The Securities and Exchange Board of India (Sebi) has proposed to streamline the initial public offering (IPO) with Unified Payment Interface (UPI) with application supported by blocked amount (ASBA) for retail individual investors. In 2018, Sebi introduced the use of UPI as an additional payment mechanism with ASBA for retail investors along with timelines for listing within six days of closure of issue.
The regulator said that based on the experience gained with the current UPI system, it has identified certain issues based on the feedback from market participants. It further said gaining on the experience of the market with the current UPI system.
Sebi has identified certain issues based on the consultation with market participants. The issues are:
1) Delay in receipt of the mandate by investors for blocking of funds due to systemic issues at Intermediaries/Self-Certified Syndicate Banks (SCSBs).
2)Failure to unblock funds for cancelled/withdrawn/deleted cases in the Stock Exchanges platform.
3)Failure to unblock the funds in cases of partial allotment by the next working day from the finalization of the basis of allotment(BOA).
4)Failure to unblock the funds in cases of non-allotment by BOA+1.
5)SCSB blocking multiple amounts for the same UPI application.
6)SCSB blocking more amount in the investors’ account than the application amount.
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Market regulator Sebi streamlines the initial public offering (IPO) process
The market regulator said that the lead manager is the nodal entity for any issues arising out of a public issuance process and they shall ensure the adherence of timelines, processes and compensation policy by intermediaries. For ensuring timely information to investors, SCSBs shall send SMS alerts for mandate block and unblock.
For ease of doing business, sponsor banks shall host a web portal for intermediaries from the date of IPO opening till the date of listing. It will have details of statistics of mandate blocks/ unblocks, the performance of apps and UPI handles, down-time/ network latency (if any) across intermediaries and any such processes having a bearing on the IPO bidding process.
To provide an efficient redressal mechanism for complaints from investors about a block or unblock of funds and to avoid any opportunity loss, Sebi has come out with a compensation structure. The compensation comprises compensation by SCSBs along with those by post issue lead managers.
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Let’s have a look at this scenario
An investor has applied in an IPO with an application amount of Rs. 15,000. The public issue is closed on 2 November 2020. The investor got no-allotment and hence, the effective date for unblocking of the fund shall be 6 November 2020 (BOA+1). However, the investor has raised a complaint on the pending unblock of funds with Lead Managers/SCSB on 25 November 2020. The SCSB unblocks the amount in investors account on 30 November 2020.
Compensation by SCSBs
Rs 100 per day or 15% per annum of the application amount, whichever is higher
Duration: 6 November 2020 to 25 November 2020
Compensation by post issue lead managers
Rs 100 per day or 15% per annum of the application amount, whichever is higher
Duration: 25 November 2020 to 30 November 2020
Total compensation
Compensation by SCSBs+ Compensation by Post Issue Lead managers
The regulator said syndicate banks should compensate the investor, immediately on the date of receipt of a complaint from them. The new rule would come into force for IPOs opening on or after 1 May 2021.
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