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Regulations for IPOs
Because of the
public
participation, SEBI
oversees that such
companies act in a
reasonable and fair
manner, especially
with reference to
the minority
shareholders. For
example, such
companies should
have a board of
directors, where at
least half the
members are
independent of the
promoters/company.
Moreover, companies
have to comply with
the listing
agreement, which
among other things,
stipulate continuing
disclosures in
specified formats
and frequency.
SEBI’s Role in
IPOs
Any company making
an IPO is required
to file a draft
offer document with
SEBI for its
observations.
Officials of SEBI at
various levels
examine the
compliance with DIP
guidelines and
ensure that all
necessary material
information is
disclosed in the
draft offer
documents.
The validity period
of SEBI’s
observation letter
is three months only
i.e. the company has
to open its issue
within three months
period.
Does it mean that
SEBI recommends an
issue?
SEBI does not
recommend any issue
nor does take any
responsibility
either for the
financial soundness
of any scheme or the
project for which
the issue is
proposed to be made
or for the
correctness of the
statements made or
opinions expressed
in the offer
document.
Does SEBI approve
the contents of the
offer document?
Submission of offer
document to SEBI
should not in any
way be deemed or
construed that the
same has been
cleared or approved
by SEBI. The Lead
manager certifies
that the disclosures
made in the offer
document are
generally adequate
and are in
conformity with SEBI
guidelines for
disclosures and
investor protection
in force for the
time being. This
requirement is to
facilitate investors
to take an informed
decision for making
investment in the
proposed issue.
Does the SEBI
clearance tag make
the IPO safe for the
investors?
The investors should
make an informed
decision purely by
themselves based on
the contents
disclosed in the
offer documents.
SEBI does not
associate itself
with any
issue/issuer and
should in no way be
construed as a
guarantee for the
funds that the
investor proposes to
invest through the
issue. However, the
investors are
generally advised to
study all the
material facts
pertaining to the
issue including the
risk factors before
considering any
investment. They are
strongly warned
against any ‘tips’
or news through
unofficial means. |
