By Abhirup Roy and Rama Venkat
MUMBAI (Reuters) -India's market regulator on Thursday ordered Brickwork Ratings India Pvt Ltd to wind down operations within six months, citing "failure to exercise proper skill, care and diligence" while discharging duties as a credit rating agency.
In a rare order, the Securities and Exchange Board of India (SEBI) cancelled the certificate of registration of Brickwork Ratings and prevented it from taking on any new business, saying there have been repeated lapses in the functioning of the rating agency.
"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 said in the order.
Brickwork did not immediately respond to requests for comment.
SEBI has been tightening disclosure rules for credit rating agencies since 2016, in a bid to boost transparency and accountability after a number of sudden sharp corporate rating changes.
It cracked down on the agencies following mounting concerns among authorities and investors in 2018 over their failure to proactively flag financial problems at a top shadow lender until after a subsidiary defaulted on some of its debt.
SEBI investigated Brickworks on several occasions and undertook a joint inspection with the RBI.
The key findings of the initial investigations, according to the order, include a delay in recognition of default of non-convertible debentures, failure to downgrade to 'default', failure to review ratings even after receiving information about delayed payments, SEBI said in the order.
The regulator also pointed to a lack of surveillance mechanism for tracking the interest and principle repayment schedule of issuers, which would hamper the rating agency's ability to provide accurate ratings.
Further investigation found that the rating agency failed to follow a proper rating process and failed to exercise due diligence while providing ratings, among other violations, SEBI said.
The big three global agencies - Moody's, Standard & Poor's and Fitch - are majority owners of firms in India. Those firms operate separately from their parent companies and have different rating standards.
(Reporting by Abhirup Roy in Mumbai and Rama Venkat in Bengaluru; Editing by Arun Koyyur and Emelia Sithole-Matarise)