SEBI Lays Down Stricter Disclosure Norms For Listed Debt Securities

The market regulator has issued guidelines directing disclosure of the status of interest and redemption payments on listed debt securities within one day of the due date.

The move is to “enhance transparency” to further secure the interests of the investors in debt securities, the Securities and Exchange Board of India said in a circular issued on Monday.

Debenture trustees—the holders of a debenture stock for another party—will now be required to update the status of interest and redemption payments not later than one day from the due date. In case the payment is made with a delay by the issuer, the trustee will have to specify it with the date and a “delayed payment” remark.

This comes after recent incidents where debt securities issued by promoters faced a delay in redemption and interest payment on account of high debt at the promoter level.

SEBI has asked debenture trustees to display the details of interest and redemption due to all holders on their website within five days of the start of a financial year. The details will have to be updated for any new issues during the fiscal within five days of closure.

The debenture trustees will also have to disclose the nature of compensation agreement with its clients on their website. This would include the minimum fee to be charged and the factors that have determined the fee.

The registrars to an issue, or the issuers themselves, will have to forward the details of the debenture holders to the debenture trustees at the time of allotment and thereafter by the seventh working day of every subsequent month. This will help debenture trustees to keep their records updated.

In case of private placed issues, additional covenants will be included as part of the issue details. These include:

• Default in payment: In the case of default, additional interest of 2 percent per annum over the coupon rate shall by payable for the defaulting period.
• Delay in listing: If listing is delayed beyond 20 days, a penal interest of at least 1 percent per annum over the coupon rate will be charged.