The Securities and Exchange Board of India (Sebi) on Thursday directed Rajesh Mokashi, former Managing Director & Chief Executive Officer (CEO) of Care Ratings to not associate with any stock market intermediary for a period of two years.
Sebi in its order noted that Mokashi, who remained on the post between August 2016 and July 2019, exerted influence on the employees of Care for ensuring favourable ratings towards certain issuers like DHFL.
The market regulator, meanwhile, disposed of the proceedings against SB Mainak, the former Non-Executive Chairman of Care Ratings, noting that there was insufficient material on record to prove any interference in the ratings process.
The market regulator, meanwhile, disposed of the proceedings against SB Mainak, the former Non-Executive Chairman of Care Ratings, noting that there was insufficient material on record to prove any interference in the ratings process.
The market watchdog has relied upon exchanges and messages on WhatsApp by the members of the rating committee lamenting the repeated interference by Mokashi.
Further, WhatsApp conversations have been taken into as more reliable record than the recorded statements of identified persons, wherever there is a variance in the views expressed.
Additionally, when one of the analysts was asked why he did not raise concerns before the board of Care, he stated that he did not adopt such a course considering his future employment prospects.
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In the order, Sebi whole time member Ashwani Bhatia noted that the ‘unequal relationship’ within Care would have allowed Mokashi to ‘exert influence on the rating committee members to ensure that they toe the line’.
“...(Mokashi) had a veto on decisions of the rating committee by asserting his authority, which in turn resulted in inflated ratings assigned for DHFL,” Bhatia said in the order.
“The measures adopted by Care to ensure independence of the rating decisions like independent rating committee, separation of rating and business development, etc. amounted to nothing more than a collective exercise in futility,” the order added.
Mokashi had sought to place reliance on the findings in the Justice Srikrishna Report which concluded that there was no substance in the charges of his interference in the rating of DHFL, Yes Bank, and ILFS. However, Sebi has concurred with the conclusions of the report barring that for his interference in the ratings of DHFL as there was sufficient evidence on record.
Sebi also stated that Mokashi’s claim that Care was the first rating agency to downgrade the ratings of DHFL is misleading.
The market regulator had initiated proceedings after receiving allegations raised through whistleblower complaints. In July 2019, Sebi had directed the audit committee of Care to conduct a forensic review of the irregularities highlighted in the complaints. After receiving Sebi’s letter, Mokashi was asked to go on leave and later his employment with the rating agency was terminated.
