PR No.124/2008
SEBI notifies SEBI (Public Offer and Listing of Securitised Debt Instruments) Regulations, 2008
The amendment to Securities Contracts (Regulation) Act, 1956 (SCRA) enabled SEBI to provide for disclosure based regulation for public issue of or listing of securitized debt instruments on the recognized stock exchanges with a view to develop market for securitized debt instruments. Accordingly, SEBI has notified SEBI (Public Offer and Listing of Securitised Debt Instruments) Regulations, 2008 on May 26, 2008 taking into account the market needs, cost of the transactions, competition policy, the professional expertise of credit rating agencies, disclosures and obligations of the parties involved in the transaction and the interest of investors in such instruments. Salient features of the regulations are as follows : -
(a) The special purpose distinct entity i.e. issuer shall be in the form of a trust, the trustees thereof will require registration from SEBI. The registration granted to a trustee shall be permanent subject to compliance with the provisions with the SCRR and the regulations and payment of appropriate fees.
(b) If a debenture trustee registered with SEBI or a securitization company or a asset reconstruction company registered with Reserve Bank of India or National Housing Bank or the NABARD is the trustee of the issuer no registration from SEBI to act as such shall be required.
(c) The securitized debt instruments issued to public or listed on recognized stock exchange shall acknowledge the beneficial interest of the investors in underlying debt or receivables assigned to the issuer. The regulations provide flexibility in terms of pay through / pass through structures and do not restrict any particular mode.
(d) The assignment of assets to the issuer shall be a true sale. The debt or receivables assigned to the issuer should be expected to generate identifiable cash flows for the purpose of servicing the instrument and the originator should have valid enforceable interests in the assets and in cash flow of assets prior to securitization.
(e) The issuer shall be a bankruptcy remote from the originator. Originator shall be an independent entity from the issuer and its trustees and the originator and its associates shall not exercise any control over the issuer. However, the originator may be appointed as a servicer. The issuer may appoint any other person as servicer in respect of any its schemes to co-ordinate with the obligors, manage the said pool and collection therefrom, administer the cash flows of asset pool, distribution to investors and reinvestments. The issuer shall not acquire any debt or receivables from any originator who is part of the same group or which is under the same management as the trustee. Regulations require strict segregation of assets of each scheme.
(f). The issuer may offer securitised debt instruments to public for subscription through an offer document containing disclosures of all relevant material facts including financials of the issuer, originator, quality of the asset pool, disclosure of various kinds of risks, credit ratings including unaccepted ratings, arrangements made for credit enhancement, liquidity facilities availed, underwriting of the issue etc. apart from the routine disclosures relating to issue, offer period, application, etc.
(g) Rating from atleast two credit rating agencies is mandatory and all ratings including unaccepted ratings shall be disclosed in the offer documents. The rating rationale should include reference to the quality of the said pool and strengthen of cash flows, originator profile, payment structure, risks and concerns for investors, etc.
(h) The instrument shall be in dematerialized form.
(i) The draft offer document shall be filed with SEBI atleast 15 days before opening of the issue.
(j) In case of public issuances listing will be mandatory. The instruments issued on private placement basis may also be listed subject to the compliance of simplified provisions of the regulations. The securitised debt instruments issued to the public or listed on a recognized stock exchange in accordance with these regulations shall be freely transferable.
(k). It has been proposed to introduce simplified and relaxed listing agreement. Listing of private placement is also permitted subject to the compliance of simplified provisions of the listing agreement and the regulations. The simplified listing agreement is under preparation.
The full text of the SEBI (Public Offer and Listing of Securitised Debt Instruments) Regulations, 2008 is available on the SEBI website: www.sebi.gov.in
Mumbai
June 19, 2008