Sebi cancels registration of Brickwork Ratings, asks it to wind down operations in 6 months

India’s market regulator on Thursday ordered Brickwork Ratings India Pvt Ltd to wind down operations inside six months, citing “failure to exercise proper skill, care and diligence” whereas discharging duties as a credit standing company.

In a uncommon order, the SEBI cancelled the certificates of registration of Brickwork Ratings and prevented it from taking over any new enterprise, saying there have been repeated lapses within the functioning of the ranking company.

“The repeated lapses, noticed across multiple inspections conducted by SEBI, shows that governance changes recommended in earlier inspections, and monetary penalties imposed have not proved effective,” the regulator mentioned within the order.

The capital market regulator started investigating the credit standing company in 2020 and undertook a joint inspection with the RBI.

The key findings of the preliminary investigations, based on the order, embrace a delay in recognition of default of non-convertible debentures, failure to downgrade to ‘default’, failure to overview scores even after receiving details about delayed funds, the order mentioned.

The regulator additionally pointed to a scarcity of surveillance mechanism for monitoring the curiosity/ precept reimbursement schedule of issuers, which might hamper the ranking company’s means to offer correct scores. Further investigation discovered that the ranking company did not observe a correct ranking course of and did not train due diligence whereas offering scores, the order mentioned.