Recent “Investor friendly steps by SEBI

IPO: Anchor investors
With the objective of boosting investor confidence in the primary market, SEBI brought the concept of ‘Anchor Investors’. This allows an individual or entity to subscribe up to 30% of the institutional share of an IPO, similar to a pre-placement agreement. Since 50% of an IPO is typically reserved for institutional investors, this would mean up to 15% of the total offering could be given to an ‘anchor investor.’ This would thereby impute confidence to the retail investors as they see a large investor taking a significant stake in the IPO.

As per the guidelines, anchor investors will apply for the shares a day before the subscription opens for other investors. They will pay 25% of the purchase price when placing the order and the remaining 75% within two days after the IPO has closed. There will be a firm allotment to this anchor investor and therefore there will be a lock-in of 30 days after the issue gets listed. No person related to the promoter, promoter group or the book running lead managers will be allowed to apply as an anchor investor. This is a good move as it brings a certainty to the issue and would help the promoters of the IPO create demand for their shares and get a better price.
This step is expected to stabilize public offerings and give an overall boost to the primary market. This could lead to concentrated shareholdings, though, and it is likely the general norms of any single investor holding over 34% stake in a company having to make an open offer will still hold.

IPO: ASBA
SEBI has recently introduced a new process applicable to retail individual investors popularly referred to as ASBA (Application Supported by Blocked amount) process. Under this process, the bid amount is blocked in the investor account at the time of bidding. If and when an allotment is made against the investors’ application to the extent of money due on the shares allotted, his account will be debited and the money will be remitted to the company. Therefore, the bid amount remains in his account earning interest during the whole process period. Investor’s account will be debited only to the extent of shares allotted, if any, and the remaining amount will be unblocked. There will be no refund as such and therefore the investor will not encounter the problems related to non-receipt of refund. This is a facility extended by some self certified syndicate bankers (SCSBs) who have registered as such with SEBI. Currently almost all major banks have been identified as SCSB banks.

IPO: QIB limit
Earlier, QIB had to pay 10% of the total investment amount in an IPO, but this limit has increased to 25%, so that only serious players bid for the IPO. This will not unnecessary oversubscribe the IPO.

IPO card validity
SEBI has increased the IPO card validity from 3 months to 1 year, so that IPO compny can bring the IPO in the market at a right time (say in a bull trend), This will provide better opportunity for the investors.

Mutual fund: No entry Load
SEBI has decided to do away with the entry load of around 2.5% of the money invested, for direct applications for mutual fund investments. Any commission will be disclosed and paid upfront by the investor to the distributor, bringing much-needed transparency into mutual fund investing. According to SEBI, mutual fund investors will be exempted from payment of entry fee on applications, which are received through the Internet, directly submitted to AMCs’ or to the collection centre/investor services centers that are not routed through any distributor, agent or broker. The new rule also applies to additional purchases done directly by the investor under the same folio and to switch-ins to one scheme from another, if such a transaction is done directly by the investor. The proposed move will only benefit investors who are smart enough to pick the right scheme from the universe of MF offerings.

No issuance of shares of superior voting rights
No listed company will be allowed to issue shares with superior voting rights. There could also be no preferential issues with superior voting rights.

Rights issue
SEBI has also tinkered with some norms in the rights issue. One of the representations from the market was that the disclosure documents for rights issues tends to be extremely bulky because it is treated like a public issue, whereas that company is already listed and has continuing disclosure requirements. Investors know not only the price of the shares but also know the continuing disclosures. So SEBI has decided to do away with certain earlier requirements, including disclosing the summary of the industry and business of the issuer company. This will hasten the process for companies and also help reduce the costs.

Warrants
Earlier 10% of the installment, now 25%. Only serious investor will apply for this.

IDRs (Indian Depository recipts)
SEBI is seriously thinking of bringing IDRs in the Indian markets, so that retail investors can also apply in a foreign company. Now, SEBI has eased some norms for bringing IDRs in the market.

Interest rate swaps
SEBI is also thinking of bring “Interest rate swaps” in the market. Eg. We can exchange fixed interest rate with floating rate of various country and vice versa.  (same as currency swap)

Currency Markets
Earlier, Currency market was not open for all, but now, retail investors can also participate in the currency market.