By Abhinav Kaul
August 19, 2021
The Securities and Exchange Board of India (Sebi) has asked depositories to create, host, and maintain a system using the distributed ledger technology (DLT), or blockchain technology, to record and monitor the creation of securities as well as to monitor the covenants of non-convertible securities, according to Live Mint.
The markets regulator had constituted a working group comprising officials from Sebi, depositories, stock exchanges and Trustees Association of India (TAI) last November to suggest ways to strengthen the process of security creation, monitoring of security created, monitoring of asset cover and covenants of non-convertible securities.
Based on the recommendations, Sebi has called for the creation of a platform for security and covenant monitoring system hosted by depositories.
The system will also be able to record the following information: security creation, asset cover and covenants, interest and redemption payment of non-convertible securities, credit rating information as well as perform functions such as periodical monitoring of security cover, asset cover, and covenants.
Depositories have been asked to “provide secure login credentials to issuers, credit rating agencies (CRAs), debenture trustees (DTs), etc. for recording and verifying requisite information on the system” and to “put in place adequate safeguards to ensure the integrity and security of the data on the system”. They have also been asked to “share information with the other depository for integrating and maintaining a compatible system”, Sebi said in a notification on Friday.
Depositories will also have to develop an alert mechanism to be sent to the stakeholders for submission, acceptance and rejection of information and alerts for periodic and event-based compliances.
Moreover, in case the issuer fails to intimate the status of interest payment or redemption amount, the DT(s) will need to seek the status of payment from the issuer and/ or conduct an independent assessment (from banks, investors, etc.) to determine the same.
“Based on such assessment, DT(s) shall update in the system the status of payment of non-convertible securities within seven working days of interest payment becoming due or nine working days of the maturity/ redemption date,” Sebi said.