Tighter disclosure norms for ratings firms to benefit structured products

Details about explicit guarantees will lead to higher transparency

Structured instruments, such as those involved in loans against share transactions that have led to turbulence in mutual funds, will have to follow tighter disclosure requirements under the proposed regulatory norms by the Securities and Exchange Board of India (Sebi).

The regulator on Thursday directed rating firms to put out additional information on structured finance instruments, which include such entities. 

Instruments with an underlying security (backed by loans or other assets), are currently classified together with those that do not have such backing. The reason for the similar classification is that the parent firm or a third party provides an explicit guarantee. 

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