Mutual funds seek common investor kitty for paying credit rating agencies

Fund houses say need measures like rotating raters to resolve any conflict of interest

The Securities and Exchange Board of India’s (Sebi) plan to make the credit rating agencies’ business model less issuer-oriented through a proposed subscription-like platform on exchanges is unlikely to have the desired result, according to mutual fund (MF) industry officials.

Fund managers say that the market regulator would need to take more measures to resolve the possible conflict of interests that can creep up in an issuer-pay model. “We need a framework where rating agencies are rotated after a certain time-frame, like auditors. Additionally, instead of issuer choosing the rating agency, the regulator could put in a system where it