SEBI Issues Guidelines for Using a New DLT System
SEBI (Securities and Exchange Board of India) has issued operational guidelines on the use of a new DLT (distributed ledger technology) system for monitoring the security and covenants of non-convertible securities.
In August 2021, SEBI directed depositories to develop a new DLT-based platform for monitoring security creation, covenants and asset cover by April 2022. The platform is designed to capture the process of creation of security (due diligence, charge creation, etc.), continuous monitoring of covenants by debenture trustees, and credit ratings of non-convertible securities.
In a new notice, SEBI said the recording of asset details (and their verification), allotment, listing and payment of interest or redemption was available in the new DLT system from 1 April 2022.
The platform is expected to enhance transparency and efficiency in the creation and monitoring of covenants of non-convertible securities, the regulator said.
It will enable movable assets such as furniture, equipment, and inventory as well as current assets such as portfolio of advances and receivables to be tracked at the portfolio level, where a 12-digit alphanumeric string will be assigned to each asset as a unique ID.
Key participants of the new DLT system include issuers and intermediaries such as debenture trustees and credit rating agencies. Debenture trustees will be required to reconcile and eliminate duplicate entries for an asset in the system each year.
All issuers proposing to issue non-convertible securities on or after 1 April are required to record the details in the new system prior to ISIN activation. Those that are not able to do so will be given until 1 July 2022 to record the details in the system, if they can provide an explanation to depositories.
For outstanding non-convertible securities, issuers have to enter the details into the DLT system by 30 September 2022. Debenture trustees will have to verify the same by 30 November 2022.
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