Summary of Amendments to the Revised Guidelines on Credit Rating Agencies

SUMMARY OF AMENDMENTS
REVISED GUIDELINES ON CREDIT RATING AGENCIES (Date of Issuance: 10 January 2023) The following table provides a summary of key amendments to the revised Guidelines on Credit Rating Agencies (Guidelines) issued on 10 January 2023:
A. Overview

1. The Guidelines was revised pursuant to a holistic review on the existing credit rating agency (CRA) framework. The key amendments
   relate to, among others, enhancements to governance requirements and improvements to integrity of the rating process.
2. Additional amendments were made to enhance clarity of certain requirements in the Guidelines.
3. Consequential amendments were made in relation to the implementation of the Electronic Application System (EASy).
4. Housekeeping amendments throughout the Guidelines were made to provide greater clarity and consistency. These amendments include
   stylistic or formatting changes and necessary changes of an editorial nature such as renumbering and rephrasing of certain requirements and contents, standardisation of terminology, updating of information, grammatical corrections, and alphabetical order. Other amendments include substitution of terms (i.e. ‘shall’ with ‘must’, ‘bond’ with ‘corporate bonds and sukuk’ and ‘working days’ to ‘business days’). 2023 Revised Version Dated 10 January 2023 Comments
   Chapter 1: Introduction
5. Paragraphs 1.1 – 1.8 Paragraphs 1.01 – 1.05 Repositioned and amended to provide greater
   clarity.
   Removed requirements that are outdated and no longer applicable.
6. Paragraph 1.9 Paragraph 3.01 Repositioned to Chapter 3 on Definitions.

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Chapter 2: Applicability
3. Paragraphs 1.11 and 1.12 Paragraphs 2.02 – 2.03 Amended to provide greater clarity.
4. - Paragraphs 2.01 and 2.04 New paragraphs inserted to clarify applicability
of the Guidelines.
Chapter 3: Definitions
5. Paragraph 1.9 Paragraph 3.01 Inserted the following new definitions of:

• ‘board committees’ to provide clarity on
  the committees of the board of directors to be established by the CRA;
• ‘corporate bonds’ and ‘sukuk’ to provide
  greater clarity on references made to
  ‘bonds’;
• ‘EASy’ in conjunction with the
  implementation of this system;
• ‘fit and proper’ to refer to the fit and
  proper criteria under Appendix 1 to the Guidelines; and
• ‘senior management’ to provide greater
  clarity.

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Amended the following existing definitions for greater clarity:

• ‘controller’ to be consistent with the
  Capital Markets and Services Act 2007
  (CMSA);
• ‘external member’ to clarify the
  independence of the external members of CRA’s rating committee from the shareholders of CRA and its rating holding company; and
• ‘independent director’ to be consistent
  with the Main Market Listing
  Requirements of Bursa Malaysia
  Securities Berhad.

6. • Paragraph 3.02 New paragraph inserted to provide greater
     clarity on references to ‘days’.
     Chapter 4: Registration of CRA
7. Chapter 2 Chapter 4 Repositioned certain paragraphs from previous
   Chapter 2, amended, and grouped into the
   relevant headers for greater clarity.
8. Paragraph 2.2 Paragraphs 4.02 and 4.03 Amended the financial requirements for the CRA
   to provide greater clarity.

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9. Paragraph 2.44 Paragraph 4.05 Amended paragraph to require a controller and
a compliance officer of a CRA, and the senior management of a CRA and its rating holding company to be fit and proper.
10. Paragraph 2.45 Paragraph 4.06 Amended to provide greater clarity on additional
considerations for candidates of relevant positions under paragraph 4.05(b), including the capability of the chief executive to lead the CRA.
11. Paragraph 2.44 Paragraph 4.07 Amended paragraph to require the SC’s prior
approval for the proposed appointment of compliance officer of a CRA.
12. - Paragraph 4.08 New paragraph inserted to provide greater
clarity on SC’s powers to refuse registration of an applicant if it is not fit and proper.
13. Paragraph 2.20 Paragraph 4.09 Amended paragraph to require:

• a majority of independent directors for
  the composition of a CRA and its rating holding company’s board of directors and board committees; and
• an independent director as the
  Chairman of the board and all board

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14. Paragraph 2.9 Paragraph 4.12 Amended to require a majority of external
members for the composition of a CRA’s rating committee.
15. - Paragraphs 4.14 – 4.18 New paragraphs inserted to require
establishment of the CRA’s board committees including the nomination, audit committee, risk management and remuneration committee.
Chapter 5: Continuous Obligations
16. Chapter 2 and Chapter 4 Chapter 5 Paragraphs repositioned from previous
Chapters 2 and 4, amended and grouped into the following new headers to provide greater clarity:
(a) Matters requiring prior approval of the SC (b) Disclosure Requirements

• Notification to the SC
• Reporting to the SC
• Other disclosure obligations

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(c) Conduct Requirements

• Governance of CRA
• Conduct of meetings
• Compliance officer
• Conflict of interest
• Confidentiality of information
  (d) Other Continuous Obligations
• Rating criteria, methodologies
  and policies
• Monitoring of corporate bonds
  and sukuk rated by CRAs
• Human resources and expertise
• Rating agreement
• Records and data management

17. Paragraph 2.3 Paragraph 5.02 Amended to require a CRA to obtain the SC’s
    prior approval for any proposed change in the CRA’s direct or indirect shareholdings, which results in a new controller.
18. • Paragraphs 5.03 and 5.04 New paragraphs inserted to provide greater
      clarity on approval requirement for appointment of relevant persons under paragraphs 4.05(b)(i) to (iv), as well as the requirement to undertake necessary due diligence on the candidates.

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19. - Paragraphs 5.05 and 5.06 New paragraphs inserted to provide greater
clarity on matters that require notification to the SC.
20. Paragraph 2.27 Paragraph 5.07 Instead of approval requirement, amended to
require notification on change in the rating of a corporate bond or sukuk, and when a CRA is appointed to replace another CRA.
21. Paragraph 2.46 Paragraph 5.22 Amended the length of service of CRA’s
independent directors and external members of the CRA’s rating committee to a cumulative term of nine years, consistent with the Malaysian Code on Corporate Governance.
22. - Paragraph 5.23 New paragraph inserted to prescribe
requirements relating to the quorum of meetings for board of directors, board committees and rating committee.
Chapter 6: Submission Procedure
23. Chapter 3 Chapter 6 Chapter 6 is replaced with new provisions
consequential to the implementation of EASy.
Also introduced new provisions to provide for the submission procedure via EASy or email submission.

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Chapter 7: Refusal of Registration and Deregistration
24. Chapter 5 Chapter 7 Paragraphs repositioned from previous Chapter
5, amended for greater clarity and grouped into the following new headers:

• Refusal of registration
• Suspension and deregistration

25. • Paragraph 7.01 New paragraph inserted to provide greater
      clarity on the SC’s powers to refuse an application for registration or approval.
26. Paragraph 5.2 Paragraphs 7.02 and 7.03 Amended to provide greater clarity on SC’s
    powers relating to suspension and deregistration of a CRA.
    Appendix
27. Paragraph 3.2 Appendix 1 (Fit and Proper Criteria) Repositioned and enhanced the fit and proper
    criteria for entity and individual respectively.
28. Appendices 4 to 6 - Deleted following the implementation of
    submission procedures via EASy.