Done nothing wrong to invite SEBI’s wrath: Brickwork Ratings

K Ram Kumar Mumbai | Updated on October 19, 2021

No major market losses could be attributed to us, says firm’s chief

Bengaluru-based Brickwork Ratings (BWR) has claimed that were no major market losses due to its ratings. This assertion comes in the wake of the Securities and Exchange Board of India (SEBI) slapping the credit rating agency (CRA) with a notice seeking explanation as to why its license should not be cancelled.

This notice was based on SEBI’s audit findings for the October 2018-November 2019 period.

Vivek Kulkarni, Founder & Managing Director, observed that CRAs are heavily regulated, and audits are done frequently by SEBI and RBI. They set benchmarks and standards to ensure standardisation of rating processes across various agencies. “What they (SEBI) found in our case are, really speaking, were minor violations, mainly related to timelines. For example, we should have given a rating today, we gave it the next day,” he said. But these violations are in the case of companies whose instruments are hardly traded in the bond market. Kulkarni averred that nobody lost money, nobody gained money due to this.

‘No substantive errors’

The BWR chief stated that there has not been any material, substantive mistakes by the agency. There were only clerical, technical/ procedural mistakes such as inclusion of a name in the rating committee, he added. “During these past two years, and even before that, there have been no major market losses that could be attributed to Brickwork,” Kulkarni claimed.

In this regard, he highlighted the huge losses investors faced due to ratings given by some of the large CRAs to the debt instruments issued by the fraud-hit IL&FS group. “Finally, these agencies were fined just about ₹25 lakh, which later went up to ₹1 crore. The agencies have appealed to SAT (Securities Appellate Tribunal) and the case is going on,” Kulkarni said.

Sangeeta Kulkarni, Co-Founder & Director, BWR, emphasised that her agency, over the past two years, has automated all its processes and ensured greater levels of standardisation and compliance. “We have hired experienced analysts and senior executives and are completely transforming the way we are doing business,” she said.

Referring to a regulatory audit asking BWR to engage an independent management consulting firm to look at all its internal processes, Sangeeta noted that the firm literally gave her agency a clean chit.

Published on October 18, 2021

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