SEC approves draft rules of book building method
Wednesday, 3 December 2008
FE Report
The Securities and Exchange Commission (SEC) Tuesday approved the draft rules of book building method, a modern mechanism for price fixing of IPOs (initial public offering).
The commission set the month of December to pay the annual fees against BO (beneficiary owner) accounts and made mandatory for the investors to provide national identification (ID) number with applications for primary shares from the beginning of next year.
The commission also decided, in principle, to withdraw the loan exposure limits of banks and non-banking financial institutions (NBFIs).
"The draft method will be published in the national dailies this month for seeking opinions and recommendations from members of the public before giving it the final shape," SEC executive director Farhad Ahmed told reporters after the regular commission meeting.
The practical opinions and suggestions will be included in the draft rules which will come into effect after issuance of the gazette notification, he added.
"The method will be introduced to attract national and multinational companies and to increase the number of quality stocks in the market. Moreover, the method will fetch fair IPO prices for the companies," he said.
Under the draft rules, the book building process will have two stages-price discovery and book building by eligible institutional investors and public offer based on price found out through book building process, he said adding that the commission will also retain the existing fixed price method of IPO.
The SEC has decided, in principle, to withdraw the limit on loan exposures of banks and NBFIs to improve the liquidity situation in the market.
"The withdrawal of loan exposure limit will enhance the capacity of merchant banks in financing their clients," the SEC executive director said adding once the amendment to the rules are made, the banks and NBFIs will have no limit for portfolio exposure.
The commission took the decision as part of its agreement with stakeholders during a series of market development meetings held recently, he said.
Currently, banks and NBFIs are allowed to provide margin loans in portfolio investment to their clients upto five times of their respective paid-up capital.
The provision of mentioning the National ID numbers has been introduced apparently in an effort to curb the practice of submitting IPO applications in fake names.
Farhad said, putting national ID numbers in the IPO application along with other details will bring more transparency in the process and help remove any dispute concerning the applicants.
But a non-resident Bangladeshi will not have to provide such ID number. The ID is applicable both for local individuals and joint applicants.
The BO account holders will now pay the annual fee of Tk 300 in advance against their accounts. According to the decision, the fees for the year 2009 will have to be paid in December 2008.
In case of a new BO account to be opened in the year 2009, the fee will have to be paid while opening the account and the particular BO holder will have to pay the fee for the year 2010 in December 2009.
The Securities and Exchange Commission (SEC) Tuesday approved the draft rules of book building method, a modern mechanism for price fixing of IPOs (initial public offering).
The commission set the month of December to pay the annual fees against BO (beneficiary owner) accounts and made mandatory for the investors to provide national identification (ID) number with applications for primary shares from the beginning of next year.
The commission also decided, in principle, to withdraw the loan exposure limits of banks and non-banking financial institutions (NBFIs).
"The draft method will be published in the national dailies this month for seeking opinions and recommendations from members of the public before giving it the final shape," SEC executive director Farhad Ahmed told reporters after the regular commission meeting.
The practical opinions and suggestions will be included in the draft rules which will come into effect after issuance of the gazette notification, he added.
"The method will be introduced to attract national and multinational companies and to increase the number of quality stocks in the market. Moreover, the method will fetch fair IPO prices for the companies," he said.
Under the draft rules, the book building process will have two stages-price discovery and book building by eligible institutional investors and public offer based on price found out through book building process, he said adding that the commission will also retain the existing fixed price method of IPO.
The SEC has decided, in principle, to withdraw the limit on loan exposures of banks and NBFIs to improve the liquidity situation in the market.
"The withdrawal of loan exposure limit will enhance the capacity of merchant banks in financing their clients," the SEC executive director said adding once the amendment to the rules are made, the banks and NBFIs will have no limit for portfolio exposure.
The commission took the decision as part of its agreement with stakeholders during a series of market development meetings held recently, he said.
Currently, banks and NBFIs are allowed to provide margin loans in portfolio investment to their clients upto five times of their respective paid-up capital.
The provision of mentioning the National ID numbers has been introduced apparently in an effort to curb the practice of submitting IPO applications in fake names.
Farhad said, putting national ID numbers in the IPO application along with other details will bring more transparency in the process and help remove any dispute concerning the applicants.
But a non-resident Bangladeshi will not have to provide such ID number. The ID is applicable both for local individuals and joint applicants.
The BO account holders will now pay the annual fee of Tk 300 in advance against their accounts. According to the decision, the fees for the year 2009 will have to be paid in December 2008.
In case of a new BO account to be opened in the year 2009, the fee will have to be paid while opening the account and the particular BO holder will have to pay the fee for the year 2010 in December 2009.