Municipalities proposing to issue and list municipal bonds can’t indulge in pseudo advertising under the garb of ‘promotional or educational’ activities at time of raising funds from investors and they will have to follow a strict disclosure regime.
The draft norms finalised by markets regulator Sebi, which is in the process of notifying the final regulations, also provide for a number of strict safeguards in the interest of investors, while some of the disclosure requirements are even tougher than in developed markets like the US.
The new norms are expected to give a major boost to the government’s initiative of setting up 100 smart cities in the country, as they will allow the urban local bodies to raise much-needed funds, from public investors as also from large institutions, including pension funds, for infrastructure building exercise in their respective areas.
The draft Sebi (Issue and Listing of Debt Securities by Municipality) Regulations, 2015 has been finalised after extensive consultations and final norms would be soon notified by the regulator, a senior official said.
Among others, the new norms provide that the issuer may make an advertisement in a national daily with wide circulation, on or before the issue opening date and such advertisement will have to contain extensive disclosures.
No issuer can “issue an advertisement which is misleading (in) material particulars or which contains any information in a distorted manner or which is manipulative or deceptive. The advertisement shall be truthful, fair and clear and shall not contain a statement, promise or forecast which is untrue or misleading.
“Any advertisement issued by the issuer shall not contain any matters which are extraneous to the contents of the offer document. The advertisement shall urge the investors to invest only on the basis of information contained in the offer document.
“Any promotional or educative advertisement issued by the issuer during the subscription period shall not make any reference to the issue of debt securities or be used for solicitation.”