The Securities and Exchange Commission of Pakistan (SECP) has received 20 key comments from five stakeholders for revision of the existing Credit Rating Companies Rules, 1995 for better governance of the credit rating agencies (CRAs) in Pakistan.
Sources told Business Recorder on Friday that the stakeholders have given their comments mainly on the issues covering "definition of Credit Rating"; minimum equity requirement for credit rating company; technical collaboration arrangement with an internationally recognised credit rating institution; renewal of registration of CRA; approval of SECP for appointment/re-appointment of the chief executive officer; and dissemination of information regarding cancellation of registration.
According to the sources, the amendments in the Credit Rating Companies Rules, 1995 (the Rules) were published in the official gazette vide notification S.R.O. 642 (I)/2014 dated July 15, 2014 for soliciting public comments. Comments on the said amendments in the Rules have been received and the Rules are being revised/finalised in light of the same.
The draft amendments in the Rules are being revised in the light of the comments received from the stakeholders and will be submitted to the Federal Government for final approval. After approval by the Federal Government the same will be notified.
A total of five stakeholders have provided in aggregate 20 comments mainly on 6 different clauses of the revised draft Rules, sources maintained. The salient features of the revised draft Rules included redefining the term "credit rating", making the definition more comprehensive; setting up the minimum equity requirement for registration of any company as CRA; procedure for commencement of credit rating business in Pakistan by a foreign CRA; circumstances where registration is not granted or renewed; procedure for suspension and cancellation of registration; applicability of the Code of Conduct for CRAs; requirements for changes in key management position; appointment of the compliance officer who shall be responsible for continuous monitoring of compliance with the provisions of the applicable laws and procedure relating to investigation and inspection of CRAs, sources added.
Under the proposed rules, the SECP has revised the criteria for eligibly of registration of the credit rating agencies. A Company proposing to commence business as a credit rating company shall be eligible for registration under these rules if it fulfils or complies with the specified conditions or requirements. Such company is incorporated as a limited company under the Companies Ordinance, 1984. Such company has entered into a joint venture or technical collaboration arrangement with an internationally recognized credit rating institution for a period of not less than five years.
Provided that the Commission may allow exit of the international credit rating institution after the completion of five years of such collaboration, if it deems that technical expertise have been transferred and retained by the domestic credit rating company.
Explanation: For the purpose of this clause, the internationally recognized credit rating institutions mean the foreign credit rating agencies specified by the Commission from time to time as internationally recognized credit rating institutions. That such company has a minimum equity of one hundred million rupees. Provided that the existing credit rating company shall, after the date of notification of these amendments in the official Gazette, increase its equity to the said minimum threshold within a period of five years, proposed rules added.