Debt securities trustee: SECP fixes Rs 50 million minimum equity requirement

The Securities and Exchange Commission of Pakistan (SECP) has fixed Rs 50 million as minimum equity requirement for performing functions of a debt securities trustee. The SECP has issued Debt Securities Trustees Regulations, 2017 to give a comprehensive regulatory framework under the Securities Act, 2015 for licensing and regulation of debt securities trustees (DSTs).
According to sources, the validity of DSTs' licence has been reduced from three years to one year as per requirement of the Securities Act. Banks, development financial institutions and investment finance companies may act as DSTs subject to the condition that they remain compliant with the requirements of the act and the regulations at all times. In order to facilitate the development of the debt market, DST has been allowed to make investment up to 10 per cent in the debt issue of which it is acting as a DST, subject to the condition that it would hold such investment till maturity.
Furthermore, for protection of investors, approval of two-thirds of the outstanding debt securities holders in value has been made mandatory in case of restructuring/rescheduling of any debt security. The existing DSTs have been allowed one-year timeframe to comply with the requirements of the revised regulations, sources added.
No person shall act as or perform the functions of a debt securities trustee unless such person is licensed by the Commission under the act and these regulations:
Provided that a person registered as debt securities trustee prior to coming into force of these regulations, shall be deemed to be licensed as a debt securities trustee under the Act and these Regulations till the time its existing certificate of registration remains valid. The debt securities trustee shall obtain licence under the act and these regulations upon expiry of its certificate of registrations granted under the Debt Securities Trustee Regulations, 2012, the SECP said.
Provided the existing debt security, trustees shall comply with the requirements of these regulations within a period of one year from the date of coming into force of these regulations.
The eligibility criteria for licence revealed that any person may apply to the Commission for grant of licence under these regulations, if such person fulfils the laid down conditions:
One, it is a wholly owned subsidiary set up by a scheduled bank or a development financial institution or a depository company for carrying out the activities of debt securities trustee.
Two, it is any other company allowed by the Commission.
Thirdly, it is authorised by its memorandum of association to act as a debt securities trustee.
Fourthly, its equity is not less than fifty million rupees.
Fifthly, its entity credit rating, assigned by a credit rating company licensed by the Commission, is not less than A- (single A minus) and such rating is not more than six months old.
Sixthly, it has necessary infrastructure for performing efficient and uninterrupted functions as debt securities trustee and its chief executive or any of its executive directors or the senior management officer heading the debt securities trustee function has at least three years' experience of providing services as a debt securities trustee or has at least three years' experience of working at the senior management level in any regulated financial services sector.
Subject to compliance with the provisions of the Act and these Regulations, a person may apply to the Commission for grant of a licence as a debt securities trustee in Form A along with the documents specified in Annexure I and receipt evidencing payment of non-refundable fee of one hundred thousand rupees.
The Commission, while considering the application for grant of licence, may require the applicant to furnish such further information or clarification regarding its activities and businesses as it deems appropriate.
The applicant shall, if so required, appear before the Commission for a representation through an officer duly authorised for this purpose in writing by the board of directors of the applicant.
Any subsequent change in the information provided to the Commission at the time of filing of application shall be intimated to the Commission within five working days from the date of such change, the SECP added.