More Stories

Informist, Wednesday, Dec. 18, 2024

--SEBI announces reforms to debenture trustees regulations 

MUMBAI – The Securities and Exchange Board of India in its board meeting Wednesday has mandated listed or to-be-listed securitised debt instruments to be issued and transferred only in the demat form. The regulatory body said in its report that the amendments aim to refresh and restate the securitised debt instruments regulations. 

The regulator has defined the minimum ticket size for a single investor in securitised debt instruments, which varies depending on the originator. For originators regulated by the Reserve Bank of India, the minimum ticket size is INR 10 million at initial subscription, while for originators not regulated by RBI, it is INR 10 million for both initial and subsequent transfers. For securitised debt instruments backed by listed securities, the minimum ticket size is the highest face value among such listed securities for both initial and subsequent transfers, SEBI said.

In its board meeting Wednesday, SEBI introduced conditions governing securitisation resulting in the issuance of listed or to-be-listed securitised debt instruments. The regulator said that there should be no single obligor constituting more than 25% of the asset pool. However, it said that the requirements may be relaxed on a risk-based approach from time to time. It also said that the assets comprising the securitisation pool must be homogeneous, and that the securitised debt instruments should be fully paid-up upfront.

Further, it also said that originators and obligors must also have a three-year track record of operations which resulted in the creation of the type of debt or receivable they are seeking to securitise, although this requirement will not apply to RBI-regulated originators.

Additionally, SEBI has introduced provisions related to minimum retention requirement, minimum holding period, clean-up call option, liquidity facility, and advertisement. The regulator has also provided flexibility in the offer period as minimum two working days and maximum 10 working days and revised the eligibility criteria for trustees of special purpose distinct entities.

SEBI also introduced periodic disclosure requirements including the outstanding litigations, material developments' disclosure, which has to be made on an annual basis, allowing any authorised person of the originator, instead of directors, to make declarations in the offer document when the issuance is done through private placement. Furthermore, SEBI has introduced e-voting for securitised debt instruments investors and an optional safe harbour for private securitisation transactions.

The regulator also approved measures to reform the debenture trustees regulations while aiming to facilitate ease of doing business for them. SEBI said in its report that the reforms include the insertion of provisions in debenture trustees norms, specifying the rights and obligations of debenture trustees to aid in the performance of their fiduciary duties. The reforms also involve the standardisation of model debenture trust deeds by the industry standards forum in consultation with SEBI. This will enable issuers to utilise these standardised deeds, with any deviations disclosed to investors for review, SEBI said. 

Furthermore, SEBI has approved an activity-based regulatory framework for debenture trustees, allowing them to undertake activities falling under the purview of other financial sector regulators. Debenture Trustees will be required to hive off non-regulated activities to a separate entity within two years from the date of notification. This should be ensured without incurring any legal liability on the regulated entity. The hived-off entity should not use the brand name of the debenture trustee beyond two years, SEBI said. End

Reported by Vaishali Tyagi

Edited by Deepshikha Bhardwaj

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (22) 6985-4000 

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2024. All rights reserved.