SECP drafts recommendations for improvement in public offering regime

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has drafted major recommendations for improvement in the public offering regime in order to foster capital formation.

The requisite regulatory amendments will be finalized by the SECP after receiving public feedback and stakeholders’ consensus by September 20, 2024.

In this regard, the SECP has issued a Consultation Paper on areas of improvement in the public offering regime. The supply-side measures would focus on enabling a conducive regulatory environment for businesses/issuers to raise funds in a smooth and cost-effective manner within minimum time.

Digital solutions are also proposed for embracing technology while remaining consistent with requirements of the parent law; i.e., the Securities Act, 2015.

On the demand side, the SECP suggested measures that can improve the overall investor journey by enabling better-informed decision making through enhanced disclosures and increased transparency; facilitate more efficient price discovery; and enhance existing investor protection measures.

The SECP is also working on end-to-end automation of the entire Initial Public Offering (IPO) process, including book building and public subscription. This requires ensuring that all payments relating to IPO applications are processed through electronic banking channels. Currently, banks have imposed certain transaction limits, which restrict use of electronic banking channels for IPO transactions.

The SECP firmly believes in and is a big advocate of making capital formation easier for businesses. Efficient and cost-effective capital formation is a game changer for growing businesses and the economy as a whole.

Overtime, SECP has introduced various improvements in the public offering regime for capital formation. In this regard, the Consultation Paper covers potential areas of improvement which have been identified based on a holistic review of the regulatory regime, international practices, evolving technology and suggestions received from the market. It is envisaged that potential improvements will bring greater transparency, efficiency and vibrancy; thereby benefiting issuers, investors and the overall economy.

Broad areas identified for improvement include; IPO pricing, public offering and listing conditions, role of consultant to the issue, IPO approval timelines and documentation requirements, disclosure requirements, digitization and IPO outreach, public offering regime for GEM companies and post IPO matters.

Suggested improvements are focused on both, supply and demand side. The supply side improvements are focused on enabling a conducive regulatory environment for businesses/issuers to raise funds in a smooth and cost-effective manner within a short period of time. Demand side improvements are expected to improve the overall investor journey.

At present, only securities brokers and other companies having Consultant to the Issue (CTI) license can act as advisor for all types of primary market transactions (equity, debt and GEM Board listings). Banks, DFIs and Investment Finance Services Companies can obtain a CTI license, however, their role is limited to only debt IPOs and GEM Board listings.

There is a growing realisation that universe of CTI needs to be enhanced, allowing other players to provide advisory services, for improved outreach and competition. SECP has also carried out preliminary discussions on subject area with various financial institutions including brokerage houses, commercial banks, and development finance institutions, SECP maintained.

Copyright Business Recorder, 2024