The Securities Appellate Tribunal (SAT) has overturned the decision made by the Securities and Exchange Board of India (Sebi) to cancel the certificate of registration (CoR) of Brickworks Ratings. After an appeal by the rating agency, SAT ruled that the violations committed by Brickworks Ratings were simply routine operational errors that should not have escalated to regulatory proceedings. Sebi has been asked to consider the observations made by SAT and provide an opportunity for a hearing of Brickworks Ratings.
In its decision, SAT emphasised the need for proportionality when making punitive measures and highlighted the importance of following regulations 26 and 27 of the Intermediaries Regulations before taking drastic steps, such as cancellation of registration. Regulations 26 and 27 pertain to the cancellation of registration.
This latest development comes after Sebi had cancelled Brickworks Ratings’ CoR in January 2021, citing the rating agency’s failure to comply with regulatory measures. However, SAT’s ruling has given Brickworks the chance to clear its name and potentially reclaim its registration.
It is important to note how SAT’s ruling showcases the significance of fairness and due process in regulatory proceedings. It is essential for regulatory bodies to follow established regulations before taking drastic decisions that can have significant impacts on businesses. SAT has sent a significant signal to Sebi and other regulatory bodies to exercise fairness and proportionality when dealing with regulatory infractions.
Overall, SAT’s decision has provided Brickworks Ratings with a chance to defend itself and correct any errors it has committed. It also serves as a reminder for regulatory bodies to tread carefully before making drastic decisions that can adversely affect businesses.
