KARACHI: The Security and Exchange Commission of Pakistan (SECP) has approved the Debt Securities Trustee Regulations (DST Regulations) to further strengthen corporate debt market in the country.
According to SECP here Wednesday, this is one of the major moves towards development of a vibrant corporate debt market in Pakistan, a long standing demand of the stock exchanges and the Mutual Fund Association of Pakistan (MUFAP).
Its first draft has been notified in the official gazette to solicit public opinion as required under Sub-section (1) of Section 506 (A) of the 1984 Companies Ordinance.
Most of the debt securities issued in Pakistan are privately placed and issued under Section 120 of the Ordinance. Under the said Section a company may issue any instrument in the nature of redeemable capital to companies, banks, financial institutions and such other persons as notified there under, without seeking the SECP approval.
However, the SECP approval is required in those cases where such securities are offered to the public.
There have been cases where Debt Securities Trustees have not actively discharged their obligations.
The DST Regulations are aimed at safeguarding the interests of the debt securities holders; ensuring that provisions of the Trust Deeds executed between the issuers and the trustees are not breached.
The regulations will help to monitor compliance by the issuers of the terms and conditions of the respective trust deeds; to monitor maintenance of the security, if any; to monitor the payment of profit/ mark-up/ interest to the holders and redemption of the securities; and also redress the complaints of debt securities holders.
In various developed and emerging markets regulatory framework for regulating affairs of Debt Securities Trustees already exists as the Debt Securities Trustees play a pivotal role in safeguarding the interests of debt securities’ holders and thus in the development of the corporate debt market.