SEBI issues framework for Security and Covenant Monitoring using DLT of security creation

PR No. 13/2022, Dated: 18.04.2022

In order to strengthen the process of security creation and monitoring of security created, asset cover and covenants of the non-convertible securities, The SEBI vide. circular dated August 13, 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.

Accordingly, SEBI specified that, w.e.f. April 01, 2022, the recording of asset details (and their verification), allotment, listing, and payment of interest or redemption shall be available in the DLT system. Operational guidelines in this regard have been issued vide SEBI circular dated March 29, 2022

Now, in order to ensure the uniqueness of assets of the issuer offered as security, SEBI has required DTs to reconcile and eliminate duplicate entries for an asset in the system on yearly basis. SEBI has also standardized the format for unique Asset ID to a 12-digit alphanumeric string.

SEBI further clarified that the said system is applicable to all the issuers proposing to issue non-convertible securities on or after April 01, 2022, and they shall 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 the recording of the above-mentioned information by issuers.

However, a relaxation till July 01, 2022, has been provided 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. Further, for existing outstanding non-convertible securities, issuers shall enter the details into the DLT system on or before September 30, 2022.

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