NEW DELHI: In a big relief to Brickwork Ratings, the Securities Appellate Tribunal (SAT) has quashed a Securities and Exchange Board of India (Sebi) order cancelling the rating agency’s licence. In an order passed on Tuesday, the appellate tribunal said that the order of cancellation of the license for violations committed by the rating agency is unjustified and is not in proportion to the alleged violations.
The Securities and Exchange Board of India (Sebi) October last year had cancelled the registration of Brickwork Ratings India and asked it to shut down its operations within six months for repeated lapses in ‘discharging’ its duties.
The capital market regulator had earlier imposed monetary penalties on and recommended governance changes in Brickwork Ratings after it found several instances of lapses by the agency.
Following the Sebi order, the rating agency moved SAT against the order. In its order, the appellate tribunal has said the violations as pointed out by Sebi are routine operational errors, which have unnecessarily been escalated to regulatory proceedings.
The appellate tribunal even said that the violations are trivial in nature. “Isolated instances by not meeting the rating criteria, not signing the minutes of the meeting, not recording the names of the attendees of the meeting of the rating committee, failure to comply with the timelines specified in the appellant’s manual are such violations which do not warrant cancellation of the licence of the appellant,” said the order.
The SAT even said that the charge of conflict of interest is not that serious which by itself could warrant cancellation of the license of the appellant. In its concluding remark, the SAT said Sebi should pass a fresh order on the quantum of penalty other than the order of the cancellation.