GEN 2.27 GEN 2.27 Operating a Credit Rating Agency
GEN 2.27.1(1) In GEN Rule 2.2.2,
Operating a Credit Rating Agencymeans undertaking one or more Credit Rating Activitiesfor the purpose of producing a Credit Ratingwith a view to that Credit Ratingbeing:(a) disseminated to the public; or(b) distributed to awhether or not it is in fact disseminated or distributed. Personby subscription;(2) For the purposes of (1):(a) Credit Rating Activitiesare data and information analysis relating to a Credit Ratingor the evaluation, approval, issue or review of a Credit Rating; and(b) a Credit Ratingis an opinion expressed using an established and defined ranking system of rating categories regarding the creditworthiness of a Rating Subject.(3) In (2), a Rating Subjectmeans:(a) a Personother than a natural person;(b) a credit commitment; or(c) a debt or debt-like Investment.
GEN 2.27.2 GEN 2.27.2
Persondoes not Operate a Credit Rating Agencywhere that Personprepares any credit scores, credit scoring systems or similar assessments relating to obligations arising from consumer, commercial or industrial relationships.
GEN 2.27.2 Guidance1. The effect of GEN Rule 2.27.1 is that even if a
Personundertakes from a place of business in the DIFC some but not all of the Credit Rating Activitiesfor the purpose of producing a Credit Rating, that Personneeds to have a Licenceauthorising it to Operate a Credit Rating Agency.2. Where a Credit Rating Agencyoutsources some of its Credit Rating Activities, it will need to ensure that it meets the relevant requirements, including those relating to outsourcing, in GEN Rule 220.127.116.11. There is no express prohibition against carrying on the Financial Serviceof Operating a Credit Rating Agencyby Personswho are authorised to carry on other Financial Services. However, the specific conduct requirements applicable to Credit Rating Agenciesin COB chapter 8, include a prohibition against certain types of consultancy and advisory services being provided by a Credit Rating Agency. Therefore, even if a Credit Rating Agencyhas an appropriate Licenceauthorising it to provide advice on financial products, it will not be able to provide the prohibited type of consultancy and advisory services.4. A Personmay provide a private Credit Ratingfor the exclusive use of another Person(Second Person) without seeking a Licenseauthorising it to Operate a Credit Rating Agencywhere the Credit Ratingis produced based on the request of the Second Person and is not intended to be disseminated to the public or distributed by subscription. Such a Personmay wish to include an express warning in the Credit Ratingthat it is intended only for the exclusive use of the Second Person and obtain from such Second Person a prior written undertaking that the Credit Ratingwill not be disseminated to the public or distributed on subscription.5. Credit scoring referred to in GEN Rule 2.27.2 is a method of assessing creditworthiness. A credit score is primarily based on credit report information typically sourced from credit bureaus. A Persondoes not become a Credit Rating Agencymerely by preparing or providing credit assessments. Lenders, such as banks and credit card companies, use credit scores to evaluate the potential risk posed by lending money to consumers and to mitigate losses due to bad debt. Insurance companies, and government departments also employ the same techniques.