The capital market regulator is introducing a new Share Allotment Directives-2068 to discourage fake applicants in primary issue. The new draft prepared by Securities Board of Nepal (Sebon) has proposed proportionate allotment irrespective of the amount of application or the volume of oversubscription. "The proportionate allotment will designate the shares to the applicants according to the proportion of the applied amount thus there will not be any reason for the applicants to provide multiple applications," according to the director of Sebon Niraj Giri. According to the proposed guidelines, shares will be distributed proportionately to all the applicants irrespective of amount applied for. "If the issue is oversubscribed by five times then all the applicants will be allotted unit of shares equal to a total number of shares applied divided by five," according to proposed draft.
"Investors applying for 500 units will get 100 units and the ones applying for 25 units will be allotted five units of the shares," the proposed draft stated. The proposed draft of the regulation has to be endorsed by Finance Ministry to come into effect. Currently, the primary issue allotment is based on Share Allotment Directive 2051 that gives more weightage to the small applicants. According to it, in any public issue it is mandatory to allot shares to more than 25,000 applicants that have distorted the public issue application process. "The regulation itself has increased the chances of small applicants being allotted the shares, thus public apply for the small numbers of share units under multiple names," he said, pointing out that applicants have more chances of getting larger number of shares allotted, if the applicant applies for 100 units through 10 different names than through single application.
The public applies for the shares under names of every family members due to higher chances of getting shares allotted. Such instances has created more work for the issuer and lot of time is wasted in verifying the identification of the applicants. Moreover, being flooded with applications sometimes a genuine applicant is missed out on being allotted shares. However, the proposed directive has segregated 40 per cent of total issue for the retail applicants to ensure that retail investors also get the chance. The retail applicants are defined as those applying upto Rs 50,000.
1 comment:
This way people who put in lots of shares in others name will be reduced. But they will put heavy amount in large quantity.
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