the initial proposals have not been well lowered in the industry. Senior officials from the Securities and Exchange Commission of India (SEBI) articulated regulatory thinking at a meeting with CRA officials.
Regulators like rating companies will not only carefully review how companies spend mobilizing funds, but even propose rating agencies to comment on whether the company makes rational use of the stock market, if the funding is fully required, or the quantum raised is comparable to business and history.

No clear clarity on SOP comments
The idea puts most CRA officials in trouble, who think they have neither access to information to delve into the company's activities nor their business to study the relevance and appropriateness of the company's stock problem program, which was approved by the board and cleared by SEBI.

Currently, the CRA monitors the utilization of the issuance proceeds, providing different types of equity in equity over Rs 10 billion – virgin issuance, priority distribution, placement of qualified institutions or rights issues. A company raises funds to sign a contract with the CRA after the issue is over. For auditing company certificates, company invoices, bank statements and other documents from management, SEBI obviously hopes that CRAS hopes that CRA can surpass auditor certificates and other standard documents. There are even fewer CRAs. Industry officials said CRA surveillance continued until the entire problem benefits were exploited.

Rating companies negotiated with SEBI have developed standard operating procedures (SOPs) on how to monitor the benefits of problems. “We don't know yet whether the SOP must be reviewed after the regulators have these new expectations. If so, this also requires the company to have more data. In addition, CRAS must take into account the cost of additional efforts. So far, there has been no written intent in the regulator, at least in one meeting that stated the intentions of another,” another said. ”

It is not clear what triggered the idea. “It could be one or two instances of Shell, which could be one or two, that steals the stock market in the stock market, bringing some suffering within the SEBI,” one banker realized the discussion.

A SEBI spokesperson did not respond to ET's questions about the matter.