Sebi considering changes in regulatory framework for debenture trustees

New Delhi Sebi is considering steps to strengthen the framework for debenture trustees, including raising minimum net worth requirement for registration of such entities and introducing e-voting provision to obtain consent of the unitholders.

The proposal is likely to be discussed at Sebi's board meeting this week.

In order to secure the interests of debenture holders and to enable debenture trustees (DTs) to perform their duties effectively and promptly in the interests of investors, Sebi had floated a public consultation paper on the proposed changes in October.

The board of Sebi may make new framework for debenture trustees based on the public comments received on the consultation paper.

The proposed changes include raising minimum net worth requirement for registration of debenture trustees to Rs 10 crore from the current Rs 2 crore. Further, a three-year time would be given for attaining this networth requirement.

The new criteria will help in restricting registration of debenture trustees to financially sound entities.

It has been proposed that there should be no requirement of calling for a meeting of debenture holders in the event of default by the issuer in case of public issues. The DT can directly enforce the security without obtaining any consent from the debenture holders.

Among others, it has been proposed that DTs should disclose the nature of compensation arrangements with their clients on their websites. The disclosure include the minimum fee that a DT will charge and factors determining the fee charged.

Also, e-voting has been proposed as a valid option for obtaining the consent of debenture holders wherever applicable.

A debenture trustee, in market parlance, is a person or entity that serves as the holder of debenture stock for the benefit of another party.