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Our Bureau

Mumbai , Jan. 25

COMPANIES that are planning public issues can look forward to reducing their advertisement cost with the changes that the Securities and Exchange Board of India has made to the Disclosure and Investor Protection guidelines.

Earlier, companies had to mandatorily publish the abridged prospectus in their pre issue advertisements.

Now SEBI requires these companies to only issue certain minimum details in the advertisements.

This change has been effected as advertising costs for publishing the abridged prospectus were said to be too high.

Since the abridged prospectus is anyway made available to investors along with the application form, SEBI does not see a requirement for this to be part of the issue advertisements.

The issuer company has an option of including additional disclosures in these advertisements so long as they are not inconsistent with the guidelines.

Issue related billboard advertisements also should not contain information other than as stipulated in the formats specified by SEBI, according to the amended guideline.

In order to improve the readability of the abridged prospectus, the number of repetitive clauses has been reduced while also instructing issuer companies to increase the visual content of these documents.

The modified guidelines also provide the order in which items have to be listed under the disclosure requirements. The prospectuses in general do not follow a uniform pattern of presentation of disclosures and contain lot of repetitions. In order to address this, SEBI has decided to amend Section I of Chapter VI of the guidelines. Clauses of Section I have been rearranged in the same order in which disclosures should appear in the prospectus.

Few requirements and sections have been added to make the prospectus more effective. Issuer companies have to provide summary, table of contents, industry review, etc. Also `notes to accounts' must now be made a part of the risk factors.

Repetitive disclosures are to be avoided by giving cross-references to the extent possible. An annexure indicating order of presentation of disclosures in the prospectus has been inserted in the guidelines for easy understanding.

Further, the restriction on the number of co-managers to an issue has been removed. The earlier guideline specified that lead merchant bankers should ensure that the number of co-managers to an issue does not exceed the number of lead merchant bankers and that there is only one advisor to the issue.

These amendments come into effect from February 25, 2005 and all offer documents submitted after this date have to comply with these modifications.

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