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Regstreet Law Advisors successfully represented the former Non-Executive Chairman of CARE Ratings

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SEBI based on certain complaints, had initiated an enquiry in 2018 against certain key management personnel (KMP) of CARE Ratings, including Mr. Mainak (former Non-Executive Chairman) and another individual being the erstwhile MD & CEO. Subsequently, SEBI issued Show Cause Notices under the SEBI CRA Regulations inter alia alleging non-independence in the composition of rating committees and interference in the rating process of certain issuers such as Dewan Housing Finance Corporation Ltd. – India, YES BANK, and Infrastructure Leasing & Financial Services Limited (IL&FS).

During the course of the proceedings, Mr. Sumit Agrawal, representing Regstreet Law Advisors, appeared on behalf of Mr. Mainak. The SEBI Whole-Time Member, Mr. Ashwani Bhatia, while disposing of the proceedings, in the facts and circumstances, noted that the onus of composition of the ratings committee was on the CRA, which was not a party to the proceedings. Additionally, enough material was lacking to prove any interference in the ratings process.

Based on the above, Learned Whole Time Member disposed of the proceedings against Mr. Mainak without any adverse directions, exonerating him.

In the past, SEBI had issued various orders imposing penalties of 25 lakhs each (and then subsequently increasing to 1 cr.) on three rating agencies, ICRA, CARE and India Ratings & Research – A Fitch Group Company, in connection with over-dependence on statements submitted by IL&FS which allegedly led to lapses on their parts while assigning credit rating to the non-convertible debentures (NCDs) of IL&FS. SEBI had also issued several notices to individuals who were at the helm of affairs at the relevant time and many of them rather than litigating, settled the matter with SEBI.

This case is significant in the context of individual’s role and responsibilities on the board of Credit Rating Agencies.

The complete order is enclosed for reader’s views.

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