RAM claims independence not an issue with shareholders composition

RAM Holdings Bhd today insisted that its independence and integrity would not be affected by its recent acquisition by CTOS Digital Bhd, saying both it and its wholly-owned subsidiary RAM Rating Services Bhd are “strictly regulated” by the Securities Commission Malaysia (SC).

In a statement, RAM Holdings CEO Chris WK Lee listed out what he described as key safeguard measures undertaken in the credit rating agency’s day-to-day operations, including a requirement for SC approval for any change in shareholding structure resulting in a party holding a stake of 20% or more.

“The SC would not grant approval to any party to exceed this limit if it deems this to be detrimental to the best interest of the credit rating agency and the bond market,” he added.

Likewise, he said, the boards of RAM Holdings and RAM Ratings comprise “independent directors, with the exception of the executive director”.

“All directors including its chief executive, deputy chief executive and members of the rating committee are subject to the approval of the SC,” he said.

“Furthermore, the tenures of directors and rating committee members are also subject to a maximum limit.”

Lee also said that with the exception of governance oversight, the board does not participate in the operations of the agency, which he added was the domain of its CEO and management staff.

“All rating actions by RAM Ratings are decided and assigned by an independent rating committee,” he said.

“The chairman and majority of the members that constitute the rating committee are external individuals with relevant expertise who do not participate in the operations of the credit rating agency.”

He added that the SC reviews the agency’s registration on a regular basis and conducts periodic examinations of the compliance record of RAM Holdings and RAM Ratings, both of which he said had “continued to fulfil the requirements of the credit rating agency registration”.

MalaysiaNow last week reported concerns about the independence and credibility of RAM Holdings following the SC’s green light for its acquisition by CTOS Digital, which was given the approval to acquire a more than 51% stake in RAM.

RAM was established by Bank Negara in 1990 to support the local debt capital market, and is accepted as the industry leader in credit ratings.

Its constitution bars any individual stakeholder from owning more than 20% of company shares – a limit that MalaysiaNow reported would be put to vote at RAM’s upcoming annual general meeting (AGM).

The proposed amendment would see a drastic change, allowing a member to hold more than 20% of the paid-up capital as long as “the prior approval of the SC and/or any relevant authority… has been obtained in accordance with the law, regulations and guidelines from time to time imposed by the SC and/or any relevant authority for that member to hold interest in shares in excess of the prescribed limit”.

Concerns were also raised about the compsition of its shareholders and potential conflict of interest, with a capital market analyst saying that at least one CTOS non-executive director sits on the SC board of directors.

Lee however said that the proposed amendment would require approval by 75% of shareholders.

“RAM Holdings is confident that our credit rating operations at RAM Ratings will not be impacted and will remain independent, regardless of the outcome of the vote,” he added.

“Regardless of past, present and future shareholding changes, the integrity and independence of the credit rating agency have and will continue to be the bedrock of RAM Ratings’ operations – established to serve in the best interest of all bond market participants.”