Amendments to the SEBI (Disclosure and Investor Protection) Guidelines, 2000 - SEBI - RMB (Compendium) Series Circular No. 2 (1999- 2000)

SECURITIES AND EXCHANGE BOARD OF INDIA PRIMARY MARKET DEPARTMENT Mittal Court, A Wing, Ground Floor Nariman Point, MUMBAI - 400 021. TEL NO. : 2850451- 56/ 2880962-70 FAX NO. :204 5633 RMB (Compendium) Series Circular No. 2 (1999- 2000) February 16, 2000 To: All Registered Category I Merchant Bankers Dear Sirs, Sub: Amendments to the SEBI (Disclosure and Investor Protection) Guidelines, 2000 The SEBI (Disclosure and Investor Protection) Guidelines, 2000, (hereinafter referred to as Guidelines ) came into effect from January 27, 2000. Following amendments to the Guidelines, as explained in two sections of this circular, may be noted: Section A It may be recalled that RMB (GI) series Circular No. 2 dated December 1, 1999 was not consolidated in the Guidelines. The same has now been consolidated into the Guidelines and therefore ceases to be in force with effect from the date of this circular. Certain other inconsistencies brought to our attention are being rectified. Section B In order to reduce inconvenience caused to investors applying in public/ rights issues through the depository mode, the issuer companies shall be required to enter into agreements with all the depositories. Also in order to eliminate the risks to the investors on account of fake/ forged certificates, bad delivery and delays in transfer etc., it has been decided that, trading in securities of companies making an Initial Public Offer shall be in dematerialised form only. Hitherto, draft offer document submitted to SEBI was made available at SEBI website. It has now been decided that final offer document would also be made available on SEBI s website. The lead merchant banker shall therefore, be required to also furnish a soft copy of the final offer document to SEBI as per the procedure explained in this circular. SEBI had prescribed during August 1993 that in every issue, Lead merchant banker should associate a Resource Personnel ( SEBI nominee ) while finalising the allotment . In June 1994 the guidelines were modified to stipulate that association of Resource personnel is required only in all par issues oversubscribed more than 5 times and premium issues oversubscribed more than 2 times. It has now been decided to stop the practice of associating Resource Personnel while finalising the allotment. Henceforth, the Executive Director/Managing Director of the regional stock exchange along with the post issue Lead Merchant Banker and the Registrars to the Issue shall be responsible to ensure that the basis of allotment is finalized in a fair and proper manner. The Circular shall come into force with effect from February 16, 2000 and shall be applicable to, 1. the offer documents pending with SEBI, and 2. the public / rights issues, the offer documents for which are not yet filed with the Registrar of Companies/ concerned Stock Exchange (s). Please acknowledge receipt. Yours faithfully, O P Gahrotra Senior Executive Director Section A I. A Clause 4.14 (A) shall be inserted after clause 4.14 in Chapter IV of the Guidelines which shall read as follows: 4.14 (A) Lock-in of pre issue share capital of an unlisted company Where an unlisted company eligible to make a public issue and desirous of getting its securities listed on a recognised stock exchange pursuant to a public issue has issued shares to any person within six (6) months prior to the date of opening of the public issue at a price lower than the price at which equity is being offered/issued to public, the entire share capital (except shares issued to venture capitalists and employees of the company) existing prior to public issue shall be locked in for a period of six (6) months from the date of trading of the shares on the regional stock exchange. Provided, the lock-in would not apply to the shares (other than shares issued to promoters, friends, relatives and associates) if the same were issued more than 6 months prior to the date of opening of the public issue and are offered under offer for sale. II The Clause 4.1.2 in Chapter IV of the Guidelines shall be deleted. III The Clause 4.5 of Chapter IV of the Guidelines shall be deleted. Section B I. A Clause 5.14 shall be added in the Chapter V of the Guidelines which, shall read as follows: 5.14 Agreements with depositories 5.14.1 The lead manager shall ensure that the issuer company has entered into agreements with all the depositories for dematerialisation of securities. He shall also ensure that an option be given to the investors to receive allotment of securities in dematerialised form through any of the depositories. II. (a) Clause 5.7.3 of Chapter V shall be deleted (b) In the Clause 16.1.4 (a) words 10 days prior to issue opening date shall be replaced with the following words within three (3) days of filing offer document with Registrar of Companies / concerned Stock Exchange (s) as the case may be (c) The Clause 16.1.4 (b) shall be modified and shall read as follows: The lead merchant banker shall submit one final printed copy of the final offer document to Primary Market Department, SEBI, Head Office, within three (3) days of filing the offer document with Registrar of Companies / concerned Stock Exchange(s) as the case may be. (d) A new clause 16.1.4 (c) shall be inserted which shall read as follows The lead merchant banker shall submit a computer floppy containing the final prospectus/ letter of offer to Primary Market Department, SEBI, Head Office, as specified in Schedule XXIII within three (3) days of filing the final prospectus/ letter of offer with the Registrar of Companies/ concerned Stock Exchange(s). Along with the floppy, the lead manager shall submit an undertaking to SEBI certifying that the contents of the floppy are is in HTML format and are identical to the printed version of prospectus/ letter of offer filed with Registrar of Companies/ concerned Stock Exchange as the case may be. (e) Existing Schedule XXIII shall be modified and shall be read as given at the end of this circular. III. (a) In Clause 16.1.5 the after the words the following details and before the words shall be given the words certified as correct shall be inserted. (b) Following sub clauses shall be added after sub clause (vii) of clause 16.1.5 (viii) whether any promoter/ director/ group and/ or associate company of the Lead Manager is associated with securities related business and registered with SEBI. (ix) If any one or more of these persons/entities are registered with SEBI, their respective registration numbers. (x) If registration has expired, reasons for non-renewal. (xi) Details of any enquiry / investigation conducted by SEBI at any time. (xii) Penalty imposed by SEBI (Penalty includes deficiency/warning letter, adjudication proceedings, suspension / cancellation / prohibitory orders) (xiii) Outstanding fees payable to SEBI by these entities, if any. IV A Clause 6.34 (c) shall be added in Chapter VI of the Guidelines which shall read as follows: 6.34 (c) In case of public issues by unlisted companies, the lead merchant banker shall incorporate a statement in the offer documents that the trading in the securities shall be in dematerialised form only for all the investors. V (a) The Clause 7.1 of Chapter VII of the Guidelines shall be deleted. (b) Following amendments shall be made to Clause 7.6 of Chapter VII (i) Clause 7.6.1 shall be replaced with the following clause In a public issue of securities, the Executive Director/Managing Director of the Regional Stock Exchange along with the post issue Lead Merchant Banker and the Registrars to the Issue shall be responsible to ensure that the basis of allotment is finalised in a fair and proper manner in accordance with the following guidelines: Provided, in the book building portion of a book built public issue notwithstanding the above clause, Clause 11.3.5 of Chapter XI of these Guidelines shall be applicable. (ii) Following clauses shall be added after Clause 7.6.1.2 of Chapter VII 7.6.2 The drawal of lots (where required) to finalise the basis of allotment, shall be done in the presence of a public representative on the Governing Board of the Regional Stock Exchange. 7.6.3 The basis of allotment shall be signed as correct by the Executive Director/Managing Director of the stock exchange and the public representative (where applicable) in addition to the lead merchant banker responsible for post issue activities and the Registrar to the Issue. The stock exchange shall invite the public representative on a rotation basis from out of the various public representatives on its governing board. Applicability: The Circular shall come into force with effect from February 16, 2000 and shall be applicable to, (i) the offer documents pending with SEBI, and (ii) the public / rights issues, the offer documents for which are not yet filed with the Registrar of Companies/ concerned Stock Exchange (s). Schedule XXIII 1. The soft copies of draft offer documents shall be submitted in both HTML and PDF formats in a floppy placed in a sealed envelope. The floppy (1.2 MB, write protect mode) should be submitted in a sealed envelope. 2. One floppy shall contain prospectus/ letter of offer of a single issue only and in one single file. 3. They must go through the offer documents after conversion into HTML and PDF formats thoroughly to ensure that their internal notings, additions/deletions or corrections do not appear in the final format which is submitted to SEBI. It is to be ensured that the data given in the tables is in systematic order. It is to be understood that merchant bankers are fully responsible for the contents of soft copies of the offer documents. 4. The Merchant Bankers are required to submit an undertaking to SEBI while filing the offer document certifying that the information contained in the floppy is in HTML format and matches exactly with the contents of the hard copy. 5. The floppies containing the soft copy of the offer document should have a sticker duly posted giving the following information : 1. 1. the name of merchant banker 2. name of the issuer company 3. issue type (public/ rights/ offer for sale) 4. signature of the by the person who has signed the due diligence certificate. 6. If the requirements of this circular regarding submission of soft copy of the offer document are not fulfilled, the offer document would not be processed. 7. Merchant bankers are further advised to confirm to SEBI in writing, within one day of the posting of draft offer document on the website (if the next day is a holiday, on the first working day), that the contents of the draft offer document appearing on the website are in order. 8. The merchant bankers are advised to follow the above procedure explained above in respect of the draft offer document, for the final offer document as well. The sticker mentiones at clause (5) above shall contain following additional information: a) date of filing with Registrar of Companies/ stock exchange b) issue opening date