The markets regulator on Saturday, in an order signed by member Ashwani Bhatia, also said the agency that it cannot take on any fresh business.
Sebi’s crackdown on rating agencies began after Infrastructure Leasing & Finance Services (IL&FS) collapsed in 2018. One of the allegations against rating agencies was that they did not respond to risk build-up and overleveraging in the company.
The regulator had earlier pulled up Brickwork for delay in recognising the default of non-convertible debentures (NCDs) of Bhushan Steel even after disclosure of default by the trustees, Failure to downgrade to default the NCDs of Gayatri Projects, having employees involved in rating participating in fee discussions with rated entities.
It had subsequently again pulled up the rating agency for lack of surveillance mechanism for tracking repayments, delay in recognition of default by Diamond Power Infrastructure, Great Eastern Energy, Essel Corporate Resources and Zee Entertainment.
Sebi had also found irregularities in the company’s rating of Welspun, IDFC First and Adani Rail stating that it had not done independent analysis of the projections provided by the companies In January 2020, Sebi, along with the RBI, conducted joint inspections of the rating agency and administrative warning was issued advising Brickwork to rectify discrepancies. After this, Sebi issued a show-cause notice in Novem ber 2020 on why actions should not be taken in terms of the intermediaries’ regulations.
Sebi’s inquiry report revealed that the agency failed to follow the process and exercise due diligence while providing ratings. It also did not maintain records to support its ratings. It also failed to make proper disclosures in its rating press releases. Brickwork had already sought legal remedy for Sebi action in the courts and obtained a stay order from the Karnataka high court in August 2021. Last month, the Supreme Court vacated the stay granted by the high court, following which the Karnataka HC dismissed the writ petition filed by Brickwork.
Brickwork could not be reached out for a comment. Earlier, spokespersons and a senior executive said they were no longer with the organisation. According to the company’s September 2022 disclosures, it is promoted by Vivek Kulkarni, Sangeeta Kulkarni, Balasubramanian N Dandapani Ravishankar and Canara Bank.
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