Sebi caps cross-shareholding in rating agencies at 10%

Markets regulator Sebi said cross-holding in credit rating agencies (CRAs) will be capped at 10 per cent and also decided to raise the minimum networth requirement to Rs 25 crore from the current Rs 5 crore. Higher minimum net worth requirements for CRAs and increased shareholding requirements along with minimum holding period for promoters of CRAs will ensure that only serious and credible players with long-term perspective enter the field.

In a significant move, the regulator has decided that no CRA should, directly or indirectly, hold more than 10 per cent of shareholding and/ or voting rights in another CRA and would not have representation on the board of the other CRA. A shareholder holding 10 per cent or more shares and/ or voting rights in a registered CRA shall not hold 10 per cent or more shares and/ or voting rights, directly or indirectly, in any other CRA.

The minimum net worth threshold for the rating agencies has been proposed to be raised to Rs 25 crore from the current level of Rs 5 crore. The move would check the menace of ‘rating shopping’ and ‘pick-and-choose’ approach in their actions. The quarterly and half yearly financial results reporting, as applicable to the listed equity instruments, have been mandated even for listed debt instruments, as against the extant requirement of providing only the half yearly results.

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