Premium| Listen to this article |
Market watchdog, Sebi has issued operational guidelines for security and covenant monitoring using Distributed Ledger Technology (DLT). The regulator has given relaxation to issuers who are unable to record details in the system while existing outstanding non-convertible securities issuers need to feed details in their DLT before September end.
With effect from April 1, 2022, the recording of asset details (and their verification), allotment, listing and payment of interest or redemption shall be available in the DLT system.
To strengthen the process of security creation and monitoring of security created, asset cover and covenants of the non-convertible securities, the regulator in August 2021, had specified the manner of recording of charges by Issuers and manner of monitoring by Debenture Trustees (DTs), Credit Rating Agencies, etc. and responsibilities thereof.
The regulator issued operational guidelines in this regard on March 29, 2022.
In the guidelines, to ensure the uniqueness of the assets of the issuer offered as security, appropriate validation/ duplicate checks based on parameters identified for each asset type have been put in place in the system. Also, debenture trustees, on a yearly basis, shall reconcile and eliminate duplicate entries for an asset in the system.
For data exchange and verification across depositories, the format for unique Asset ID assigned to an asset has also been standardised to a 12-digit alphanumeric string.
Meanwhile, to begin with, movable assets viz furniture, equipment, inventory, etc., current assets viz portfolio of advances/ receivables, etc. and any other asset of similar nature shall be tracked at the portfolio level.
Notably, the system is applicable to all the issuers proposing to issue non-convertible securities on or after April 01, 2022, and Sebi had directed issuers to record the details in the system before activation of ISIN.
"Depositories shall allot or unfreeze an existing ISIN (in case of re-issuance), as applicable only after confirming recording of above-mentioned information by issuers," Sebi said in a statement.
However, Sebi has also given a relaxation till July 01, 2022, to issuers who are unable to record details in the system after explaining Depositories, post which ISIN shall not be allotted to an issuer for non-compliance.
On the other hand, Sebi has asked existing outstanding non-convertible securities, and issuers to enter the details into the DLT system on or before September 30, 2022.