ISLAMABAD - As part of its mandate to develop the debt capital market in Pakistan, the Securities and Exchange Commission of Pakistan (SECP) has approved the Debt Securities Trustee Regulations, 2012, which will provide guidance to the trustees in discharging their responsibilities under the Trust Deeds.

The regulations empower the trustees to (i) regularly monitor payment of profit/mark-up/interest to the debt security holders and redemption of the securities; (ii) regularly monitor maintenance of the security, if any, backing the debt instrument; (iii) ensure that compliance with the provisions of the Trust Deeds, particularly their covenants, are adhered to; and (iv) monitor that the debt security holders’ complaints are resolved by the issuers.

Under the regulations, registration with the SECP has been made mandatory and only scheduled banks, development finance institutions and investment finance companies can act as debt security trustees. The institutions presently acting as trustees in any issue of debt securities, including issues made entirely through private placement, are required to get themselves registered with the SECP within a period of three months from the date of publication of these regulations in the Official Gazette.

The role of trustees in the issues of debt securities is of a critical nature as they safeguard the interest of the debt security holders. The regulations will enable the trustees to play their role more proactively, which will help building investor confidence and lead to corporate debt market development.

The purpose of these regulations is to effectively regulate affairs of the debt securities trustees and similar regulatory frameworks already exist in various developed and emerging markets.

The draft regulations were earlier notified in the Official Gazette of Pakistan and were placed on the SECP’s website for soliciting public opinion as required under the law.