SECP revamps public offering process to promote listing
The main objective is to promote ease of doing business.
KARACHI (Web Desk) - The Securities Exchange Commission of Pakistan (SECP) has approved a comprehensive regulatory framework under the Securities Act, 2015, for public offering of debt and equity securities.
Its main objective is to promote ease of doing business and streamline the entire public offering process. Prior to its approval, the SECP held consultative sessions with the industry participants in March and September 2016.
In order to promote ease of doing business and streamline the entire public offering process, the numbers of regulations have been reduced to two. It is worth mentioning that 7 rules/regulations/guidelines relating to public offering and 6 different rules/regulations/ guidelines were initially circulated for public consultation.
Without objective consolidation of the framework, the same would have resulted in 10 different rules/regulations/ guidelines governing the public offering process.
The public offering regulations have been divided into three parts, i.e. process for public offering, methods of public offering and functions and responsibilities of intermediaries, i.e. consultant to the issue, underwriter, banker to the issue, etc. In the new public offering regulatory framework, an issuer would be ineligible to make a public offer, if the issuer or its directors, sponsors or substantial shareholders have overdue/ defaults or have been declared defaulter by the exchange.
Securities brokers appointed by companies as consultants to their public offering play a pivotal role in promoting quality listing and development of capital markets. Therefore, their role as “Consultants to the Issue” is being notified as a regulated securities activity.
The SECP has drafted regulations for licensing of consultant to the issue and only licensed securities brokers would be eligible to undertake consultant to the issue activity. The role of consultants to the issue has been enhanced by requiring them to carry out due diligence encompassing eligibility and suitability aspects of the proposed issue in order to protect the interest of the general public. Furthermore, a requirement of separate valuation section has been introduced where the consultant to the issue shall provide justifications for the price set by the issuer taking into account the track record of the issuer, management expertise, inherent risks, past financial performance, financial projections, etc.
