Operational Framework Introduction
Introduced by SEBI Circular dated 23.06.2020
Purpose of the Operational Framework –
It is a framework for transaction in defaulted debt securities post maturity date/redemption date under provisions of SEBI (Issue and Listing of Debt Securities) Regulations, 2008
Effective date of the circular is 01.07.2020
Detailed Operational Framework
As we know the Stock exchanges suspend trading/ reporting of trade on debt securities before the redemption date. Depositories impose restrictions on off market transfers on redemption date that restricts transfer on and after the redemption date.
By considering the above facts, it is proposed to allow these restrictions be lifted on defaulted debt securities after following the procedure given as follow-
Step-1 Procedure under Operational framework
Temporary restrictions on transactions in debt securities
Step-2 Intimation on status of payment
Step-3 Role of Debenture Trustee
Independent Assessment : Where issuer fails to intimate the status of payment then debenture trustee seeks the status of payment and arrange a assessment of the issuer
Pre-authorization: At the time of executing DTD, issuer shall provide to its bank pre-authorization to DT to seek the debenture redemption related information from the issuer’s bank.
Intimate Stock Exchange: Based on assessment the DTs shall intimate to Stock Exchange the status of payment within 9 Working days from the date of redemption.
What, if intimation not received: In case intimation of status of payment not received by SE & depository then such continue to be restricted.
Step-4 Default in the payment of redemption amount-
1. Update the ISIN Master file, &
2. Lift the restriction on transactions of such debt securities.
3. Information regarding this shall be disseminated immediately on website of both depositories and stock exchange.
Step-5 Reporting of trade in defaulted debt securities on stock Exchange platform
The trade repository shall flag such trade as “Trades in ISIN-defaulted debt security.
The trade repository shall flag such trades as “Trades in ISIN-defaulted in redemption.”
Step- 6 Intimation of transactions in defaulted debt securities
The Depositories shall send intimation to both parties to the transaction that it is “Transaction in ISIN-defaulted in redemption” immediately.
Step- 7 Account Statement
While sending the periodic account statement to the Demat account holders, including Consolidated Account statement (CAS), Depositories shall highlight in such statements that a particular debt securities is an “ISIN – defaulted in redemption”.
Step- 8 Continuous assessment of default status
In case the Issuer fails to intimate the updated status of payment of the concerned debt securities, within the stipulated timelines, the Debenture Trustee(s) shall carry independent assessment and intimate the status of payment of debt securities to the Stock Exchange and Depositories within 7th working day of April of each Financial Year.
In case of any developments that impact the status of default of the debt securities (including restructuring of debt securities, IBC proceedings, its repayment, etc.), the issuer/debenture trustee shall intimate the stock exchange and depositories within 1 working day of such development.