SEBI Removes Mandatory Security Deposit for Public Issues

On November, 21, the Securities and Exchange Board of India (SEBI) abolished the requirement of a mandatory security deposit which was put in place for public/rights issues so that an issuer resolves investor complaints.

SEBI Streamlines Public Issue Norms

Previously, companies planning to launch a public issue of equity shares were required to deposit an amount equal to 1% of the issue size with the stock exchanges. This deposit was refunded to the company after the public issue was completed.

In February, SEBI published a consultation paper suggesting the removal of the 1% security deposit requirement for public or rights issues.

The regulator explained that the deposit was initially introduced to ensure issuers could address investor complaints related to the transaction, such as refunding application money, allotting securities, and dispatching certificates.

However, SEBI noted that with reforms like ASBA (Application Supported by Blocked Amount), UPI payment modes, and mandatory demat allotments, concerns regarding post-issue complaints, such as non-refund of application money or failure to dispatch physical certificates, are no longer an issue.

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Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.