The Securities and Exchange Board of India (Sebi) has notified
regulations for securitised debt instruments. The new guidelines
require an issuer to be in the form of a trust, whose trustees will
need to register themselves with the capital market regulator.
The
new guidelines have been formulated, taking into account market needs,
cost of transactions, competition policy, professional expertise of
credit rating agencies, disclosure and expertise of parties involved in
the transaction and interest of investors in such instruments.
If
a debenture trustee, securitisation company or an asset reconstruction
company is already registered with regulatory bodies such as Reserve
bank of India, Sebi or Nabard, no separate registration will be
required.
The securitised debt instruments that are issued to
public or listed on a recognised stock exchange will be in
dematerialised form and will have to acknowledge actual benefit accrued
to the investors in underlying debt or receivables. These regulations
have provided flexibility in terms of pay through/ pass through
structures and do not restrict to any particular mode.
The
regulator has said that assignment of assets to the issuer should be a
true sale. Debt or receivables assigned to the issuer should be able 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 securitisation, said
Sebi.
The guideline has also mandated the originator to be an
independent entity from the issuer and its trustees should not exercise
any control over the issuer. The issuer cannot acquire any debt from
any originator who is part of the same group or which is under the same
management as the trustee.
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