Defaulted debt securities

SEBI has vide its circular dated 23rd June, 2020 laid down operational framework for transactions in defaulted debt securities post maturity date/ redemption date. This will be operationalised from 1st July, 2020.

Copy of SEBI circular can be found https://www.sebi.gov.in/legal/circulars/jun-2020/operational-framework-for-transactions-in-defaulted-debt-securities-post-maturity-date-redemption-date-under-provisions-of-sebi-issue-and-listing-of-debt-securities-regulations-2008_46912.html

Gist of some of the operational framework is given below:

  1. No transactions shall be allowed two prior days to the maturity/ redemption date.
  2. On maturity/ redemption date, transactions shall be restricted from such maturity/ redemption date to the date when the payment is confirmed;
  3. Issuer has to intimate to the SEs, Depositories, debenture trustees, the status of payment within one working day of making the payment.
  4. For existing defaulted debt securities, that period is 5 days from the date of issuance of this circular;
  5. If default in payment takes place, then within 2 working days, depositories in co-ordination with the SEs shall update the ISIN of that particular security as “ISIN defaulted in redemption” and lift the restrictions on transactions on such defaulted debt securities;
  6. For transactions which take place in defaulted debt securities, the depositories shall send an intimation to both the parties that it is a transaction in defaulted debt security.
  7. Even the periodic consolidated account statement shall carry the legend that it is a defaulted debt security;
  8. In case full payment of such defaulted debt securities is made by the issuer, then the same shall be reported to the depositories who in turn shall inform the stock exchanges and the particular ISIN shall be extinguished.
  9. The same applies if there is a change in the status of the debt securities such as restructuring of debt securities, IBC proceedings, its repayment etc.
  10. Every year on the 2nd working day of April, the issuer shall confirm the status of the defaulted debt securities

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