SEBI moots stricter rules for securitisation trustees

Mumbai, Aug 8: Capital market watchdog Sebi (Securities and Exchange Board of India) has proposed stricter norms, including enhanced responsibilities, for managing issuance of securitised debt instruments. Besides, the regulator has suggested a standardised term sheet for securitisation transactions, that covers both public issues and private placements.

Generally, securitisation refers to creating a financial instrument by pooling various debt instruments and then selling them to investors. Sebi said the proposals are aimed to “further rationalise and clarify the roles and responsibilities of the securitisation trustees and explore some other associated aspects”.

The suggestions are part of the concept paper on securitisation transactions released today. Under the proposed norms, the trustee should 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.

The trustee should “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 the paper. In case there are any violations with regard to the securitised debt instrument, the trustee would be required to immediately inform Sebi .

Further, Sebi has proposed that the trustees should call meeting of all investors in case there is any happening, which constitutes a servicer default or which could affect the interest of investors. As per a code of conduct for the trustees, they are required to avoid possible conflict of interest.

“A securitisation trustee of any of his employees shall not render, directly or indirectly, any investment advice about any security in the publicly accessible media, whether real time or non real time unless a disclosure of his interest including long or short position in the said security has been made, while rendering such advice,” the paper said. Sebi has invited public comments on the paper till August 28.