Sebi board approves stricter rules for securitisation trustees

Sebi board today approved stricter norms for trustees managing issuance of securitised debt instruments, as part of efforts to boost investor confidence in securitisation transactions.
Besides, Sebi's board has approved a proposal for a standardised term sheet for securitisation transactions that cover both public issues and private placements.
These norms are aimed at rationalising and making clear the roles and responsibilities of securitisation trustees.
"The Board approved amendments in SDI (Securitised Debt Instruments) regulations to rationalise and clarify the role and responsibilities of trustee," Sebi said in statement after the board meeting.
The board has approved a proposal allowing banks and public financial institutions to act as trustee without obtaining registration.

Generally, securitisation refers to creating a financial instrument by pooling various debt instruments and then selling them to investors.

The term standardised term sheet includes disclosures on originators, issuer, trustee, transaction structure, key pool features and credit enhancement, among others to enhance disclosure requirements.
These measures are expected to enhance the confidence of investors in securitisation transactions, Sebi in a statement.
The Securities and Exchange Board of India has specified a minimum net worth requirement of Rs 2 crore for these trustees.
Further, the trustees would be required to have at least two persons and between them, they need to have an minimum experience of five years in activities related to securitisation.

Under the new norms, the trustee would call for periodic reports, supervise the implementation of conditions regarding creation of security for securitised debt instruments and take steps to ensure protection of investors as well as resolve their grievances.
Besides, they would have to appoint a compliance officer for performing duties including monitoring compliance of the various rules and redress of investor grievances.
The trustees need to ensure on a continuous basis that the trust property is available and adequate at all times to pay the securitised debt instrument holders.
As per a code of conduct for the trustees, they are required to avoid possible conflict of interest.

As part of the new procedures, Sebi board would make necessary amendments to the Sebi (Public offer and Listing of Securitised Debt Instruments) Regulations.
Further, Sebi's board has decided to add a provision that "if the acquirer and the merchant banker are able to demonstrate that they have contacted all the public shareholders about the offer then the condition of mandatory participation of 25 per cent of the public shareholders holding shares in demat mode would not be applicable.