In a big relief to Brickwork Ratings India, the Securities Appellate Tribunal (SAT) has set aside a Sebi order cancelling the licence of the credit rating agency.

However, the appellate tribunal partly affirmed some of the violations and referred the matter back to Sebi to issue a fresh order on the quantum of the penalty.

The Securities and Exchange Board of India (Sebi) in October 2022 cancelled the registration of Brickwork and directed it to wind up operations within six months for violations of regulatory norms. Following this, the rating agency approached SAT.

In its order passed on Tuesday, SAT said the alleged violations by Brickwork were "not deliberate or fraught with malafides or fraud and therefore cannot result in the cancellation of the licence".

Terming the cancellation "unjustified", SAT said the violations found were trivial and routine operational errors, which had unnecessarily been escalated to regulatory proceedings.

"Isolated instances by not meeting the rating criteria, not reviewing the rating criteria for a shorter period than 3 years / 5 years, not signing the minutes of the meeting, not recording the names of the attendees of the meeting of the rating committee, failure to comply with the timelines specified in the appellant's manual are such violations which do not warrant cancellation of the licence," SAT observed.

In January 2020, Sebi along with RBI inspected the period October- November, 2019 to ascertain whether Brickwork had been complying with the provisions of the Sebi Act and the CRA (Credit Rating Agency) regulations.

This was the third inspection by markets regulator Sebi against Brickwork.

In its October 2022 order, Sebi highlighted several violations by Brickwork, including that it failed to follow a proper rating process and exercise due diligence while providing ratings.

Also, the rating agency failed to ensure proper maintenance of records to support its ratings and make correct disclosures in its press releases concerning some issuers.

Brickwork did not conclude the rating exercise within the timelines prescribed as per its internal manual, Sebi had said. Moreover, repeated lapses were noticed across multiple inspections conducted by the regulator.

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