Sebi proposes Rs 1 cr minimum investment, mandatory demat form for securitized debt instruments
Mar 2, 2025, 11:29 IST
Public offers should remain open for a minimum of three days and a maximum of 10 days, with advertisement requirements aligned with Sebi's regulations for non-convertible securities.
Additionally, the regulator has suggested that all securitized debt instruments should be issued and transferred exclusively in demat form.
The Securities and Exchange Board of India (SEBI) has proposed several regulatory changes to enhance the framework for securitized debt instruments (SDIs). These proposals aim to bolster investor protection and align with contemporary market practices. Key aspects of the proposal include:
Minimum Investment Threshold
SEBI suggests setting a minimum investment threshold of ₹1 crore for both RBI-regulated originators and unregulated entities involved in securitization activities. This move is intended to attract institutional investors and high-net-worth individuals, ensuring that participants have the requisite sophistication to understand the complexities and risks associated with SDIs.
Restrictions on Private Placements
The proposal limits the number of investors in private placements of SDIs to a maximum of 200. If this limit is exceeded, the issuance must be classified as a public issue, subjecting it to more stringent regulatory requirements. This measure aims to maintain the integrity of private placements and prevent circumvention of public offering regulations.
Mandatory Dematerialized Form
To enhance transparency and facilitate efficient tracking, SEBI proposes that all SDIs be issued and transferred exclusively in dematerialized (demat) form. This aligns with broader market trends towards digitization and aims to reduce risks associated with physical securities.
Risk Retention Requirements
The regulator recommends that originators retain a minimum risk exposure of 10% of the securitized pool. For receivables with maturities up to 24 months, this retention requirement is reduced to 5%. This "skin in the game" approach ensures that originators remain financially invested in the performance of the underlying assets, aligning their interests with those of investors.
Public Offer Regulations
For public offers of SDIs, SEBI proposes that the offer period should remain open for a minimum of three days and a maximum of ten days. Additionally, advertising requirements for these public offers would be aligned with SEBI's existing regulations for non-convertible securities, ensuring consistency and clarity in disclosures.
These proposals are part of SEBI's ongoing efforts to update the regulatory framework governing SDIs, reflecting changes in market dynamics and incorporating feedback from stakeholders. The regulator has invited public comments on these proposals until November 16, 2024.
By implementing these measures, SEBI aims to enhance the robustness of the securitization market in India, promoting greater investor confidence and contributing to the overall stability of the financial system.