ISLAMABAD

The Securities and Exchange Commission of Pakistan (SECP) took enforcement action against a credit rating company involved in rating shopping and imposed the first ever-monetary penalty of Rs 600,000/- on the credit rating company.

The company was earlier given an appropriate opportunity of hearing by the Commission. Further, the credit rating company was warned to comply with the regulatory framework and code of conduct in letter and spirit in future.

SECP believes that the role of credit rating companies is crucial for the development of the capital markets as they provide an independent view to the investors regarding the standing of a company or an instrument.

The issue was highlighted in the inspection reports of Commission’s first ever onsite inspections of both the credit rating companies in Pakistan conducted in 2015. Following which, show cause notices were issued, and hearings were held in the matter. During the hearings, the credit rating companies assured to comply with the regulatory framework in letter and spirit.

Considering the willingness shown by credit rating companies to comply with the regulatory framework, and first onsite inspection, no monetary penalties were imposed on them. However, they were strictly warned to comply with the regulatory framework in future as any future non-compliance with the regulatory framework would result in imposition of monetary penalties. The onsite inspections of credit rating companies would be a regular feature of the Commission supervisory objective in future.