The Securities and Exchange Commission has made changes to Securities and Exchange Commission (Public Issue) Rules, 2006 for unlisted securities, known as placement shares, restricting number of placement holders within 100 and made tax identification numbers mandatory for its holders.
According to a SEC notification released on Sunday, shares allotted through private placement will be subjected to a lock-in for one year, before which, it cannot be transferred to another person or entity.
It also said the sponsor/promoter group should maintain a minimum post-issue shareholding of 30 per cent of the total paid up capital of the company at least for three years from the date of giving consent to the issue by the regulators.
The issuer of such securities must submit an information memorandum which will include background of the company, profiles of key management personnel, reasons for capital raising, schedule of project implementation, audited financial statements, basic earnings per share, diluted earnings per share for the last three years and net asset value based on the last balance sheet.
The memorandum should be placed to the SEC thorough a merchant bank, the guideline said.
The guideline also mentioned that a complete list of subscribers should be submitted to the SEC within 15 days of the closing of the subscriptions along with the copy of the allotment letters.
Private placement is a way of raising funds from chosen or selected private investors without an initial public offering.
In Bangladesh’s stock market, only an issue manager can sell shares under private placement on behalf of an issuer company.
The probe committee for the January’s stock market scam severely criticised the practice of privet placement shares terming it an instrument to bribe the high ups.
The report also said the placement shares were one of the key reasons that caused huge price inflation before issuing IPO that put impact on the secondary market.
-With New Age input
