BSEC to bring changes to book-building rules

The securities regulator to form five-member committee

FE Report | Wednesday, 20 March 2019

The securities regulator has decided to bring some changes to book-building method to make it more transparent and ensure 'fair' price of IPO (initial public offering) shares.
The Bangladesh Securities and Exchange Commission (BSEC) took the decision at a commission meeting held on Tuesday presided over by its Chairman Prof. M Khairul Hossain.
At the meeting, the securities regulator also decided to form a five member committee headed by BSEC executive director Ms. Rukshana Chowdhury, said a BSEC statement on Tuesday.
The committee will review the 'Book Building Method' of Bangladesh Securities and Exchange Commission (Public Issue) Rules, 2015. The committee will recommend necessary changes after reviewing the book-building method, according to the statement.
Book building is a process through which an issuer attempts to determine the price to offer for its security based on demand from institutional investors.
The price of an IPO share is determined through automated bidding joined by different financial institutions.
The BSEC approved the 'Public Issue Rules, 2015' on December 28, 2015 after reviewing on the public opinion.
Companies that will offer primary shares with premium prices will have to follow the book building method to raise capital from public, according to the existing book building method.
The securities regulator made the system mandatory for the premium seekers to ensure accountability and responsibility of issuer companies, issue managers, auditors and other stakeholders.
In January 2018, the securities regulator also brought change in rules regarding conduct of eligible investors (EIs) while taking part in price bidding process of book building method.
Recently, the BSEC Chairman M Khairul Hossain hinted that some changes to the definition of institutional investors are being planned to ensure the transparency of the book building system.
He said also made harsh remarks on the price manipulation by alleged institutional investors in book-building method, saying the book building system would be suspended or stopped if needed for the sake of capital market.
Mr Hossain also warned errant institutional investors, including brokers, dealers, merchant bankers and asset management companies, saying they will be excluded from the list of institutional investors.
At Tuesday's meeting, the securities regulator also decided to bring necessary changes in the notification dated October 02, 2011 regarding fund raising by the un-listed companies.
The BSEC has decided to form a four-member committee headed by BSEC Executive Director Mahbubul Alam.
The committee will recommend necessary changes after reviewing the notification, said the statement.
Sources said the BSEC committee might review the notification regarding increasing the lock-in period on the trading of placement shares from the existing one year.

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