SEBI Issues Winding Up Order against Brickwork Ratings
Moneylife Digital Team 06 October 2022
On 6th October, Securities and Exchange Board of India (SEBI) issued winding up order against Brickwork Ratings citing "failure to exercise proper skill, care and diligence, while discharging its duties as a credit rating agency".
The market regulator has also asked them to shut down operations within six months, it said in an order.
"In exercise of the powers contained under the SEBI Act, 1992 read with the SEBI (Credit Rating Agencies) Regulations, 1999, SEBI had carried out inspections of Brickwork for the periods April 1, 2014–September 30, 2015 and April 1, 2017–September 30, 2018. The contraventions /deficiencies observed in the first and second inspections led to initiation of separate adjudication proceedings against Brickworks," the order stated.
SEBI further noted that the repeated lapses, noticed across multiple inspections conducted by it, shows that governance changes recommended in earlier inspections and monetary penalties imposed have "not proved effective or deterred the Noticee (Brickwork Ratings) in addressing very basic requirements of running a CRA. "
The regulator’s punitive action comes exactly after a year since there were media reports about SEBI initiating action and revoking the licence of Brickwork Ratings. A sudden ban by SEBI on Brickwork Ratings could have spelt trouble for bonds issuers that were using its rating and they would need to find alternatives. Bonds sold by Adani group, SREI group, IIFL and Edelweiss, among others, were being rated by Brickwork. 
Brickwork is one of the seven SEBI-registered credit rating agencies (CRAs). The others are CRISIL, CARE, ICRA, Fitch, Infomerics Ratings and Acuité Ratings & Research.Credit rating agencies are institutions which rate the debt instruments of companies. These ratings are used by investors and companies to take business decisions on a particular corporate.
Interestingly, a lot of companies had already started moving to other CRAs and notifying stakeholders accordingly. In fact, non-convertible debenture (NCD) investors of Aadhar Housing Finance received a communication last month (see image below) explaining, "The said Non-convertible debentures were previously rated by CARE Ratings Limited and Brickwork Ratings India Pvt. Ltd. The Company has now decided to withdraw ratings from Brickwork Ratings India Pvt. Ltd and replace it with the new ratings received from ICRA Limited.Please note ratings received from ICRA Limited are same as per existing ratings of Brickwork Ratings India Pvt. Ltd.” 
2 years ago
Well done, if badly delayed. Can one expect to see strict action against the other CRAs, who may not have been as egregiously bad as Brickwork, but have their own lesser share of mishandled cases? Every CRA should be made to publish, with explanation, statistics of ratings dropped more than two notches within a space of 2 weeks.
2 years ago
I've no sympathy for Brickwork ratings but this SEBI order clearly shows how "rich and powerful" get away from regulatory action and only "poor and weaker" have to face the full brunt of the law. It seems SEBI has taken action because they want to show they are very strict and they have chosen Brickwork because it is one of the weakest among other big-wigs like CRISIL, ICRA, CARE.

If I am not wrong then, AMTEK auto which caused huge losses to investors was rated by CRISIL and CARE. Similarly fraudulent Deewan Housing Finance (DHFL) and HDIL which went down and dragged PMC bank with them was rated by CRISIL.
Will SEBI dare to take similar action against CRISIL or ICRA or CARE or India Ratings ? who is saving these other rating agencies ?
Replied to crusader1 comment 2 years ago
Forgot to mention IL&FS case which was bigger scam and in that case SEBI imposed only 1 crore penalty on ICRA, INdia Ratings.......why did SEBI not cancel their licenses ?
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