19 June 2008

Corporate debt market – the last of the R.H. Patil Recommendations implemented by SEBI

The third big ticket regulation – one simplifying the issue and listing of corporate debt securities is notified. It has been put on the SEBI website only today, though the notification shows it as 6th June 2008. The SEBI (Issue and Listing of Debt Securities) Regulations 2008 rewrites the entire regulatory philosophy of regulating debt securities where the equity of a company is already listed. Since extensive set of disclosure norms are already prescribed, the philosophy is to give a light touch set of regulations and disclosures – and virtually make the issue shelf. Of course, the liabilities for misstatement etc of merchant bankers and other intermediaries is not diluted. The point of the regulation is to encourage private placement of corporate debt followed by listing in the markets. Even if there is a public issue by a company whose equity is listed, the burdens are substantially lowered for the reason cited above – though compliance with Schedule II disclosure as mandated by the Companies Act 1956 cannot be and is thus not diluted – but at the same time is made principle based. A reasonable explanation is given in the press release of today. To get a fuller idea, see the consultative paper issued when the draft regulations were exposed for public comment – the philosophy of that paper is retained in full in the final regulation.

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