SECP approves 2015 Book-Building Regulations

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) policy board on Monday approved the 2015 Book-Building Regulations, aimed at promoting primary market and extending maximum facilitation to initial public offerings (IPOs) in Pakistan.
The new regulations require that the total offer size should not be less than 25 million shares and maximum bid size by a single bidder is 10 percent of the book building portion.
The associated companies and associated undertakings of the Issuer or the offerer shall not in aggregate make bids for shares in excess of five percent of the book-building portion. For a person to be eligible to perform the functions of book runner, he must be registered as a book runner with the SECP.
The prospectus is required to be published and circulated just once, ie, before commencement of the book building. Mechanism for pre-registration of the potential bidders with the institution providing the book building system is also required.
The regulations further say that an eligible investor shall not make a bid with price variation of more than 20 percent of the prevailing indicative strike price. The bidding shall remain open for at least two days; and related employees, ie, employees who are directly involved in the issue or the offer for sale, of the issuer, the offerer, the book runner, and sub-book runner shall not participate in the bidding.
The rules further ask the bidder to ensure provision for payment of margin money through online transfer. Further, there is a restriction on making a consolidated bid, ie, a bid which is fully or partially beneficially owned by persons other than the one named therein.
The SECP has put a restriction on release of the subscription money received against the bids accepted till credit and dispatch of all shares allocated under the retail portion of the issue. The commission has exempted the company, which is already listed, from taking NOC from the SECP.
Withdrawal and downward revision of bids after 4:00 pm on last day of the bidding period would not be allowed.
Failure or refusal to comply with, or contravention of any of the provisions of the regulations would be punishable with a fine not exceeding ten million rupees, the SECP regulations add.
Earlier, the draft regulations were published in the Official Gazette of Pakistan vide notification SRO 35(I)/2015 on January 15, 2015 and in the newspapers on February 7, 2015, to elicit public opinion.
The book-building mechanism in IPO was initially introduced by the SECP in 2008 through amendments to the listing regulations of the stock exchanges. Book building is a common practice in developed markets and being used in emerging markets as well. Since the introduction of the book building mechanism in our market, 22 companies make IPOs through book building out of total 33 issues.
The existing book-building regulations, which are part of the listing regulations of the stock exchanges are not effectively enforceable due to, non-applicability of these regulations to the book runners and non-availability of any penalty clause therein. To bring about efficiency and transparency in the book-building process, it was imperative to replace the regulatory framework for book-building with the one directly administered by the SECP.