Regulation of IPOs by SEBI-Some recent developments

There have been a string of developments in the field of IPOs, overseen by the SEBI. In fact, more focussed regulations has been an agenda of the SEBI for some time now. The SEBI had already set up an expert group to examine the entire IPO process. The SEBI has deemed the current regulations as not being investor friendly, and has therefore agreed to change the format, and to bring down the pages of the document. The SEBI is also attempting to bring in an e-IPO process, which would be paperless, and would make the bidding process faster.

But the last few days have seen a flurry of activity relating to IPOs and regulation by the SEBI.

On the 26^th of December, the SEBI has banned any incentives attached to any public issue of debt securities. The SEBI believes that such incentives cause unfair advantages to those buyers who are receiving the incentive, and also increases the cost of issuance for the company. Therefore, incentives of any sort relating to IPOs have been banned.

The 28^th of December saw especially stern and swift action, with the SEBI banning seven companies which had made IPOs, and the merchant banks associated with dealings. The banks were banned for failing to properly regulate the inappropriateness of these dealings. These dealings came to light as a result of fluctuations of the stocks of the companies involved, which was a result of their siphoning off these funds into the equity market.

The text of the order mentions the focus of the SEBI inquiry that led to the order:

1. Adequacy, accuracy and completeness of disclosures made in the offer document by the company and standards of due diligence carried out by the merchant banker;
2. Misutilization/diversion of funds, if any, from the IPO proceeds by the company;
3. Possible violations in relation to the bidding/trading pattern in the shares of the company on the day of listing and immediately thereafter and
4. Other consequential or related matters.

-By Malavika Chandu, Third Year, NUJS, Kolkata