ISLAMABAD: To promote debt market in the country, the Securities and Exchange Commission of Pakistan (SECP) has issued revised functions and duties of Debt Securities Trustees (DSTs) for providing a comprehensive regulatory framework for licensing and regulation of the DSTs.
According to the revised Debt Securities Trustees Regulations, 2017, issued through SRO 1384(I)/2020 by the SECP, a debt securities trustee shall enter into an agreement with the issuer for issuance of secured debt securities through execution of trust deed, which interalia 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: Provided that agreement must be entered before the subscription period.
Explaining the maintenance of records by debt securities trustee, the SECP explained that the debt securities trustee shall ensure that the specified record is maintained and preserved in good order for a period of at least 10 years from the date of complete redemption of the issue.
The DSTs should maintain high standard of integrity and fairness in performing its functions and discharging all its obligations under the Act and these regulations in a fair, efficient, transparent, and ethical manner, the SECP said.
The debt securities trustees would ensure that the 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 and ensure that issuer submits the following information to the Commission in relation to obtaining the NOC for creation/registration of trust: Author of the trust; name of trustee; purpose of the trust; issue size; trust assets; main features of the issue; beneficiary of the trust, and any other information required by the Commission.
The debt securities trustees would enforce security, in the interest of the debt securities holders according to the terms of the trust deed, and initiate legal proceeding, in case an event of default occurs, in terms of the relevant trust deed, and the Trust Act, and efficiently take steps as per trust deed in the event the security becomes enforceable.
The trustee will regularly monitor compliance of the issuer with all the covenants of the trust deed.
The debt securities trustees would report to the debt security holders and the securities exchange, in case of listed debt securities, on semi-annual basis, the status of compliance with the covenants of the trust deed.
He/she would monitor the status of the redemption reserve, if any, established by the issuer for the redemption of debt securities, and in case of listed debt securities, furnish the same to the securities exchange, on semi-annual basis, and 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 semi-annual basis, highlighting default, if any.
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. In this context, it shall before entering into an agreement with the issuer, disclose to the issuer all possible conflicts of interest including that of its sponsors and directors, which could impair its ability to render fair, objective, and unbiased service; immediately inform to the issuer and the debt security holders, in case any conflict of interest arises, and not gain any direct or indirect advantage from the situation, and shall act in the best interest of the debt security holders.
Copyright Business Recorder, 2020
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