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REGULATIONS, 2012

DEBT SECURITIES TRUSTEE REGULATIONS, 2012

[Gazette of Pakistan, Extraordinary, Part-II, 3rd April, 2012]

SRO 339(I)/2012, dated 30.3.2012.—In exercise of the powers conferred by Section 506A of the Companies Ordinance, 1984 (XLVII of 1984) and having being previously published in the official Gazette vide Notification No. SRO 712(I)/2011 dated July 18, 2011 as required by sub-section (1) of Section 506-A of the said Ordinance the Securities and Exchange Commission of Pakistan hereby makes the following Regulations, namely:—

CHAPTER-I 
PRELIMINARY

1.  Short title and commencement.—(1) These Regulations shall be called the "Debt Securities Trustee Regulations, 2012".

(2)  They shall come into force at once.

2.  Definitions.—(1) In these Regulations, unless there is anything repugnant in the subject or context, —

(a)      "Act" means the Securities and Exchange Commission of Pakistan Act, 1997 (XLII of 1997);

(b)     "Constitutive Documents" includes the memorandum and articles of association and any document governing the formation of a company or a body corporate;

 

(c)      "Commission" means the Securities and Exchange Commission of Pakistan established under Section 3 of the Act;

(d)     "Debt Security" means any security which creates or acknowledges indebtedness and includes;

                   (i)         Corporate debt securities such as Term Finance Certificates (TFCs), Sukuk Certificates, Participation Term Certificates (PTCs), Commercial Papers, and all kinds of debt instruments issued by any Pakistani or foreign company or corporation registered in Pakistan; and

                   (ii)        Government debt securities such as Treasury Bills (T-bills), Federal Investment Bonds (FIBs), Pakistan Investment Bonds (PIBs), Foreign Currency Bonds, Government Papers, Municipal Bonds, Infrastructure Bonds and all kind of debt instruments issued by Federal Government, Provincial Governments, Local Authorities and other statutory bodies.

(e)      "Debt Securities Trustee" means a person appointed as a Debt Securities Trustee by virtue of a Trust Deed and registered under these Regulations;

(f)      "Form" means a form specified through these Regulations;

(g)     "Issue" includes issue of debt securities through,—

          (i)      initial public offering by an issuer;

          (ii)     secondary public offering by an issuer;

                   (iii)       an offer to the existing shareholders or debt securities holders by an issuer;

                   (iv)       private placement to persons referred to and notified under Section 120 of the Ordinance; or

          (v)     offer for sale to the public by an offer or.

(h)     "Investment Finance Company" means a company as defined in clause (xxiv) of sub-regulation (1) of Regulation 2 of Non-Banking Finance Companies and Notified Entities Regulations, 2008;

(i)      "Offeror" means any person who directly or indirectly holds ten percent or more debt securities and offers for sale such debt securities in full or in part to the general public;

(j)      "Ordinance" means the Companies Ordinance, 1984 (XLVII of 1984);

(k)     "Regulations" means these regulations along with all Schedules, Forms and Annexures attached to it;

(l)      "Schedule" means a schedule specified in these Regulations;

(m)    "Scheduled Bank" has the same meaning as defined in clause (m) of Section 2 of the State Bank of Pakistan Act, 1956 (XXXII of 1956); and

(n)     "Trust Deed" means a trust deed executed by an issuer or an Offeror, as the case may be, in accordance with the provisions of the Trust Act, 1882 (II of 1882).

(2)     Words and expressions used but not defined in these Regulations shall, unless there is anything repugnant in the subject or context, have the same meaning as are assigned to them in the Act, the Ordinance or the Securities and Exchange Ordinance, 1969 (XVII of 1969).

(3)     Headings and sub-headings given in these Regulations are given for ease of reference and shall not change meaning of the terms expressed in these Regulations.

CHAPTER-II 
REGISTRATION OF DEBT SECURITIES TRUSTEE

3.  Prohibitions.—(1) No person shall act as or perform the functions of a Debt Securities Trustee unless such person is registered with the Commission under these Regulations.

(2)     Any person providing services as Debt Securities Trustee at the time of coming into force of these Regulations shall get itself registered under these Regulations within a period of three months from the date of notification of these Regulations in the official Gazette.

(3)     A Debt Securities Trustee shall not be eligible to act as a Debt Securities Trustee to any Issue,—

(a)     of its associated company or associated undertaking;

(b)     where the Debt Securities Trustee or any of its associated company or associated undertaking holds or has taken steps to acquire any shares or debt securities of the issuer;

(c)      where the Debt Securities Trustee has underwritten or intends to underwrite the Issue;

(d)     where the Debt Securities Trustee or any of its associated company or associated undertaking has provided any guarantee with respect to the amount payable under such Issue.

4.       Eligibility requirements for registration.—Any person may apply to the Commission for registration as a Debt Securities Trustee under these Regulations if such person is authorized by its Constitutive Document to act as a Debt Securities Trustee and is,—

(a)     a Scheduled Bank;

(b)     a Development Finance Institution as notified by the State Bank of Pakistan;

(c)     an Investment Finance Company;

(d)     a wholly owned subsidiary set up by a Scheduled Bank, Development Finance Institution or a depository company for carrying out the activities of Debt Securities Trustee; or

(e)      any other company or entity or class of companies/entities allowed by the Commission.

5.       Application procedure for registration.—(1) An application for registration as a Debt Securities Trustee shall be made to the Commission in Form A along with all the documents specified in Annexure-I and receipt evidencing payment of non-refundable fee of rupees one hundred thousand.

(2)     The Commission, while considering the application for grant of certificate of registration, may require the applicant to furnish such further information or clarification regarding its activities and businesses as it deems appropriate.

(3)     Any subsequent change in the information provided to the Commission at the time of filing of application under sub-regulation (1) shall be intimated to the Commission within a period of seven working days from the date of such change.

6.  Grant of registration.—(1) The Commission while considering the application for grant of certificate of registration made under sub-regulation(1) of Regulation 5 shall inter-alia take into account the following matters, namely,—

(a)      the ability of the applicant to safeguard the interest of debt securities holders;

(b)     the capability of the applicant to efficiently handle its functions as Debt Securities Trustee and its obligations under these regulations;

(c)      the availability of necessary infrastructure including but not limited to adequate office space, equipment, experienced manpower and financial and technical aspects to effectively discharge its activities as Debt Securities Trustee;

(d)     earlier refusal, if any, by the Commission for registration of the applicant as a Debt Securities Trustee;

(e)      conviction or adverse findings in investigation of directors or employees in the senior management level of the applicant in an offence involving, fraud or breach of trust;

(f)      penal action against the applicant or its director(s) including initiation of any kind of prosecution for an offence under the Ordinance, Act or the Securities and Exchange Ordinance, 1969 (XVII of 1969);

(g)     track record as a Debt Securities Trustee, if any; and

(h)     any other matter as deemed necessary by the Commission.

(2)  The Commission on being satisfied that the applicant is eligible for registration may grant a certificate of registration to the applicant in Form B and impose such conditions as it may deem necessary.

(3)  The certificate of registration shall remain valid for a period of three years from the date of registration unless it is restricted, suspended or cancelled earlier by the Commission.

7.       Renewal of Registration.—(1) A Debt Securities Trustee shall, three months prior to the date of expiry of its registration, apply to the Commission in Form C for renewal of its registration along with all the documents specified in Annexure III and receipt evidencing payment of non-refundable renewal fee of rupees one hundred thousand.

(2)     The Commission upon being satisfied that the applicant continues to meet the minimum requirement for registration and is eligible for renewal of registration shall renew the registration of Debt Securities Trustee and issue a certificate of renewal of registration to the applicant in Form D. Where the Debt Securities Trustee fails to meet the requirements as mentioned in Regulations 4 and 6 above, its application for renewal may be refused subject to the provisions of Regulation 8.

(3)     Where the application for renewal of registration is made within such time as specified in sub-regulation (1) but has not been decided by the Commission the registration shall continue to be valid until the application for renewal is decided by the Commission.

8.       Procedure where registration is not granted or renewed.—(1) The Commission, after giving a reasonable opportunity of hearing to the applicant, may refuse to grant or renew a certificate of registration if in the opinion of the Commission such applicant does not fulfill the requirements prescribed in these Regulations or where the Commission after taking in to account the facts, is of the view that it is not in the public interest or in the interest of the securities market to grant or renew such certificate of registration.

(2)     The decision of refusal to grant a certificate of registration or refusal of renewal of registration shall be communicated to the applicant stating therein the grounds on which the application has been rejected.

(3)     The applicant, if aggrieved by the decision of the Commission under sub-regulation (1) may, within a period of thirty days from the date of receipt of such refusal, apply to the Commission for review of its decision.

(4)     On receipt of the application made under sub-regulation (3), the Commission may review its decision and communicate its findings, in writing, to the applicant within sixty days and the decision of the Commission in this regard shall be final.

(5)     An applicant whose application for renewal of certificate of registration is refused by the Commission under sub-regulation (1) shall, from the date of receipt of the final decision of the Commission, not act as Debt Securities Trustee for any new Issue.

(6)     A Debt Securities Trustee whose application for renewal is refused shall, on the day of the receipt of the final decision of the Commission, intimate to all the concerned parties including the issuers, the debt securities holders, the concerned credit rating company and the stock exchange(s) in case of listed debt securities about its inability to act as a Debt Securities Trustee.

(7)     Debt Securities Trustee whose application for renewal of certificate of registration is refused by the Commission shall continue to act as such in all previous Issues in which it is acting as Debt Securities Trustee till the appointment of any other Debt Securities Trustee by the issuer or complete redemption of such Issues, whichever is earlier. Provided that the appointment of any other Debt Securities Trustee should be made within such time period as mentioned in the refusal order but not exceeding 60 days from the date of such refusal.

CHAPTER-III 
DUTIES AND RESPONSIBILITIES OF DEBT SECURITIES TRUSTEE

9.  Obligations of Debt Securities Trustee. A Debt Securities Trustee shall,–

(i)      sign a Trust Deed with the issuer before commencement of the subscription period which inter-alia contain that the Debt Securities Trustee has agreed to act as a trustee under the Trust Deed for securing the interest of the Debt securities holders;

(ii)     ensure that the Trust Deed contains all terms and conditions specified in Schedule-I and required under the Trust Act, 1882 (II of 1882);

(iii)    ensure compliance with the provisions of the Trust Deed;

(iv)    put in place a mechanism to resolve any conflict of interest situation that may arise in the conduct of its business as Debt Securities Trustee and where any conflict of interest arises it shall take reasonable steps to resolve the same in an equitable manner;

(v)     ensure that in case of secured debt securities, appropriate security has been arranged and based on the information obtained from the issuer, the assets backing the debt security are maintained throughout the tenure of the Issue;

(vi)    enforce security, where necessary, in the interest of the debt securities holders according to the terms of the Trust Deed;

(vii)   efficiently do such acts as are necessary in the event the security becomes enforceable;

(viii)  regularly monitor compliance of the issuer with all the covenants of the Trust Deed and in case of listed debt securities, report the same on semi-annual basis to the concerned stock exchange and non-compliance, if any, of the covenants of the Trust Deed shall upon its occurrence and coming into its notice or knowledge be immediately reported to the concerned stock exchange and the Commission;

(ix)    monitor the status of the redemption reserve, if any, established by the issuer for the redemption of debt securities and furnish, on semi-annual basis an update on the same to the Commission and in case of listed debt securities to the concerned stock exchange as well;

(x)     regularly monitor payment of profits to the debt security holders and redemption of the debt security and inform the Commission and the concerned stock exchange, in case of listed debt securities of any default in payment of profit or redemption of debt securities;

(xi)    maintain proper record of the complaints received and a report on the number and nature of the complaints received and the manner in which such complaints have been redressed shall be provided to the Commission and in case of listed debt securities to the concerned stock exchange also, on annual basis;

(xii)   ascertain that the debt securities have been converted, where required, in accordance with the provisions and conditions under which they were issued;

(xiii)  inform the Commission immediately of any breach by the issuer of the Trust Deed or provision of the Ordinance or any other law applicable to the Issue which comes to its knowledge;

(xiv)  ensure that the Commission is promptly informed about any action, legal proceeding etc, initiated against it in respect of any material breach or non-compliance by it of any law, rules or regulations;

(xv)   file yearly report with the Commission within sixty days of the end of its financial year containing clause-wise status of the compliance with the provisions of this regulation;

(xvi)  comply with the code of conduct prescribed in Schedule II;

(xvii) call a meeting of all debt securities holders, within such time period as provided in the Trust Deed, on,—

                   (a)        a requisition in writing signed by at least one-tenth of the debt securities holders in value for the time being outstanding; and

                   (b)        the happening of any event, which pursuant to the Trust Deed constitutes a default by the issuer or which in the opinion of the Debt Securities Trustee adversely affects the interest of the debt securities holders.

(xviii)     not relinquish duties as Debt Securities Trustee to an Issue until another Debt Securities Trustee is appointed in its place;

(xix)  file its audited annual accounts with the Commission within thirty days of its issuance;

(xx)   submit any document or information as and when required by the Commission; and

(xxi)  provide, on request in writing, copy of certified Trust Deed to the debt security holders as and when required by them.

10.  Maintenance of books and records by Debt Securities Trustee.–(1) A Debt Securities Trustee shall properly maintain at least the following record in respect of each Issue:

(a)      all contracts relating to the Issue to which it is acting as a Debt Securities Trustee including but not limited to the Trust Deed, letter of hypothecation, memorandum of deposit of title deed and the charge registration certificate, where applicable etc;

(b)     statements relating to profit payment and principal redemption;

(c)      all documents relating to compliance with the covenants of the Trust Deed and enforcement of security, where applicable;

(d)     Debt Security holders complaints and subsequent correspondence; and

(e)      such other records as may be specified by the Commission from time to time.

(2)     The Debt Securities Trustee shall ensure that the record referred to in sub-regulation (1) is maintained and preserved in good order for a period of at least five years from the date of complete redemption of the Issue.

(3)     The Debt Securities Trustee shall,—

(a)      ensure that the record is kept at such a place and maintained in such a manner that the Commission or any person appointed by it has easy access to it; and

(b)     establish and follow record retention policies which shall ensure that all relevant legal and regulatory requirements are complied with.

11.     Appointment of Compliance Officer.—Every Debt Securities Trustee shall designate any of its officers as a compliance officer possessing relevant qualification and experience and certification as may be specified by the Commission. The Compliance Officer shall be responsible for,—

(a)     monitoring compliance with the terms of the Trust Deed;

(b)     redressal of investors' grievances and complaints; and

(c)      reporting to the Commission immediately if the Debt Securities Trustee ceases to maintain any of the requirements referred to in regulation 4 of these Regulations.

CHAPTER-IV 
DISCIPLINARY PROCEEDINGS

12.     Restrictions, Suspension of Registration.—(1) Where a Debt Securities Trustee contravenes or fails to comply with any provision of these Regulations or fails to fulfill its obligations under the Trust Deed or is not in compliance with conditions of registration or any directive, circular or order issued by the Commission, the Commission, after providing a reasonable opportunity of representation to the Debt Securities Trustee may:

(a)      impose a restriction on its activities as Debt Securities Trustee;

(b)     suspend its registration; and/or

(c)      impose a penalty provided under sub-section (2) of Section 506A of the Ordinance.

(2)     Notwithstanding anything contained in sub-regulation (1), where the Commission is satisfied that a delay in suspension of registration of the Debt Securities Trustee will be detrimental to the interest of investors or the public in general or the capital market, the Commission may immediately suspend the registration of the Debt Securities Trustee till the time an opportunity of hearing is provided to the Debt Securities Trustee and a final order is passed under sub-regulation (1):

Provided that where the Commission suspends the registration under sub-regulation (2), the opportunity of hearing and final order must be passed within sixty days of the order under sub-regulation (2).

(3)     A Debt Securities Trustee whose registration has been suspended shall not act as a Debt Securities Trustee for any new Issue during the period of suspension and remove the cause of suspension as specified in the suspension order within a period of one hundred and twenty days from the receipt of the suspension order or such earlier period as provided in the said order.

(4)     The Commission while suspending the registration of a Debt Securities Trustee may impose such conditions as it deems appropriate.

13.  Cancellation of Registration.—(1) The Commission, after providing a reasonable opportunity of representation to the Debt Securities Trustee, may cancel the registration of a Debt Securities Trustee if,—

(i)      in the opinion of the Commission the Debt Securities Trustee has been in violation of these Regulations or the Trust Deed or restriction imposed under sub-regulation (1) of Regulation 12;

(ii)     it is found guilty of fraud; or

(iii)    its registration has been suspended and the cause of suspension has not been removed within one hundred and twenty days from the receipt of the suspension order or such earlier period as provided through the order of suspension .

(2)  The registration of a Debt Securities Trustee shall stand automatically cancelled if such Debt Securities Trustee,—

(i)      is declared insolvent by a Court;

(ii)     is wound up by an order passed by a Court, or

(iii)    ceases to hold valid license/registration as a Schedule Bank, Development Finance Institution or Investment Finance Company.

(3)  Upon the cancellation of the registration, the Debt Securities Trustee shall with immediate effect cease to solicit or enter into further business as a Debt Securities Trustee and transfer all necessary record to another Debt Securities Trustee appointed by the issuer, within thirty days of its appointment and the appointment of the new Debt Securities Trustee, shall be immediately communicated to the Commission, Debt security holders and the stock exchanges concerned in case of listed debt securities.

14.     Dissemination of information regarding cancellation of registration.—The Issuer upon cancelation of registration of the Debt Security Trustee by the Commission shall immediately notify such cancelation for information of the stakeholders, through press release in at least two newspapers, one English and one Urdu language, having wide circulation in the country.

15.     Relaxation: Where the Commission is satisfied that it is not practicable to comply with any of the requirements of these regulations in a particular case or class of cases, the Commission may for reasons to be recorded, relax such requirement(s) subject to such condition(s) as it may deem fit.

FORM A

[see regulation 5(1)]

APPLICATION FOR GRANT OF CERTIFICATE OF REGISTRATION AS DEBT SECURITIES TRUSTEE

(Please carefully read the instructions annexed to this Form)

To,

The Securities and Exchange Commission of Pakistan

Pursuant to the decision of the Board of Directors of …. [Name of the applicant] …. taken in its meeting held on ……… [Date of Meeting] ……, we hereby apply for registration under Regulation 5(1) of the Debt Securities Trustee Regulations, 2012.

The information and documents mentioned in Annexure-I are attached herewith.

Date:_________________     Signature: _________________

Place: _______________

                                                Name of the Chief Executive Officer, the Company Secretary or the Chief Financial Officer duly authorized by the Board of Directors through a resolution for signing and submission of this application.

Annexure-I

(see Form A)

1.       General and business Information:

1.1     Brief history of the applicant containing the name of the applicant; date and place of its incorporation; date of commencement of business; length of experience as Debt Securities Trustee, if any; names of its sponsors/promoters/major shareholders; group structure, if any and status of the applicant whether Scheduled Bank, Development Finance Institution as notified by the State Bank of Pakistan, Investment Finance Company or other.

1.2     Address of the Registered Office of the applicant (postal address, postal code, telephone & fax numbers).

1.3     Name and designation of the compliance officer along with contact detail i.e. postal address, postal code, telephone number, fax number and e-mail address.

1.4     Detail of ongoing legal or regulatory proceedings, if any, initiated against the applicant or any of its directors, Chief Executive Officer, Chief Financial Officer or Company Secretary by the Commission or any other regulatory authority.

1.5     Detail of penal or regulatory action(s), if any, taken against the applicant during the last three years by the Commission or any other regulatory authority.

1.6     In case any associated company of the applicant is already registered under these Regulations, the following details shall be provided:

          (i)      Name of such associated company;

                   (ii)        Detail of warning notices, if any, issued to such associated company by the Commission during the last three years;

                   (iii)       Detail of ongoing legal proceedings, if any initialed against such associated company or any of its directors, Chief Executive Officer, Chief Financial Officer or Company Secretary, by the Commission; or any other regulatory authority; and

                   (iv)       Penal action, if any, taken against such associated company by the Commission during the last three years.

2.       Other Information:

2.1     Detail of pending disputes:

Nature of dispute relating to the Trusteeship business of the Applicant

Name of the party

Name & Place of Court / Tribunal where dispute is pending

Amount Involved

Date of last hearing

Decision taken in the last hearing


 

 

 

 

 

 

2.2     List of financial or criminal offenses which have been alleged against the applicant or any of its sponsors, directors or employees during the last three years.

2.3     Procedures for redressal of complaints, if any, lodged by the Debt securities holders.

2.4     Any other information considered relevant to the business of the applicant as Debt Securities Trustee.

2.5     Any significant awards or recognition.

3.       List of documents to be provided along with application:

3.1     copy of Memorandum & Articles of Association of the applicant, certificate of incorporation and certificate of commencement of business

3.2     copy of Form 3, 27, 28 and 29 of the applicant duly certified from the Company Registration Office (CRO) concerned,

3.3     audited accounts of the applicant for the last three years and latest half yearly and quarterly accounts.

3.4     profile of Chief Executive Officer, Chief Financial Officer, Company Secretary, Compliance Officer and Directors, of the applicant [Name, Qualification, Experience and Date of Appointment, Directorship in other companies and Date of Appointment as director in such other companies).

3.5     date wise breakup of Issues, if any, in which the applicant acted as Debt Securities Trustee during the last three years. The statement should also contain size of each Issue.

3.6     list of Issues, if any, in which the applicant has enforced security or taken any other remedial action for safeguarding the interest of its debt securities holders.

3.7     an Affidavit as specified in Annexure-II signed by the Chief Executive or any director of the applicant authorized by the Board of Directors to do so through resolution passed in its meeting.

3.8     confirmation that the quantum of minimum capital or equity, as the case may be, required under the respective statute is maintained.

3.9     any other information/document as required by the Commission.

*Instructions:

(i)      The applicant must submit application for registration under regulation 5 on this form duly filled in and signed, together with supporting documents to the Commission.

(ii)     All columns of the application form should be filled in. In case a column is not relevant or not applicable, the same should also be filled in as "Not Applicable" or "Not Relevant".

(iii)    Information, which needs to be supplied in more details may be provided on separate sheet(s) and attached to the application.

Annexure-II

(See clause 3.7 of Annexure-I)

AFFIDAVIT

(On Stamp Paper of appropriate value)

I, _____________ son/daughter/wife of _____________ adult, resident of _______________ and holding CNIC/Passport No. _________ affirmation as under:–

1.       That I am the chief executive/director of ………. name of the applicant)…. and as such I am well conversant with the facts deposed to below.

2.       That the statements made and the information and documents provided along with the application for registration as a Debt Securities Trustee under the Debt Securities Trustee Regulations, 2012 are correct and there are no facts which have been concealed.

3.       That the Securities Exchange Commission of Pakistan (the Commission) will be notified of any change in the information provided to it along with the application for registration under regulation 5 of the Debt Securities Trustee Regulations, 2012 during the period the applications for registration is being considered and after the grant of registration.

4.       That all the documents provided to the Commission are true copies of the originals.

That I do hereby verify that the statements made above are correct to the best of my knowledge and belief and nothing has been concealed therein.

DEPONENT

Signature. _____________

The Deponent is identified by me.

Signature. ____________

ADVOCATE
(Name & Seal)

Solemnly affirmed before me on this _____ day of ______ at ___________ by the Deponent above named who is identified to me by _______________, Advocate.

Signature ____________

OATH COMMISSIONER 
FOR TAKING AFFIDAVIT
(Name & Seal)

FORM B
[see Regulation 6(2)]

SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN

CERTIFICATE OF REGISTRATION TO ACT AS DEBT SECURITIES TRUSTEE

Islamabad, the …….. (date)…………

Registration No ……………………..

1.       The Securities and Exchange Commission of Pakistan having considered the application for registration as a Debt Securities Trustee under Regulation 5(1) of the Debt Securities Trustee Regulations, 2012 (the Regulations) by ……… [Name of the applicant) …………. and being satisfied that the said ………. [Name of the applicant) ……… is eligible for registration and that it would be in the interest of the securities market so to do hereby grants Certificate of Registration, in exercise of the powers conferred under regulation 6(2) of the Regulations to …. [Name of the applicant)…. as a Debt Securities Trustee to carry out the activities as specified in the Regulations subject to the condition that …. [Name of the applicant]…. shall comply with all the provisions of the Regulations and to any other condition that may be imposed hereafter.

2.  Unless cancelled or suspended this certificate of registration is valid for a period of three years from the date of its issuance or the existence of ……. [Name of the applicant) ………. whichever is earlier provided that it remains eligible under the Regulations for registration as a Debt Securities Trustee.

For and on behalf of the 
Securities and Exchange Commission of Pakistan 
Authorized Signatory

FORM C
[see Regulation 7(1)]

APPLICATION FOR GRANT OF RENEWAL OF CERTIFICATE OF REGISTRATION AS DEBT SECURITIES TRUSTEE

(Please carefully read the instructions annexed to this Form)

To,

The Securities and Exchange Commission of Pakistan

Pursuant to the decision of the Board of Directors of …. [Name of the applicant] …… taken in its meeting held on …… [Date of Meeting]………., we whereby apply for renewal of registration as Debt Securities, Trustee under Regulation 7(1) of the Debt Securities Trustee Regulations, 2012. The information and documents mentioned in Annexure-III are attached herewith.

Date: __________________              Signature:_________________

Place: _________________

                                                Name of the Chief Executive Officer, the Company Secretary or the Chief Financial Officer duly authorized by the BoD through a resolution for signing and submission of this application..

Annexure-III

(see Form C)

The following details shall be provided by a Debt Securities Trustee along with the relevant supporting documents:—

1.       Detail of non-compliance, if any, by the Debt Securities Trustee with any provision of the Debt Securities Trustee Regulations, 2012 and reasons thereof.

2.       Detail of non-compliance, if any by the Debt Securities Trustee with any provision of any Trust Deed to which it is a party and reasons thereof.

3.       Detail of the Issue(s) of securities for which the Debt Securities Trustee remained engaged during the last one year.

4.       Detail of legal proceedings initiated against the Debt Securities Trustee and penal actions taken against it by the Securities and Exchange Commission of Pakistan or any other regulatory authority during the last one year.

5.       Detail of changes, if any, in the status of the Debt Securities Trustee.

6.       Detail of complaints relating to the Issue of Debt Securities received in the capacity as Debt Securities Trustee during the last one year and their status.

7.       Detail of default, or delay in profit payment or redemption, if any, by the issuers including the following:

                   (a)        the action taken by the Debt Securities Trustee to safeguard the interest of debt securities holders;

          (b)     mode of enforcement of security, if any; and

          (c)      compensation provided to debt securities holders.

For and on behalf of ……….. (Name of the applicant) ….

Date: _________________    Signature: _________________

Place: ________________      __________________________

                                                Name of the Chief Executive Officer or any director of the applicant authorized by BoD to submit the above-mentioned information.

*Instructions:

(i)      The applicant must submit application for registration under Regulation 7 on this form duly filled in and signed, together with supporting documents to the Commission.

(ii)     All columns of the application form should be filled in. In case a column is not relevant or not applicable, the same should also be filled in as "Not Applicable" or "Not Relevant".

(iii)    Information, which needs to be supplied in more details may be provided on separate sheet(s) and attached to the application.

FORM D

[see Regulation 7(2)]

SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN

CERTIFICATE OF RENEWAL OF REGISTRATION AS DEBT SECURITIES TRUSTEE

Islamabad, the …….. (date)……….

Registration No. ………………….

1.       The Securities and Exchange Commission of Pakistan having considered the application of the Debt Securities Trustee for renewal of its registration under regulations 7(1) of the Debt Securities Trustee Regulations, 2012 by …….. [Name of the applicant] ……… and being satisfied that the said ……..[Name of the applicant] …….is eligible for renewal of registration and that it would be in the interest of the securities market so to do hereby grants renewal of Certificate of Registration, in exercise of the powers conferred under Regulation 7(2) of the Regulations to ….[Name of the applicant]…. as a Debt Securities Trustee to carry out the activities as specified in the Regulations subject to the condition that ….[Name of the applicant]…. shall comply with all the provisions of the Regulations and to any other condition that may be imposed hereafter.

2.       Unless cancelled or suspended this renewal of the certificate of registration is valid for a period of one year from the date of the issuance of this certificate of renewal or the existence of ……… [Name of the applicant] …….. whichever is earlier provided that it remains eligible under the Regulations for registration as a Debt Securities Trustee.

For and on behalf of the
Securities and Exchange Commission of Pakistan
Authorized Signatory

SCHEDULE-I

CONTENTS OF TRUST DEED

[see Regulation 9(ii)]

The Trust Deed should contain all the necessary terms and conditions including the following:–

1.       The Issuer

All obligations and responsibilities of the issuer under the Regulations, the Ordinance, the Act, the Trust Act and any other applicable law or directions by the Commission including the following:

(i)      its obligation for maintaining proper record of its books of accounts and keeping it open for inspection by the Debt Securities Trustee;

(ii)     its obligations for maintaining proper register of debt securities holders with their addresses, record of subsequent transfers and changes of ownership;

(iii)    its obligations for facilitating the Debt Securities Trustee to enter its premises and inspection of the charged assets, if any;

(iv)    its obligations for intimating the Debt Securities Trustee of all orders, directions, notices of the Courts of law affecting or likely to affect the charged assets or interest of the debt securities holders;

(v)     its obligations for submitting any document or information including copies of financial reports; auditor's certificate on maintaining minimum redemption reserve fund, if required; report on redemption of debt securities; report on conversion of debt securities, if they are convertible; report on dividend payment, contracts relating to the Issue and detail of the assets backing the debt security etc. as and when required by the Debt Securities Trustee;

(vi)    its obligations for keeping the charged assets, if any, in proper condition;

(vii)   its obligation to pay the profit and the principal amount;

(viii)  its obligation to seek prior consent of the Debt Securities Trustee for declaration of any dividend, if so required by the Trustee;

(ix)    its obligations for reporting to Debt Securities Trustee before any change in the nature and conduct of business of the issuer;

(x)     its obligations for submitting periodical report on semi-annual basis to the Debt Securities Trustee containing at least the following:

          (a)      register of debt securities holders;

                   (b)        number and nature of grievances received by the issuer from debt securities holders and status of resolution thereof;

                   (c)        amount of markup due but unpaid and reasons for non payment thereof and detail of unclaimed/undelivered payments, if any;

                   (d)       a declaration confirming that its assets which are available by way of security are sufficient to discharge the claims of the debt securities holders as and when they become due.

(xi)    its obligations for submission of its annual audited accounts to the Debt Securities Trustee within thirty (30) days from the date of the general meeting in which such accounts are approved;

(xii)   its obligations to conduct and manage its business affairs with due diligence and efficiency in accordance with sound financial practices;

(xiii)  its obligations to inform the Debt Securities Trustee about the material change in its shareholding structure and the Board of Directors;

(xiv)  its obligations to provide the Debt Securities Trustee information about its financial condition, business and operations as and when requested by the Debt Securities Trustee;

(xv)   its obligation to inform the Debt Securities Trustee regarding any change in the utilization of proceeds of the Issue where the offering document sets out specific purpose for the utilization of the proceeds of the issue;

(xvi)  its obligations to furnish to the Debt Securities Trustee copies of all documents, reports, notices, circulars and particulars which the issuer provides to its creditors;

(xvii) its obligations to immediately inform the Debt Securities Trustee of the occurrence of any event of default;

(xviii)     its obligations that until all the amounts payable by the issuer in relation to the debt security have been paid in full to the satisfaction of the Debt Securities Trustee, the issuer shall not without prior written consent of the Trustee;

                   (a)        sell, transfer or otherwise dispose of, except in the ordinary course of business, any of the charged assets or more than 20 per cent of its undertaking or assets or permit any merger, consolidation, dismantling or reorganization;

                   (b)        create or permit to subsist any pari passu or superior security interest over the charged assets or any portion thereof except in accordance with inter-creditor agreement if any, to which the Debt Securities Trustee is a party;

                   (c)        demolish or remove any part of the buildings which are part of the secured assets or the fixtures and fittings annexed thereto except in the ordinary course of repair, maintenance, replacement or improvement;

                   (d)       change its memorandum or articles of association, in a manner that may adversely affect its ability to perform its obligations in respect of the debt security Issue;

                   (e)        take any action which is likely to result in a material adverse change in the Issue; and

                   (f)        declare or pay any dividends after the occurrence of any event of defaults.

(xix)  its obligation to ensure that the assets of the Issuer backing the debt security are maintained and sufficient to discharge its obligations as the issuer

(xx)   its obligation to ensure that all information provided to the Debt Securities Trustee relating to the issue is accurate and that it has not concealed any material facts/information.

2.       Purpose and salient features of the Issue

Complete detail and information regarding the following:

(a)      Purpose of the Issue, utilization of the proceeds thereof and Issue size.

(b)     tenure of the Issue.

(c)     markup/coupon rate.

(d)     redemption schedule.

(e)      options like call option, put option and conversion option, if any, and in case of conversion option, the conversion procedure.

(f)      debt equity ratio (the company's long term debt/equity ratio and the company's total debt/equity ratio both before and after the issuance of the debt security).

(g)     debt service coverage ratio, if applicable.

3.       Details of the assets backing the debt security if applicable;

(a)     Nature of the assets.

(b)     Book value of the assets as per the latest audited accounts of the issuer.

(c)      Nature of the existing charge(s) viz floating, exclusive, pari passu, ranking etc. on the charged assets and total amount of such charges.

(d)     Nature of charge(s) established in favor of the Debt Securities Trustee.

(e)     Circumstances under which security becomes enforceable.

(f)      Restriction on the issuer with respect to creation of further charges or encumbrances of the assets without the consent of Debt Securities Trustee.

(g)     Minimum amount of the security to be maintained at all times during the tenure of the debt security.

(h)     Procedure for successive valuation of the assets backing the debt security.

(i)      Procedure for inspection of the charged assets and books of account by the Debt Securities Trustee or any person or persons authorized by it.

(j)      Mechanism for preservation of the assets backing the debt security.

(k)     Circumstances under which the security may be disposed off or leased out with the approval of the Debt Securities Trustee.

4.       Procedure for Enforcement of Security and related risk factors

The procedure for enforcement of security in case of default by the issuer and risk factors connected to the enforcement of security should be provided in detail.

5.       Representation and Warranties

Details regarding the issuer representation and warranties regarding any issue or creation of trust or the clause that execution of this declaration shall not contravene the memorandum and articles of association of the Issuer, any agreement which constitute legal and binding obligation of the issuer etc.

6.       Details of the agreements executed by the issuers with its creditors and covenants thereof.

7.       Events of Default

All the events, which if occurred shall require the Debt Securities Trustee to initiate the actions, proceedings including enforceability of the security for safeguarding interest of the debt securities holders, should be defined

8.       Rights of Debt Securities Trustee in case of issuer's default:

(i)      right of the Debt Securities Trustee to inspect any document of the issuer relating to the Issue including the books of accounts, contracts relating to assets backing the debt security, the register of debt securities holders and shareholders etc. and to take copies and extracts thereof.

(ii)     a statement whether, in case of default, the Debt Securities Trustee has the right to appoint nominee directors) on the board of the issuer or not.

(iii)    right of the Debt Securities Trustee to call meeting of the debt securities holders, the events under which such meeting may be called and minimum quorum for the meeting of debt securities holders.

(iv)    right of the Debt Securities Trustee to approach a Court of competent jurisdiction in the event of any default by the issuer and its failure to comply with the covenants of the Trust Deed.

9.       Rights of the debt securities holders

(i)      right of the debt securities holders to call meetings;

(ii)     to vote at the meetings of the debt securities holders;

(iii)    in the event the Debt Securities Trustee, upon receiving instructions from the debt securities holders in accordance with the provisions of the Trust Deed, refuses or fails to act in accordance with such instructions, then any of the debt securities holders, holding such number of debt securities as specified in the Trust Deed, may, on giving the Trustee a notice in writing of its intention to initiate proceedings against the issuer;

(iv)    to replace the Debt Securities Trustee if it contravenes any of its obligations under the Trust Deed and procedure for such replacement.

(v)     to replace the Debt Securities Trustee if it contravenes any provision of the Regulations or the Ordinance or the Act.

10.     Duties of Debt Securities Trustee

All obligations and duties of the Debt Securities Trustee under the Regulations, the Ordinance, the Act, the Trust Act, 1882 and any other applicable law including the following:

(i)      its obligation to regularly monitor payment of profit to the debt securities holders and redemption of the debt security and ensure that it is according to the redemption schedule provided to the debt securities holders.

(ii)     its obligation to monitor delay or default in payment of profit and redemption of principal amount to the debt securities holders.

(iii)    its obligations towards regularly monitoring compliance by the issuer with all the covenants of the Trust Deed.

(iv)    its obligations of reporting to the debt securities holders about actual or potential breaches of its own or the issuer's obligations along with remedial steps taken or to be taken and the manner and time period during which the debt securities holders shall be informed of such breaches.

(vi)    its obligations to initiate legal proceedings against the issuer where the issuer refuses or fails to fulfill its obligations under the Trust Deed.

(vi)    its obligation to monitor on semi annual basis the quantum of security, where the Issue is secured, and to ascertain whether the security of the issuer backing the debt security is sufficient to discharge the claims of debt securities holders as and when they become due.

(vii)   its obligation incase of impairment of the security; and

(viii)  its obligation to enforce security, where necessary, in the interest of the debt securities holders.

11.     Removal and Resignation of the Debt Securities Trustee

(i)      Provide in details the instances and procedure for the retirement, removal and resignation of the Debt Securities Trustee including appointment of new Debt Securities Trustee.

(ii)     Procedure for modifications/rectification in the Trust Deed.

(iii)    clause prohibiting any unilateral modification/ amendment by either party to the Trust Deed.

12.     Miscellaneous

(a)      Provisions for redressal of grievances of debt securities holders.

(b)     Provision that the Debt Securities Trustee shall not relinquish from its assignment unless another Debt Securities Trustee is appointed.

(c)     fee or commission of the Debt Securities Trustee.

(d)     Provisions relating to the quorum, voting, whether meeting of the debt securities holders may be convened by the issuer, the Debt Securities Trustee and/or by the debt securities holders, minimum holding for convening meeting by debt securities holders etc.

(e)      Conditions under which the provisions of Trust Deed or the terms and conditions of the issue may be changed.

(f)      Provisions relating to the creation and maintenance of redemption reserve fund, if any.

(g)     Indemnification of the Debt Securities Trustee.

Note:

(i)      The arrangement for rendering services as Debt Securities Trustee does not absolve the issuer of the obligations and responsibilities placed on it under the Ordinance, the Act, the Securities and Exchange Ordinance, 1969 and these Regulations.

(ii)     The Debt Securities Trustee may incorporate additional clauses, provided that the additional clauses do not dilute or contravene the provisions of the Regulations particularly of the above clauses.

SCHEDULE-II

CODE OF CONDUCT

[see Regulation 9]

The Debt Securities Trustee shall follow the following code of conduct:

1.       A Debt Securities Trustee shall protect the interest and rights of the debt security holders in accordance with the Trust Deed.

2.       The Debt Securities Trustee shall ensure that:

                   (i)         any change in registration status which may adversely affect the interest of the debt securities holders is promptly notified to the issuer, the Commission and in case of listed debt securities to the stock exchange concerned; and

                   (ii)        where the Debt Securities Trustee cease to act as a Debt Securities Trustee for the Issue, its business relating to the Issue is transferred to another trustee in consultation with the issuer.

3.       A Debt Securities Trustee shall take all reasonable steps to establish the true and full identity of the issuers and maintain proper record of the charged assets, if any, and the financial and operating position of the issuer.

4.       A Debt Securities Trustee shall not discriminate among the issuers.

5.       A Debt Securities Trustee shall share information regarding the Issue available to it with the concerned credit rating company, if so desired by such credit rating company.

6.       A Debt Securities Trustee shall provide the issuer and debt securities holders with adequate and appropriate information about its trusteeship business, including contact details, services available to issuers, and the identity and status of employees and other persons acting on its behalf with whom the issuer may have to interact.

7.       A Debt Securities Trustee shall not indulge in any unfair competition, which is likely to harm the interests of other Debt Securities Trustee.

8.       A Debt Securities Trustee shall ensure that the information shared with the debt security holders through correspondences or other means is correct, adequate, comprehensive and not misleading to the best of his knowledge and belief and is shared on timely basis.

9.       A Debt Securities Trustee shall ensure that its directors or managers having the management of the whole or substantially the whole of affairs of the trusteeship business, shall not either through its account or their respective accounts or through their associates or family members, relatives or friends indulge in any insider trading.

10.     A Debt Securities Trustee or any of its directors, employees, officers, etc. shall not divulge to anybody either orally or in writing, directly or indirectly, any confidential information about its clients which has come to its knowledge, without taking prior permission of its clients, except where such disclosures are required to be made in compliance with any law.

11.     A Debt Securities Trustee shall ensure that:

                   (i)         inquiries from debt securities holders are adequately dealt with; and

                   (ii)        grievances of debt securities holders are redressed in a timely and appropriate manner.

12.     A Debt Securities Trustee or any of its directors, employees, officers, etc. dealing with trusteeship business shall not render, directly or indirectly, any investment advice about any security in the media, whether real-time or non-real-time unless a disclosure of interest including long or short position in the said security has been made, while rendering such advice.

13.     A Debt Securities Trustee shall be responsible for the acts or omissions of its employees and agents in respect to the conduct of its business.

14.     Debt Securities Trustee shall provide adequate freedom and powers to its compliance officer for the effective discharge of its duties under these Regulations.

15.     A Debt Securities Trustee shall ensure that good corporate policies and corporate governance is in place.

16.     A Debt Securities Trustee shall not disclose the non-public price sensitive information it has due to its position as a trustee to any person.

 

17.     Debt Securities Trustee shall call for periodical reports regarding profit payment and redemption of the debt security from the issuer.

18.     A Debt Securities Trustee shall inspect books of accounts, records, registers of the issuer and the security to the extent necessary for discharging its obligations under the issue of debt security.

19.     Debt Securities Trustee shall maintain high standard of integrity and fairness in performing its functions and discharging all its obligations under these Regulations in a fair, efficient, transparent and ethical manner.

20.     A Debt Securities Trustee shall make every possible effort to avoid any conflict of interest relating to its trusteeship business with the issuer and in case conflict of interest exists, the Debt Securities Trustee shall immediately make a disclosure of the same to the debt securities holders, the stock exchange concerned in case of listed debt security and the Commission and shall try to resolve that conflict in an equitable manner.

——————–

REGULATION, 2012

STOCK EXCHANGES (CORPORATISATION, DEMUTUALIZATION AND INTEGRATION) REGULATIONS, 2012

[Gazette of Pakistan, Extraordinary, Part-II, 18th June, 2012]

S. R. O. 750 (I)/2012.—In exercise of its powers under Section 23 of the Stock Exchanges (Corporatisation, Demutualization and Integration) Act, 2012, the Securities and Exchange Commission of Pakistan hereby makes the following regulations namely:—

1.       Short title and commencement.—(1) These Regulations may be called the Stock Exchanges (Corporatisation, Demutualization and Integration) Regulations, 2012.

(2)  They shall come into force at once.

2.       Definitions.—(1) In these Regulations, unless there is anything repugnant in the context or subject:

(a)      "Act" means the Stock Exchanges (Corporatisation, Demutualization and Integration) Act, 2012; and

(b)     "Clearing House" includes any company formed and established to provide facilities for the clearing or settlement of securities traded on a securities market registered outside Pakistan.

(2) Words and expressions not defined herein shall have the same meaning as ascribed thereto in the Act, the Securities and Exchange Ordinance, 1969, the Companies Ordinance, 1984 and the Central Depositories Act, 1997 or any rules and regulations made thereunder.

3.  Criteria for approving a strategic investor.—(1) A strategic investor desirous of acquiring the shares of a stock exchange shall fulfil the following minimum criteria:—

(i)      In the case of a stock exchange or a derivative exchange:

                   (a)        is registered as a stock exchange or a derivative exchange:

                                         Provided that in the case of a stock exchange, the companies listed on the stock exchange have a total market capitalization of at least five times of the total market capitalization of companies listed on the stock exchange, shares of which it is desirous of acquiring;

          (b)     has a net equity equivalent to at least Rs. 20 billion;

                   (c)        has experience of at least five years as a demutualized exchange;

          (d)     is in operation since last ten years;

                   (e)        has profit after tax in at least three of the last five years as per the audited financial statements;

                   (f)        has a diverse range of actively traded products which may include futures, options and other internationally acceptable derivative instruments recognized by the Commission for this purpose;

                   (g)        has a robust risk management system and default handling mechanism and good track record of handling market settlements; and

                   (h)        has been provided such classification by an international index provider as acceptable by the Commission for this purpose.

(ii)     In the case of a depository company or a clearing house—

                   (a)        is registered as a depository company or a clearing house in the country in which it operates;

                   (b)        has a net equity equivalent to at least Rs, 20 billion or is a wholly owned subsidiary of a stock exchange which fulfills the criteria mentioned in sub-regulation 3(I )(i) above;

                   (c)        has for, at least the past five years, been associated with a stock exchange or a derivative exchange which fulfills the criteria mentioned in sub-regulation 3(1)(i) above; and

                   (d)       has profit after tax in at least three of the last five years as per the audited financial statements.

(iii)    has sufficient operational and technical resources to assist in the development and promotion of the stock exchange shares of which it is desirous of acquiring;

(iv)    any other condition as may be specified by the Commission at the time of granting the approval:

               Provided that the Commission may relax any of the conditions as contained in regulation 3(1 )(i) and 3(l)(ii) except regulation 3(l)(i)(c) after taking into consideration the reputation, past track record, overall financial and operational strengths and expected benefits from a stock exchange, derivative exchange, clearing company or a depository company.

(2)  Notwithstanding anything contained in sub-regulation (1) above, a registered stock exchange, derivative exchange, depository company or clearing house, as the case may be, shall not be approved as a strategic investor if it is a connected person of the trading right entitlement certificate ("TREC") holder(s) of the stock exchange shares of which it is desirous of acquiring.

4.  Criteria for approving a firm of Chartered Accountants.—The Commission shall approve a firm of Chartered Accountants for the purposes of revaluation of the assets and liabilities of a stock exchange in accordance with Section 4(1)(b) of the Act, in consideration of the following:

(a)      the partners or directors of the entity must not be a 'connected person' of the stock exchange or directors of the stock exchange of which the revaluation is to be carried out;

(b)     it must not be engaged either in the external or internal audit of the stock exchange of which the revaluation is to be carried out.

          Explanation,—For the purpose of this regulation the firm of Chartered Accountant shall include an entity providing audit services or an entity holding license for management consultancy from the Institute of Chartered Accountants of Pakistan.

5.  Manner of operating the blocked account.—The Board of Directors of a stock exchange operating a blocked account in pursuance of Section 9(2) of the Act, shall do so in the following manner:

(a)      A CDC Participant account shall be opened by the stock exchange under which separate sub-accounts for each initial shareholder shall be opened. The account .shall be opened on the basis of a resolution of the Board of Directors of the stock exchange;

(b)     Sixty per cent of the total shares of the stock exchange shall be held in the sub-accounts of the initial shareholders in a manner that each sub-account shall hold sixty per cent of the shares allotted to each initial shareholder.

(c)      No movement or pledging of shares held in the sub-accounts shall be allowed except the transfer pursuant to the sale of shares to the strategic investor, the general public and the financial institutions in accordance with the Act and requirements of these regulations;

(d)     When the stock exchange reaches an agreement for the sale of not more than forty per cent shares to the strategic investor in accordance with the requirements of Section 12(1)(a) of the Act, the shares may be transferred in the name of strategic investor subject to the following conditions:—

                   (i)         The stock exchange shall provide a copy of the agreement executed with the strategic investor to the Commission, showing the number of shares to be sold and the price at which the sale is agreed;

                   (ii)        The agreement shall describe among other matters the terms and conditions for payment and transfer of shares;

                   (iii)       Evidence regarding the sufficient funds available with the strategic share holder to execute the transaction including but not limited to account statement; and

                   (iv)       Any other condition as may be imposed by the Commission at the time of granting approval.

(c)      After completion of the conditions provided in sub-regulation (d) and obtaining prior approval of the Commission in writing, the Board of Directors of the stock exchange shall issue instructions to the CDC to transfer the shares to the strategic investor:

          Provided that no shares shall be transferred unless the payment for the same is received from the strategic investor and confirmation of the same is provided to the Commission by the stock exchange.

6.  Manner of issuance of TREC.—(1) The TREC shall be issued in physical form in accordance with the format prescribed in Annexurc-I.

(2)     Each TREC shall—

(a)     be allotted a distinctive number.

(b)     be prepared and delivered by the stock exchanges to the initial shareholders within thirty days of the grant of the Commission's approval under Section 4(2) of the Act.

(3)     The stock exchanges shall confirm in writing to the Commission the issuance of TRECs alongwith the names of initial shareholders and the distinctive numbers of the TREC so issued.

(4)     The TREC to be issued under Section 16(5) & (6) of the Act shall be issued by the stock exchange within fifteen days of completion of all procedures/requirements for issuance of TREC in accordance with the requirements of these regulations and any other regulations of the stock exchange(s).

(5)     The stock exchanges shall maintain a register of TREC holders which shall contain the name, CNIC/Company Registration Number, address of the TREC holder and any other matters as may be specified by the Commission from time to time.

(6)  A stock exchange shall issue a TREC under Section 16(5) & (6) of the Act on the basis of a written application which shall be accompanied by such documents as a stock exchange may specify from time to time.

(7)  The TREC under Section 16(5) & (6) of the Act shall only be issued to a person upon satisfaction by the Exchange that the applicant fulfills the fit and proper criteria specified by the Commission from time to time for registration as a broker and the stock exchange shall obtain such documents from the applicant as may be necessary for this purpose.

7.       Manner of Transfer of TREC—(1) The stock exchanges shall ensure that not more than one transfer is registered in respect of a TREC issued under Section 5 of the Act:

Provided that no transfer shall be executed or registered in respect of TREC issued under Section 16(5) & (6) of the Act;

Provided further [hat any change in the name of TREC holder as a result of conversion of status from an individual TREC holder to a corporate TREC holder shall not be considered as a transfer of TREC, if the concerned individual member retains the majority shareholding and management control of the company.

(2)     A TREC holder who has been issued a TREC under Section 5 of the Act shall request the stock exchange to provide a no objection certificate (NOC) before entering into any transaction for the transfer of TREC.

(3)     Any TREC issued under Section 5 of the Act by the stock exchanges shall only be transferred to a person who fulfills the fit and proper criteria for the brokers as specified by the Commission from time to time and before registering any transfer of TREC, the stock exchange shall ensure that the transferee fulfills the fit and proper criteria.

(4)     The stock exchanges may require transferor and transferee of the TREC issued under Section 5 of the Act to provide such information as may be required for determining the fit and proper status for registering a transfer of TREC or for issuing a NOC for such transfer.

(5)     The TREC issued under Section 5 of the Act shall only be transferred on the basis of a written application signed by both the transferor and transferee, the contents of which and the signatures of the transferor shall be verified by the stock exchange before registering the transfer.

8.       Manner of disposal of shares of a stock exchange.—After demutualization, shares of a stock exchange held in the blocked account may be disposed in the following manner:

(a)      The Demutualization Committee of a stock exchange shall exercise its best efforts to attract a strategic investor which fulfills the eligibility criteria prescribed in these Regulations:—

               Provided that the stock exchange shall take all necessary steps for the implementation of necessary reforms and upgrading its systems to fulfill this objective;

(b)     If, as a result of negotiation, the Demutualization Committee of a stock exchange receives multiple offers which are above the valuation of such stock exchange, it shall accept the highest offer:

               Provided that, it may grant any other offerors the opportunity to match the highest offer:

               Provided further that the Demutualization Committee of a stock exchange may accept an offer which is not the highest offer but is greater than the valuation of the stock exchange after considering the reputation, past track record and expected future benefits from the participation of such offeror;

(c)      Shares sold to a strategic investor shall be held in a blocked account in the name of such strategic investor and shall only be transferred with the prior written approval of the Commission.

9.  Allotment of shares of stock exchange to the initial shareholders.—(1) Within 30 days of receiving approval under Section 4(2) of the Act, or a determination under Section 4(6) of the Act, the stock exchange shall forward to the CDC the list of initial shareholders, submitted to the Commission under Section 4(1)(d) of the Act, with the instructions to credit forty per cent shares out of total shares allotted to such initial shareholder in the account of each initial shareholder;

(2)  On the basis of instructions of the stock exchange, CDC shall credit in the account of each initial shareholder, forty per cent shares out of total shares allotted to such initial shareholder.

10.  Segregation of Commercial and Regulatory Functions.—(1) Each stock exchange shall ensure compliance with the plan for segregation of commercial and regulatory functions approved by the Commission under Section 4(2)(f) of the Act in accordance with the timelines provided in the plan.

(2)  Any modifications to address foreseeable events of non-compliance with the approved plan must be submitted to the Commission for approval alongwith detailed rationale, well in advance of occurrence of any such event/modification.

ANNEXURE-I

[See Regulation 6(1)]

______________ STOCK EXCHANGE

TRADING RIGHT ENTITLEMENT (TRE) CERTIFICATE

The _________ Stock Exchange, in pursuance of Section 5 or Section 16, whichever applicable, of the Stock Exchanges (Corporatisation, Demutualization and Integration) Act, 2012 read with regulation 6 of the Stock Exchanges (Corporatisation, Demutualization and Integration) Regulations, 2012 hereby grants a TRE Certificate to ___________________________, subject to the requirements of the Regulations of the ___________________ Stock Exchange, where applicable.

2.  TRE Certificate number: _____________________

Dated:        _________________

Place :         _________________

By order

Sd/-
For and on behalf of

            _________________ STOCK EXCHANGE