New regulations to curb public issue grey market
The Securities and Exchange Board of India is planning sweeping changes in the public issue process.
These include reducing the gap between opening of any public issue and its listing to less than five days and increasing the application money that institutional investors have to put up from 10 per cent to 100 per cent. The moves are likely to kill the grey market that emerges in the current drawn-out listing process.
The SEBI board, which met in Delhi on Wednesday, decided that the primary market issuance (public issue) process would be reviewed to reduce the gap between the opening of an issue and the listing of shares.
Addressing the media after the board meeting, newly appointed SEBI Chairman CB Bhave said there was scope for “collapsing” the time between opening of an issue and its listing. This would help in discouraging the grey market, he added.
Without disclosing the new listing schedule, Bhave said, “We are in consultations and have received a lot of advice. We need to evaluate the impact and the legality of the issue… Whether we need to have any physical application forms… there are many issues that need to be resolved before taking a final decision.”
The primary market committee of SEBI, headed by Deepak Parekh, chairman of HDFC, is meeting on March 10 to finalise the guidelines. SEBI sources said the new guidelines would in line with secondary market transactions, where investors need to give money to their brokers, which in turn are aggregated at the stock exchange level. Once the allotment is completed, the refund comes to the brokers’ account, and is then transferred to investors.
In addition, the regulator is planning to change the norms for institutional investors applying in public issues. Like retail investors, institutions will need to put up the entire money at the time of application. Currently, institutional investors put up 10 per cent at the time of application and 90 per cent at the time of allotment.