**Policy Summary: Amendments to Guidelines for Issue and Listing of Structured Products/Market Linked Debentures (MLDs)**
This circular, reference number SEBI/HO/DDHS/CIR/P/2020/120, dated July 13, 2020, issued by the Securities and Exchange Board of India (SEBI), announces amendments to the guidelines for the issue and listing of Structured Products/Market Linked Debentures (MLDs). Specifically, it modifies paragraph 4(f)(i) of the MLD circular issued on September 28, 2011.
The key change pertains to the valuation of MLDs. Previously, issuers were required to appoint a Credit Rating Agency (CRA) registered with SEBI as the third-party valuation agency. However, due to amendments to SEBI's Credit Rating Agencies Regulations in 2018, CRAs are prohibited from conducting activities other than rating securities post May 30, 2020.
Therefore, the circular mandates that the valuation of MLDs must now be carried out by an agency appointed by the Association of Mutual Funds in India (AMFI), referred to as the "AMFI appointed valuation agency." Issuers are now required to appoint a third-party valuation agency which shall be an AMFI appointed valuation agency.
This circular is issued under the authority granted by Section 11(1) of the Securities and Exchange Board of India Act, 1992. The circular is accessible on the SEBI website (www.sebi.gov.in) under the "Legal Framework" section, within the "Circulars" category.
For further information, please contact Richa G. Agarwal, Deputy General Manager, Department of Debt and Hybrid Securities, at Tel No.: 022-2644 9596 or via email at richag@sebi.gov.in.
Key Entities Referenced
Securities and Exchange Board of India: Regulatory body for the securities market in India (SEBI).
Structured Products Market Linked Debentures: A type of debt instrument whose returns are linked to the performance of an underlying asset or index (MLDs).
Association of Mutual Funds in India: Industry association of mutual funds in India (AMFI).
MLD circular: SEBI circular no. CIRIMDDF172011 dated September 28, 2011 prescribing guidelines for issue and listing of structured products Market linked Debentures MLDs.
SEBI Credit Rating Agencies Regulation, 1999: Regulation governing the operations of Credit Rating Agencies (CRAs) in India.
Credit Rating Agency: An agency registered with SEBI for carrying out valuation of MLDs (CRA).
Securities and Exchange Board of India Act, 1992: The law under which SEBI exercises its powers.
Richa G. Agarwal: Deputy General Manager, Department of Debt and Hybrid Securities, SEBI.
CIRCULAR
SEBI/HO/DDHS/CIR/P/2020/120 July 13, 2020
To
All issuers who have listed/ intend to list their Structured Products/ Market Linked
Debentures
All Registered Merchant Bankers
All Recognized Stock Exchanges
Association of Mutual Funds in India (AMFI)
Dear Sir / Madam,
Sub: Guidelines for Issue and Listing of Structured Products/ Market Linked Debentures-
Amendments
1. SEBI vide circular no. CIR/IMD/DF/17/2011 dated September 28, 2011 (hereinafter
referred as “MLD circular”) prescribed guidelines for issue and listing of structured
products/ Market linked Debentures (MLDs).
2. Para 4(f)(i) of the MLD circular, specifies that issuer of MLDs shall appoint a third
party valuation agency which shall be a Credit Rating Agency (CRA) registered with
SEBI for carrying out valuation of MLDs.
3. Pursuant to amendment to SEBI (Credit Rating Agencies) Regulation, 1999 on May
30, 2018, a CRA cannot carry out any activity other than rating of securities post
May 30, 2020.
4. In view of the above, therefore, it has been decided that valuation of MLDs shall be
carried out by an agency appointed by AMFI for the purpose of carrying out
valuation (“hereinafter referred as AMFI appointed valuation agency”).
Page 1 of 25. Accordingly, paragraph 4.f (i) of MLD circular stands modified as under:
“It shall be mandatory for the issuer to appoint a third party valuation agency which
shall be an AMFI appointed valuation agency.”
6. This circular is issued in exercise of powers conferred under Section 11(1) of the
Securities and Exchange Board of India Act, 1992.
7. This circular is available on SEBI website at www.sebi.gov.in under the categories
“Legal Framework” and under the drop down “Circulars”.
Yours faithfully,
Richa G. Agarwal
Deputy General Manager
Department of Debt and Hybrid Securities
Tel No.: 022-2644 9596
Email id: richag@sebi.gov.in
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