The Hindu Business Line : SEBI moots steps to stop pre-listing deals in IPOs

SEBI move
Pre-listing deals will be barred by making it compulsory on the part of "depositories to block or freeze the securities in demat accounts of the allottees till the designated stock exchange and the issuer confirm to them that listing and trading permissions have been granted by all stock exchanges," SEBI said.

Mumbai , June 19

SEBI on Monday initiated measures to stop pre-listing deals in IPOs by recommending amendments in regulations to make it mandatory for depositories to block the securities in demat accounts of investors till the shares are listed on stock exchanges.

The move comes in the wake of the recent IPO allotment scam, which saw manipulators cornering large number of shares allotted in fictitious names, through grey market or off-market deals.

Pre-listing deals will be barred by making it compulsory on the part of "depositories to block or freeze the securities in demat accounts of the allottees till the designated stock exchange and the issuer confirm to them that listing and trading permissions have been granted by all stock exchanges," SEBI said.

This was suggested in a discussion paper on `Measures to check excess dematerialisation of securities and pre-listing grey market in securities issued in IPOs', issued by SEBI today.

The proposed changes will be introduced through amendments in the SEBI (Depositories & Participants) Regulations, 1996.

Significantly, the regulator also suggested further steps to tackle the malice of "excess securities" i.e.; dematerialisation of shares in excess of issued capital of a listed company.

These include putting certain responsibilities on the depositories, issuer, its registrar and the depository participant to ensure that securities are not dematted in excess of listed/issued capital.

SEBI said despite taking several steps in the past, the problems arising out of "excess demat" have

not been completely resolved.

SEBI has also suggested regulatory amendments to slap penalty up to Rs 25 crore on those responsible for issue of excess securities.

A key feature of the proposed changes is that it put the entire onus on checking the pre-listing transactions on the depositories viz., the National Securities Depository Ltd and Central Depository Services Ltd. The proposed amendments will cover: (1) capturing of distinctive numbers in the depository system; (2) casting responsibility of the depositories to obtain the confirmation from the issuer and the designated stock exchange regarding grant of listing permission, before permitting dematerialisation; (3) casting responsibility on the depository to block the securities in the demat account of the beneficiary owner till trading permission is granted by the stock exchanges, in case of fresh issue of securities and (4) casting responsibility on the depositories to reconcile records of issued, listed, and dematted securities, the SEBI paper said.

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