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The Securities and Exchange Board of India Chairman U.K. Sinha today said that corporates should not draw credit rating agencies, also overseen by the capital markets regulator, into litigation and let the due process of assessment prevail.
“My message to corporates is that if they are raising money, they should be willing to follow the rules of the game,” Sinha told reporters on the sidelines of a securitisation summit here.
“I am also sure that all the boards of the country are aware that if SEBI is regulating a particular industry and a particular instrument is looked by SEBI, I hope that they will let the due process prevail rather than coming in the way of this,” he said.
Rating agencies had held a meeting with SEBI yesterday wherein they are understood to have told the capital markets regulator about the difficulties in business they are facing because of litigation from some corporates.
The rating agencies’ concern emanate as corporates, which are mandated to rate themselves, tend to pull an agency into litigation because of their discomfiture with the rating and commentary thereof.
According to rating agencies, litigation expenses eat into the fees they charge from the particular corporate for the rating.
SEBI guidelines
When asked if SEBI is contemplating to come up with some guidelines on the issue, Sinha said that there are many regulations regarding rating agencies and if need be, SEBI will look into revising it.
“India is one of first countries, where the credit rating agencies are regulated. Off and on, we issue guidelines, our aim is to protect the investor interest,” he said.
Securitisation
On securitisation, Sinha said one of the reasons why it is not picking up is due to taxation issues and said the government should clarify on some problems.
“Asset management companies have received notices that they have to pay taxes. This is a matter on which government has to clarify what the final position is. One of the reasons why securitisation is not doing good is due to taxation issues,” he said.
SEBI will facilitate with any changes in the regulatory requirements, if needed, Sinha added.
On the growing concerns over high frequency algo trades, Sinha said SEBI has recently come up with guidelines disincentivising such activity.
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