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SEC to frame two new rules for capital market
M Azizur Rahman
12/30/2005
The country's capital market watchdog has decided to frame two new rules aiming at removing the existing policy-related bottlenecks.
"Public Issue Rules - 2006 and Rights Issue Rules - 2006 will be constituted by the Securities and Exchange Commission (SEC) to replace those adopted in 1998," SEC Chairman Mirza Azizul Islam told the FE.
He said the new rules would address the limitations of the existing ones relating to initial public offering (IPO), merchant banks, right shares, mutual funds and direct listing.
The SEC new rules will supersede its previous decision on amendments to the existing Public Issue Rules - 1998 and Rights Issue Rules - 1998, commission sources said.
"The commission has preferred formulating fresh rules to save capital market stakeholders from unnecessary hassles," a senior SEC official said.
The proposed amendments were so extensive that the commission believed it would be wise to constitute new laws instead, he added.
The commission wants to bring these rules into effect before the tenure of its current chairman expires in February next.
Under the proposed rules, the SEC will reduce floatation cost of the initial public offering (IPO) to lure more business houses to go public.
Merchant bankers and the aspirant public-issuing companies have long been demanding reduction of IPO floatation cost.
According to the existing rules, the IPO-floatation cost is equivalent to 5.0-7.0 per cent of the total offered amount of IPO, commission sources said.
The issuers have to pay issue fee, under-writing fee, banker to issue fee, IPO permission fee and prospectus publication fee before floatation of IPOs.
Besides, these companies have to pay fee to the stock exchanges to get their securities listed, SEC official said.
The merchant bankers usually take fees from the issuers to process the IPO applications and offer their securities in the market.
The existing IPO rules would be replaced to make subscription process transparent and easier for the investors.
The DSE also wants to develop 'Market Maker Rule' and its proper implementation from the primary IPO level and ensure underwriting facility for brokers.
The new regulations will help the merchant banks work properly.
In the proposed rule the commission might fix the amount and criteria for mandatory floatation of IPOs by 'big' and financially-sound companies.
The new rules will simplify issuance of rights shares by the listed companies.
The commission will also introduce a new policy on bringing provident funds in the capital market.
There will also provision of offloading of government held shares with different companies in the new rules, commission sources added.
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