The Security and Exchange Board of India (SEBI) on Tuesday proposed to Streamline the process of IPOs with Unified Payment Interface (UPI) in Application Supported by Blocked Amount (ASBA) and redressal of investor grievances.
The Circular was issued addressing all the Registered Merchant Bankers, Recognized Stock Exchanges, Registered Registrars to an Issue, and Share Transfer Agents Self-Certified Syndicate Banks.
SEBI vide circular dated November 01, 2018, introduced the use of Unified Payment Interface as an additional payment mechanism with Application Supported by Blocked Amount (ASBA) for Retail Individual Investors along with timelines for listing within six days of closure of issue (T+6).
While in Phase 1 it was operational but in Phase II with effect from July 01, 2019, vide SEBI circular dated June 28, 2019, UPI was mandated for applications by Retail Individual Investors submitted through Intermediaries.
Subsequently, SEBI vide circular dated November 08, 2019, extended the timeline for implementation of Phase II. The said circular had prescribed the detailed timelines of T+6 listing, compliance, reconciliation process and reporting standards to be followed by Intermediaries.
In terms of Regulations 23(2), 23(4), 23(5), 271, Schedules I & II of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 and SEBI Circular No. dated November 8, 2019, the Lead Manager is the nodal entity for any issues arising out of a public issuance process and the timelines, processes, and compensation policy defined in this circular shall form part of the agreement(s) that shall be signed among the intermediaries. Lead Managers shall ensure the adherence of timelines, processes, and compensation policy by intermediaries.
In order to ensure timely response with regard to IPO process, SCSBs shall identify the nodal officer for IPO applications processed through UPI as a payment mechanism and submit the details to SEBI within 7 working days from the issuance of this circular. For ease of reference, the details of nodal officers of SCSBs shall be hosted on the SEBI Website.
For ensuring timely information to investors, SCSBs shall send SMS alerts for mandate block and unblock.
For ease of doing business, Sponsor Banks shall host a web portal for intermediaries (closed user group) from the date of IPO opening till the date of listing with 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 impact/bearing on the IPO bidding process.
To avoid duplication, the facility of re-initiation provided to Syndicate Members shall preferably be allowed only once per bid/batch and as deemed fit by the concerned Stock Exchange, after bid closure time.
Registrars to an Issue (RTI) shall submit the details of cancelled/withdrawn/deleted applications to SCSB’s on daily basis within 60 minutes of bid closure time from the Issue opening date till Issue closing date (T) by obtaining the same from Stock Exchanges. SCSB’s shall unblock such applications by the closing hours of the bank day and submit the confirmation to Lead Managers and RTA on daily basis.
SCSBs failing to provide the details as per Annexure IV to Lead Managers/RTI, not later than BOA+1 shall be liable to face appropriate action under Securities Laws. In order to provide an efficient redressal mechanism for complaints from investors pertaining to Block/Unblock of funds, to protect the interests of investors and to avoid any opportunity loss, the compensation structure as prescribed in Annexure V shall be applicable. SCSBs shall compensate the investor, immediately on the date of receipt of complaint from the investor.
For Example, investors have applied in an IPO with an application amount of Rs. 15,000. The Public Issue is closed on November 02, 2020. The Investor got no-allotment and hence, the effective date for unblocking of funds shall be November 06, 2020 (BOA+1). However, Investor has raised a complaint on pending unblock of funds with Lead Managers/SCSB on November 25, 2020. The SCSB unblocks the amount in investors’ accounts on November 30, 2020.
Compensation by SCSBs in this case will be Rs.100/- per day or 15% per annum of the application amount, whichever is higher from November 06, 2020 to November 25, 2020.
Compensation by Post Issue Lead Managers in this case will be Rs.100/- per day or 15% per annum of the application amount, whichever is higher from November 26, 2020 to November 30, 2020.
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