The IFSCA Official issued a circular on October 17, 2024, regulating the listing of Commercial Paper (CP) and Certificates of Deposit (CD) on stock exchanges within the International Financial Services Centre (IFSC). This article outlines the essential aspects of the circular and the requirements for listing these financial instruments.
1. Introduction to the Circular
The IFSCA (Listing) Regulations, 2024 lay down the framework for listing various securities, including CP and CD, on the recognized stock exchanges in the IFSC. The regulations aim to promote transparency, ease of access, and cross-border investments while maintaining robust regulatory standards.
2. Commercial Paper (CP)
Commercial Papers (CP) are short-term debt instruments used by companies to raise funds. According to the new regulations, only eligible issuers under Chapter II of the IFSCA (Listing) Regulations can list CP on an IFSC exchange. However, issuers based in India are not eligible to issue CPs under the ‘External Commercial Borrowings’ framework of the Reserve Bank of India (RBI).
Key Conditions for Listing CP:
● Depository: The CP must be in demat form and held with a recognized depository.
● Maturity: CPs should have a maturity period between seven days and one year.
● Currency: The CP should be denominated in a foreign currency as specified in the regulations.
● Issuance: CP must be issued at a discount and cannot have options like call or put. It is also prohibited from being underwritten or co-accepted.
Eligible Investors:
● Both residents in India and abroad can invest in CPs, subject to compliance with the Foreign Exchange Management Act (FEMA) guidelines.
Listing Application:
● The issuer must file a listing application with the exchange, along with the offer document and a regulatory fee of USD 1000.
Disclosure Requirements:
● Detailed disclosures about the issuer, including risk factors, financial statements, management, and borrowings, are mandatory in the offer document.
3. Certificates of Deposit (CD)
Certificates of Deposit (CD) are time deposits offered by banks. The listing of CDs in IFSC is open to IFSC Banking Units (IBUs) licensed by the IFSCA. These units must comply with the IFSCA Banking Regulations.
Key Conditions for Listing CD:
● Depository: CDs must be dematerialized and held with a recognized depository.
● Application: Similar to CP, the issuer must file an application with the exchange and pay a regulatory fee of USD 1000.
Disclosure Requirements:
● Similar to CPs, detailed disclosures regarding the issuer, default history, financial condition, and credit rating must be provided.
4. Continuous Disclosures
Both CP and CD issuers are required to disclose their audited financial statements annually, no later than three months after the financial year-end. Any material event, delay, or default related to the payment obligations of the debt instruments must be reported promptly, within 24 hours, to the recognized stock exchange.
5. Buyback of CP and CD
Both CPs and CDs are subject to buyback conditions:
● The buyback must be conducted at the prevailing market price.
● The offer must be extended to all investors with identical terms.
● CP buybacks cannot occur before 30 days from the issuance date.
6. Conclusion
These circular aims to streamline the listing of Commercial Paper and Certificates of Deposit within the IFSC, enhancing the global accessibility of these financial products. The framework ensures compliance with international standards and fosters investment opportunities in India's financial hubs.
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Disclaimer: This post is for informational purposes only and does not constitute professional advice. While efforts are made to ensure accuracy, we do not guarantee the completeness or reliability of the information provided. Any reliance is at your own risk. Consult professionals for specific advice.
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