Sebi puts out disclosure norms for municipal bonds

Putting in place the disclosure norms for municipal bonds, markets regulator Sebi today asked municipalities to disclose all the price sensitive information and financial results to the stock exchanges.
Municipalities proposing to issue debt securities on private placement basis would have to make certain disclosure to the stock exchanges. This includes financial as well as non-financial information.
The issuer would have to inform its intention to raise funds through debt securities.
The issuer would have to submit un-audited financial results on a half yearly basis to exchange and debenture trustee, wherever applicable, within three months from the end of the half year.

"The issuer shall prepare and submit the annual audited financial results with the stock exchange and debenture trustee, wherever applicable, as soon as the same is available but not later than six months from the end of the financial year," Sebi said in a circular.
The audited financial results should be accompanied by the annual report that comprises key financial statements; municipal commissioner's report on the financial statements and the qualifications and comments made in the report of the auditor among others.

Before submission of the financial information to the exchanges, the financial information should be taken on record by standing committee or governing body. The annual financial information need to be audited by the auditor.

An issuer would have to enter into a simplified listing agreement, with all the exchanges where it proposes to list debts securities.
The issuer would first disclose to exchange of all events or information having bearing on the performance of the listed entity, price sensitive information that would affect payment of interest or redemption of debt securities "as soon as reasonably possible and not later than 24 hours from the occurrence of event or information".
It should submit a certificate to the bourse within five working days of the interest or principal or both becoming due that it has made timely payment of interests or principal obligations or both in respect of the debt securities issued.

Every credit rating should be reviewed at least once a year by the registered credit rating agency.
With regard to the grievance redressal mechanism, Sebi said that an issuer would have to ensure that adequate steps are taken for expeditious redressal of investor complaints. Also, it would have to ensure that it is registered on the SCORES platform.
An issuer will have to appoint a compliance officer, who would be responsible for ensuring conformity with the regulatory provisions.
Earlier this year, Sebi eased rules governing the issuance of municipal bonds in order to boost such bond market. It allowed municipalities with surplus in their books in the preceding three financial years to issue public debt securities.

Under previous norms, municipality or a Corporate Municipal Entity making public issue of debt securities should not have negative net worth in any of three immediately preceding financial years.