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CS Professional · Strategic Management and Corporate Finance · Role of Intermediaries in Fund Raising

Under the SEBI framework for debt securities, which of the following is the principal function of a debenture trustee appointed for a public issue of secured debentures?

A debenture trustee protects debenture holders by overseeing the security created, monitoring the asset cover and checking that the issuer follows the trust deed and legal requirements. Underwriting, book building and rating are done by other intermediaries such as underwriters, merchant bankers and credit rating agencies.

  1. AProtecting the interests of debenture holders and monitoring the security cover and compliance with the terms of the issueCorrect
  2. BUnderwriting the unsubscribed portion of the debenture issue
  3. CDetermining the coupon rate by assessing market demand through book building
  4. DAssigning the credit rating to the debentures before listing

Explanation

A debenture trustee acts as a custodian of the debenture holders' interests. It holds or oversees the security, monitors the security cover and ensures the issuer complies with the trust deed and the law. Underwriting, price discovery and rating belong to underwriters, merchant bankers and credit rating agencies respectively.

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