The Securities and Exchange Commission of Pakistan (SECP) has issued functions and duties of debt securities trustees for issuance of debt securities both under the applicable private placement or public offering framework.
Through an S.R.O.15(I)/2017, the SECP has issued Structuring of Debt Securities Regulations, 2020 here on Monday.
At the same time, the SECP has repealed the Debt securities trustees Regulations, 2012.
Under the new regulations, the “debt securities trustee” means a person licensed by the Commission and appointed as Debt securities trustee by an Issuer through execution of the Trust deed. The debt securities trustee shall enter into an agreement with the issuer for issuance of secured debt securities through execution of Trust Deed, which inter- alia contain that the Debt securities trustee has agreed to act as a trustee under the Trust Deed for securing the interest of the Debt securities holders.
The debt securities trustee would also ensure that NOC is obtained by the Issuer from the Commission before the creation of trust relating to debt securities and the said trust is registered with relevant provisional authorities.
Debt securities trustee shall not make unsubstantiated claims, in order to induce customers, about qualifications of its professional staff or its capabilities to render certain services or its achievements concerning services rendered to other customers; involve in unfair competitive practices which are likely to be harmful to the interest of other Debt securities trustee, nor shall solicit business from customers on assurance of providing any undue benefit.
The SECP has also imposed certain restrictions on the business of debt securities trustee. A debt securities trustee shall not be eligible to act as a debt securities trustee to any ‘Issue’ by its associated companies or associated undertakings; where the debt securities trustee and its associated companies or associated undertakings collectively holds more than 30% shareholding or debt securities of the issuer.
The debt securities trustee would regularly monitor payment of profits to the debt security holders and redemption of the debt security and report the same to the Commission and the securities exchange on a semi-annual basis, highlighting default, if any.
The trustee would maintain proper record of the complaints received and ascertain that the debt securities have been converted, where required, in accordance with the provisions and conditions under which they were issued and call a general meeting of all debt securities holders, within such time period as provided in the Trust Deed.
Every Debt securities trustee shall designate any senior management officer as a compliance officer, SECP said.
The Debt securities trustee shall take all reasonable steps to ensure that no conflict of interest arises while undertaking any transaction and performing its duties.
The debt securities trustee shall also properly maintain the records including all contracts relating to the Issue to which it is acting as a Debt securities trustee including but not limited to the Trust Deed, letter of hypothecation, letter of lien, memorandum of deposit of title deed and the charge registration certificate, where applicable etc.; statements relating to profit payment and principal redemption; minutes of the general meeting of the debt security holders and special resolution passed therein and other specified documents.
The debt securities trustee shall ensure that the record referred to in subregulation (1) is maintained and preserved in good order for a period of at least ten years from the date of complete redemption of the Issue.
The SECP has also issued the functions and duties of Investment agent. An Investment agent shall enter into an agreement with the issuer for issuance.