In a Circular dated 16th March, 2021, the Securities and Exchange Board of India (“SEBI”) has issued information regarding streamlining the process of Initial Public Offer (“IPOs”) with UPI in ASBA and redressal of investor grievances.
Background:
Through circular SEBI/HO/CFD/DIL2/CIR/P/2018/138 dated 1st November, 2018, SEBI had introduced the use of Unified Payment Interface as an additional payment mechanism with Application Supported by Blocked Amount (ASBA) for Retail Individual Investors along with timelines for listing within six days of closure of issue (T+6).
While the above was operational in Phase 1, in Phase II w.e.f 1st July, 2019, UPI was mandated for applications by Retail Individual Investors submitted through Intermediaries through another circular SEBI/HO/CFD/DIL2/CIR/P/2019/76 dated 28th June, 2019.
Subsequently through another circular SEBI/HO/CFD/DCR2/CIR/P/2019/133 dated 8th November, 2019 SEBI had extended the timeline for implementation of Phase II. The said circular had prescribed the detailed timelines of T+6 listing, compliance, reconciliation process and reporting standards to be followed by Intermediaries.
The intermediaries in the IPO ecosystem have agreed to the standard operating procedure as well as the level of security for all messaging protocols from different nodes. This has addressed a lot of investor issues.
Gaining on the experience of the market with the current UPI system, the following issues have been identified based on the consultation with market participants which need to be addressed.
1. Delay in receipt of mandate by investors for blocking of funds due to systemic issues at Intermediaries/SCSBs.
2. Failure to unblock funds for cancelled/withdrawn/deleted cases in the Stock Exchanges platform.
3. Failure to unblock the funds in cases of partial allotment by the next working day from the finalization of basis of allotment (BOA).
4. Failure to unblock the funds in cases of non-allotment by BOA+1. e) SCSB blocking multiple amounts for the same UPI application.
5. SCSB blocking more amount in the investors account than the application amount.
In light of the above, the need has been felt to put in place measures to have a uniform policy and to further streamline the reconciliation process among intermediaries/SCSBs. This circular also provides a mechanism of compensation to investors.
Key Takeaways:
1. Streamlining the IPO Process:
a. In terms of Regulations 23(2), 23(4), 23(5), 271, Schedules I & II of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 and SEBI Circular No. SEBI/HO/CFD/DCR2/CIR/P/2019/133 dated 8th November, 2019 the Lead Manager is the nodal entity for any issues arising out of a public issuance process and the timelines, processes and compensation policy defined in this circular shall form part of the agreement(s) that shall be signed among the intermediaries. Lead Managers shall ensure the adherence of timelines, processes and compensation policy by intermediaries.
In order to ensure timely response with regard to IPO process, SCSBs must identify the nodal officer for IPO applications processed through UPI as a payment mechanism and submit the details as per Annexure I to SEBI within 7 working days from the issuance of this circular. For ease of reference, the details of nodal officers of SCSBs shall be hosted on the SEBI Website.
b. Further, for ensuring timely information to investors, SCSBs must send SMS alerts for mandate block and unblock. The SMS shall include the details as prescribed in Annexure II.
c. For EODB sponsor banks must host a web portal for intermediaries (closed user group) from the date of IPO opening till the date of listing with details of statistics of mandate blocks/unblocks, performance of Apps and UPI Handles, down-time/network latency (if any) across intermediaries and any such processes having an impact/bearing on the IPO bidding process.
2. Re-initiations of UPI Bids:
To avoid duplication, the facility of re-initiation provided to Syndicate Members should preferably be allowed only once per bid/batch and as deemed fit by the concerned Stock Exchange, after bid closure time.
3. Further, the Circular has provisions regarding:
a. Unblocking of UPI Mandates
b. Cancelled/Withdrawn/Deleted applications
Source: Securities and Exchange Board of India
