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The Bangladesh Securities and Exchange Commission has asked brokerage houses to ensure at least Tk 20,000 in investment by the general investors in the stock market to be eligible for participating in any initial public offering from April 1.
The BSEC issued letters to brokerage houses in this regard in the past week.
Earlier on December 31, 2020, the BSEC at a commission meeting decided to allot IPO shares among the general investors on pro rata basis instead of IPO lottery system.
It also decided that the general investors must have at least Tk 20,000 in investment in the market to be eligible for participating in any IPO.
The minimum value of application by a general investor for IPO subscription must also be Tk 10,000.
The new system will come into effect on April 1.
BSEC officials said that the new rules would be effective from the next IPO subscription and investors must follow the new system.
So, the commission has reminded the brokerage houses to inform their clients about the new rules, they said.
They also said that at least additional Tk 1,500 crore would be injected into the capital market through the system.
The regulator imposed the minimum investment requirement on investors as many investors who did not have any investment on the secondary market opened many BO accounts only to win IPO lottery, the officials said.
The BSEC decided to scrap the lottery system to ensure that every applicant would get shares on pro rate basis.
Pro rata basis means assigning an amount to one person according to his/her share/portion of the whole.
This would be calculated by dividing the investment of each applicant by the amount of oversubscription and then multiplying the resulting fraction by the total value of floating shares allotted for the retail investors.
If the IPO is not oversubscribed, every applicant would get shares according to their investments.
The BSEC officials said that the system for general investors would be quite similar to the IPO system for eligible investors.
Eligible investors are merchant bankers, asset managers, mutual funds, stock-dealers, banks, financial institutions, insurance companies, fund managers, alternative investment funds, recognised provident funds, approved pension funds and approved gratuity funds.
The new IPO system would reduce the time for IPO subscription, the officials said.
The BSEC has also moved to make it mandatory for an IPO intending company to float at least 10 per cent of its paid-up capital on the stock market to ensure enough floating shares for the general investors.
The regulator has drafted the amendment to the public issue rules, 2015 for the purpose and sought public opinions.
The commission also reshuffled quota facility for the investors.
According to the draft rules, general investors would enjoy 65 per cent, non-resident Bangladeshis 5 per cent, eligible investors 20 per cent and mutual funds 10 per cent of the IPO shares under the fixed price method.
Under the book building method, general investors will enjoy 65 per cent, NRBs 5 per cent and eligible investors 30 per cent.
