In a consultation document On Saturday, the markets watchdog proposed replacing the term “consent letter” with “debenture trust agreement” in the Sebi (Issue and Listing of Non-Convertible Securities) rules or NCS regulations.
The debenture trust agreement (DTA), which legally validates the appointment of a debenture trustee, is considered by the regulator to be more meaningful than the term “consent letter” used previously.
The change will help investors make more informed decisions when investing in bonds.
Earlier, a working group noted that the issuer obtains the consent letter from the bond trustees before initiating the offering, while the DTA is executed between them at a later stage. However, the consent letter does not seem to have any legal sanctity, it added. Therefore, the working group agreed that the legal document validating the appointment of the bond trustee is the DTA and not the consent letter. Sebi also said, “The bond trustee agreement will be made available to investors by using a ‘QR code’ in the offer document.” This digital access will enable investors to review the agreement, ensuring that they are fully informed about the role and obligations of the trustee and have easy access to critical information.
The Securities and Exchange Board of India (Sebi) has invited comments and suggestions from the public on the consultation paper till September 6.
The move comes in response to recommendations by a task force tasked with improving the ease of doing business in the financial sector, in line with targets set by the government in the Budget for fiscal year 2023-24.
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