SEBI Tightens Compliance Norms for CRAs Rating Instruments Regulated by Other Authorities

Circular no. SEBI/HO/DDHS/DDHS-PoD-2/I/4685/2026; Dated: 10.02.2026

The Securities and Exchange Board of India (SEBI) has strengthened the compliance framework applicable to Credit Rating Agencies (CRAs) when they undertake rating activities relating to financial instruments that fall under the jurisdiction of other financial sector regulators (FSRs).

The revised framework seeks to enhance regulatory segregation, transparency, and investor protection.

1. Segregation of SEBI-Regulated and Other-Regulator Activities

Under the new framework, CRAs are required to:

Maintain separate email IDs for:

1. SEBI-regulated activities, and
2. Activities regulated by other financial sector regulators

Maintain separate web disclosures for such activities to ensure clear distinction.

This segregation is intended to prevent regulatory overlap and reduce the risk of investor confusion.

2. Protection of Minimum Net Worth Requirements

CRAs must ensure that:

Their minimum net worth requirements, as prescribed under SEBI regulations,
Are not adversely impacted by undertaking ratings of instruments overseen by other regulators.

This ensures that SEBI-regulated activities remain financially insulated and compliant with regulatory thresholds.

3. Enhanced Website Disclosures

CRAs are required to prominently disclose on their websites:

The list of all activities being carried out
The name of the regulator governing each activity

This measure promotes transparency and allows stakeholders to clearly understand the regulatory framework applicable to each service offered by the CRA.

4. Separation of Advertising and Marketing Materials

SEBI has mandated that:

Advertising or marketing material relating to activities under other Financial Sector Regulators (FSRs)
Must be separate and distinct from marketing materials related to SEBI-regulated activities.

This prevents any implied regulatory endorsement or confusion regarding investor protections.

5. Mandatory Client Confirmation

CRAs must obtain written confirmation from clients stating that:

The client understands the nature of the activity being undertaken
The risks involved in such activity
The non-availability of SEBI investor protection mechanisms, including grievance or dispute redressal systems, for such non-SEBI-regulated activities

This requirement strengthens informed consent and mitigates potential misinterpretation by clients.

6. Regulatory Objective

The tightened framework aims to:

Maintain regulatory clarity and jurisdictional boundaries
Safeguard the integrity of SEBI-regulated activities
Enhance investor awareness and informed decision-making
Prevent mis-selling or regulatory arbitrage

7. Key Takeaway

CRAs undertaking activities regulated by other financial sector authorities must ensure operational segregation, enhanced disclosures, financial insulation, and explicit client consent, reinforcing transparency and regulatory discipline across multi-regulator engagements.