Markets regulator SEBI on Tuesday put in place a uniform policy to streamline the reconciliation process among intermediaries with regard to initial public offers as well as a new mechanism to compensate investors.
The new framework would address issues related to delays in receipt of mandate by investors for blocking of funds due to systemic issues at intermediaries and failure to unblock the funds in cases of partial allotment by the next working day from the finalisation of Basis of Allotment(BOA), SEBI said in a circular.
Other issues that would be addressed include Self Certified Syndicate Banks (SCSBs) blocking multiple amounts for the same Unified Payment Interface application and SCSBs blocking more amount in the investor’s account than the application amount. In case of delays,
In order to ensure timely response with regard to IPO (Initial Public Offer) process, SCSBs would identify the nodal officer for IPO applications processed through UPI as a payment mechanism and submit the details to Sebi within seven working days.
For ease of reference, the details of nodal officers of SCSBs will be hosted on the Sebi Website. To ensure timely information to investors, SCSBs would send SMS alerts for mandate block and unblock.
For ease of doing business, sponsor banks would host a web portal for intermediaries from the date of IPO opening till the date of listing. It will have details of statistics of mandate blocks/ unblocks, performance of apps and UPI handles, down-time/ network latency (if any) across intermediaries and any such processes having an bearing on the IPO bidding process.
To avoid duplication, Sebi said the facility of re-initiation provided to syndicate members would preferably be allowed only once per bid/ batch and as deemed fit by the concerned stock exchange after bid closure time.
In respect of cancelled or withdrawn applications, the regulator said that Registrars To an Issue (RTI) would have to submit the details of cancelled or withdrawn applications to SCSB’s on a daily basis within 60 minutes of bid closure time from the issue opening date till issue closing date by obtaining the same from bourses.
SCSB have to unblock such applications by the closing hours of the bank day and submit the confirmation to lead managers.
In view of the complaints received pertaining to delayed unblock, Sebi has prescribed a process, whereby sponsor banks need to execute the online mandate revoke file for non-allottees or partial allottees on BOA+1.
Subsequently, any pending applications for unblock would be submitted to RTA, not later than 12:30 PM on BOA+1.
After this, RTI would submit the bank-wise pending UPI applications for unblock to SCSB’s along with the allotment file, not later than 2:00 PM on BOA+1. The allotment file would include all applications pertaining to full-allotment/ partial-allotment/ non-allotment/ cancelled/ withdrawn/ deleted applications.
Sebi said an SCSB need to ensure that the unblock for non-allotted/ partial-allotted applications is completed by the closing hours of bank day on BOA+1. The SCSB would submit the confirmation on the same to lead managers and RTA, not later than BOA+1.
SCSBs failing to provide the details as per the prescribed format would be liable to face appropriate action under the securities laws.
In order to provide an efficient redressal mechanism for complaints from investors pertaining to block or unblock of funds and to avoid any opportunity loss, out with a compensation structure whereby SCSBs would pay ₹100 per day or 15% p.a. of the application amount, whichever is higher, to investors.
SCSBs would compensate the investor, immediately on the date of receipt of complaint from the investor.
If there is any delay in resolving the grievance beyond the date of receipt of complaint from investor, for each day of delay, then merchant banker would pay Rs 100 per day or 15 per cent per annum of the application amount, whichever is higher, to investors.
The compensation comprises compensation by SCSBs along with those by post issue lead managers.
Lead managers would have to ensure that the payment of processing fee or selling commission to the intermediaries be released only after ascertaining that there are no pending complaints pertaining to block/ unblock of UPI bids, receiving the confirmation on completion, Sebi said.
The new framework would come into force for IPOs opening on/ after May 1, 2021.