SEBI is about to make changes for the Investors who regularly apply for IPO. The market regulator has approved these changes to make investing in IPOs easier and more transparent. The regulator has announced a technology-based system to correctly mark pledged pre-issue shares as locked in. This rule will make the IPO process simpler and less time-consuming for companies.
On 17 December, the board also approved the use of an offer document summary instead of the long abridged prospectus. All the information will be available in this document, helping investors to understand all the details related to the IPO. According to the board, every company that is planning to launch its IPO must compulsorily provide a summary of the offer documents while filing the Draft papers.
To prevent irregularities related to IPOs, Non-promoters of the company launching the initial public offering cannot transfer pledged shares. Tuhin Kanta Pandey, SEBIās chairperson, stated that the board has decided to strengthen transparency surrounding financial transactions.
SEBI found that, Draft Red Herring Prospectus (DRHP), which is filed by the companies before planning to launch their IPO, can be very lengthy to read. Since the DRHP consists of complex and misleading information, it makes investors hard to understand the details. To make this easy for investors, the stakeholders recommended presenting a summary document along with the DRHP. The board stopped the debate by saying that this goal can be better met through the abridged prospectus.
To make this easy for investors, the board decides that the DRHP will be available along with the QR code. Through this QR code, investors can scan and easily access all the necessary IPO related information without going through the lengthy documents. While the full DRHP will also be available for investors who want complete checking and analysis.
SEBI announces that there will be no separate document. Instead, they said the company must provide access to an abridged prospectus on the first stage of the IPO process. And according to the new rules, before the IPO, both promoters and non-promoters shares will be locked for six months.
