SECP revamps public offering process ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has approved a comprehensive regulatory framework for the public offering of debt and equity securities.
Its objective is to promote the ease of doing business and streamline the entire public offering process, according to a statement by the SECP on Friday.
The SECP held pre-approval consultative sessions with industry participants in March and September.
The numbers of regulations under the approved framework has been reduced to two. As many as seven rules/regulations/guidelines relating to the public offering were initially circulated for public consultation.
Without the objective consolidation of the framework, the same would have resulted in 10 different rules/regulations/guidelines governing the public offering process.
The public offering regulations have been divided into three parts: the process of public offering, methods of public offering and functions and responsibilities of intermediaries, such as consultants, underwriters and bankers.
In the new public offering regulatory framework, an issuer will be ineligible to make a public offer if the company – or its directors, sponsors or substantial shareholders – has been declared a defaulter by the exchange.
Securities brokers appointed by companies as consultants to their public offering play an important role in promoting quality listing. As such, their role as consultants to the issue is being notified as a regulated securities activity.
The SECP has drafted regulations for the licensing of consultants to the issue and only licensed securities brokers will now be eligible to undertake the consultant-to-the-issue activity.
Furthermore, a requirement for the separate valuation section has been introduced where the consultant-to-the-issue will provide justifications for the price set by the issuer taking into account the track record of the company, management expertise, inherent risks, past financial performance and financial projections.
The role of the securities exchange has also been enhanced, as it is now required to examine the proposed issue from various aspects, including eligibility requirements and suitability of the issue in the interest of the general public.
The securities exchange is now required to place the prospectus on its website for public consultation purposes and incorporate/address public comments appropriately in the prospectus.
The conflict of interest has been reduced through the appointment of an independent consultant, underwriter, book runner and banker to the issue.
With regard to the book-building process for a public offering, flexibility has been introduced by allowing 100 per cent book building with no retail offer. Such companies will be traded only among sophisticated investors on a board other than the main ready board.
In order to make funds available to the issuer at an early date and early completion of the public offering process, post-subscription, time allowed for balloting, allotment and credit/dispatch of shares to the public has been reduced from 30 to 10 days.
As a result of the revamped regulatory framework, Underwriter Rules 2015, Book Building Regulations 2015, Guidelines for Issuance of Prospectus 2002 and Guidelines for Issuance of Term Finance Certificates to the General Public 2002 will stand repealed.