Specification of the terms and conditions for Debenture Trustees for carrying out activities outside the purview of SEBI
Summary
This circular specifies the terms and conditions for Registered Debenture Trustees to undertake activities outside the purview of SEBI. It mandates that such non-regulated activities must be conducted through separate business units with strict Chinese Wall protections. The document outlines specific disclosure, record-keeping, and compliance reporting obligations for these entities.
Text
The DT shall undertake such activities that are not regulated by SEBI only at arms’ length basis through one or more Separate Business Unit (SBU) of the DT, segregated by a Chinese Wall and ring-fenced from the SEBI regulated activities.
The DT shall ensure that the grievance redressal mechanism including escalation mechanism, if any, with respect to activities not regulated by SEBI, is separate and distinct from the grievance redressal mechanism provided for activities regulated by SEBI and is part of the SBU.
The DT shall prepare and maintain separate records in the SBU, for the non-SEBI regulated activities.
The staff of the DT engaged in the non-SEBI regulated activities, should be distinct from the staff handling activities regulated by SEBI. However, the staff can cross the Chinese Wall, subject to due procedures approved by the board of directors of the DT. Such Chinese Wall shall not be applicable for the key managerial personnel.
The other resources including the information technology infrastructure may be shared between the activities regulated by the Board and activities that are not regulated by the Board subject to due procedures approved by the board of directors of the DT.
The DT shall duly disclose on its website, the list of the activities that are not SEBI regulated, along with a disclosure that none of the SEBI investor protection mechanism will be available for any grievances or disputes arising out of or pertaining to such activities.
If the DT undertakes activity regulated by other Financial Sector Regulator (FSR), the name of the relevant FSR should also be specified in disclosures to relevant stakeholders. Further, the DT shall comply with the regulatory framework, if any, as may be specified by the respective FSR...
The DT shall ensure that its advertising or marketing material and its webpage displaying information pertaining to non-SEBI regulated activities, shall be separate and distinct from SEBI-regulated activities.
Before undertaking any activities which are not regulated by SEBI, there shall be an upfront written disclosure by the DT... to the relevant stakeholders including clients, beneficiaries and counterparties... confirmation shall also be obtained from the stakeholders... that they have understood the nature of the activity, risks involved and non-availability of any SEBI investor protection mechanism.
For the existing and ongoing arrangements w.r.t the non-SEBI regulated activities, a DT shall make disclosures... and obtain confirmation/ acknowledgement from the stakeholders... and submit a compliance report to the Board, within a period of six months from the date of this circular.
The DT undertaking any activity not regulated by SEBI shall ensure that, in respect of activities not regulated by the Board, it submits an undertaking as part of the half-yearly compliance report confirming compliance with the requirements of regulation 9C of the DT Regulations and the provisions of this circular...
Further, as specified in the first proviso to regulation 9C(1) of the DT Regulations, a DT which is also regulated by the Reserve Bank of India, shall carry out the activity of DT through SBUs of such DT. Therefore, the terms and conditions specified at paragraph 2 above shall be complied with by such SBU.
Source: SecMarx — Specification of the terms and conditions for Debenture Trustees for carrying out activities outside the purview of SEBI. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.