The Bangladesh Securities and Exchange Commission has initiated a move to tighten subscription of initial public offering shares by eligible investors by increasing the minimum stock market investment to Tk 3 crore from the existing Tk 1 crore.
The minimum investment for approved pension funds, recognised provident funds and approved gratuity fund would be increased to Tk 1.5 crore from the existing Tk 50 lakh.
BSEC officials have submitted the proposals to the commission past week.
The conditions, if approved, will be mentioned in the consent letter of each IPO prospectus.
The BSEC has also decided to ask the stock exchanges to register provident fund and gratuity fund as eligible investors after assessing the audited financial statements of the funds.
Currently, the stock exchanges register them only seeing the fund registration certificate issued by the National Board of Revenue.
Besides, the DSE must also ensure that investments by the provident fund and gratuity fund would not exceed the total size of the fund.
Now, provident funds worth Tk 1 crore can invest Tk 2 crore or more on the primary market after borrowing through other means.
The BSEC took the initiative as it observed that many eligible investors, which have no apparent role on the secondary market, were enjoying IPO quota facility, depriving the active ones.
Besides, it found that many provident funds and gratuity funds, which actually exist in name or were opened only for the IPO purpose, were also enjoying the IPO quota facility and making money.
So, strengthening the monitoring would prevent such errant eligible investors from the market, BSEC officials said.
According to the current requirement of IPO subscription by eligible investors, each eligible Investor who intends to submit application must maintain a minimum investment of Tk 50 lakh for approved pension funds, recognised provident funds and approved gratuity fund and other EIs of Tk 1 crore in the listed securities at market price as on the end of a working day which is immediately preceded by five working days from the first day of starting the IPO subscription.
The stock exchanges must send the list of BO accounts which have applied in the IPO to the Central Depository Bangladesh Limited (CDBL).
The CDBL must send a report to the exchanges on the basis of the list of BO accounts provided by the exchanges regarding holding of EIs in listed securities and the exchanges will ensure the compliance in this regard.
Eligible investors, including mutual fund, enjoy 25 per cent quota in IPO under the fixed price method and the book building method as per the BSEC public issue rules.
The eligible investors are merchant bankers and portfolio managers, asset management companies, mutual funds and collective investment scheme, stock dealers, banks, financial institutions, insurance companies, alternative investment fund managers, alternative investment funds, market makers, issuer of listed securities, resident or non-resident Bangladeshis, and other institutions as approved by the BSEC.