Sebi issues operational guidance for monitoring covenant with DLT



Market watchdog SEBI on Tuesday released operational guidelines for monitoring security and covenant using distributed ledger technology (DLT).


In August 2021, the regulator specified the method for recording fees by issuers and the method for monitoring by bond custodians (DTs) and credit rating agencies, among others.

Since the backbone of a DLT system will be unique to the assets registered in the system, each asset that the issuer provides as security for the non-transferable securities will be assigned a unique identifier (Asset Identifier).


To exchange and verify data across repositories, the format of the unique asset identifier will be a 12-digit alphanumeric string.


Sebi said in a prospectus that the DLT system will provide an alert to the issuer and DT by having proper validation/duplicate checks in the system to identify potential duplicate entries for the issuer’s assets.


First of all, certain assets will be tracked at the portfolio level and no specific parameters of the underlying assets will be recorded. It will include movable assets such as furniture and equipment, and current assets such as portfolio advances/receivables.


All issuers proposing to issue non-convertible securities on or after 1 April must register the details in the system prior to activating the ISIN.


“For outstanding non-convertible securities, issuers will be required to enter details into the DLT system on or before September 30, 2022, and DT will verify this by November 30, 2022,” Sebi said.

(The title and image for this report may have been reformulated only by the Business Standard staff; the rest of the content is automatically generated from a shared feed.)


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