Operational guidelines for ‘Security and Covenant Monitoring’ using Distributed Ledger Technology (DLT)
Summary
This circular establishes operational guidelines for monitoring security and covenants using Distributed Ledger Technology (DLT) for non-convertible securities. It mandates the use of a unique 12-digit Asset ID for each asset offered as security, with specific formats defined in Annexure-I. The document outlines procedures for duplicate detection, trigger events regarding security cover, and applicability timelines for new issuances and existing outstanding securities.
Text
With effect from April 01, 2022, recording of asset details, allotment, listing and payment of interest or redemption shall be available in the system.
A system generated unique identifier (Asset ID) shall be allotted for each asset offered by Issuer as security for the non-convertible securities.
Format for unique Asset ID shall be a 12-digit alphanumeric string, which will be generated as provided in Annexure-I.
The DLT system will provide an alert to the Issuer and the DT by having appropriate validation/ duplicate checks... Issuers shall ensure that the entry of the asset is made only once in the DLT system for generation of the unique Asset ID, which shall be verified by the DT.
To begin with, the following assets shall be tracked at portfolio level and no specific parameters for the underlying assets would be captured: movable assets viz furniture, equipment, inventory etc.; current assets viz portfolio of advances/ receivables, etc.; any other asset of similar nature.
On detection of duplicate/ near duplicate asset, an alert shall be generated and sent to the Issuer and DT to cross check and verify the details entered into the system for assets creation. The Issuer and the DT will be able to override the alert after verifying the same.
DTs, on a yearly basis, will reconcile the list of assets recorded in the system for an Issuer and in case any duplicate entry is found for an asset, it shall take necessary steps to eliminate such duplicate entries in the system and verify security cover thereof and take remedial action, if required.
Any event which reduces the security cover below the mandated/ stipulated limit, as per regulation 54 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, shall be updated by the issuer in the system immediately. Such event shall be termed as ‘trigger event’ and depositories shall send such trigger events’ alerts to all the concerned stakeholders.
Paragraph 9 and para 10.1(c) regarding “asset cover” stands deleted; All references to term “asset cover” stand deleted.
Issuer shall upload all the credit rating information for non-convertible securities including rating action, date of press release and hyperlink for press release of credit rating. CRAs shall access the platform to validate the rating information uploaded by the Issuer. In case of any discrepancy, Issuer or CRAs shall notify the same on system and update the correct information in the system within three working days of such notification.
All issuers proposing to issue non-convertible securities on or after April 01, 2022 shall record the details in the system before activation of ISIN.
Depositories are advised to allot or unfreeze an existing ISIN (in case of re-issuance), as applicable only after confirming recording of above-mentioned information.
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Source: SecMarx — Operational guidelines for ‘Security and Covenant Monitoring’ using Distributed Ledger Technology (DLT). Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.