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Sunday, September 28, 2008

[SEBI-ASBA] Lets Learn the Concept

Credits to Mr. CS Pradeep for this wonderful presentation






What is ASBA?


SEBI has laid down detailed guidelines for a new application process for public issues. The new scheme named ASBA - Applications Supported by Blocked Amount is being introduced to cut down complaint-prone refund process in IPOs.


Is it compulsory?


The process is available as an alternate mode of application in all public issues made through the book building route. The scheme begun as a supplementary process and shall co-exist with the current process, wherein cheque is used as a mode of payment.  Click here to know the Detailed Guidelines.


How does it work?


Ø     The bank will block the money corresponding to the value of shares applied for in the bank account of the applicant itself. During the allotment period, the money does not leave the account of the investor, but since it is blocked he can’t use it for any other purpose.


Ø     If and when the shares get allotted, the money will be transferred to the issuer. In case the bid is rejected then, the money will be released immediately.


Ø     To keep it simple to begin with, SEBI has said that only those investors who are bidding at “cut off” [the final decided price] can opt for this scheme. Only one option is accepted for the number of shares bid for. It also says investors cannot revise their bid, though they can withdraw their bid in the period.


Ø     However, investor can’t go to any bank of his choice and ask for the service, yet. The Regulator said banks willing to offer this facility to apply for the same.


Ø     “A bank desirous of offering ASBA facility shall submit a certificate to SEBI, as per the specified format, for inclusion of its name in SEBI’s list of Self Certified Syndicate Banks (SCSB).


Ø     The IPO applications through this process can be accepted only by SCSBs, whose names appear in the list of SCSBs displayed in SEBI’s website, the SEBI order said. The investor will have the option of applying either through physical application forms or through electronic forms. 


Ø     SEBI has also notified other intermediaries like the merchant bankers, registrars to the issue and stock exchanges to make adequate changes in their systems to ensure that the applications that come through the new channel are treated on par with those from conventional channel.


What are the advantages of ASBA?


This will do away with immense paperwork involved and loss of money and peace of mind of investors. Consequently, there should be less investor complaints.


Click here to read the Detailed Guidelines.


Anonymous said...

Adding to Presentation:
A.S.B.A has given advantage to the applicants by providing interest to applicants till amount is allotted & assurance to investors for utilisation of their funds to allot shares.
Jyoti Bhatia

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