1. * Sebi is looking at introducing a system where an investor can sell shares as soon as they are allotted in an IPO
2. * Bankers shouldn’t get bad companies to markets
3. * The regulator aims to empower investors to make informed decisions while maintaining market integrity
4. * IPO documents must provide enough information to assess pricing
5. * Finds egregious misuse of IPO funds by certain cos
6. * Whistleblowers are good, but should talk at right time 

FPJ News Service mumbai

In a bid to curb grey market activity and ensure transparency in price discovery, the Securities and Exchange Board of India (Sebi) is planning to allow trading in shares issued during initial public offerings (IPOs) before they are listed. 

Sebi is looking at introducing a system where an investor can sell shares as soon as they are allotted in an IPO, Sebi chairperson Madhabi Puri Buch said here on Tuesday. Speaking at an event organised by the Association of Investment Bankers of India, Buch said, this would allow investors to trade their entitlements immediately upon allotment.

The top two proxy advisory firms are on the verge of launching a portal which will be a repository of related party transactions and will be useful in judging the governance standards in a company for any stakeholder.

Many IPOs in the recent past have seen very high subscriptions, and many of the issuances have also made huge listing-day gains which result in the grey market activity of passing on allotted shares.  

“We feel that if anyway investors want to do that, why not give them that opportunity in a proper regulated way?’’ Whatever is the grey market that is going on, pre-listing, we think that is not suitable. If you got an allotment and want to sell your right, sell it in the organised market," she said. Discussions are underway with two stock exchanges to put in place the ‘when listed’ facility where shares can be traded during the three days between the allotment and listing.

As soon as the allotment is over, the entitlement to that share gets crystallised. Then the person should have the right to sell that entitlement.

On the plans of proxy advisors to launch the Related Party Transactions portal, the Sebi chief said the two major entities in the fray are on the verge of launching the facility.  It will be a valuable resource for anyone looking to judge the governance of a company and will be a step towards democratisation of information on related-party transactions, she underlined.

Buch said proxy firms play an important role in the market and attributed their success to the reliance on the subscriber pays model rather than issuer paying.  The capital markets regulator has found ‘‘egregious misuse’’ of funds raised through IPOs by certain companies and urged investment bankers to desist from helping such entities access the capital markets.

Even before the term ‘‘’agentic artificial intelligence’’ was coined, Sebi had been working on a tool based on that concept to process IPO documents faster. Buch said investment bankers know exactly when they are bringing a ‘‘pump and dump’’ company to the market. You should not bring a bad company to the market.’’ 

There are markers like the high fees being paid to the banker, or the company having less or no staff at all or no visits by the bankers to the facilities of a company which speak loudly about the intent behind an issuance and it being a "pump and dump" issue, she said.

Speaking in the context of the SME board, Buch said in the case of a pump and dump issuance, an IPO sees high subscription that leads to the price of a stock going up and is typically followed by a share sale by the promoter to make a quick buck.