040414

SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN
(Professional Services and Policy Division)
No.PSP/CRC/01/2004 Islamabad, April 14, 2004
CIRCULAR NO.20 OF 2004

Subject: RATING CONTRACT/AGREEMENT BETWEEN THE CREDIT RATING COMPANIES AND THEIR CLIENTS

It has been noticed by the Commission that credit rating companies, at times, accept assignments from clients which had previously engaged another credit rating company but terminated the contract prematurely.

2. This being an unhealthy practice, the Commission in exercise of the powers conferred by Rule 7 of the Credit Rating Companies Rules, 1995 is pleased to direct in the interest of capital market and the public that while entering into a rating contract, the credit rating companies shall -

(i) not accept a rating assignment where a client terminated a rating contract with another credit rating company, except with the prior approval of the Commission to be obtained by the client;

(ii) communicate in writing with the credit rating company, if any, which had previously rated the client to ascertain professional reasons as to why the appointment should not be accepted; and

(iii) consider the information obtained as per (ii) above while accepting rating assignment.

Executive Director

1. State Bank of Pakistan, Central Directorate, I.I. Chundrigar Road, Karachi
2. Chief Executives of Credit Rating Companies
3. Press Information Department, Islamabad
4. Associated Press of Pakistan
5. All officers of the Commission