SEBI Proposes New Disclosure Rules for Securitised Debt

The Securities And Exchange Board Of India on Monday floated a proposal to require special purpose distinct entities and their trustees to submit detailed half-yearly disclosures about securitized debt instruments to both the regulator and stock exchanges.

This action is part of SEBI's broader initiative to enhance transparency and improve investor protection within the securitization market.

The proposed circular mandates that Special Purpose Distinct Entities and their trustees furnish detailed disclosures on a half-yearly basis to the SEBI and stock exchanges, where Securitized Debt Instruments are listed, within 21 days from the end of March and September.

These disclosures will encompass the performance, structure, and credit quality of the assets that back the securitized instruments.

The draft guidelines state that disclosure requirements will vary based on the type of securitized assets. For SDIs backed by loans, listed debt securities, or credit facilities, trustees must provide data concerning asset maturity profiles, overdue exposures, prepayment rates, recovery actions, loan-to-value ratios, and expected credit losses.

A separate format is proposed for SDIs backed by other asset types.

The markets watchdog also requested comprehensive details on credit enhancements, liquidity support, and any significant events that impact the creditworthiness of obligors (those who owe the payments) or the servicing of receivables (the process of managing and collecting payments owed).

Trustees are required to report any amendments made post-securitisation to loan terms or documentation and provide updates on the industry and geographical distribution of asset pools.

The disclosure formats aim to support automated supervision and automated processing of data, SEBI said, in alignment with its regulatory push for greater data transparency and market discipline in line with the Reserve Bank of India's revised securitisation framework.

The consultation paper stems from a review undertaken by a Sebi's working group tasked with aligning the Sebi (Issue and Listing of Securitised Debt Instruments and Security Receipts) regulations, 2008, with the Reserve Bank's 2021 guidelines on securitisation of standard assets.

The Securities and Exchange Board of India invites feedback from the public on the draft circular with regards to periodic disclosure requirements for trustee of the special purpose distinct entity until July 7.

(With Inputs From PTI)