Advisory body suggests expediting launch of book building system
Thursday, 13 December 2007
FE Report
The advisory body on capital market development Wednesday recommended the Securities and Exchange Commission (SEC) to expedite the introduction of the book building system replacing the existing primary market to ensure proper pricing for newly floated issues.
The book building is a modern method for distribution of initial public offerings (IPOs) as practised by the modern bourses in the world.
The book building system is a method of selling equities when an investment firm seeks bids for new issue at indicative prices. When a book is complete it offers prices and sells the lot in a single day.
Underwriters buy all the shares to be floated by public limited companies through competitive bidding procedure under the proposed system. Later, the underwriters choose some brokers to sell those shares to retail investors.
The meeting with SEC chairman Faruq Ahmad Siddiqi in the chair discussed ways and means to develop the stock market.
Briefing newsmen after the meeting, SEC's executive director Farhad Ahmed said the advisory body proposed to send a letter to the Bangladesh Bank seeking cooperation on compliance of the recent SEC directive on opening of new beneficiary owners' accounts (BO) by the general investors.
The meeting also discussed the issue on raising the paid-up capital of a public limited company through going public.
The advisory committee held its second meeting Wednesday after the reconstitution of the committee at the end of last year.
The SEC executive director said any volatility in the stock market will again invite tough action from the SEC.
"The commission has already taken measures against the 'irrational surge', and whenever such situation will prevail, we will take preventive measures to protect the investors' interest," said a senior SEC official while briefing the newsmen.
The SEC is against intervention in the market, but sometimes the situation reaches such a height that compels the market regulatory body for taking preventive measures to protect the interest of the small investors, he added.
He said the market saw the correction between May and November this year only after intervention of the SEC, otherwise, the market would have gone beyond the control. However, the SEC wants the market will go in its own course."
"Some members of the advisory body opposed the recent measures taken by the commission to cool down the overheated market. Some members viewed that the SEC should consult with the advisory body before the intervention in the market," Farhad Ahmed said.
The advisory body on capital market development Wednesday recommended the Securities and Exchange Commission (SEC) to expedite the introduction of the book building system replacing the existing primary market to ensure proper pricing for newly floated issues.
The book building is a modern method for distribution of initial public offerings (IPOs) as practised by the modern bourses in the world.
The book building system is a method of selling equities when an investment firm seeks bids for new issue at indicative prices. When a book is complete it offers prices and sells the lot in a single day.
Underwriters buy all the shares to be floated by public limited companies through competitive bidding procedure under the proposed system. Later, the underwriters choose some brokers to sell those shares to retail investors.
The meeting with SEC chairman Faruq Ahmad Siddiqi in the chair discussed ways and means to develop the stock market.
Briefing newsmen after the meeting, SEC's executive director Farhad Ahmed said the advisory body proposed to send a letter to the Bangladesh Bank seeking cooperation on compliance of the recent SEC directive on opening of new beneficiary owners' accounts (BO) by the general investors.
The meeting also discussed the issue on raising the paid-up capital of a public limited company through going public.
The advisory committee held its second meeting Wednesday after the reconstitution of the committee at the end of last year.
The SEC executive director said any volatility in the stock market will again invite tough action from the SEC.
"The commission has already taken measures against the 'irrational surge', and whenever such situation will prevail, we will take preventive measures to protect the investors' interest," said a senior SEC official while briefing the newsmen.
The SEC is against intervention in the market, but sometimes the situation reaches such a height that compels the market regulatory body for taking preventive measures to protect the interest of the small investors, he added.
He said the market saw the correction between May and November this year only after intervention of the SEC, otherwise, the market would have gone beyond the control. However, the SEC wants the market will go in its own course."
"Some members of the advisory body opposed the recent measures taken by the commission to cool down the overheated market. Some members viewed that the SEC should consult with the advisory body before the intervention in the market," Farhad Ahmed said.