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Sebi introduces guidelines for on-line issue of shares
Sebi, in its endeavour to bring the Indian stock market on par with the global counterparts, has introduced a guideline for on-line issue of shares by corporates. The on-line system will not only reduce the time and cost of the IPO process, it will also lead to quicker listing of shares, thereby enabling faster access to funds. The new norms prescribe that allotment of securities should be made not later than 15 days from the closure of the issue, failing which interest at the rate of 15% should be paid to investors. The balance sheets of some companies which approached the capital market for funds in the past clearly shows a huge interest income on oversubscription monies. This new guideline will definitely be helpful to those investors whose monies are stuck for 2-3 months due to a company’s IPO. They consequently lose interest on their monies.
Corporates planning an IPO can reduce their stationery expenses, etc. and funds will be available quickly. The salient features of the guidelines are:
The company will have to first enter into an agreement with a stock exchange for the on-line offer of securities
The company will have to appoint a registrar to the issue having electronic connectivity with the stock exchange.
The stock exchange, in turn, will appoint Sebi-registered brokers for accepting applications and placing orders for shares.
The broker will collect the money from clients and in case the client fails to pay for the shares allocated, the broker has to cough out the amount.
The broker shall accept orders from clients, send the application with the payment to the registrar to the issue, or place the order to subscribe through a broker under the on-line system.
In the event of a failure by a client to pay the application money, the broker through whom the client placed the order will have to bring in the money. If the broker fails to pay up, he will be declared a defaulter.
During the period the issue is open to the public for subscription, applicants may approach brokers of the stock exchange through which the securities are offered under the on-line system, to place an order for subscribing to the shares.
In case of public issues of Rs 10 cr or more, the registrar to the issue shall open centres for collection of applications in New Delhi, Chennai, Calcutta and Mumbai.
The broker shall open a separate bank account (escrow account) with the clearing house bank for primary market issues and the amount collected by the broker from his clients as margin money shall be deposited in this account.
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