SEBI Decreases Timeline for Listing of Securities on Private Placement Basis

Nikhil Mogha

30 May, 2024

The Securities & Exchange Board of India issued a circular, “Review of timelines for listing of securities issued on a private placement basis“, on 30^th November 2022, which inter alia decreases the timeline for listing of securities on a private placement basis. With the issuance of the current circular, the SEBI has brought changes in Chapter VII of the operational circular “SEBI/HO/DDHS/P/CIR/2021/613”, dated 10^th August 2021. The recommendations received from the market participants have necessitated the SEBI to decrease the timeline for listing of securities for Non-convertible Securities, Securitised Debt Instruments, municipal debt securities, Security receipts & Commercial paper on a private placement basis. This reduction will bring efficacy to the listing process, accelerate the availability of securities for trading, and brings clarity & standardisation in the listing and issuance of securities. This article will discuss in detail the revision provisions brought in the circular.

What Are The Reason And Relevant Provisions For Reducing The Timeline For Listing Of Securities?

The relevant provisions with respect to the timeline for listing of securities for debt securities are deduced in Chapter VII of the Operational Circular “Operational Circular for issue & listing of Non-Convertible Securities, Securitised Debt Instruments, Municipal Debt Securities, Security Receipts and Commercial Paper ” dated 10^th August 2021. In order to bring efficiency to the market, there is a need to standardise the prelisting process and revise the time gap between the ISIN activation and credit confirmation. Accordingly, the SEBI has revised the operational circular to incorporate the new timeline for listing of securities from T+4 to T+3 days.

What Is The Revised Chapter VII Of The Operational Circular On Standardising The Timeline For Listing Of Securities?

The revised Chapter VII of the operational circular on standardisation of listing of securities will apply to the non-convertible securities, Securitised Debt, municipal debt securities and security receipts that were issued on a private placement basis. Further, it shall contain the following new provisions:

In-principle approval: The issuer willing to issue and list municipal debt securities and non-convertible securities should make an application for in-principle approval to the stock exchange as per regulation 6 of NCS regulations and Regulation 4A of ILDM regulations and submit all relevant documents and make necessary disclosures.

Timeline for the listing of securities on a Private Placement basis: In addition to the timeline for listing of securities, the revised table mentioned below will include the timeline for submissions of the application for in-principle approval.

Informing listing approval details: The stock exchanges are required to inform the depositories about the approval for permission is given for listing securities issued on a private placement basis.

Activation of ISIN: The activation of ISIN shall be done by the depositories only after the stock exchanges have approved the listing of securities.

Allocation of temporary ISIN to new securities: The re-issuances of new securities in existing ISIN shall be done by the depositories by issuing temporary ISIN to such securities which shall be kept frozen. Upon receiving approval for listing such securities, the securities credited under the new temporary ISIN shall be debited and credited in the pre existing ISIN of the existing securities before trading.

Penalty: The penalty will be levied on the issuer at a penal interest rate of 1 % P.A over the coupon or dividend rate for the period of delay. Further, it shall be paid to the investor if there is a delay in the timeline for listing of securities.

Directions:  The stock exchanges shall issue directions in relation to:

1. Submission or disclosures are to be made at the time of in-principle approval application and listing application.
2. Timeline within which in-principle approval and listing are to be made by an issuer.

Deviation from the timeline: The stock exchange may allow deviation from the above timeline for listing of securities provided it does not exceed T+3 days for concluding the trading. Further, the reaons for such deviation shall be recorded in writing.

Conclusion

The SEBI^[1], to bring efficiency and standardise the timeline for listing of securities, has issued the present circular concerning the non-convertible securities and municipal debt securities issued on a private-placement basis. The standardised timeline will enable the issuer to trade the securities on stock exchanges in a streamlined manner. The revised timeline has now reduced the overall trading settlement cycle from T+4 days to T+3 days. Reducing the timeline for listing of securities will also aid the investor in their settlement cycle.

Read Our Article: Shares Listing Procedure in India