SEBI Adjudication Officer G Geetha passed the order on finding that certain companies had failed to submit their NDS to CRAs for certain months between the years 2019 to 2020.
A notice dated May 19, 2022 was issued against 41 companies under Rule 4(1) of the SEBI Adjudication Rules to show cause as to why an inquiry should not be initiated against them and why penalty should not be imposed for violation of Regulation 8 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.
Out of these companies, seven were found to have violated the provisions of Regulation 8. Regulation 8 requires a listed entity to cooperate with and submit correct and adequate information to the intermediaries registered with SEBI, which includes registered CRAs. The SEBI also issued a circular on June 30, 2017 requiring the submission of NDS to CRAs on a monthly basis by companies with listed debt securities.
The information contained in an NDS is required to be submitted to the CRAs to enable them to accurately monitor and assign credit ratings to companies that list debt securities. If CRAs are informed of delays or defaults in debt repayments by companies by their NDS, such companies stand the risk of having their credit ratings downgraded.
In other words, by omitting to file such NDS during times of financial stress, a company may dodge the CRAs from downgrading their debt securities based on the disclosures made in an NDS.
Source: Barandbench
