In a circular published on Tuesday, the Security Board Of India (SEBI) has proposed to streamline the process of Initial Public Offering (IPO) with the use of Unified Payment Interface (UPI) as an additional payment mechanism with Application Supported by Blocked Amount (ASBA) with the investors’ grievances redressal.
In the year 2018, SEBI introduced UPI accompanied by the ASBA for Retail Individual Investors. Later, UPI became mandated for Retail Individual Investors applications submitted through Intermediaries.
The new framework identifies the solutions for the issues that arise in the current UPI market ecosystem. The circular addresses the recurring problems like delay in receipt of a mandate by investors for blocking of funds due to systemic issues at Intermediaries/SCSBs, Failure to unblock funds for cancelled/withdrawn/deleted cases in the Stock Exchanges platform and partial allotment by the next working day from the finalization of the basis of allotment (BOA) or non-allotment by BOA+1.
Therefore, a policy has put in place to further streamline the reconciliation process among intermediaries and Self Certified Syndicate Bank (SCSB) and provides a system of compensation to investors.
Streamlining of IPO Process:
The regulator explained that the “Lead manager is the nodal entity for any issues arising out of a public issuance process, and the timelines, processes and compensation policy should form part of the agreements signed among the intermediaries. They are obliged to ensure adherence to timelines and compensation policy by intermediaries.”
SEBI ensures a timely response about the IPO process. It said,
“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 convenience of reference, the details of nodal officers of SCSBs would be made available on the SEBI Website. And to communicate 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, the performance of Apps and the UPI Handles, downtime/network latency (if any) across intermediaries and any such processes having an impact/bearing on the IPO bidding process”, the circular informs.
UPI Re-initiation
To prevent the duplication, SEBI approves the facility of re-initiation provided to Syndicate Members, preferably be allowed only once per bid/batch, and as deemed accurate by the concerned Stock Exchange after bid closure time.
In case of the Cancelled/Withdrawn/Deleted Applications-
Registrars To an Issue (RTI) would have to submit the details, describing cancelled/withdrawn/deleted applications to SCSB’s regularly within 60 minutes of bid closure time from the Issue opening date till the Issue closing date (T) by obtaining it from the same bourses.
SCSB’s would have to unblock such applications by the closing hours of the bank day and submit the confirmation to Lead Managers and RTA regularly. However, SEBI has taken some steps to solve the issue of delayed unblock.
Compensation
Security Board Of India (SEBI) has laid the compensation norms for the investors if they do not get the redressal of their grievances.
As per the compensation rules, SCSBs would have to pay ₹ 100 per day or 15 % per year of the application amount, whichever deemed to be higher, to investors. SCSBs will compensate the investor, immediately on the date they receive a complaint.
If any delay occurs in resolving the grievance beyond the date of complaint reception, for each day of delay, merchant bankers will be paying ₹ 100 per day or 15 % per year of the application amount, whichever is higher, to investors.
Total compensation would comprise the compensation by SCSBs and lead managers.
The new rule would be enforceable for IPOs opening on or after May 01, 2021.