MONEY
SEBI scraps 1% security deposit for companies floating public or rights issues
- IBJ Bureau
- Nov 22, 2024
The SEBI has abolished 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.
Before this decision, any company that was looking to launch a public issue of equity shares had to deposit with the stock exchanges an amount equal to 1 per cent of the issue size. The deposit was returned to the company after the public issue.
“In order to facilitate ease of doing business to issuer company, the requirement to deposit 1 per cent of the issue size available for subscription to the public with the designated stock exchange by the issuer company under... Sebi (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR Regulations), has been dispensed with,” the markets regulator has said.
In February, the SEBI had floated a consultation paper proposing that the requirement of 1 per cent 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 per cent security deposit was put in place for public or rights issues so that an issuer resolved investors’ complaints relating to the transaction such as for refund of application money, allotment of securities and despatch of certificates.
However, considering various reforms and present framework for public or rights issues such as application through ASBA (Application Supported by Blocked Amount) UPI mode of payment, mandatory allotment in demat, among others, the concerns relating to post-issue investors’ complaints regarding refund of application money, non-despatch of physical certificates did not arise, it had added.
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