The Securities and Exchange Board of India (Sebi) on Friday, proposed stricter ownership and governance norms for credit rating agencies (CRAs), debenture trustees (DTs) and registrar and share transfer agents (RTAs) in line with the norms applicable to other market infrastructure institutions
Currently, stock exchanges, depositories and clearing corporations are considered market infrastructure institutions (MIIs). Sebi has now proposed to classify CRAs, debenture DTs and registrar RTAs in this category. Sebi has proposed this following suggestions made by a high level committee under the chairmanship of former RBI Deputy Governor R Gandhi.
While framing the recommendations, the committee took note of trends in ownership and governance of these market intermediaries, compared them with the internationally prevailing practices and also took into consideration the views expressed by various market participants. The regulator has sought public comments till May 19 on the suggestions made by the committee. Final regulations will be put in place after taking into consideration views of all the stakeholders.
The panel has suggested that it may not be desirable to prescribe any additional ownership norms for rating agencies at this stage. It has also deliberated on the possibility of mandating the presence of Public Interest Directors (PIDs) in the board of CRAs as they satisfy the ‘Essential Facility Doctrine’ and ‘Public Utility’ criteria.
The panel, however, felt that the changed regulatory requirement for CRAs is sufficient since prominent CRAs are either listed or are public limited companies and have to comply with the appointment of independent directors in terms of listing requirements or Companies Act respectively, and therefore the presence of PID on the board of CRAs may not be insisted upon.
For RTAs, the panel has proposed that regulated entities and those who are in this business should be free to hold ownership up to 100 per cent, while entities other than regulated entities cannot hold more than 49 per cent collectively and 15 per cent individually. “The ownership requirements may not be applicable if the qualified RTA is an in-house entity or who performs the function exclusively for one entity only,” as per the proposal.