The licence of Lanka Rating Agency (LRA) is scheduled to expire tomorrow, and its future of remaining as a registered rating agency with the Securities and Exchange Commission (SEC) hangs in balance.

According to sources, LRA has so far been unable to provide the SEC with credible proof of an agreement it has with a recognized foreign rating agency providing them with technical assistance.

SEC’s directive barring LRA from issuing ratings with effect from March 25 was believed to be largely based on the nature of affiliation LRA has with a foreign rating agency. 

The SEC, as the official body regulating rating agencies, says a local rating agency applicant should be promoted by a foreign credit rating agency recognized in the country of its incorporation, having at least five years of experience in rating securities. 

The website of LRA, formerly RAM Ratings Lanka, says they have a Memorandum of Understanding (MoU) with India’s CRISIL “to obtain the technical assistance and training related to credit rating.”

The rating reports issued by LRA also stated that their technical partner was CRISIL India, the largest rating agency in India, of which the majority shareholder is Standards & Poors. 

However, SEC appears to be of the view that an arrangement of this nature is not adequate as it is not a fully-fledged agreement between the two entities.
Mirror Business learns that SEC has written to CRISIL India inquiring about the nature of their relationship with LRA, though there had been no response from CRISIL.

Meanwhile, in an interesting turn of events, LRA had informed the SEC last Friday that they were planning to partner with another leading Indian credit rating agency, despite their earlier stance of having a partnership with CRISIL.