SEBI has proposed replacing the term ‘consent letter’ with ‘debenture trustee agreement’ to improve transparency in offer documents. To enhance the disclosure of debenture trustee appointments in offer documents.

This change aims to simplify and promote transparency in the appointment process of debenture trustees for securities issuance and underline their vital role in the securities market. In a recent consultation paper, SEBI proposed replacing the term “consent letter” with “debenture trustee agreement” in its (Issue and Listing of Non-Convertible Securities) rules or NCS regulations.

The regulator deems the debenture trustee agreement (DTA), which validates the appointment of a debenture trustee, more significant than the previously used term ‘consent letter’. This alteration will enable investors to make better-informed decisions when investing in debentures.

A working group previously observed that the issuer obtains the consent letter from the debenture trustees prior to starting the assignment, while the DTA is executed between them at a later stage.

However, the working group noted that the consent letter has no legal validity. Therefore, it was agreed that the legal document verifying the appointment of the debenture trustee is the DTA, not the consent letter.

Additionally, SEBI stated, “The debenture trustee agreement shall be made available to investors through a ‘QR code’ in the offer document”. This digital access will enable investors to review the agreement, ensuring they are fully informed about the trustee’s role and responsibilities and have easy access to important information.

SEBI has requested public feedback and suggestions on the consultation paper by September 6. This initiative was prompted by recommendations from a working group entrusted with improving the ease of doing business in the financial sector, aligning with the government’s objectives outlined in the FY2023-24 Budget.

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