Streamlining the process of IPOs with UPI in ASBA and redressal of investors grievances

Securities and Exchange Board of India

SEBI/HO/CFD/DIL2/CIR/P/2021/2480/1/M 

March 16, 2021

To

Registered Merchant Bankers
Recognized Stock Exchanges
Registered Registrars to an Issue and Share Transfer Agents
Self-Certified Syndicate Banks

Dear Sir / Madam,

Sub: Streamlining the process of IPOs with UPI in ASBA and redressal of investor grievances

1. SEBI vide circular SEBI/HO/CFD/DIL2/CIR/P/2018/138 dated November 01, 2018 introduced the use of Unified Payment Interface as an additional payment mechanism with Application Supported by Blocked Amount (ASBA) for Retail Individual Investors along with timelines for listing within six days of closure of issue (T+6).

2. While the above was operational in Phase 1, in Phase II w.e.f July 01, 2019 vide SEBI circular SEBI/HO/CFD/DIL2/CIR/P/2019/76 dated June 28,2019, UPI was mandated for applications by Retail Individual Investors submitted through Intermediaries.

3. Subsequently, SEBI vide circular SEBI/HO/CFD/DCR2/CIR/P/2019/133 dated November 08, 2019 extended the timeline for implementation of Phase II. The said circular had prescribed the detailed timelines of T+6 listing, compliance, reconciliation process and reporting standards to be followed by Intermediaries.

4. The intermediaries in the IPO ecosystem have agreed to the standard operating procedure as well as the level of security for all messaging protocols from different nodes. This has addressed a lot of investor issues.

5. Gaining on the experience of the market with the current UPI system, the following issues have been identified based on the consultation with market participants which need to be addressed.

a) Delay in receipt of mandate by investors for blocking of funds due to systemic issues at Intermediaries/SCSBs.

b) Failure to unblock funds for cancelled/withdrawn/deleted cases in the Stock Exchanges platform.

c) Failure to unblock the funds in cases of partial allotment by the next working day from the finalization of basis of allotment (BOA).

d) Failure to unblock the funds in cases of non-allotment by BOA+1.

e) SCSB blocking multiple amounts for the same UPI application.

f) SCSB blocking more amount in the investors account than the application amount.

6. Therefore, need has been felt to put in place measures to have a uniform policy and to further streamline the reconciliation process among intermediaries/SCSBs. This circular also provides a mechanism of compensation to investors.

Streamlining the IPO Process

7. In terms of Regulations 23(2), 23(4), 23(5), 271, Schedules I & II of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 and SEBI Circular No. SEBI/HO/CFD/DCR2/CIR/P/2019/133 dated Nov 08, 2019 the Lead Manager is the nodal entity for any issues arising out of a public issuance process and the timelines, processes and compensation policy defined in this circular shall form part of the agreement(s) that shall be signed among the intermediaries. Lead Managers shall ensure the adherence of timelines, processes and compensation policy by intermediaries.

8. In order to ensure timely response with regard to IPO process, SCSBs shall identify the nodal officer for IPO applications processed through UPI as a payment mechanism and submit the details as per Annexure I to SEBI within 7 working days from the issuance of this circular. For ease of reference, the details of nodal officers of SCSBs shall be hosted on the SEBI Website.

9. For ensuring timely information to investors, SCSBs shall send SMS alerts for mandate block and unblock. The SMS shall include the details as prescribed in Annexure II.

10. For ease of doing business, Sponsor Banks shall host a web portal for intermediaries (closed user group) from the date of IPO opening till the date of listing with details of statistics of mandate blocks/unblocks, performance of Apps and UPI Handles, down-time/network latency (if any) across intermediaries and any such processes having an impact/bearing on the IPO bidding process.

Reinitiations of UPI Bids

11. To avoid duplication, the facility of re-initiation provided to Syndicate Members shall preferably be allowed only once per bid/batch and as deemed fit by the concerned Stock Exchange, after bid closure time.

Cancelled/Withdrawn/Deleted applications

12. Registrars to an Issue (RTI) shall submit the details of cancelled/withdrawn/deleted applications to SCSB’s on daily basis within 60 minutes of bid closure time from the Issue opening date till Issue closing date (T) by obtaining the same from Stock Exchanges. SCSB’s shall unblock such applications by the closing hours of the bank day and submit the confirmation to Lead Managers and RTA on daily basis, as per the format prescribed in Annexure III.

Unblocking of UPI Mandates

13. Vide SEBI circulars SEBI/HO/CFD/DIL2/CIR/P/2018/138 and  SEBI/HO/CFD/DCR2/CIR/P/2019/133, SEBI had endeavored that the unblock of applications shall be completed on T+4 (T: Issue Closing Date), which is effectively BOA+1. However, in view of the complaints received pertaining to delayed unblock, the following process shall be implemented by intermediaries.

13.1 Sponsor Banks shall execute the online mandate revoke file for Non-Allottees /Partial Allottees on BOA+1. Subsequently, any pending applications for unblock shall be submitted to RTA, not later than 12:30 PM on BOA+1.

13.2 Subsequently, RTI shall submit the bank-wise pending UPI applications for unblock to SCSB’s along with the allotment file, not later than 02:00 PM on BOA+1. The allotment file shall include all applications pertaining to full-allotment/partial-allotment/non-allotment/cancelled/withdrawn/deleted applications etc.

13.3 SCSB’s shall ensure that the unblock for non-allotted/partial-allotted applications is completed by the closing hours of bank day on BOA+1. SCSB’s shall submit the confirmation on the same, to Lead Managers and RTA, not later than BOA+1. Such report shall be submitted as per the format prescribed in Annexure IV.

14. SCSBs failing to provide the details as per Annexure IV to Lead Managers/RTI, not later than BOA+1 shall be liable to face appropriate action under Securities Laws. In order to provide an efficient redressal mechanism for complaints from investors pertaining to Block/Unblock of funds, to protect the interests of investors and to avoid any opportunity loss, the compensation structure as prescribed in Annexure V shall be applicable. SCSBs shall compensate the investor, immediately on the date of receipt of complaint from the investor.

15. If there is any delay in resolving the grievance beyond the date of receipt of complaint from investor, for each day delay, the compensation as prescribed in Annexure VI shall be applicable in addition to the compensation as per para 15 (Annexure V). A brief illustration of the same is provided below:

Scenario

Investor has applied in an IPO with an application amount of Rs. 15,000/-. The Public Issue is closed on November 02, 2020. The Investor got no-allotment and hence, the effective date for unblocking of funds shall be November 06, 2020 (BOA+1). However, Investor has raised a complaint on pending unblock of funds with Lead Managers/SCSB on November 25, 2020. The SCSB unblocks the amount in investors account on November 30, 2020.

Total Compensation = Compensation by SCSBs + Compensation by Post Issue Lead Managers.

16. Lead Managers shall ensure that the payment of Processing fee/Selling commission to the intermediaries be released only after ascertaining that there are no pending complaints pertaining to block/unblock of UPI bids, receiving the confirmation on completion of Unblocks from Sponsor Banks/SCSBs and Annexure IV from RTI/SCSBs.

17. This circular shall come into force for IPOs opening on/after May 01, 2021. The provisions of this circular shall become part of the offer documents, DRHP and RHP. SCSBs/Lead Managers are also advised to resolve all pending issues related to pending unblock applications whether on the SEBI SCORES portal or otherwise using the compensation policy outlined in this Circular.

18. This circular is being issued in exercise of the powers under section 11 read with section 11A of the Securities and Exchange Board of India Act, 1992.

19. This circular is available on SEBI website at sebi.gov.in under the categories “Legal Framework” and “Issues and Listing”.

Yours faithfully,

Yogita Jadhav
General Manager
+91-22-26449583
yogitag@sebi.gov.in

Please refer to the attached file for details.