NEW DELHI: Capital markets regulator Sebi on Thursday did away with the requirement of a mandatory security deposit with the exchanges before a public issue in a bid to facilitate ease of doing business for issuer companies.
This measure has been taken with the aim of facilitating ease of doing business for issuing companies. The new rule effective immediately.
Earlier, a company looking to launch a public issue had to deposit with the stock exchanges an amount equal to 1% of issue size. The deposit would go back to the company after the issue.
“In order to facilitate ease of doing business, the requirement to deposit 1% of the issue size available for subscription to the public with the stock exchange by the issuers under... Sebi (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR Regulations) has been dispensed with,” Sebi said.
In February, the Securities and Exchange Board of India floated a consultation paper proposing the requirement of 1% security deposit for public or rights issues should be done away with. Explaining the rationale behind the move, the regulator had stated that the requirement of 1% security deposit was put in place for public/rights issues so an issuer resolves investor complaints relating to transaction like for refund of application money, allotment of securities and dispatch of certificates.
However, considering various reforms and present framework for public or rights issues like application via ASBA (Application Supported by Blocked Amount) UPI mode of payment, mandatory allotment in demat, among others, the concerns relating to post-issue investor complaints regarding refund of application money, non-dispatch of physical certificates does not arise, it had added.