Relax IPO rules: SEC body

The Consultative Committee of Securities and Exchange Commission (SEC) yesterday decided to recommend that the regulator relax the IPO rules to encourage non-listed companies to go public.
The committee said a company with at least Tk 25 crore in paid-up capital, including the IPO offer size, should be allowed for listing on the exchanges.
Mansur Alam, convenor of the committee and also a member of the SEC, confirmed the recommendations after the meeting.
The existing IPO (initial public offering) rules allow a company having minimum Tk 40 crore in paid-up capital, including the IPO offer size, to be listed on the exchanges.
The issue managers at the meeting argued that many companies are interested to come to the market, but cannot due to the IPO conditions, officials present at the meeting said.
If the rules are relaxed, they will be able to bring more new companies to the market that is now facing a dearth of fresh securities, the issue managers told the meeting.
A senior official of the SEC said the regulator has set the existing IPO rules with the directives from the government, and so it may need to discuss with the government again on the recommendations placed by the consultative committee.
The committee comprises representatives from Bangladesh Bank, Dhaka Stock Exchange, Chittagong Stock Exchange, Bangladesh Association of Publicly Listed Companies (BAPLC), Institute of Chartered Accountants of Bangladesh, Bangladesh Merchant Bankers' Association and the SEC.
Representatives from Central Depository Bangladesh Ltd and the SEC also attended the meeting.
The meeting also put forward a recommendation that pre-IPO private placement, or raising capital before IPO, should be through a regulatory framework, and necessary rules should be formulated to bring transparency in the private placement process.
The committee has asked merchant bankers and stock exchanges to prepare with the help of BAPLC a set of recommendations on formulating rules for pre-IPO private placement.
"Presently, there are no specific rules or guidelines for pre-IPO private placement," said Mansur Alam, adding that now the companies raise capital before public offer with permission from the SEC under the capital issue rules.
But, there are no details about the pre-IPO placement in the rules, and many companies allegedly placed pre-IPO at will, taking advantage of the loopholes.
Following allegations, the SEC recently proposed an amendment to the capital issue rules. The proposed amendment says raising capital before public offer shall be through the over-the-counter (OTC) market, instead of the existing private placement.
"The recommendations, set by the merchant bankers and stock exchanges, will be discussed at the next meeting of the consultative committee," Alam said.
The committee also discussed the calculation method for margin loan maintenance. As another committee of the SEC -- Executive Directors' (EDs) Committee -- is working on the issue, the consultative committee asked the EDs Committee to submit its recommendations at the next meeting.
The consultative committee further discussed the calculation method for determining indicative price of a stock under book building method, and opposed the existing computing system.
As per the existing method, indicative price is determined by averaging the price offers of the participating bidders.

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