The Securities and Exchange Board of India (SEBI) on March 29, 2022 has issued a circular for the Operational guidelines for ‘Security and Covenant Monitoring’ using Distributed Ledger Technology (DLT).
As the backbone of the DLT system would be uniqueness of assets recorded in the DLT system, a system generated unique identifier (Asset ID) shall be allotted for each asset offered by Issuer as security for the non-convertible securities. For data exchange and verification across depositories, format for unique Asset ID shall be a 12-digit alphanumeric string.
To ensure that there is only one unique asset ID assigned to an asset of the issuer for effective asset creation as well as tracking, the DLT system will provide an alert to the Issuer and the DT by having appropriate validation/ duplicate checks in the system for identifying possible duplicate entries for assets of an issuer and this validation/duplication check shall be based on the parameters. Issuers shall ensure that the entry of the asset is made only once in the DLT system for generation of the unique Asset ID, which shall be verified by the DT.
The circular shall be applicable under the following conditions:
All issuers proposing to issue non-convertible securities on or after April 01, 2022 shall record the details in the system before activation of ISIN.
Further, in order to ensure compliance with para 8.a above, Depositories are advised to allot or unfreeze an existing ISIN (in case of re-issuance), as applicable only after confirming recording of above-mentioned information.
Further, where an issuer is unable to comply with the above requirement, it shall provide an explanation to Depositories. However, this dispensation is available only till July 01, 2022, after which ISIN shall not be allotted to an issuer.
For existing outstanding non-convertible securities, issuers will be required to enter the details into the DLT system on or before September 30, 2022 and DTs shall verify the same by November 30, 2022.
[Notification No. SEBI/ HO/ MIRSD/ CRADT/ CIR/ P/ 2022/ 38]
