The Securities and exchange Board of India (Sebi) on Monday, put in place disclosure norms for municipal bonds or muni bonds. The market watchdog has directed municipalities to disclose all the price sensitive information and financial results to the stock exchanges.
According to the new rules, municipalities proposing to issue debt securities on private placement basis will have to make certain financial and non-financial disclosure to the stock exchanges. For instance, the issuer will have to inform its intention to raise funds through debt securities and submit its un-audited financial results on a half-yearly basis to exchange and debenture trustee, within three months from the end of the half year.
“The issuer shall prepare and submit the annual audited financial results with the 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.
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.
Sebi has mandated that the before submission of the financial information to the exchanges, it should be taken on record by standing committee or governing body. The annual financial information also need to be audited by the auditor. Every credit rating should be reviewed at least once a year by the registered credit rating agency, said Sebi. A bond issuer will have to ensure that adequate steps are taken for expeditious redressal of investor complaints.
An issuer will also have to appoint a compliance officer, who will be responsible for ensuring conformity with the regulatory provisions. Sebi also said an issuer of muni bonds will have to enter into a simplified listing agreement, with all the exchanges where it proposes to list debts securities. The issuer will disclose all information having bearing on the performance of the listed entity, price sensitive information that would affect payment of interest or redemption of debt securities.