New Delhi: Market regulator Sebi is likely to soon allow trading of securitized debt instruments or certificates on stock exchanges, a move that will boost the country’s debt market.
The issue of allowing trading of securitized debt on exchanges is likely to be taken up by the Sebi board in its meeting scheduled to be held later this month, official sources said.
Securitization is a form of financial instrument involving pooling of financial assets and the issuance of securities that are repaid from the cash flows generated by the assets. Common assets for securitization include credit cards, mortgages, auto and consumer loans, student loans, corporate debt, export receivable and offshore remittances.
The Sebi Board will also take up the issue of fine-tuning the guidelines for delisting companies from bourses, apart from preparing rules for investment advisors, sources said.
Currently, trading in certificates or instruments related to securitization transactions cannot take place at stock exchanges, as they are not covered under the definition of ‘securities´ in Securities Contracts (Regulation) Act, 1956.
The Securities Contracts (Regulation) Amendment Bill 2007 was passed by Parliament last month.
Sources said Finance Ministry is in favour of disclosure-based regulations for trading of securitization instruments as against approval-based approach, and has asked Sebi to finalise guidelines at the earliest to give a filip to the debt market.
The regulator is expected to frame ’disclosure-based’ regulations, which would specify eligibility criteria and other requirements that an issuer needs to fulfil before offering securitised debt instruments to public or getting them listed on a stock exchange.
However, the approval-based approach would have meant that Sebi nod would be mandatory for every such transaction.
The securitization market is not developed in the country due to the absence of trading facility in such instruments.
On delisting of companies from the exchanges, the Sebi board is expected to discuss norms including how much premium against market prices of shares should be paid to the investors if companies decided to delist from bourses.
The Sebi board is also expected to discuss whether there should be some norms or code of ethics for unregistered investment advisors such as one-stop-shops calling themselves financial advisors, banks, chartered accountants and tax consultants, engaged in sale of retail financial products and provide consultancy to investors.
Sebi had earlier expressed concern that some financial experts and journalists have been misusing the electronic and print media for guiding public on market.
It had invited public comments whether it should be made mandatory for such financial advisors to be registered with market regulator and be made to abide by a Code of Conduct and disclosure requirements.