The Securities and Exchange Board of India (Sebi) has ordered credit rating agency Brickwork Ratings India Pvt Ltd to wind up its operations within six months while barring it from taking on any fresh clients or business.
The regulatory diktat has come following a probe, which among other things, found deficiencies or violations including failure to document meetings with management /undertake site visits, failure to undertake independent analysis of projection provided by the issuer, delay in default recognition, material event delay and conflict of interest.
“The Noticee (Brickwork Ratings India Pvt Ltd) shall wind down its operations (including intimating its client about closure of its operations) within a period of six months from the date of this Order. The Noticee shall not take any new clients /fresh mandates from the date of this Order,” SEBI stated in a 51-pages order.
Incidentally, the adjudication proceedings against the rating agency go back many years as the first inspection period was between April 1, 2014 and September 30, 2015 while the second was between April 1, 2017 and September 30, 2018.
Post the probes, the capital markets regulator issued two adjudication orders while penalising the agency Rs 3 lakh and Rs 1 crore, respectively. Both the orders were challenged by the rating agency at Securities Appellate Tribunal, which upheld both the orders though the monetary penalty was reduced.
Some of the violations alleged in the findings of the two probes were delay or failure in recognition of default of non-convertible debentures of entities like Bhushan Steel, Zee Entertainment Enterprises, Essel Corporate Resources and Diamond Power Infrastructure while failing to review the rating of firms like Great Eastern Energy Corporation and Gayatri Projects.
Meanwhile, Sebi, along with the Reserve Bank of India (RBI), did a joint inspection of the credit rating agency between January 20 and 24, 2020, for the period from October 1, 2018 to November 30, 2019.
“The… inspection revealed several irregularities which were prima facie in violation of the provisions of the CRA Regulations and certain SEBI Circulars,” stated the Sebi order.
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