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CS Professional · IFSCA - Regulations, Listing and Compliances · Capital Market Intermediaries

Kaveri Trusteeship Ltd is appointed for a series of non-convertible debt securities listed in GIFT IFSC. Its principal role is to hold security for the investors, monitor the issuer's covenant compliance and act when the issuer defaults. Which intermediary function is Kaveri performing?

Kaveri is acting as a debenture trustee. A debenture trustee safeguards investors in debt securities by holding security, monitoring the issuer's covenant compliance and taking action on default. Merchant bankers, depository participants and clearing members perform issue management, custody or settlement roles instead.

  1. ADebenture trusteeCorrect
  2. BMerchant banker managing the issue
  3. CDepository participant
  4. DClearing member

Explanation

Protecting debt investors by holding security, monitoring covenants and acting on default is the debenture trustee's role. A merchant banker manages the issue process, a depository participant holds securities in demat form for clients, and a clearing member settles trades. The distractor of merchant banker is wrong because it does not hold security for investors post-issue.

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