SEBI orders credit rating agency Brickwork Ratings to shut operations

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SEBI orders credit rating agency Brickwork Ratings to shut operations

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 came after a probe found deficiencies or violations, including failure to document meetings with management with site visits, failure to undertake independent analysis of projection provided by the issuer, delay in default recognition, material event delay and conflict of interest.

Noticee Brickwork Ratings India Pvt Ltd will wind down its operations, including intimating its client about the closure of its operations within a period of six months from the date of the Order. The Noticee shall not take any new clients fresh mandates from the date of the Order, the SEBI stated in a 51-sided order.

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 and the second inspection period was between April 1, 2017 and September 30, 2018.

The capital markets regulators issued two adjudication orders and penalised the agency with Rs 3 lakh and Rs 1 crore after the probes. Both of the orders were challenged by the Securities Appellate Tribunal, which upheld both orders, even though the monetary penalty was reduced.

Some of the violations alleged in the findings were delays or failures in recognition of defaults of non-convertible debts of entities like Diamond Power Infrastructure, Zee Entertainment Enterprises, Essel Corporate Resources and Bhushan Steel, while failing to review the ratings of firms like Great Eastern Energy Corporation and Gayatri Projects.

The credit rating agency was in a joint inspection by Sebi and the Reserve Bank of India RBI between January 20 and 24, 2020, for the period from October 1, 2018 to November 30, 2019.

The inspection revealed several irregularities that were alleged to be in violation of the provisions of the CRA Regulations and certain SEBI Circulars, according to the Sebi order.