Latest news with #non-Sebi-regulated
Mint
09-07-2025
- Business
- Mint
Sebi proposes broadening Credit Rating Agencies' mandate amid regulatory gaps
The Securities and Exchange Board of India (Sebi) has issued a proposal to clarify and expand the scope of activities that Credit Rating Agencies (CRAs) in India can undertake, especially in areas regulated by other financial sector authorities. The proposals are open for public comment till 30 July. Currently, Sebi's rules restrict CRAs to rating securities that are listed or proposed to be listed on recognized stock exchanges. However, CRAs are not barred from rating other financial products if permitted by guidelines from other financial sector regulators (FSRs) like the Reserve Bank of India (RBI) or the Insurance Regulatory and Development Authority (IRDA). The industry pointed out a regulatory gap: financial products under other FSRs lack specific rating guidelines. This has led to confusion about whether CRAs can rate such products, such as unlisted securities. Sebi's new consultation paper seeks to address this ambiguity, responding to feedback from industry stakeholders who believe that allowing CRAs to rate a wider range of products would bring synergies and fill an important gap in the market. Sebi is considering allowing CRAs to rate financial instruments under the jurisdiction of other FSRs, even if those regulators have not issued explicit rating guidelines. However, this expanded role comes with strict conditions designed to protect investors and ensure transparency. CRAs must ensure that the existing non-Sebi-regulated activities are transferred to a separate business unit (SBU) within six months of the new rules coming into effect. Each SBU must have its own grievance redressal mechanism, separate from that for Sebi-regulated activities. SBUs must maintain their own records and employ staff distinct from those handling Sebi-regulated work. Staff movement across the Chinese Wall is allowed only with proper board-approved procedures. The minimum net worth required for a CRA under Sebi regulations must be protected from any risks arising out of non-Sebi regulated activities. CRAs must clearly disclose all non-Sebi regulated activities on their website and in related rating reports, along with a disclaimer that Sebi's investor protection mechanisms do not apply. Market participants, investors and other stakeholders have until 30 July to share their views.
Time of India
09-07-2025
- Business
- Time of India
Sebi mulls allowing CRAs to rate instruments outside its regulatory purview
Markets watchdog Sebi on Wednesday proposed permitting credit rating agencies (CRAs) to undertake the rating of financial instruments that may come under other financial sector regulators, even if they have not issued any rating-related guidelines. Under the current CRA regulations, credit rating agencies are only allowed to rate securities that are listed or proposed to be listed on a stock exchange recognised by Sebi. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Free P2,000 GCash eGift UnionBank Credit Card Apply Now Undo However, the regulations do not stop CRAs from rating products, securities, or issuers if such ratings are done under the guidelines of another financial sector regulator or any authority specified by Sebi. Play Video Pause Skip Backward Skip Forward Unmute Current Time 0:00 / Duration 0:00 Loaded : 0% 0:00 Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 1x Playback Rate Chapters Chapters Descriptions descriptions off , selected Captions captions settings , opens captions settings dialog captions off , selected Audio Track default , selected Picture-in-Picture Fullscreen This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Opacity Opaque Semi-Transparent Text Background Color Black White Red Green Blue Yellow Magenta Cyan Opacity Opaque Semi-Transparent Transparent Caption Area Background Color Black White Red Green Blue Yellow Magenta Cyan Opacity Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Drop shadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. In its consultation paper, Sebi proposed that CRAs may be permitted to undertake activities that are not regulated by it, subject to certain conditions. "CRA may undertake rating of financial instruments, which fall under the purview of any other FSR, provided it shall comply with the regulatory framework, if any, as may be specified by the respective FSR for the matters relating to policy, eligibility criteria, risk management, investor grievance or dispute handling mechanism, inspection, enforcement and claims," Sebi proposed. Live Events The regulator suggested that CRAs may undertake only those rating activities that are fee-based and non-fund-based. Additionally, such activities should be carried out strictly on an arm's length basis through one or more Separate Business Units (SBUs), which should be segregated by a Chinese Wall and ring-fenced from Sebi-regulated functions. The regulator further stated that CRAs should ensure the transfer of all non-Sebi-regulated activities to these separate business units within six months from the date of notification of the proposal. These SBUs would also be required to establish distinct grievance redressal mechanisms, including escalation procedures, which are separate from those applicable to Sebi-regulated activities. Moreover, CRAs should maintain independent records within the SBU for such non-Sebi-regulated activities, and the personnel engaged in these functions must be distinct from those involved in Sebi-regulated operations. However, crossing the Chinese Wall may be permitted for staff, subject to due procedures approved by the Board of Directors and proper documentation. Notably, this restriction does not apply to key managerial personnel. Sebi also clarified that the minimum net worth requirement of a CRA, as specified under the CRA Regulations, should be protected from any impact arising out of non-Sebi-regulated activities. A CRA will be required to disclose on its website the list of activities that are not regulated by Sebi, along with a disclaimer clearly stating that Sebi's investor protection mechanisms will not apply to any grievances or disputes related to such activities. This disclosure should also be prominently displayed in rating reports associated with non-Sebi-regulated activities. Prior to undertaking any such activities, the CRA should provide an upfront written disclosure to all relevant stakeholders, including clients, beneficiaries, and counterparties. This disclosure should be included in all engagement letters, contracts, agreements, and business communications, indicating that the activities do not fall within Sebi's regulatory framework. Also, stakeholders should confirm, at the time of engagement, that they understand the nature of the activities, associated risks, and the non-availability of Sebi's investor protection mechanisms. For existing and ongoing arrangements related to non-Sebi-regulated activities, CRAs should make the necessary disclosures and obtain acknowledgements from stakeholders. A compliance report on this should be submitted to Sebi within six months of the notification. In addition, every CRA undertaking any activity outside the purview of Sebi should submit an undertaking as part of its half-yearly internal audit report, confirming compliance with the specified requirements. This report should be duly reviewed and approved by the CRA's board of directors. Sebi has invited public comments on the proposal until July 30, 2025. The move comes in response to representations from industry participants and stakeholders, who have requested that CRAs be allowed to rate financial products and instruments under the purview of other FSRs, even where no rating-related guidelines exist. It was highlighted that such rating activities are closely aligned with CRAs' current business, and allowing them could lead to operational synergies while filling an existing gap in the market.
Time of India
18-06-2025
- Business
- Time of India
Sebi reforms REITs and InvITs norms to align disclosures, cut entry size; allow broader role for merchant bankers
The Sebi board on Wednesday approved a set of amendments aimed at improving ease of doing business for Real Estate Investment Trusts (REITs), Infrastructure Investment Trusts (InvITs), and merchant bankers. The key changes include greater cash-flow flexibility for REITs and InvITs, a sharper definition of public unitholding, harmonised reporting timelines, and a reduction in the minimum investment size for privately placed InvITs. Separately, Sebi also allowed merchant bankers to undertake certain non-Sebi-regulated financial services under the same legal entity, subject to regulatory safeguards, PTI reported. Key changes for REITs and InvITs Under the revised framework, units held by related parties of the REIT or InvIT, or of the sponsor, investment manager, or project manager, will not be classified as part of the 'public' even if they qualify as Qualified Institutional Buyers (QIBs). This amendment formalises the exclusion and tightens disclosure norms on related-party holdings. Sebi has also enabled HoldCos to offset negative net distributable cash flows from their own operations against cash inflows from special purpose vehicles (SPVs) before distributing the balance to the REIT/InvIT. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Ballyhaunis: We Need People to Try Latest High-Tech Hearing Aids - Free Learn More Undo This marks a shift from the earlier mandate that required 100% onward distribution of SPV inflows. The regulator has further aligned the timeline for submission of various reports—such as quarterly filings to stock exchanges, trustees, investment managers, and valuation reports—with the schedule for financial results, to streamline compliance and remove redundant delays. In a bid to widen access to privately placed InvITs, Sebi has approved a uniform minimum allotment size of Rs 25 lakh in the primary market, aligning it with the trading lot in the secondary market. The earlier thresholds were Rs 1 crore or Rs 25 crore depending on the asset mix. Merchant bankers get greater flexibility Addressing long-standing feedback, Sebi revised its stance on the 2024 directive that had required merchant bankers to hive off non-Sebi-regulated business into separate legal entities. Instead, merchant bankers may now continue to conduct non-Sebi activities under the same entity, subject to two conditions: If the activity is regulated by another financial-sector regulator, compliance with that regulator's framework is mandatory. If the activity is not regulated by Sebi or any other financial regulator, it must be fee-based, non-fund-based, and directly related to financial services. Sebi said these relaxations aim to facilitate more efficient operations and reduce structural overheads for merchant bankers, without compromising regulatory oversight. The amendments to the REITs Regulations, InvITs Regulations, and Merchant Bankers Regulations were approved during Sebi's board meeting on Wednesday and will be notified shortly. Stay informed with the latest business news, updates on bank holidays and public holidays . AI Masterclass for Students. Upskill Young Ones Today!– Join Now
