The Securities and Exchange Commission of Pakistan (SECP), as part of subsidiary legislation under the Securities Act, 2015, has issued the Draft Credit Rating Companies Regulations, 2015 (Draft Regulations) for consultation purposes.
The Draft Regulations have been prepared keeping in view the international best practices including the guidelines issued by International Organization of Securities Commissions for credit rating companies.
The draft regulations introduce detailed “fit and proper criteria” for the sponsors, directors and senior management of a credit rating company. Keeping in view the significance of a ratings analyst in the rating process, fit and proper criteria has also been specified for the analysts.
In order to avoid potential conflicts of interest, provisions have been included in the draft regulations regarding disclosure and shareholding of the credit rating companies. The draft regulations also prescribe best governance practices, obligations for credit rating companies and enhanced conduct of business requirement. Moreover, broad guidance has been provided with respect to contents of rating reports for standardisation and quality assurance purposes. Appropriate disclosure requirements have also been prescribed enabling the stakeholders to make unbiased and informed decisions.
The draft regulations, once finalized, will replace Credit Rating Companies Rules, 1995 and Code of Conduct for credit rating companies. The feedback on the draft regulations may be forwarded to the SECP by December 7, 2015.
