Sebi Comes Out With Monitoring, Disclosure Framework For Debenture Trustees

New Delhi, Nov 12: Markets regulator Sebi on Thursday came out with a disclosure framework as well as guidelines to monitor the asset cover of debenture trustees.

The framework will become effective from the quarter ended December 31, 2020 for listed debt securities, the Securities and Exchange Board of India (Sebi) said in a circular.

The regulator said Debenture Trustees (DTs) will have to carry out periodical monitoring of 'security created' or assets on which charges are created.

They are also required to incorporate the terms and conditions of periodical monitoring in the debenture trust deed.

Further, a listed entity will be liable to provide relevant documents or information to enable the debenture trustees to submit asset cover certificate and net worth certificate of guarantor, among others, to stock exchanges within the stipulated timelines.

Under the framework, asset cover certificate and statement of value of pledged securities need to be submitted on a quarterly basis while net worth certificate of guarantor (secured by way of personal guarantee) will have to be submitted on a half-yearly basis.

Besides, the value of the guarantor prepared on the basis of audited financial statements of the guarantor (secured by way of corporate  guarantee) and valuation report for the immovable or movable assets, need to be submitted within 75 days from the end of each financial year.

For existing debt securities, listed entities and DTs will have to enter into supplemental or amended debenture trust deeds within 120 days from the date of the circular, incorporating the changes in the debenture trust deed, Sebi said.

In case, a listed entity has more than one debenture trustee for its listed debt securities, then DTs may choose a common agency for preparation of  asset cover certificate.

With regard to disclosure requirements, Sebi said DTs will have to make disclosures about revision in credit ratings and status of payment of interest or principal by the listed entity within T+1 day (trading plus one day) from receipt of information on its website.

Also, they need to make disclosures about monitoring of asset cover certificates and quarterly compliance reports of the listed entities within 60 days from the end of each quarter.

In addition, details of debenture issues handled by a DT and their status as well as status of information regarding breach of terms of the issue, if any action taken by the DT, are also required to be disclosed on a half-yearly basis.

Complaints received by DTs, including default cases, status of information regarding any default by listed entity and action taken by debenture trustees and monitoring of utilisation certificate, need to be disclosed annually on their websites.

In respect of reporting of regulatory compliance, Sebi said DTs will have to furnish risk-based supervision report to the regulator on a half-yearly basis.

Earlier this month, Sebi prescribed the manner in which debenture trustees will have to carry out due diligence for creation of security at the time of issuance of debt securities.