Market regulator SEBI ordered Brickwork Ratings to cease operations within six months as the watchdog said there had been major breaches of the ratings agency’s duties during of its inspections.
In its order, the Securities and Exchange Board of India cited the rating agency’s failure to “exercise proper skill, care and diligence, while discharging its duties as a credit rating agency “.
It was also mentioned that there were deficiencies in the case of the Bhushan Steel and Gayatri projects. Brickwork is one of seven SEBI-registered credit rating agencies. Brickwork Ratings has Canara Bank as a promoter and strategic partner, according to the company’s website.
SEBI began probing the credit rating agency in 2020 and undertook a joint inspection with the Reserve Bank of India. Credit rating agencies are institutions that rate corporate debt securities. These ratings are used by investors and companies to make trading decisions on a particular company. “Given the vital public functions performed by credit rating agencies, it becomes important to ensure that these agencies comply with the applicable regulatory framework and have high standards of care. SEBI regulations and circulars require agencies to credit rating to provide ‘true’, ‘fair’, ‘appropriate’ and ‘accurate’ ratings, and in order to fulfill these obligations, higher standards of due diligence, integrity, dignity, fairness , etc. are expected from credit rating agencies,” said Ashwani Bhatia, Full-Time Fellow, SEBI, in the order.
He also added: “It is apparent that Brickwork failed to exercise skill, care and diligence in carrying out its duties as a credit rating agency, which frustrated the very purpose of the regulation, namely the protection of investors and the orderly development of securities markets”.
In January 2020, SEBI and the RBI undertook a joint inspection of the rating agency, where the two regulators found “several irregularities”. SEBI issued an administrative warning and ordered him to rectify the discrepancies and take corrective action.
In July 2021, SEBI received notice from the Karnataka High Court, where Brickwork had challenged the recommendation to revoke its license.