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IPO: New regulation for retail segment

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By IE&M Research

SEBI has put in place a regulatory framework for retail investors who do not get IPO allotment. It has asked merchant bankers to compensate retail investors applying for shares in IPOs if no allotment is made to them despite their eligibility. Besides, the public issue banker would need to pay an interest amount of 15 per cent to the investors for failing to resolve the grievance within 15 days, while they may also face SEBI action for such failures. SEBI’s new dictat comes into force with immediate effect.

IPO: New regulation for retail segment 1While calculating minimum compensation, factors including opportunity, loss suffered by the investor due to non-allotment of shares; number of times the issue was oversubscribed in the relevant category; probability of allotment; and listing gains if any on the day of listing should be taken into consideration. It is also proposed that in case of issues which are subscribed between 90-100 per cent — that is, non-oversubscribed issues — the applicants would be compensated for all the shares which they would have been allotted,” SEBI noted. But no compensation should be payable to the applicant in case the listing price is below the issue price, the circular said.

While the process of Applications Supported By Blocked Amount (ASBA) has resulted in almost complete elimination of complaints pertaining to refunds, SEBI said there have been instances where the applicants in an IPO have failed to get allotment of specified securities and in the process have suffered an opportunity loss due to failure on the part of bankers to process the applications even when they have been submitted within time.

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