Mode of Operation

The company should, after filing the offer document with the ROCs and before opening of the issue, issue an advertisement each in an English and Hindi daily with nationwide circulation and also in a regional daily with circulation at the place where is registered office is situated. The advertisement should contain the salient features of the offer document as specified in form 2-A of the Companies (Central Government’s) General Rules and Forms, 1956. In addition to other required information. It should contain of the date of opening/closing of issue, (ii) the method, and process of application/allotment and (iii) the names/addresses/telephone numbers of the brokers/centers for accepting applications.

On the closure of. the issue, the regional stock exchange, along with the lead merchant banker and registrars to the issue, should ensure that the basis of allocation is finalized in a fair and proper manner according to the basis of allotment norms specified. These may be modified from time to lime. After the finalization of the basis of allocation, the registrar to the issue company should send the computer file containing the allocation details, that is, the allocation numbers, allocated quantity and so on of the successful applicants to the exchange to be processed, generate the both otherwise pay-in obligation and send the file to member brokers. On receipt of the allocation data, the brokers should immediately intimate the fact of allocation to their should ensure that each successful client/applicant submits the duty filled In and signed application to them along the amount payable towards the application money. The amount already paid by the applicant as margin honey towards the total allocation money payable. The broker should, thereafter, hand over the application forms of the successful applicants, who have paid the application money, to the exchange to submit the same to the registrar to the issue/company for their records.

The broker would refund the margin money, collected earlier, within three days of receipt the basis of allocation to the applicants who did not receive allocation. He should give details of the amount received from each client and the names of clients who have paid the application money, and also give a son copy of the exchange. On the pay-in day, the broker should deposit the amount collected from the clients in the escrow account opened for primary issues with the clearing house/bank. The clearing house would debit the primary issue account of each broker and credit the amount so collected from each broker to the Issue Accounting.

In the event of successful applicants failing to pay the application money, the broker through whom such clients placed the orders should bring in the funds to make good the latter’s default. The broker who does not bring in the funds would be declared defaulter by the exchange and action, as prescribed under its bylaws, would be initiated against him. In such a case, if the minimum subscription as disclosed in the prospectus is not received, the issue proceeds would be refunded to the applicants.

The subscriber should have an option to receive the security certificates or hold the securities in dematerialized form as specified in the SEBI guidelines.

The exchange concerned should not use the Settlement/Trade Guarantee Fund of the exchange for honoring the brokers commitment in case of failure of a broker to bring in funds.

On payment and receipt of the sum payable on application for the amount towards minimum subscription, the company should allot the shares to the applicants as per these guidelines. The issue should post the share certificate to the investors or instruct the depository to credit the depository account of each investor. The allotment of securities should he made not later than 15 days from the closure of the issue, failing which interest at 15 per cent would he paid to the investors.

In cases of applicants who have applied, directly or by post to the registrar to the issue and have not received allocation, he (the registrar) should arrange to refund the application monies by them within the time prescribed.

The brokers and other intermediaries engaged in the process of offering shares through the online system should maintain the following (i) records for a period of five years: the orders received, (ii) applications received, (iii) details of allocation and allotment, (iv) details of margin collected refunded, and (v) details of refund of application money.

The SEBI would have the right to carry out an inspection of the records, books and documents ting to the above, of any intermediary connected with the system and every incendiary in them should at all times cooperate with the inspection. In addition, the stock exchange(s) has the right of supervision and inspection of the activities of its connected member brokers.

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