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The stock market regulator has sought public opinions on the proposed amendments to IPO (Initial public offering) rules.
The task force formed to advise market reforms submitted a set of recommendations to the securities regulator on March 24, meant to modernise regulatory frameworks, enhance market efficiency, and ensure transparency to attract good companies to the equity market.
The Bangladesh Securities and Exchange Commission (BSEC) requests market stakeholders and individuals to share their opinions by April 15 through emails to suggestion.iporules@sec.gov.bd, according to a statement published on Monday.
"On receiving public opinions, the securities regulator will give its final approval for amendments to the public issue rules," said Mohaimiul Haque, assistant spokesperson of the BSEC.
The task force, formed by the securities regulator in October last year, suggested measures in eight areas to ensure fair prices, reduce the time needed for interested firms to get listed, encourage new investors, increase the supply of quality stocks, improve audit quality, empower stock exchanges, and enhance operating and cost efficiency.
It has recommended direct listing of multinational firms and large companies, with an annual turnover surpassing Tk 10 billion, in addressing the dearth of quality stocks.
Currently, only state-owned enterprises are given the opportunity of direct listing on the stock exchanges.
The task force also proposed slashing the minimum offload requirement to 10 per cent stakes from the existing 25 per cent for direct listing, so that well-performing companies get listed easily.
Moreover, mandatory listing has been proposed for large corporations having outstanding bank loans more than Tk 10 billion.
The task force also recommended setting a minimum pre-IPO capital requirement at Tk 300 million under the fixed-price method and Tk 500 million under the book-building method.
Currently, the minimum pre-IPO paid-up capital is Tk 150 million under the fixed price method while the amount is Tk 300 million under the book building method.
To ensure the fair price of primary shares, the task force suggested reinstating the Dutch Auction method, a price discovery mechanism where the auctioneer starts with the highest asking price and lower it until it reaches an optimum price.
The advisory panel also suggested imposing a three-month lock-in period on half of the holdings of institutional investors, meaning they will not be able to sell that many shares for that period since the debut trading. The provision is expected to encourage them to make well-thought-out decisions during the bidding for price discovery.
To accelerate the IPO process, the task force proposed cutting the time for new listings to six months. At present, it takes one year to three years for a firm to list.
The taskforce also proposed a 15 per cent quota for high net-worth individuals in IPO schemes in a way to incentivize them.
It suggested removal of 10 per cent circuit breaker for the first three days upon listing so that the post-IPO euphoria is allowed to subside and people do not get caught by purchasing shares at high prices.
There should be no discount on the cut-off price for general investors, said the task force, adding that the issuer should not be deprived of expected premiums unnecessarily. Presently, general investors receive IPO shares at a discounted rate below the cut-off price.
The task force has also recommended omission of the minimum prior equity investment requirement of Tk 50,000 for investors to apply for IPO shares.
To improve audit quality, the panel said a list of 20 eligible auditors may be prepared.
The BSEC should allow more institutes to be underwriters and choose the right underwriters so that they can take up undersubscribed portions of IPOs, it said.
To empower the stock exchanges, the task force said the BSEC should not approve any IPO if a bourse disapproves it. The bourses should be allowed to submit recommendations instead of observations, it added.
The task force also suggested introducing cross-border IPO subscription both for equity and bonds and other financial instruments.
Regarding operating and cost efficiency, it said the requirement to distribute hard copies of prospectuses should be abolished.
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