Sebi Directs CRAs To Verify Issuers’ Funds Availability

Further, credit rating agencies told to track escrow payments in certain cases

New Delhi: Markets regulator Sebi has directed Credit Rating Agencies (CRAs) to verify the issuer’s fund availability and ascertain the reasons for payment failure in cases where non-payment of debt arises due to factors beyond the issuer’s control.

Also, CRAs have to ensure that the required payments are deposited into an escrow account on the due date in these cases. These additional guidelines have been introduced to address scenarios of non-payment of debt (principal or interest) caused by factors beyond the issuer’s control. These factors include issues such as incorrect investor account details, outdated payment information, or government-mandated account freezes.

“It has been decided that in the aforesaid scenario, the CRA shall confirm and verify the availability of adequate funds with the issuer and also confirm and verify the proof of failure of the required payment of debt (principal and/ or interest) and the reasons for failure,” Sebi said in its circular.

Additionally, CRAs must ensure the issuer deposited the required amount into a designated escrow account with a scheduled commercial bank on the due date. For such cases, CRAs must provide details -- security name, ISIN, amount, due date, reasons for failure -- to stock exchanges, depositories, and debenture trustees. These entities will publish the information on their websites. Issuers should use facilities like penny-drop verification to ensure accurate account details and avoid payment failure.