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The Pakistan Credit Rating Agency Limited
POLICY FOR CHARGING FEE
PACRA POLICY Page 1 of 3
December 2018 www.pacra.com
1 DETERMINATION
OF RATING FEE
Capitalized terms used herein are defined in Annexure I “Defined Terms”
1.1 Standard fee structure: PACRA standard fee structure furnishes a list of
charges relating to rating services. It contains all the rating services rendered and
functions performed by PACRA and the rate of fee for each such service and function.
The fee is provided mainly in the form of range (i.e. minimum and maximum) or in the
form of percentage or fixed amount in some cases.
1.2 Fee is communicated to and finalized with the Client before the beginning of the
Rating assignment. The most recent view of the fee structure is maintained on the
website. http://www.pacra.com.pk/pages/relationship/fee.php
1.3 PACRA largely abides by its standard fee structure. However, as the fee charged
is a function of diverse factors that may vary greatly in each individual case, fee may be
adjusted accordingly.
1.4 PACRA may adjust its fees under the following (not exhaustive) circumstances:
i If the Issuer is already rated by PACRA or has a prior Rating relationship with
PACRA. PACRA will also consider whether the Issuer is part of a group or has an
Associated Company that is already rated by it
ii The size of the issuance (a fee cap or floor may be applied to facilities /
programs, depending on the total facility/program amount)
iii The complexity of the Rating assignment in terms of unique risks or risks not
hitherto evaluated by PACRA
iv Fees for structured transactions will take into account the complexity of
transaction structures and nature of the underlying assets
1.5 Fee Negotiations: All fee negotiations are handled solely by the concerned
personnel in the Business development and marketing Department.
The standard fee structure is valid unless reviewed:
PACRA reserves the right to revise its standard fee structure at any time without
prior notice.
Revisions in standard fee structure may not routinely impact existing Clients as
existing Fee Mandates may be revised only after a mutual agreement has been
reached with the Client regarding such revision
1.6 Dissemination of Rating Actions: Rating Actions for all Ratings are
disseminated on PACRA’s website. PACRA receives no separate compensation from
Clients for disseminating Ratings on its website.
2 DISCLOSURE 2.1 PACRA makes the following disclosures in its annual financial statements:
(a) Its total revenue from rating services and non-rating services separately;
(b) Customer-wise non-rating revenue of the credit rating company or its holding
or subsidiary companies, if any, in case where non-rating revenue of the credit
rating company or its holding or subsidiary companies, if any, from any single
customer or group is ten percent (10%) or more of its or its holding or
The Pakistan Credit Rating Agency Limited
POLICY FOR CHARGING FEE
PACRA POLICY Page 2 of 3
December 2018 www.pacra.com
subsidiary companies’ total revenue; and
(c) Names of the customers who along with their associates contribute ten percent
(10% or more of the total revenue of the credit rating company or its holding
or subsidiary companies.
3 TASKS 3.1 Business Development and Marketing: A current version of the standard fee
structure is always maintained on the website.
3.2 Finance: Specified disclosures are present in the annual financial statements.
4 POLICY
ADMINISTRATION
4.1 Interpretation: Competent Authority is responsible for interpreting and applying
the Policy to specific situations when questions arise. Competent Authority is designated
on a case-to-case basis based on relevant competency.
4.2 Review: This Policy is subject to review as follows:
Reviewer Scope Frequency Regulation
Competent
Authority
Appropriateness
& sufficiency Annual
Chapter III | 11-B-
(k)
Internal Audit Actual vs. Policy Annual Chapter III | 11-B-(l)
Expert Comprehensive
Every
three (3)
years
Chapter III | 11-A-
(b)
4.3 Policy Approval: This Policy is required to be approved by the board of directors.
4.4 Investigations of Suspected Violations: All reported violations shall be promptly
investigated and treated confidentially to the extent reasonably possible.
4.5 Disciplinary Protocol: Compliance with all Codes of Conduct and PACRA
Policies, including this Policy, is a condition for employment. Compliance with the Codes
and PACRA Policies shall be monitored on periodic basis:
Those who come within the bounds of this Policy shall cooperate fully to provide
truthful, accurate information
The current version of this Policy is available on the website:
www.pacra.com
5 REGULATORY
REQUIREMENT
5.1 PACRA’s compliance to SECP’s regulatory requirements in terms of the Policy
for Charging Fee is as follows:
PACRA’s Compliance for Policy for Charging Fee
SECP’s Code of Conduct for Credit Rating Companies (CRCs) Regulations, 2016
SECP Regulation Code Clause
Regulation Chapter III | 15-(1): The credit rating company shall prepare a
list of fees and charges relating to its rating services and disseminate the same
on its website
Regulation Chapter III | 15-(2): The list of fees and charges must contain all
Clause 1.1
The Pakistan Credit Rating Agency Limited
POLICY FOR CHARGING FEE
PACRA POLICY Page 3 of 3
December 2018 www.pacra.com
the rating services rendered and functions performed by it and the rate of fee
for each such service and function.
Regulation Chapter III | 15-(3): The fee may be provided in terms of
percentage, in the form of range (i.e. minimum and maximum) or in the form
of fixed amount for each service/function.
Regulation Chapter III | 15-(4): The credit rating company shall provide the
list of fee charged against national or social cause projects.
Regulation Chapter IV | 22-(2): A credit rating company shall disclose in its
audited annual financial statements, the following information:
(a) its total revenue from rating services and non-rating services
separately;
(b) customer-wise non-rating revenue of the credit rating company or its
holding or subsidiary companies, if any, in case where non-rating
revenue of the credit rating company or its holding or subsidiary
companies, if any, from any single customer or group is ten percent
(10%)or more of its or its holding or subsidiary companies’ total
revenue; and
(c) names of the customers who along with their associates contribute
ten percent (10%)or more of the total revenue of the credit rating
company or its holding or subsidiary companies.
Section 2
Annexure H: (List of Policies to be developed & disclosed by a
credit Rating company / agency: Policy for Charging Fee
Policy developed
& disclosed on
website
The Pakistan Credit Rating Agency Limited
ANNEXURE I | CHARGING FEE
ANNEXURE Page 1 of 3
December 2018 www.pacra.com
DEFINED TERMS
Associated Company
“Associated companies” and “associated undertakings” as defined in The Companies Act
(2017), Part 1, Clause 2-(4):
“ ‘associated companies’ and ‘associated undertakings’ - mean any two or more
companies or undertakings, or a company and an undertaking, interconnected with each
other in the following manner, namely:—
(a) if a person who is owner or a partner or director of a company or undertaking, or who,
directly or indirectly, holds or controls shares carrying not less than twenty percent of the
voting power in such company or undertaking, is also the owner or partner or director of
another company or undertaking, or directly or indirectly, holds or controls shares
carrying not less than twenty percent of the voting power in that company or
undertaking; or
(b) if the companies or undertakings are under common management or control or one is
the subsidiary of another; ”
Client An entity / issuer, whose rating assignment is to be undertaken, having signed a Rating
Agreement with PACRA
Codes of Conduct Sets of Standards (Do’s & Don’ts) governing day-to-day conduct
Competent Authority A designated authority considered to possess the requisite expertise / knowledge
Initial Rating
The Rating assigned by PACRA for the first time
Ratings are also termed “Initial” when a previously:
i Private Rating converts into a Public Rating
ii Preliminary Rating is finalized
iii Withdrawn Rating comes back to PACRA with a fresh Mandate
iv Defaulted Rating emerges from default and assigned a fresh Rating
Issuer Any entity by which a security has been / being issued
Line of Business
Areas of activity / functionality at or in PACRA: (i) Ratings, (ii) Criteria Group, (iii)
Business Development & Marketing, (iv) Compliance & Policy, (v) Support, (vi) Non-
rating business
Potential Conflict of
Interest (COI)
A COI that exists due to inherent aspects in a business model despite institution of prudent
systems and controls to manage such COI
Preliminary Rating The Rating assigned to a debt instrument / mutual fund yet to be issued based upon its
proposed terms and conditions
Public Dissemination
(also termed
Announcement)
Distribution of information in a manner whereby it becomes widely, freely and
simultaneously available to all users of such information. This includes public filing with a
regulatory body and disclosure on PACRA’s website or in media
Ratee The entity / issuer whose Rating is assigned
Rating
“An opinion regarding securities or a person expressed in the form of standard symbols or
in any other standardized manner, assigned by a credit rating company and includes credit
rating.”
Credit Rating Companies Regulations, 2016, Regulation Chapter I, 2-1-(i)
The Pakistan Credit Rating Agency Limited
ANNEXURE I | CHARGING FEE
ANNEXURE Page 2 of 3
December 2018 www.pacra.com
Rating Agreement An agreement enumerating the terms and conditions driving the rating relationship between
PACRA and the Ratee
Rating Analyst also
termed as “Analyst”
“An employee of the credit rating company who performs analytical functions that are
necessary for the issuing or monitoring of a credit rating or participates in determining
credit ratings”
Credit Rating Companies Regulations, 2016, Regulation Annexure F, p 48
Rating Modifiers
Rating Modifiers are refinements about a Rating opinion that PACRA may use:
PACRA employs two modifier listings:
(i) Rating Watch
Alerts to the possibility of a Rating change subsequent to, or in anticipation of, a) some
material identifiable event and/or b) deviation from expected trend. But it does not mean
that a Rating change is inevitable.
Rating Watch may carry designations.
A watch should be resolved within foreseeable future, but may continue if underlying
circumstances are not settled.
(ii) Outlook:
Indicates the potential and direction of a Rating over the intermediate term in response to
trends in economic and/or fundamental business/financial conditions. It is not necessarily a
precursor to a Rating change:
‘Stable’ outlook means a Rating is not likely to change.
‘Positive’ means it may be raised.
‘Negative’ means it may be lowered.
Where the trends have conflicting elements, the outlook may be described as
‘Developing’
Rating Report A public document on PACRA’s website containing a Rating rationale, analyses, financials
and regulatory and supplementary disclosures
Rating Actions
Typical Rating decisions that PACRA takes in relation to its Rating. These are:
i Upgrade: The Rating has been raised in the Rating Scale
ii Maintain: The Rating has been kept at the same level on the Rating scale.
Ratings “Maintain” may also include a continuation of, or change in a Rating
Modifier (Outlook, Rating watch), if it is used
iii Downgrade: The Rating has been lowered in the Rating Scale
iv Improved: The performance ranking is higher compared to previous one in the
Fund Performance Ranking Scale
v Declined: The performance ranking is lower compared to previous one in the Fund
Performance Ranking Scale
vi Same: The performance ranking is similar compared to previous one in the Fund
Performance Ranking Scale
vii Withdraw: A Rating is withdrawn on: a) termination of Rating mandate, b)
cessation of underlying entity, c) the debt instrument is redeemed, d) the Rating
remains suspended for six months, or e) the entity/issuer defaults
viii Redeem: Withdrawal on account of redemption of obligations
ix Suspended: It is not possible to update an opinion due to lack of requisite
information. Opinion should be resumed in foreseeable future. However, if this
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ANNEXURE I | CHARGING FEE
ANNEXURE Page 3 of 3
December 2018 www.pacra.com
does not happen within six (6) months, a suspended Rating should be considered
withdrawn.
x Initial: The Rating has been assigned as an “Initial Rating”
xi Preliminary: The Rating has been assigned as a “Preliminary Rating”
xii Outlook / Rating Watch: See the definition for Rating Modifiers
xiii Harmonize: Rating action evolving from the process of harmonization. PACRA
defines harmonization as a change in rating due to revision in applicable
methodology or underlying scale.