Feb 26, 2000|
SEBI to issue norms for online IPO issues
Securities and Exchange Board of India (SEBI) is in the process of formulating a strategy through which investors would be able to apply for an issue online through a broker, which in turn would forward the application directly to the issuing company via the internet.
The modalities of this is expected to work out as the following :
It is proposed that a broker or institution would provide an ID number to their clients which would facilitate their entry to the website. Once on the site, the investor would be able to apply online for the shares by filling up the form and then forward the same to the issuer. The payment would be paid by the investor through their net banking account.
The issue of safety of online IPOs would get resolved once the Cyber Laws are in place. But IPO online need not wait till these get sorted out, as the same secondary market system could be adopted for this. In Net Trading currently the client gives a power of attorney to the concerned intermediary. At the same time there is also an ID number which is given to the investor. In India the intermediary is important for hawking issues through the net and the SEBI guidelines on this are likely to be out soon.
In developed market issuers are using the internet to assist them in their initial public offerings in the form of electronic roadshows. This access of roadshows via the internet could serve to broaden the number and nature of investors who apply for IPOs.
The norms for online IPOs are much awaited by brokers and companies to make the domestic IPOs accessible to investors in smaller cities and internationally who do not have access to the physical forms. Also the time saved on this would be tremendous, as investors would not have to write to brokers for forms, await the response by post as forms are not available on the net currently. Hence it would be a more cost effective and speedier method to apply for an IPO. Hence SEBI's first priority would be to work out the modalities for online IPOs.
The use of electronic roadshows via the internet in India though seems a long term plan would eventually happen and eliminate the cost of brokers as investors would be able to directly apply to the issuing company.
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