SEC recommends relaxation of IPO rules

The Securities and Exchange Commission (SEC) last week has recommended for relaxing the IPO (initial public offer) rules to encourage non-listed companies to go public.
The Consultative Committee of the SEC in a meeting observed that any company with at least Tk 25 crore in paid-up capital, including the IPO offer size, should be allowed for listing on the exchanges. The existing IPO rules say companies with Tk 40 crore in paid-up capital, including the IPO offer size, are to be listed on the exchanges.
The issue managers argued that many companies are interested to come to the market, but cannot do that because of the rigid IPO conditions, officials present at the meeting said. If the rules are relaxed, they will be able to bring more new companies to the market which is now facing a dearth of fresh securities, the issue managers told the SEC.
A senior official of the SEC said, the existing IPO rules had been set as per the directives of the government, and so the consultative committee needs to discuss the new recommendations with the government afresh.
The committee comprises representatives from Bangladesh Bank, Dhaka Stock Exchange, Chittagong Stock Exchange, Bangladesh Association of Publicly Listed Companies (BAPLC), Institute of Chartered Accountants of Bangladesh, Bangladesh Merchant Bankers’ Association and the SEC.
Representatives from Central Depository Bangladesh Ltd (CDBL) and the SEC also attended the meeting.
Pre-IPO placement
The meeting also put forward a recommendation that pre-IPO private placement, or raising capital before IPO, should be through a regulatory framework, and necessary rules should be formulated to bring transparency in the private placement process. The committee has asked merchant bankers and stock exchanges to prepare a set of recommendations on formulating rules for pre-IPO private placement with the help of BAPLC.
“Presently, there are no specific rules or guidelines for pre-IPO private placement,” said Mansur Alam, adding that now the companies raise capital before public offer with permission from the SEC under the capital issue rules. But, there are no details about the pre-IPO placement in the rules, and many companies allegedly placed pre-IPO at will, taking advantage of the loopholes.
Following allegations, the SEC recently proposed an amendment to the capital issue rules. The proposed amendment says raising capital before public offer shall be through the over-the-counter (OTC) market, instead of the existing private placement.
The committee also discussed the calculation method for margin loan maintenance. As another committee of the SEC – Executive Directors’ (EDs) Committee – is working on the issue, the consultative committee asked the EDs Committee to submit its recommendations at the next meeting.
The consultative committee further discussed the calculation method for determining indicative price of a stock under book building method, and opposed the existing computing system. As per the existing method, indicative price is determined by averaging the price offers of the participating bidders

Courtesy of Weekly Holiday