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regular-article-logo Tuesday, 21 May 2024

Securities and Exchange Board of India trims window for IPO listing to 3 days

Market regulator pointed out that reduction in timeline for listing and trading of shares after IPO will benefit both issuers as well as investors

Our Special Correspondent Mumbai Published 21.05.23, 04:19 AM
Representational image

Representational image File picture

The Securities and Exchange Board of India (Sebi) on Saturday proposed to cut the time taken for listing of shares through public issues to three days from six days at present.

The market regulator on Saturday released a consultation paper where it proposed to bring this change.

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It pointed out that the reduction in the timeline for listing and trading of shares after an initial public offering (IPO) will benefit both issuers as well as investors.

“Issuers will have faster access to the capital raised thereby enhancing the ease of doing business and the investors will have opportunity for having early credit and liquidity of their investments’’, the market regulator observed. Sebi has sought comments from the public till June 3, 2023 on the proposal.

Sebi had in November 2018, introduced Unified Payment Interface (UPI) as an additional payment mechanism with Application Supported by Blocked Amount (ASBA) for retail investors and prescribed the timelines for listing within six days of closure of issue (T+6). ‘T’ is the day of closure of the issue.

The regulator pointed out that over the last few years, it has ensured that a series of systemic enhancements have been undertaken across all the key stakeholders of the IPO ecosystem to streamline the activities involved in the processing of public issues which will pave the way to reduce the listing timelines from T+6 to T+3.

It disclosed that the inputs of all stakeholders including stock exchanges, SCSBs (self-certified syndicate banks which offer the facility of subscribing or applying to an IPO through the ASBA process), sponsor banks, NPCI, depositories and registrars have been taken with regard to the proposed reduction in timeline and their readiness to process the public issues in the new T+3 framework.

Sebi added that extensive back-testing and simulations have been done by all stakeholders including stock exchanges and others in respect of various key activities involved in the public issue process.

AMC controls

In a separate consultation paper, the market regulator proposed that asset management companies (AMCs) set up surveillance and internal control systems for the deterrence of possible market abuse and fraudulent transactions.

The paper also mooted that the senior management of AMCs should be responsible to ensure that an institutional mechanism is put in place to detect and report possible misconduct by its employees, dealers, stock brokers, or any other connected entities.

“The CEO, MD, CO, or other such analogous person of the AMCs shall also be held accountable for non-compliance and/or negligence in implementing appropriate surveillance and internal control systems’’, it added.

Further, AMCs should have appropriate escalation and reporting mechanism for possible market abuse and fraudulent transactions in securities related to the AMCs’ transactions, Sebi added.

It may be recalled that the watchdog had passed orders in two instances of front-running pertaining to Axis AMC and Life Insurance Corporation of India (LIC). In the Axis AMC case, it barred 21 entities including the former fund manager of Axis Mutual Fund from the securities market.

In the case of LIC, SEBI barred a dealer of LIC from buying, selling or dealing in securities until further orders for front-running the trades in the stock market of the life insurance company.

Front-running refers to an illegal practice in the stock market where an entity trades based on advance information from a broker or analyst before the information has been made available to their client

The market regulator added that in order to determine the likelihood of misconduct, AMCs shall process system driven alerts in conjunction with soft alerts like lifestyle checks, recording of communication (such as recorded emails, chats) and CCTV footage among others.

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