Sebi Unveils Proposed Revisions to SDI Rules Aimed at Boosting Growth in the Listed Securitisation Market

The Securities and Exchange Board of India (Sebi) has unveiled an ambitious set of proposals aimed at reforming the regulatory landscape for securitised debt instruments (SDIs). Key among these proposals is the allowance for single-asset securitisation by entities regulated by the Reserve Bank of India (RBI). This move is designed to foster market development and enhance the attractiveness of SDIs, which have previously been constrained by existing regulations limiting exposure to a single obligor. By permitting such transactions, Sebi aims to harmonize its framework with RBI regulations and facilitate the growth of a more vibrant listed securitisation market.

In light of the need for improved operational efficiency, Sebi has recommended significant changes regarding the responsibilities of disclosure related to the underlying asset pool’s performance. Under the new proposals, the responsibility for periodic disclosures would shift from the originator to the servicer. This change is intended to ensure more accurate and timely information dissemination to investors, enhancing transparency in the securitisation process. Furthermore, the regulator has proposed replacing the requirement for winding up securitisation schemes linked to the suspension of a trustee’s registration, advocating instead for the appointment of a new trustee in alignment with RBI guidelines.

Additionally, Sebi’s proposed structural changes extend to the governance of special-purpose distinct entities (SPDEs), particularly concerning the composition of their boards of trustees. The regulator suggests limiting the representation for RBI-regulated entities to one member without veto powers, ensuring compliance with RBI norms and promoting arm’s length transactions. This initiative reflects Sebi’s commitment to fostering a robust regulatory framework for SDIs while soliciting public comments on these proposals until May 25, inviting stakeholders to engage in a constructive dialogue on the future of securitisation in India.

Source: The Economic Times

(Expert Note: This report was prepared by the Wealthova team.)