SEC may extend Lanka Rating Agency licence renewal
The Securities and Exchange Commission (SEC) may grant an extension of the licence to Lanka Rating Agency (LRA), purely for administrative purposes, with the crisis-hit agency most likely to lose its licence, industry sources say.
LRA is yet to submit documentation the SEC has called for since March 25, when it decided to restrain LRA’s business. Its licence is up for renewal on Tuesday.
The sources said that since the regulator had wanted an agreement on collaboration with an international credit agency, the company has said that they are in talks with a rating agency in India to sell over 60 per cent of the locally held shares. “So far LRA has produced a Memorandum of Understanding (MOU) they have with CRISL (Credit Rating Information Services of India Limited which is a global analytical company providing ratings) and the SEC isn’t happy with it,” a source told the Business Times.
He added that the regulator may grant an extension to renew LRA’s licence by another month or so, to enable them to conclude the negotiations with the Indian party.
The rationale behind insisting an international rating agency is that it’s a yardstick for the regulator to evaluate the rating agency on the rating methodology. “If the methodology adopted is based on a third party the company must have a signed trade mark agreement to use it. If it is in-house then the regulator must approve it,” the source clarified.
Last month the SEC suspended a debenture issue from EAP Broadcasting Co Ltd which had rated by LRA due to a serious conflict of interest between the two parties.