Implemented on 17 January, the new regulation follows an industry consultation paper published by the MAS on 23 March last year setting out the watchdog’s proposals to bring the regulation of CRAs in to line with international standards.
The MAS has decided to introduce rules for CRAs as they were deemed partly responsible for the depth of 2008’s financial market crash due to the high ratings they gave to companies dealing in, what often turned out to be, high-risk securities.
The new regime will see CRAs regulated under the Capital Markets Services licensing regime, established by the Securities and Futures Act (SFA), and subject to licensing obligations. The MAS said CRAs will also be required to comply with existing regulations, guidelines and notices under the SFA which apply to all CMS licensees. CRAs will also have to comply with a new code of conduct.
Furthermore, the MAS said it will require CMS licensees which provide credit rating services to appoint and register, under the Representative Notification Framework, an individual to act as the company’s representative in providing credit rating services.
Existing CRAs have been given a transition period of 6 months to apply for the required licence.
