To ensure fair and non-discriminatory treatment to all investors and companies, Sebi on Wednesday asked stock exchanges, rating agencies, brokers, depositories and other market entities to put in place a strong system to manage any conflict of interest.
The credit rating agencies have been specifically asked to deploy adequate systems and policies to ensure that they address any conflict of interest during investment decisions of their own funds or by their top management and employees.
The rating agencies, their employees and key executives have also been asked not to “take undue advantage of any price sensitive information that they may have about any company”.
The key executives, such as CEOs and managing directors, would need to take prior approval from the compliance officer for sale or purchase of securities of the companies with which the credit rating agency may have rating-related dealings.
Issuing detailed guidelines for avoidance and handling of ‘conflict of interest’ by market infrastructure institutions and intermediaries, Sebi said all such entities and associated persons would need to maintain “high standards of integrity” in conduct of their business.
They have also been asked not to use any information received from the clients, under the normal business dealings, for any personal interest and to put in place “information barriers” to block flow of confidential information from one department to another.