The IPO system is undergoing rapid changes at the moment. It is going to be simpler and faster under a pilot project starting from next month. The new system will cut the processing time of an initial public offering (IPO) to three weeks from the current requirement of more than five weeks.
Earlier the SEC made the application process simpler dropping the requirement of depositing cash collateral money along with the IPO application form. Now a beneficiary account holder may apply with filling a requisition slip with the security firm in which he or she is holding the live account and running trading.
If the applicant gets the IPO slots, then the required money may be adjusted from the running account. If he does not get the slot of shares he is not bothered to draw back the money from the bank.
The new pilot project will make the IPO further hassles free that investors face in submitting IPO applications. As many as 118 stockbrokers and merchant banks will participate in the pilot project, which was approved in a meeting of Bangladesh Securities and Exchange Commission last week.
Of the institutions, 66 stockbrokers are from Dhaka Stock Exchange, 36 stockbrokers from Chittagong Stock Exchange and 16 are merchant banks.
The stock market regulator also asked the institutions to inform their clients about the pilot project for IPO subscription.
Under the project those having no trading at the bourse but running the beneficiary account, may also pay the IPO subscription fee to the stockbroker or merchant banks that will keep the amount in a block account.
The stockbroker or the merchant bank will provide the issue manager with IPO subscriber data which will be checked by the Central Depository Bangladesh Ltd before the IPO lottery.
The stockbrokers and the merchant banks will transfer the money of successful IPO applicants to the issuer company’s escrow account if the applicant gets the allotment of shares.
Investors that are not successful in the lottery will be allowed to withdraw or use their proceedings immediately after the lottery. In addition to the pilot project, investors can also make IPO subscription through the existing system.
Presently, retail investors need to attach cheque or cash to the completed IPO application form and hand it in to the issuer’s designated banks. After the lottery, successful applicants get allotment certificates; while unsuccessful applicants have to collect refund.
Source: Weekly Holiday