Sebi orders Brickwork Ratings to shut down, cites repeated lapses in functioning

India's market regulator Sebi 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 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.

The capital market regulator began investigating the credit rating agency in 2020 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, the order said.

The regulator also pointed to a lack of surveillance mechanism for tracking the interest/ 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, the order said.