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Rediff.com  » Business » India asks Fitch why it shared confidential info with US SEC

India asks Fitch why it shared confidential info with US SEC

Last updated on: June 11, 2013 09:27 IST

India asks Fitch why it shared confidential info with US SEC

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After Fitch Ratings gave lowest investment grade rating to India with a negative outlook in June last year, the government has reportedly charged the global ratings agency of sharing confidential information with US Securities & Exchange Commission (SEC), which enforces federal security laws and regulates the securities market in the country.

People familiar with the development said India is concerned that SEC might have influenced rating given to the country by Fitch Ratings.

It has expressed its displeasure that ratings can be influenced on non-technical considerations like political, economic or other vested interests by host country regulators under whose jurisdiction the rating agency is registered.

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Image: A man, wearing a mask of Hindu god Ganesh, the deity of prosperity, holds up a cob of corn at a roadside stall on the fourth day of the Ganesha Chaturthi festival in Chennai.
Photographs: Babu/Reuters

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India asks Fitch why it shared confidential info with US SEC

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Government officials said India has asked Fitch Ratings as to why it provided India rating file to SEC.

They, however, added it was not confirmed if SEC had given any directions to Fitch with regard to its rating process or rating outcome in relation to the actual rating assigned to India’s sovereign debt.   

“It is understood that the main objection to Fitch’s action is that it raises issues of client confidentiality, as significant portion of the information gathered by Fitch in its interaction with the government was privileged and non-public information that has now been released to US SEC,” said one official, who did not wish to be identified because of the sensitivity of the issue.  

Fitch Ratings did not respond to an e-mail query from Business Standard at the time of going to press.

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Photographs: Reuters

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India asks Fitch why it shared confidential info with US SEC

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Fitch Ratings was one of the three ratings agencies, together with Moody's and Standard & Poor's, first recognized by SEC as a nationally recognized statistical rating organization in 1975. It last visited India on April 12, 2013 for undertaking annual review of India’s sovereign debt rating. In June 2012, it had changed India’s rating outlook from ‘stable’ to ‘negative’.

“India deems it unacceptable that a ratings agency behavior relating to a sovereign is determined not by its own best judgment, but by the directions given under the regulatory regime set up by an instrumentality of another sovereign,” said the official.

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Image: US Securities and Exchange Commission headquarters in Washington.
Photographs: Jonathan Ernst/Reuters

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India asks Fitch why it shared confidential info with US SEC

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India’s argument is that information relating to ratings on sovereigns cannot be treated similar to the information relating to ratings on commercial entities. The country has warned that Fitch’s action would raise serious doubts in the minds of investors as well as rated entities about data confidentiality, impartiality, and independence of process.  

Last month, global credit rating agency S&P had warned that it may downgrade India's sovereign rating to junk grade if the government failed to pursue reforms and check deterioration in fiscal and current account deficits.

While retaining India's sovereign rating at 'BBB-' with a negative outlook, S&P said there was at least a one-in-three likelihood of a downgrade within the next 12 months.






Image: Performers dressed as tigers take part in Pulikali, or tiger dance, during festivities in Trichur city in Kerala.
Photographs: Sivaram V/Reuters

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