Market not ready for collecting IPO refund warrants through DPs, SEC body says
Thursday, 25 September 2008
Kayes M Sohel
The market is not ready for collecting IPO (initial public offering) refund warrants through Depository Participants (DPs) as their capacity remained poor in the present context.
The observation came at the final meeting held recently of the 10-member committee formed by the Securities and Exchange Commission (SEC) for cutting time for IPO refund warrants and application collection.
But some members in its first meeting proposed that the process of collecting IPO refund warrant money can be completed through DPs instead of commercial banks.
They, however, proposed that no bank details is required for an investor to apply in IPO for getting allotment of shares but in this case only Beneficiary Owners' (BO) accounts is enough.
Under the proposed system, the whole process of subscription, collection and distribution of refunds after conduct of lottery could be completed within four weeks, the meeting proposed.
Currently, it takes six to eight weeks to complete the process and as a result, huge amount of money remain stuck-up creating liquidity crisis in the secondary market and also affecting the investors both in primary market and secondary market.
"For opening a BO account, an investor is required to have a bank account recorded at the CDBL," a member of the committee said adding that so, the applicant may provide a different bank account in IPO application, other than the one recorded with the CDBL.
This anomalous practice in one hand renders the CDBL record redundant and on the other hand expose the IPO applications to the vagaries of omission of bank details and errors which delays distribution of refund warrant fund.
"To eliminate the problem, the IPO applications may not contain any bank details of the applicants. Such information should be obtained or downloaded from CDBL," he said.
"If this process is implemented, the level of risk of human error and omissions will be reduced, and, therefore, processing time will be cut considerably," he added.
The meeting also proposed that all BO account holders may be advised to update their bank details with the CDBL through respective DPs within a reasonable timeframe. This would save considerable application processing time.
The lottery should be conducted on BO account identity basis instead of bank serial basis, which would eliminate another level of risk of human error and omissions and therefore reduce processing time considerably, it noted.
The market is not ready for collecting IPO (initial public offering) refund warrants through Depository Participants (DPs) as their capacity remained poor in the present context.
The observation came at the final meeting held recently of the 10-member committee formed by the Securities and Exchange Commission (SEC) for cutting time for IPO refund warrants and application collection.
But some members in its first meeting proposed that the process of collecting IPO refund warrant money can be completed through DPs instead of commercial banks.
They, however, proposed that no bank details is required for an investor to apply in IPO for getting allotment of shares but in this case only Beneficiary Owners' (BO) accounts is enough.
Under the proposed system, the whole process of subscription, collection and distribution of refunds after conduct of lottery could be completed within four weeks, the meeting proposed.
Currently, it takes six to eight weeks to complete the process and as a result, huge amount of money remain stuck-up creating liquidity crisis in the secondary market and also affecting the investors both in primary market and secondary market.
"For opening a BO account, an investor is required to have a bank account recorded at the CDBL," a member of the committee said adding that so, the applicant may provide a different bank account in IPO application, other than the one recorded with the CDBL.
This anomalous practice in one hand renders the CDBL record redundant and on the other hand expose the IPO applications to the vagaries of omission of bank details and errors which delays distribution of refund warrant fund.
"To eliminate the problem, the IPO applications may not contain any bank details of the applicants. Such information should be obtained or downloaded from CDBL," he said.
"If this process is implemented, the level of risk of human error and omissions will be reduced, and, therefore, processing time will be cut considerably," he added.
The meeting also proposed that all BO account holders may be advised to update their bank details with the CDBL through respective DPs within a reasonable timeframe. This would save considerable application processing time.
The lottery should be conducted on BO account identity basis instead of bank serial basis, which would eliminate another level of risk of human error and omissions and therefore reduce processing time considerably, it noted.