Retail investors in IPO to get compensation: Sebi

Markets regulator Sebi on Thursday said retail investors applying for shares in initial public offerings (IPOs) would need to be compensated if bankers fail to make the allotment despite their eligibility.

Besides, the public issue banker would need to pay an interest amount of 15 per cent to the investors for failing to resolve the grievance within 15 days, while they may also face Sebi’s action for such failures. Putting in place a framework to compensate retail investors who fail to get securities in an IPO, Sebi said there should be a uniform policy for calculation of minimum compensation payable to investors.

While calculating minimum compensation, several factors need to be taken into account like opportunity loss suffered by the investor due to non-allotment of shares; number of times the issue was oversubscribed in the relevant category; probability of allotment; and listing gains if any on the day of listing. “It is also proposed that in case of issues which are subscribed between 90100 per cent — that is nonoversubscribed issues —- the applicants would be compensated for all the shares which they would have been allotted,” Sebi noted.

However, no compensation would be payable to the applicant in case the listing price is below the issue price, it said, which would come into force with immediate effect. While the process of Applications Supported By Block Amount (ASBA) has resulted in almost complete elimination of complaints pertaining to refunds, Sebi said there have been instances where the applicants in an IPO have failed to get allotment of specified securities and in the process have suffered loss due to failure on part of bankers to process the applications.

The public issue banker would need to pay an interest amount of 15 per cent to the investors for failing to resolve the grievance within 15 days