Sebi opposes CCI move to probe rating agencies

Sebi opposes CCI move to probe rating agencies

Mumbai: India’s capital market regulator and competition watchdog are at loggerheads over the jurisdiction of credit rating agencies.

The Securities and Exchange Board of India (Sebi) has asked the Competition Commission of India (CCI) not to entertain a complaint by ratings agency Brickworks, which moved the CCI alleging predatory pricing by its peers.

CCI rejected Sebi’s contention on the grounds that it is well within its powers to investigate anti-trust practices.“Sebi stated that for any alleged violation of these regulations (CRA Regulations), Sebi is the regulatory authority to examine the allegations and take appropriate action, if any, required. Therefore, as per Sebi, the present information may not be entertained by the Commission,” said CCI in an order dated December 29.

Sebi is opposed to CCI’s interpretation that it can investigate the business practices of rating agencies. CCI, however, brushed aside the market regulator’s argument saying just because there is a sectoral regulator doesn’t mean CCI will have no jurisdiction over such entities.

Rating agencies CRISIL, India Ratings and Research, CARE and ICRA, which were respondents in the case, raised objections over CCI looking into the matter and argued Sebi was their regulator.

CCI, however, went ahead with its investigation. It quoted a 2019 Supreme Court order in the matter of Bharti Airtel and said: “that mere presence of a sectoral regulator does not oust the jurisdiction of the Commission”.

“The Commission notes that though regulation of CRAs may be the subject-matter domain of Sebi, examining any anti-competitive conduct on part of CRAs falls within the jurisdiction of the Commission,” CCI said.

Brickworks had alleged that the bigger rating agencies were quoting very low prices for ratings to various PSUs and smaller rating agencies were not able to get the contracts. It cited a Rs 75,000-crore bond issuance by National Highway Authority of India (NHAI) where CRISIL, CARE and India Ratings Research quoted a rating fee of only Rs 1,100. Brickworks, on the other hand, had quoted a fee of Rs 9,99,000. CCI ruled that the allegations made by Brickworks did not have sufficient evidence to prove any cartelisation.

The competition regulator had asked Sebi to provide information on whether any action is in progress on the matter. Sebi didn’t disclose the information to CCI. “The Commission thus is of the opinion that it has the jurisdiction to proceed and decide the present allegations on merits,” CCI added.

Legal experts said Sebi usually does not confirm nor deny the existence of any investigation. This is to ensure that the entities under probe don’t catch wind of Sebi’s probe.

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