SEBI canceled the license of brickwork, order to close it till April

 SEBI canceled the license of brickwork, order to close it till April

The regulator, in its order, found violations of violations by failure to document meetings with management, lack of independent analysis of financial projections given by the company, delays in recognizing defaults and conflicts of interest.

Following the SEBI action, there were frequent rating defaults of several issuers including Welspun, IDFC First, Adani Rail.

MUMBAI: The Securities and Exchange Board of India (Sebi) on Thursday canceled the license of Brickwork Ratings, barred it from taking on new customers and threatened to shut down operations in six months in the toughest regulatory action against any credit rating firm. instructed.

The SEBI order lists various violations by Brickworks, including failure to document meetings with management, lack of independent analysis of financial projections given by companies, delay in recognizing defaults and conflicts of interest. Mint first reported on 12 October 2021 that the regulator has decided to cancel the license of the Bengaluru-based company promoted by Canara Bank.

SEBI and the Reserve Bank of India (RBI) conducted a joint audit of the rating agency in January 2020, which led to an administrative warning and investigation. The regulator issued a show-cause notice to the rating agency in June 2021 as to why it should not be closed. Brickworks sought interim relief in the Karnataka High Court, which restrained the regulator from canceling the registration of Brickworks.

Subsequently, SEBI filed a special leave petition in the Supreme Court. On 16 September, the apex court stayed the operation of the High Court order, clearing the decks for regulatory action.

SEBI's action comes after persistent defaults in ratings of several issuers including Welspun, IDFC First, Adani Rail, Coffee Day Enterprises, Magma Fincorp, Essel Group, Shrey Infrastructure, Indiabulls Housing Finance and promoter arm, Canara Bank. In each of these cases, the regulator had either issued an administrative warning or initiated an investigation.

SEBI also found a major lapse in the agency, where some rating advisors had promised favorable ratings. There were also concerns about conflict of interest and the role of the managing director. “There was a blurring of the analytical and BD (business development) role in the CRA (credit rating agency), the regulator said.