Compliances for issue and listing of non-convertible securities, securitised debt instruments, security receipts, municipal debt securities and commercial paper

INTRODUCTION

The Securities and Exchange Board of India (“SEBI”) in the exercise of its powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992, Regulation 55 of under the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 (“SEBIs NCS Regulations”)ⁱ Regulation 29 of the SEBI (Issue and Listing of Municipal Debt Securities) Regulations, 2015 (“SEBI ILDM Regulations”)ⁱⁱ and Regulation 48 of the SEBI (Issue and Listing of Securitised Debt Instruments and Security Receipts) Regulations, 2008 (“SEBI SDI Regulations”)ⁱⁱⁱ has issued a Master Circular for Issue and listing of Non-convertible Securities, Securitised Debt Instruments, Security Receipts, Municipal Debt Securities and Commercial Paper vide circular no. SEBI/HO/DDHS/PoD1/P/CIR/2023/119 dated July 7, 2023 (“Circular”).^iv This Circular provides for effective regulation of the corporate bond market and consolidation of the related circulars for market stakeholders’ easy compliance. Circular covers instruments under SEBI NCS Regulations, SEBI SDI Regulations and SEBI ILDM Regulations.

The following are the key highlights of the Circular:

1. Recognised stock exchanges, depositories, other SEBI registered intermediaries, Issuers and other stakeholders are directed to disseminate the provisions of the Circular on their website and monitor the compliance of this Circular by issuer companies.


2. Disclosures in case of public issue of securities by the following::
   1. Investors:
      1. The format of the application form is provided at Annex-IIA and IIB of the Circular to be filed by the investor
      2. SEBI NCS Regulations provided an option to investors to apply in public issues of debt securities with the facility to block funds through Unified Payments Interface (“UPI”) mechanism for application value upto INR 2,00,000 (Rupees Two Lakhs Only). This value has been enhanced to INR 5,00,000 (Rupees Five Lakhs Only) vide circular no. SEBI/HO/DDHS/P/CIR/2022/0028 dated March 8, 2022, for UPI based Application Supported by Blocked Amount (“ASBA”).
   
   
   2. Companies/ Issuers:
      1. Issuance of the abridged prospectus in the format as specified. SEBI vide circular no. SEBI/HO/DDHS/PoD1/CIR/P/2023/150^v dated September 04, 2023, developed new format of abridged prospectus for public issues of non-convertible debt securities and/or non-convertible redeemable preference shares to provide greater clarity and consistency in the disclosures across various documents and to provide additional but critical information in the abridged Prospectus replacing the Part B of Schedule I of the SEBI NCS Regulations. The structure for disclosures is provided at Annex-I and directions for investors on how to complete the application form is provided at Annex-II of the Circular. The issuer/merchant bankers are required to guarantee that the abridged prospectus's disclosures are accurate, sufficient, and free from any misleading or misstatement
      2. Following disclosures need to be made in the offer document:
         • Provisions relating to fictitious applications
         • Declaration by board of directors that the underwriters, if any, have sufficient resources to discharge their respective obligations;
         • Reservation in the issue, if any;
         • Utilization details regarding the previous issues of the issuer as well as its group companies, for the past 3 (three) years;
         • Benefit/ interest accruing to promoters/ directors out of the object of the issue; and
         • Details regarding material contracts other than the contracts entered in the ordinary course of business and the material contracts entered within the previous 2 (two) years.
   
   
   3. Non-banking finance company, housing finance company and public financial institution
      1. when the object of the public issue is to entail loan to any entity which is a group company, then the disclosures to be made includes details like name of the borrower, amount of advances/ exposures to such borrower and percentage of exposure.
      2. such companies shall disclose the details of the lending done out of the issue proceeds of debt securities in the last 3 (three) years.
      3. in the offer documents, they shall disclose a portfolio summary with regard to industries/ sectors to which borrowings have been made, NPA exposures of the issuer for the last 3 (three) financial years, quantum and percentage of secured and unsecured borrowings and any change in promoters’ holdings during the last financial year beyond the threshold, as prescribed by RBI.
   
   
   4. SCSBs and intermediaries:
      
      
      1. Provide acknowledgement to the investor by giving a counter foil or specifying the application number to the investor as a proof of acceptance of the application form.
      2. Pursuant to the above acknowledgement the SCSB or the other intermediaries, as the case may be, shall capture and upload details in the electronic bidding system as specified by stock exchanges and may begin blocking of funds as specified in the form and to the extent of the application money.
      3. Further, SCSBs shall also carry out actions such as signature verification, blocking of funds etc forwarding these forms to the registrar to the issue. They shall also guide investors in making applications in public issues.
      
      
   5. Role of Stock Exchanges:
      1. Stock Exchanges should allow the modification of the selected fields of bid including DP ID/ Client ID or PAN, bank code and location code on a daily basis within a specific timeline as mentioned hereinbelow.


3. Compliance by the issuer in case of a private placement of debt securities:
   
   
   1. As per Regulation 50(4) and Clause 2.2.e of Schedule 2 of SEBI NCS Regulations, the issuer seeking to list its non-convertible securities on a recognized stock exchange issued by way of a private placement shall comply with the terms and conditions as may be specified by the Board from time to time and shall make adequate disclosures in the offer document regarding the features of these instruments and relevant risk factors. One such condition with regards to the face value of each debt security or non-convertible redeemable preference share (“NCRPS”) issued and/or traded has been modified to INR 1,00,000 (Rupees One Lakh Only) from INR 10,00,000 (Rupees Ten Lakhs Only) vide circular no. SEBI/HO/DDHS/P/CIR/2022/00144 dated October 28, 2022. Further, with respect to a shelf placement memorandum, the issuer has an option to either keep the face value at INR 1,00,000 (Rupees One Lakh Only) or INR 10,00,000 (Rupees Ten Lakhs Only).
   
   
   2. A private placement of debt securities and NCRPS shall be made through the Electronic Book Provider (“EBP”) platform and the value of such securities have been modified to INR 50,00,00,000 (Rupees Fifty Crores Only) from INR 1,00,00,00,000 (Rupees Hundred Crores Only) vide circular no. SEBI/HO/DDHS/DDHS_Div1/P/CIR/2022/00139 dated October 10, 2022.
   
   
   3. With regards to ISINs
      
      
      1. Issue of debt securities from April 1, 2023:maximum of 14 (fourteen) ISINs maturing in a financial year is allowed for an issuer. Out of this 9 (nine) ISINs are allowed for plain vanilla debt securities and a maximum of 5 (five) ISINs are allowed for structured and market linked debt securities.
      
      
      2. Issue of debt securities up to March 31, 2023 and maturing in later years:maximum of 17 (seventeen) ISINs maturing in a financial year is allowed for an issuer. Out of this 12 (twelve) ISINs are allowed for plain vanilla debt securities and a maximum of 5 (five) ISINs are allowed for structured and market linked debt securities.
      
      
      3. The issuer shall within 15 (fifteen) days from the end of every half year (i.e. April 15 and October 15), submit a statement, to the stock exchange and depository containing data in the format as prescribed in the Circular.
      
      
   4. Non-Banking Finance Company, Housing Finance Company and Public Financial Institution shall disclose the details of the lending done out of the issue proceeds of debt securities in the last 3 (three) years. And in the offer documents, they shall disclose a portfolio summary with regard to industries/ sectors to which borrowings have been made, NPA exposures of the issuer for the last 3 (three) financial years, quantum and percentage of secured and unsecured borrowings and any change in promoters’ holdings during the last financial year beyond the threshold, as prescribed by RBI.
   
   
   5. Details of issuers issuing non-convertible securities through private placement for whom accessing the EBP platform is not mandatory to upload details of such private placements in accordance with the format given at Annex-XV-A of the Circular which includes the Name, QIB/Non-QIB, Category (i.e., Scheduled Commercial Banks, MF, Insurance company, Pension Fund, Provident Fund, FPI, PFI, Corporate, others) and the Amount invested in Crore.
   
   
   6. The aforementioned information must be uploaded with any one of the EBPs within 1 (one) working day of allotment of securities and regular updates need to be made by the EBPs at the end of the day post-acceptance of the bid by the issuer in the prescribed format. Further, details of all types of primary issuances (Public/EBP/Non-EBP) of listed debt securities shall be displayed on a regular basis by stock exchanges and depositaries on their website as per format given in Annex-XV-C of the Circular.


4. Issuer to pay additional interest for non-payment of interest/ redemption::

   Sl. No	Securities	Interest rate
   1.	Debt securities issued on private placement or public issue	2% p.a. over the coupon rate
   2.	NCRPS issued on private placement or public issue	2% p.a. over the rate of dividend



5. Timelines for issuance of the securities through the following ways:
   
   
   1. Public issue
      
      
      1. Circular under Chapter I (Application process in case of public issues of securities and timelines for listing)comprises detailed timelines for issuance and listing of specified securities after the closure of public issue. Further, the requirement of 6 (six) working days (T+6 days) have been reduced to 3 (three) working days (T+3) vide circular no. SEBI/HO/CFD/TPD1/CIR/P/2023/140 dated August 09, 2023^vi .
      
      
      1. Instruments covered under this include non-convertible securities, municipal debt securities and securitised debt instrument.
      
      
      2. ii) Timelines for each of the steps involved, from submission of the application for in-principle approval to the listing of the security on the stock exchange(s), are given below:
   
   

   Sl. No	Category	Particulars	Timeline
   1.	Applications	a. Submission of Applications Retail – i) on or before 5 PM (online ASBA through 3-in-1 accounts) ii) on or before 4 PM (Bank ASBA like UPI, Internet Banking, Mobile Banking etc.) iii) on or before 3 PM (Physical Applications) Non-Retail – i) on or before 4 PM (Bank ASBA like UPI, Internet Banking, Mobile Banking etc.) ii) on or before 3 PM (Electronic Applications) iii) on or before 12 PM (Physical Applications) b. Submission of final certificates from SCSBs, Sponsor Bank for confirmation of funds blocked. i) UPI ASBA – Before 09:30 pm ii) All SCSBs for Direct ASBA – Before 07:30 pm iii) Syndicate ASBA – Before 07:30 pm c. UPI Mandate acceptance time- 5pm	T dayvii
   2.	Bids	a.Bid Modification b.Validation of Bid with Depositories	From Issue Opening Day to 5pm on T Day
   3.	Issue Closure	a. For QIB and NII categories- 4pm b. For Retail and other reserved categories- 5pm	T day
   4.	Third Party Check on applications	a. On UPI Applications- on daily basis before 9:30 am b. On Non-UPI Applications- on daily basis before 1pm.	T+1 day
   5.	Basis of Allotment	a. Finalization of rejections and completion of basis of allotment- before 6 pm b. Approval of basis of allotment by designated stock exchange- before 9pm	T+1 day
   6.	Issuance of fund transfer instructions	These instructions shall be given to all SCSBS (in case of Bank ASBA and Online ASBA) and Sponsor Bank (in case of UPI ASBA) a. Initiation- not later than 9:30 am b. Completion- before 2pm for fund transfer c. Completion- before 4pm for unblocking	T+2 day
   7.	Corporate action execution for credit of shares	a. Initiation- before 2pm b. Completion- before 6pm	T+2 day
   8.	Filing of listing application with Stock Exchanges and issuance of trading notice	Before 7:30 pm	T+2 day
   9.	Publish allotment advertisement	On website of Issuer, Merchant Banker and RTI- before 9pm	T+2 day
   10.	Trading starts and Newspaper Advertisement	Publish allotment advertisement in newspapers not later than T+4 day	T+3 day

   
   
   2. Private placement basis
      
      
      1. Circular under Chapter VII (Standardization of timelines for listing of securities issued on a private placement basis) comprises detailed timelines for issuance and listing of securities on a private placement basis lastly updated vide circular no. SEBI/HO/DDHS/DDHS_Div1/P /CIR/2022/167 dated November 30, 2022.
         
         
         1. Instruments covered under this includes non-convertible securities, securitised debt instruments, security receipts and municipal debt securities.
         2. Timelines for each of the steps involved, from submission of the application for in-principle approval to the listing of the security on the stock exchange(s), are given below^viii :

         Sl. No	Category	Timeline	Nature of activity (Compliances)
         			EBP	Non-EBP
         			1	In-principle approval to the stock exchange(s)	Prior to T-2/ T-5 (EBP); Prior to T (Non-EBP)	Issuer shall ensure receipt of in-principle approval from the stock exchange(s) prior to the date of providing the placement memorandum and term sheet to EBP.	Issuer shall ensure receipt of in-principle approval from the stock exchange(s) prior to issue open date.
         			2.	Bidding announcement	On or before T-1.	Issuer shall provide the bidding start time and close time to EBP, on or before T-1.	Issue period (open and close date) is to be disclosed by the Issuer in the Placement memorandum.
         3.	Day of bidding/ Issue period	T	Issuer provides provisional allocation to the bidders and communicate about the allotments and pay-in obligations to the bidders.	On issue closure date, issuer shall finalise the allotments to investors and communicate relevant details to them.
         4.	ISIN allocation/ assignment/ confirmation by Depository	On or before T+1	Issuer shall ensure receipt of ISIN from a Depository prior to pay-in.
         5.	Settlement	On or before T+1/ T+2 (as per settlement cycle chosen by the Issuer) (EBP); On or before T+2 (Non-EBP);	Issuer to: a. finalise allocation on communicate of receipt of money by the bidder; b. Pay stamp requisite duty; c. File Corporate action file by RTA; and d. Receive credit confirmation letter by the depositories.	Issuer to: a. finalise allocation on communicate of receipt of money by the investors; b. Pay stamp requisite duty; c. File Corporate action file by RTA; and d. Receive credit confirmation letter by the depositories.
         6.	Listing	On or before T+3.	Issuer to make an application for listing of securities to the stock exchange(s).

         
         
         3. Penalty:In case of delay in listing of securities as specified above, the issuer shall pay penal interest of 1% (one percent) p.a. over the coupon/ dividend rate for the period of delay to the investor (i.e., from the date of allotment to the date of listing).
         
         
         4. Deviation from timeline mentioned:: stock exchanges may permit deviation, if found necessary, subject to the outer limit of T+3 days for conclusion and after recording the reasons.


6. Disclosure by an issuer in case of structured or market-linked debt securities:
   
   
   1. only those securities that return the principal amount in full at the end of the tenor of the instrument shall be issued and listed;
   2. issuer to have a minimum net worth of at least INR 100,00,00,000 (Rupees Hundred Crores Only) at the time of issue;
   3. displaying the risk factor attached to the securities;
   4. all commissions paid by issuer to distributor for selling/ distribution of securities to end investors are to be disclosed in the offer document; and
   5. appointment of third-party valuation agency and cost incurred for valuation to be disclosed in offer document.


7. Circular includes the obligations of the issuer, debenture trustee(s), depositories and stock exchange(s) for transactions in defaulted debt securities
   
   
   1. Stock exchanges to not allow any transaction in debt securities 2 (two) working days prior to their maturity/ redemption date.
   2. Depositories to restrict transactions of such debt securities till the time its status of payment is determined.
   3. Issuer to intimate to the stock exchanges, depositories and debenture trustees the status of payment of debt securities and inform the debenture trustee of any change in bank details within 1 (one) working day of payment/ redemption date.
   4. Stock exchanges update the ISIN master file and lift restrictions on transactions in debt securities within 2 (two) working days from the date of intimation from issuer or debenture trustee(s) that issuer has defaulted on payment obligations.
   5. The issuer shall inform the stock exchange(s), depositories and debenture trustee(s) latest by the second working day of April of each financial year on the updated status of payment of the debt securities.
   6. Circular mentions the timeline for allowing transactions in defaulted debt securities, which is as follows:



Sl. No	Event	Activity to be undertaken	Parties	Timelineix
1.	Execution of debenture trust deed	Pre-authorization to seek debt redemption payment related information from issuer’s bank	Issuer to debenture trustee(s)	At the time of execution of the deed
1.	Any change in bank details of issuer for making debt redemption payment	Information regarding updated bank details	Issuer to debenture trustee(s)	Within 1 (one) working day of event.
3.	Creation of ISIN/ listing of debt securities	Intimation of Redemption date	Issuer to depositories, stock exchange(s)	N.A.
4.	Redemption/ maturity date (T day)	Intimate status of payment of debt securities	Issuer to debenture trustee(s), depositories, stock exchange(s)	T+1
5.	Any development that impacts the status of default of the concerned debt securities (including restructuring of debt securities, IBC, its repayment, etc.)	Intimate updated status of payment of debt securities	Issuer to depositories, stock exchange(s)	Within 1 (one) working day of the event.
6.	Continuous assessment of Payment	Intimate Status of payment of debt securities	Issuer to depositories, stock exchange(s)	2nd (second) working day of April every FY.



8. Disclosure by an issuer in case of issuance of green debt securities:
   
   Regulation 26 of the SEBI NCS Regulations provides for the issue of Green Debt Security (ies) (“GDS”) . According to Regulation 2(1)(q) GDS refers a debt security issued for raising funds to be used for projects and/or assets falling under certain specified categories. Circular in Chapter IX provides for the disclosures to be made by the issuer issuing GDS in the offer document for public issue/ private placements:
   
   
   1. The purpose of issue of such GDS i.e., the environmental sustainability objectives;
   2. Brief details of the projects for which the proceeds are being raised including how the project falls under the ambit of Regulation 2(1)(q) of NCS Regulations;
   3. Details of taxonomies, green standards or certifications both Indian and global, if any referenced and the alignment of projects with said taxonomies, related eligibility criteria, and exclusion criteria, if applicable;
   4. Details of the alignment of the objective of the issue with India’s intended nationally determined contributions in case of the proceeds raised through issuance of transition bonds;
   5. Details of an indicative estimate of distribution of proceeds raised through issuance of GDS between financing and refinancing of project(s) and/ or asset(s), if applicable;
   6. The issuer shall appoint an independent third-party reviewer/certifier, for reviewing/certifying the processes of the project eligible for financing through the proceeds GDS; and
   7. g. The issuer shall make following additional disclosures along with its annual report and financial results:
      1. Utilisation of the proceeds of the issue, as per the tracking done by the issuer using the internal process as disclosed in offer document.
      2. Details of unutilized proceeds including the temporary placement/utilization of unallocated and unutilized proceeds from each ISIN of GDS issued by the issuer.
      3. Information, on a project-by-project basis, pertaining to reporting of the environmental impact of the projects financed by the GDS.


9. Circular provides norms to avoid greenwashing pursuant to the issue of GDS.
   The term Greenwashing refers to making false, misleading, unsubstantiated, or otherwise incomplete claims about the sustainability of a product, service, or business operation. In order to address the concerns regarding greenwashing, the issuer shall ensure the following:
   
   
   1. Continuous Monitoring: The issuer shall continuously monitor to check whether the path undertaken towards more sustainable form of operations is resulting in reduction of the adverse environmental impact and contributing towards sustainable economy, as envisaged in the offer document.
   2. Appropriate utilisation of funds: The issuer shall not utilize funds raised through green bonds for purposes that would not fall under the definition of GDS under the NCS Regulations. In case there arises a situation where the funds are used inappropriately come to light the same shall be disclosed to the investors and, if required, by majority of debenture holders, undertake early redemption of such debt securities;
   3. Avoid Misleading labels: The issuer shall not use misleading labels, hide trade-offs or cherry pick data from research to highlight green practices while obscuring others that are unfavourable in this behalf.


10. Additional disclosures by an issuer in case of issuance of transition bonds (“GB-T”) a sub-category of GDS::
    
    
    1. Issuer shall mention GB-T in the offer document to differentiate transition bonds from GDS.
    2. The offer document shall also mention the details of the Transition plan containing the following:
       1. Interim targets;
       2. Brief of the project implementation strategy;
       3. Usage of the type and other details of the technology used for the implementation of the project; and
       4. Mechanism to supervise the utilization of the funds raised through GB-T and the implementation of the transition plan.


11. Disclosures by the Large Corporate:
    
    All listed entities (except for Scheduled Commercial Banks) that fall within the description of Large Corporate (“LC”) to raise not less than 25% (twenty-five percent) of its incremental borrowings, during the financial year after the financial year in which it is identified as an LC, by way of issuance of debt securities. LC to make the following disclosures to the stock exchanges, where its security(ies) are listed:
    
    
    1. Within 30 (thirty) days from the beginning of the FY, disclose the fact that they are identified as an LC, in the format as provided in Annex- XII-A of the Circular..
    2. Within 45 (forty-five) days of the end of the FY, the details of the incremental borrowings done during the FY, in the formats as provided in Annex- XII-B1 and Annex- XII-B2 of the Circular.


12. Disclosure by an issuer while issuing debt instruments that are non-equity instruments and form a part of a bank’s or NBFC’s capital as per Chapter V of the SEBI NCS Regulation: :
    
    
    1. Details of all the conditions upon which the call option will be exercised by issuers for these instruments, in the placement memorandum.
    2. Risk factors, including all the inherent features of these instruments.
    
    
13. As per Regulations 17(1) and 20 of SEBI NCS Regulations, stock exchanges and depositories shall jointly create, host and maintain a centralised database of corporate bonds, held in demat form. With this comes certain responsibilities upon the issuer that are listed below:
    
    
    1. Issuers shall fill all the requisite fields as provided in Annex- XIV-A in the centralized database at the time of allotment of the ISIN. Depositories shall verify the information as provided by issuer at the time of activation of ISIN.
    2. Post listing of securities, Issuers shall submit information in the requisite fields as provided in Annex- XIV-B to any of the stock exchanges where their securities are listed on a periodical basis within 30 (thirty) days from the end of the financial year.
    CRAs and Denture Trustees to verify the information uploaded by the issuer and need to notify stock exchanges within the stipulated time in Annex-XIV-C about discrepancy, if any.


14. Circular provides the following guidelines for reporting of trades: - : :
    
    
    1. Reporting and clearing of trades in non-convertible securitiesAll person(s) dealing in non-convertible securities, regardless of their SEBI registration, to report over-the-counter (“OTC”) trades in the specified format to platforms provided by stock exchanges within 15 (fifteen) minutes of the trade. Regulated entities, listed corporates, institutional investors, all India financial institutions, and other entities allowed by stock exchanges can use the Request for Quote (RFQ) platform to negotiate transactions among themselves.
    
    
    2. Reporting and clearing of trades in SDIs:Trades in Structured debt instruments (“SDI”) must be reported promptly within 15 (fifteen) minutes of trade on designated platforms, with continuous data and relevant disclosures provided by the stock exchanges by both the buyer and the seller.
    
    
    3. Reporting and clearing of trades in CPs or CDsSEBI regulated entities must report their OTC trades in Commercial Papers (“CPs”) and Certificate of Deposits (“CDs”) on the Fixed Income Money Market and Derivatives Association of India (“FIMMDA”) reporting platform, ensuring timely dissemination of market information. The settlement of these trades follows the existing process used for non-convertible securities and is conducted through specified clearing corporations.


15. Other guidelines:
    
    
    1. The RFQ platform of stock exchanges will operate from 9AM to 5PM on working days, ensuring harmonious norms. Reporting platforms will be active from 9AM to 5:15PM, and trades occurring after 5PM should be reported between 9AM to 9:15AM the next day. .
    2. Stock exchanges shall coordinate for data dissemination and ensure establishment of links between trade repositories and the Centralized Database.


16. Provisions with respect to the listing of Commercial Papers are as follows: :
    
    
    1. If an issuer has previously submitted a General Information Document under Regulation 50A(1) of SEBI NCS Regulations for the issuance of non-convertible securities with a stock exchange within a year, and is still valid at the time of applying for the listing of CP, the issuer must submit an application for listing along with the necessary disclosures mentioned below to the concerned stock exchanges:
       
       
       1. Details of current tranche including ISIN, amount, date of issue, maturity, all credit ratings including unaccepted ratings, date of rating, name of credit rating agency, its validity period, declaration that the rating is valid as at the date of issuance and listing, details of issuing and paying agent and other conditions, if any.
       2. CP borrowing limit issued during the last 2 (two) years.
       3. End-use funds details.
    
    
    2. Other issuer(s):
       
       
       1. Details pertaining to the issuer including name, address, business, directors’ details, list of top 10 (ten) holders of equity shares of the company as on the latest quarter end, statutory auditor of the issuer etc.
       2. Details of default(s) in payment of the amount of CPs, ongoing or outstanding litigation, if any and any event having impact on the financials/ credit quality of the issuer.
       3. Details of the borrowings of the company as on the latest quarter end.
       4. Other disclosures same as mentioned above in point 14(a).
       5. Financial information not older than six months from the date of application for listing.
    
    
    
    3. Continuous disclosure requirements for listed CPs: issuer(s) to comply with the provisions mentioned under SEBI LODR Regulations, 2015.


17. In order to streamline the operations of Online Bond Platform Providers (“OBPPs”) and to facilitate the participation of investors in the bond market, the following regulatory framework has been set up:
    
    
    1. OBPPs should be a company incorporated in India and register itself as a stock broker in the debt segment of the stock exchange(s);
    2. They can offer any products or services or securities on their website/ platform other than listed debt securities, listed municipal debt securities and listed securitised debt instruments; debt securities, municipal debt securities and securitised debt instruments proposed to be listed through a public offering; listed Government Securities, State development loans and treasury bills; and listed sovereign gold bonds;
    3. A holding company, subsidiary or associate of an OBPPs or any third party shall not utilize the name/ brand name/ any name resembling to that of the OBPPs for undertaking any activity or offering products/ securities or services that are not regulated by financial sector regulator;
    4. It shall not have on its Online Bond Platform or website any link or tab to websites/platforms of its holding company, subsidiary or associate, undertaking any activity or offering products/ securities or services; and
    5. Further, OBPPs need to comply with the requirements mentioned in Annex-XXIA of the Circular.
    
    Non-compliance with any of the provisions of this Circular shall attract liability under the SEBI Act and any rules, regulations and circulars issued thereunder.


18. SEBI introduced a dedicated debt segment in January, 2013 allowing stock exchanges to offer electronic, screen-based trading with features like order matching and negotiated trades. In February 2020, National Stock Exchange of India Limited and Bombay Stock Exchange Limited launched RFQ platforms, expanding their existing platforms to bring transparency to bilateral OTC deals. Recently, SEBI has permitted stock brokers registered under debt segment to place/seek bids on the RFQ platform on behalf of clients, expanding market participation in the corporate bond market. Stock exchanges are currently using the Real-Time Gross Settlement (“RTGS”) channel for settling trades conducted on the RFQ platform involving listed corporate bonds, commercial paper, and securitized debt instruments. Furthermore, authorized banks and payment aggregators regulated by the Reserve Bank of India may also be used for trade settlement on the RFQ platform.


19. According to Regulation 23(6) r/w Regulation 2(1)(r) of SEBI NCS Regulations, it is mandatory for an issuer company to amend their Articles of Association (“AoA”) by September 30, 2023, to include provisions for the board of directors to appoint a person nominated by the debenture trustee. This requirement also applies to Investment Managers/Managers of Infrastructure Investment Trust (“InvITs”) /Real Estate Investment Trusts (“REITs”) registered with SEBI.


20. To facilitate the clearing and settlement of repo transactions in debt securities, SEBI permitted the establishment of a Limited Purpose Clearing Corporation (“LPCC”). One such designated LPCC is the AMC Repo Clearing Limited (“ARCL”). The LPCC will notify eligible issuers based on its risk management policy and stock exchanges will collect 0.5 basis points of the issuance value of debt securities per annum, based on maturity and transfer the amount to an escrow account before allotment.


21. Legal Entity Identifier (“LEI”) is a unique 20-character code used as a global identifier for legal entities involved in financial transactions. Its purpose is to establish a comprehensive reference data system that identifies every legal entity participating in financial transactions worldwide. Currently, RBI directions require non-individual borrowers with an aggregate exposure above INR 25,00,00,000 (Rupees Twenty-Five Crores Only) to obtain an LEI code. The following new directions have been issued pertaining to the same vide circular no. SEBI/HO/AFD-PoD-2/CIR/P/2023/0127^x dated July 27, 2023:
    
    
    1. It is mandatory now for all non-individual foreign portfolio investors (“FPIs”) to provide LEI details in the common application form. Accounts of FPIs whose LEI code has expired / lapsed shall be blocked for further purchases in the securities market till the time the LEI code is renewed by such FPIs.
    2. Issuers with outstanding listed non-convertible securities, securitized debt instruments, and security receipts as of August 31, 2023, must obtain and report their LEI code in the respective databases or depositories by September 1, 2023.
    3. Issuers planning to issue and list such securities on or after September 1, 2023, need to report their LEI code during the allotment process.

CONCLUSION
The Circular seeks to consolidate all the operational circulars covering instruments under SEBI NCS Regulations, SEBI SDI Regulations and SEBI ILDM Regulations including non-convertible securities, securitised debt instruments, security receipts, municipal debt securities and commercial paper. The Circular mentions the requirements issuers, recognised stock exchanges, depositories, other SEBI registered intermediaries, and other stakeholders need to comply while participating in the corporate bond market.