Sagus Speaks - May| Part I

i. Grievance Redressal Mechanism: Regulation 13(2) of the LODR Regulations mandates listed entities to ensure registration on the SEBI Complaints Redressal System ("SCORES") platform, in order to handle investor complaints electronically in the manner specified by SEBI from time to time. A new proviso has been inserted under Regulation 13(2) of the LODR Regulation wherein it has been clarified that in case of Securitised Debt Instruments("SDIs"), SCORES registration shall be undertaken at the trustee level for all special purpose distinct entities, they are trustee of.

ii. Certain additional disclosures by listed entities having SDIs – Certain additional disclosures have been added to Schedule III, Part D of the LODR Regulations to be disclosed by listed entity having listed SDI's or their trustee appointed in this regard, in relation to: (i) outstanding litigations and material developments concerning the originator, servicer, or any other party involved in the transaction that could potentially harm investor interests; and (ii) annual disclosure regarding any defaults related to servicing obligations undertaken by the servicer shall be disclosed by the entity or its trustee to the stock exchanges.

i. Regulations 2 of the ILSD Regulations: SEBI has revised Regulation 2 to define "advertisement", "issue", and "minimum holding period", and narrows "debt or receivables" to exclude re-securitisation, short-term instruments, and certain debts (e.g., revolving credit). It aligns "registration certificate" with the definition provided under the SEBI (Debenture Trustees) Regulations, 1993.

ii. Regulations 10A, 11, 11B of the ILSD Regulations: SEBI introduces Regulation 10A, mandating originators to submit quarterly asset pool performance reports and auditor certificates for securitisation trusts. Regulation 11 strengthens trustee duties, requiring trust deed compliance, SEBI reporting of non-compliance, quarterly servicer updates, and auditor certificates. It mandates investor meetings via video-conferencing with e-voting (>50% majority) and adds sub-regulations for trustee accountability, asset protection, and Schedule III compliance. Regulation 11B requires SPDEs/trustees to submit half-yearly data to SEBI for automated processing.

iii. Regulation 14 of the ILSD Regulations: The Amended Regulations, inter alia, requires regulated liquidity providers to offer arm's-length facilities for short-term use only. It prohibits use for credit enhancement or loss coverage, deems non-compliant facilities as credit enhancement, and limits facilities to non-consecutive repayment cycles.

iv. Regulations 23 of the ILSD Regulations: SEBI revises Regulation 23(2) to mandate dematerialised issuance and transfers of SDIs.

v. Regulations 30B, 30C, 30D of the ILSD Regulations: SEBI introduces Regulation 30B, requiring originators to retain 10% of securitised debt (5% for short-term or mortgage-backed securities) with restrictions on risk reduction. Regulation 30C mandates a three-month (tenors up to two years) or six-month (longer tenors) holding period, with rules for project loans and mortgages. Regulation 30D permits clean-up calls at up to 10% of asset value, prohibiting loss avoidance or credit enhancement.

vi. Schedule III of the ILSD Regulations: SEBI adds clause 3A to Schedule III, mandating corporate governance policies, prohibits sharing price-sensitive information, and inserts provisions for client identification, conflict resolution, investor grievance redressal, and SEBI compliance.

i. A new Schedule IIIA, titled 'mandatory disclosures in scheme offer document', has been inserted into the REIT Regulations and InvIT Regulations, respectively, mandating disclosures such as the trust's name, address, registration status, principal place of business, contact details, and background information. For Initial Public Offerings ("IPOs"), audited combined financial statements must be disclosed in the offer document/placement memorandum. Follow-on offers require audited consolidated financial statements for the last three financial years and stub period (if applicable), or for the period of existence if less than three years, with stub period financials required if audited financials are older than six months from the filing date.

ii. The use of condensed financial statements has been discontinued, requiring full financial statements in offer documents and post-listing disclosures, aligning with the provisions of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 ("ICDR Regulations"), and LODR Regulations. Additional audited disclosures include project-wise operating cash flows, contingent liabilities, and commitments, audited by peer-reviewed auditors approved under the respective REIT Regulations and InvIT Regulations.

iii. For continuous compliance, REITs and InvITs must submit quarterly and year-to-date financial results within 45 (forty-five) days of the quarter-end (except the final quarter) and annual financial results within 60 (sixty) days of the financial year-end, reconciling full-year audited figures with third-quarter reports. Unit holding patterns must be reported one day prior to listing, quarterly within 21 (twenty-one) days, and within 10 (ten) days of any capital restructuring exceeding a two percent change in total outstanding units, as per the Amended Regulations.

i. Agreements with LSPs and their diligence and periodic checks.

ii. Default loss guarantee contracts for losses in the loan portfolio of REs.

iii. Initial cooling-off period for prepayment of loans by the borrowers.

iv. Borrower's control over data collection, audit trails, and consent for third-party access to their data.

v. Data Storage rules for deletion and transfer of data stored in servers outside India.

vi. Interface for grievance redressal mechanism and borrowers' options to make complaints through apps and websites, apart from nodal officers.

vii. Reporting of the LSPs and digital lending apps by the RE on the centralisí information management system portal of the RBI and compliance certification, along with public disclosure in this respect.

viii. Prohibitions on the usage of dark patterns, bias, and misleading designs to unfairly push offers and disclosure of clear and fair information regarding all options.

ix. Rules for treatment of non-performing assets, capital provisioning, and loss sharing arrangements in case of defaults.

i. Regulation 8(8)(2) of the Draft Amendment provides that where the infirm power injected (in case of thermal generating stations) into the grid from the date of first synchronization of the unit up to the successful completion of the trial run shall be paid @ normal rate of charges for deviation for each time block with a price ceiling of Rs. 2.86/kWh.

ii. Regulation 8(8)(3) provides that if the infirm power is scheduled from a thermal generating station after its successful trial run in terms of the Grid Code, the charges for deviation over the scheduled infirm power applicable shall be determined based on the nature of seller i.e., general seller or wind / solar / hybrid seller.

iii. Regulation 8(8)(4) provides that if the system frequency is greater than 50.5 Hz, notwithstanding clauses (2) and (3), the charges for injection of infirm power or for deviation of scheduled infirm power after successful trial run by way of over injection by a seller, shall be zero.

i. Rule 2 provides for definitions wherein several key terms have been defined such as foreign lawyer, foreign law firm, Indian-Foreign law firm, international commercial arbitration.

ii. Rule 3 provides for registration requirements for foreign lawyers and foreign law firms and the eligibility criteria for practicing in India. Notably, registration with the BCI has been mandated unless the foreign lawyer or foreign law firm qualifies for the Fly-In-Fly-Out ("FIFO") exemption, which permits advisory services for up to 60 days annually without office presence.

iii. Under Rule 4 the Indian advocates and Indian law firms may seek registration as foreign lawyers or foreign law firms in other jurisdictions while retaining their rights to practice Indian law domestically. However, foreign lawyers may be registered in India only if there is reciprocal treatment available to Indian lawyers in the foreign jurisdiction, supported with a certification from the relevant foreign government.

iv. Rule 8 provides for the scope of permitted practice of foreign lawyers and foreign law firms whereunder the foreign lawyers and foreign law firms may only handle non-litigious matters involving international law and international arbitration. Further, foreign lawyers and foreign law firms are barred from court appearances, filing of pleadings, and conveyancing.

v. Under Rule 10, the foreign lawyers and foreign law firms are subject to BCI's Code of Ethics. Further, in case of violations BCI may issue warnings, suspend or cancel registration, or refer cases to foreign disciplinary bodies, while retaining final decision-making authority.