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SEBI Decreases Timeline for Listing of Securities on Private Placement Basis

SEBI Decreases Timeline for Listing of Securities on Private Placement Basis

The Securities & Exchange Board of India issued a circular, “Review of timelines for listing of securities issued on a private placement basis“, on 30th 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 10th 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 10th 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:

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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.

CategoryTimelineElectronic Book Platform (EBP)Non-Electronic Book Platform
In- Principle ApprovalEBP: Before T-2 or T-5 Non-EBP: Before T  The issuer shall ensure that it has received the in-principal approval from the stock exchange wherein it was willing to list the proposed debt securities before providing the placement memorandum and term sheet to EBP.The issuer shall ensure that it has received the in-principal approval from the stock exchange wherein it was willing to list the proposed debt securities before the issue open date.
Bidding AnnouncementOn or before T-1The issuer shall provide bidding start and close time to EBP on or before T-1The issuer shall disclose the period in the placement memorandum.
Bidding dateTThe bidding shall take place on the EBP platform and there will be provisional allocation by the bidders to the issuers. The issuer shall further communicate about allotments and pay-in obligations to bidders.Allotment will be finalised to the investor on the issue closure date. The issuer shall further communicate about allotments and pay-in obligations to investors on the issue closure date.
ISIN allocation or Assignment or Confirmation by DepositoryOn or before T+1The issuer shall take care of receipt of ISIN from a depository participant before pay-in. The issuer may also apply to other depositories for listing of proposed debt issuance.The issuer shall take care of receipt of ISIN from a depository participant before pay-in. The issuer may also apply to other depositories for listing of proposed debt issuance.
SettlementEBP: On or before T+1 or T+2 ( in accordance with settlement cycle chosen by issuer) Non-EBP: On or Before T+2The process shall be: 1. Pay-in by the allottees or bidders 2. Communication to issuer on receipt of money 3. Finalising the allocation by the issuer 4. Stamp duty payment by issuer. 5. Filing corporate action file by RTA 6. Decision of corporate action plan 7. Payment of funds to the issuer 8. Issuance of credit confirmation letter by the Depositories to IssuerThe process shall be: 1. Receiving of funds by issuer from investor. 2. Finalising the allocation by the issuer 3. Stamp duty payment by the issuer 4. Filing Corporate action by RTA 5. Decision of Corporate action plan. 6. Issuance of Credit letter by Depositories to Issuer.  
ListingOn or before T+3The process shall be: 1. Issuer shall make application for listing non-convertible securities and municipal debt securities to the stock exchange as per Regulation 44 of NCS regulations and 4E of ILDM regulations. 2. Confirmation letter from stock exchange for listing securities. 3. Activation of ISIN by depositories.The process shall be: 1. Issuer shall make application in terms of regulation 44 of NCS Regulations, 4E of ILDM Regulation, 35 & 38D of SDI regulations to the stock exchange. 2. Confirmation letter from stock exchange 3. Activation of ISIN by Depositories.  
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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.

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