SEBI Issues New Conditions for Debenture Trustees Undertaking Non-Regulated Activities

Circular No. HO/17/11/12(3)2025-DDHS-POD1/I/146/2025; Dated: 25.11.2025

1. Overview

Regulation 9C of the SEBI (Debenture Trustees) Regulations, 1993 defines the permitted activities that may be undertaken by Debenture Trustees (DTs).

Under this provision, DTs are allowed to:

• Undertake activities falling under the purview of any financial sector regulator specified by SEBI, and
• Undertake activities outside the purview of SEBI, subject to conditions.

SEBI has now issued a circular prescribing specific terms and conditions that DTs must comply with when carrying out activities outside SEBI’s regulatory ambit.

The circular takes effect immediately.

2. Regulatory Background

Regulation 9C aims to:

• Clarify the operational boundaries of DTs,
• Ensure that their non-SEBI-regulated activities do not conflict with their duties as DTs, and
• Protect investors by maintaining high governance and compliance standards.

With the new circular, SEBI has formally outlined the framework within which DTs may undertake such outside-scope activities.

3. Key Terms and Conditions Prescribed by SEBI

3.1 No Conflict With DT Obligations

DTs must ensure that non-SEBI-regulated activities do not compromise, conflict with, or hinder:

• Their ability to discharge trustee responsibilities,
• Their independence in monitoring issuer compliance, or
• Investor protection duties.

3.2 Adequate Systems, Controls, and Segregation

DTs must maintain:

• Appropriate internal controls,
• Proper risk management frameworks, and
• Clear segregation of operations

to ensure that external activities do not affect DT functions.

3.3 Transparent Disclosures

DTs may be required to:

• Disclose details of activities carried out outside SEBI’s scope,
• Maintain documentation demonstrating compliance with prescribed conditions, and
• Provide such information to SEBI upon request.

3.4 No Misrepresentation or Regulatory Arbitrage

DTs must avoid:

• Misleading clients or investors into believing that such external activities are regulated by SEBI,
• Using DT registration as a platform for unrelated, unregulated business without proper governance,
• Engaging in regulatory arbitrage.

3.5 Ongoing Compliance With Applicable Laws

Activities outside SEBI’s regulatory scope must:

• Comply with all applicable laws,
• Follow standards or rules of any other relevant regulator, where applicable.

4. Effective Date

The circular becomes effective immediately, and all DTs must bring their operations into compliance without delay.

5. Significance

The new framework aims to:

• Strengthen governance and oversight over DT operations,
• Prevent misuse of DT registration for unrelated activities,
• Safeguard investor interests, and
• Ensure that DTs continue to prioritise their fiduciary responsibilities.

Click Here To Read The Full Circular