New Delhi: Capital markets regulator Sebi on Thursday extended the timeline till January-end for entering the details of existing outstanding non-convertible securities in the security and covenant monitoring system hosted by depositories. Earlier, this was to be complied by October 31, 2022.

This is the second time Securities and Exchange Board of India (Sebi) has extended the deadline to comply with the rules. Earlier, the deadline was September 2022, which was extended to October 2022.

The regulator, in August 2021, asked depositories to use blockchain technology to record and monitor security creation as well as covenants of non-convertible securities.

The extension comes after Sebi received representations from debenture trustees (DTs), which cited operational or technical difficulties in entering details and sought extension of timeline for verifying the entries made by issuer.

“Accordingly, it has been decided that for existing outstanding non-convertible securities, issuers shall ensure that they enter the details into the system on or before January 31, 2023 and DTs shall verify the same by February 28, 2023,” Sebi said in a circular.

DTs will be required to submit a fortnightly progress report on status of compliance.

In a separate circular, Sebi asked depositories to ensure periodic monitoring of compliance with guidelines pertaining to ‘Security & Covenant Monitoring System’ issued by the regulator.
They have been directed to also bring to the notice of Sebi any instances of non-compliance, on a quarterly basis, within one month from the end of the quarter, in a specified format.

The regulator has also put in place a disclosure format for depositories. The new framework will be effective from April 1, 2023.

Sebi had in March last year issued the operational guidelines for security and covenant monitoring using Distributed Ledger Technology (DLT) or blockchain technology.

As the backbone of the DLT system would be uniqueness of assets recorded in the system, a unique identifier (asset ID) would be allotted for each asset offered by an issuer as security for the non-convertible securities.

For data exchange and verification across depositories, the format for unique asset ID would be a 12-digit alphanumeric string.

The DLT system would provide an alert to the issuer and the DT by having appropriate validation or duplicate checks in the system for identifying possible duplicate entries for assets of an issuer.

Under this, certain assets need to be tracked at portfolio level and no specific parameters for the underlying assets would be captured. It includes movable assets such as furniture and equipment, and current assets like portfolio of advances/ receivables.