RBI says regulated bodies can't get fresh ratings from Brickwork Ratings

Following the decision of the Securities and Exchange Board of India (Sebi) to cancel the certificate of Brickwork Ratings, the Reserve Bank of India has said that regulated entities cannot obtain any fresh ratings or evaluations from the agency.

The RBI’s advisory is applicable with immediate effect, the central bank said on Wednesday, adding that it will separately detail instructions regarding the prudential treatment of existing ratings issued by Brickwork Ratings.

On October 6, the Sebi cancelled Brickwork’s certificate of registration and directed the agency to wind down operations within six months. Brickwork counts state-owned lender Canara Bank as one of its promoters.

The markets regulator, which barred the agency from taking any new clients, highlighted several violations by Brickwork, including that it failed to follow a proper rating process and exercise due diligence while providing ratings.

The rating agency also failed to ensure proper maintenance of records to support its ratings and to make correct disclosures in its press releases concerning some issuers. It did not conclude the rating exercise within the timelines prescribed as per its own internal manual, Sebi said.

Sebi carried out a series of inspections against Brickwork, which obtained its licence as a CRA in 2008, starting April 2014, which led to multiple adjudication proceedings against the firm.

In April this year, Sebi undertook a joint inspection with RBI of the records and documents of Brickwork for the period from December 2019 – January 2022, which is at present pending.

However, the nature of discrepancies or violations contained in the prima facie observations emanating from the fourth inspection are also similar in nature to those contained in the other three inspections, Sebi said.