Description
SEBI imposes penalty on Vardhman Trusteeship for non-compliance with debenture trustee regulations including failure to verify Recovery Expense Fund creation and inadequate monitoring procedures.
Summary
SEBI has issued an adjudication order against Vardhman Trusteeship Private Limited (SEBI registration number IND000000611) for violating debenture trustee regulations during the inspection period from December 15, 2020 to April 30, 2024. The violations include failure to independently verify creation of Recovery Expense Fund (REF) and non-adherence to timelines for seeking status of interest payments and principal repayments from issuers.
Key Points
- Adjudication proceedings initiated under Section 15-I of SEBI Act, 1992
- Violations of Regulation 16 read with Schedule III of SEBI (Debenture Trustee) Regulations, 1993
- Non-compliance with Clause 3.1.2 of Chapter VIII of Master Circular for Debenture Trustees
- Show Cause Notice issued on May 27, 2025 with company reply submitted June 9, 2025
- Company claims stock exchanges (BSE/NSE) do not provide REF confirmations despite consistent requests
Regulatory Changes
No new regulatory changes introduced. Order enforces existing debenture trustee compliance requirements under DT Regulations, 1993.
Compliance Requirements
- Debenture trustees must independently verify creation of Recovery Expense Fund for each listed debenture issuance
- Trustees must adhere to prescribed timelines for monitoring interest payments and principal repayments
- Proper documentation and verification procedures must be maintained as per Master Circular guidelines
- Enhanced due diligence required in trustee oversight functions
Important Dates
- Inspection Period: December 15, 2020 to April 30, 2024
- Adjudicating Officer Appointment: May 9, 2025
- Show Cause Notice: May 27, 2025
- Company Reply: June 9, 2025
- Order Date: July 28, 2025
Impact Assessment
The order reinforces SEBI’s commitment to strict oversight of debenture trustees, who play crucial roles in protecting investor interests. While limited to one entity, this enforcement action sends a strong message to all registered trustees about compliance expectations. The company’s defense regarding non-cooperation from stock exchanges highlights systemic coordination issues that may require regulatory attention. Investors in debentures where Vardhman acts as trustee should monitor developments closely.
Impact Justification
Enforcement action against registered debenture trustee affects market confidence in trustee oversight but limited to single entity