Transfin.

SEBI to Penalise Rating Companies for Failing to Warn Bond Investors of the Crisis Brewing at IL&FS

SEBI to penalise CRA Ltd, India Ratings and Research Pvt. Ltd and Credit Analysis and Research Ltd (CARE) for failing to warn bond investors of crisis brewing at IL&FS.

 

COMPANIES

SEBI to penalise rating companies for failing to warn bond investors of the crisis brewing at IL&FS.

Silence is Compliance

As per sources, the markets regulator, Securities and Exchange Board of India (SEBI), has sent fresh notices to three rating companies - CRA Ltd, India Ratings and Research Pvt. Ltd and Credit Analysis and Research Ltd (CARE) - for failing to warn bond investors of Infrastructure Leasing and Financial Services Ltd (IL&FS) in time about the scam at the shadow lender. 

 

Bigger Picture

IL&FS defaulted on a series of debt obligations, triggering a crisis in the shadow banking sector as banks and mutual funds cut their exposure to non-bank lenders.

 

The move comes after SEBI's Board disapproved of the low penalty of ?25L ($3m) each imposed on the three rating companies on December 26th.

 

The agencies had assigned IL&FS the highest rating of AAA before the default in September 2018, even though its unit had defaulted in June of that year. [Livemint]

 

SoftBank Group expected to post drop in quarterly profit.

A Bleak House

Japanese technology conglomerate SoftBank is expected to post a slide in profits for the past quarter, further deepening concern about its ability to secure funding for a second Vision Fund.

 

This would also give New York-based activist fund Elliott Management more say in a potential shake-up at SoftBank. Elliott has already amassed a stake of almost $3bn in SoftBank and is now pushing for changes including $20bn in stock buybacks. Furthermore, the emergence of Elliott as a prominent shareholder in SoftBank is likely to highlight the latter's difficulties following its soured bet on office-sharing startup WeWork. [Reuters]

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