SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018

What this chapter covers

This chapter carries 6 per cent of the III-A examination.

Learning Objectives: After studying this chapter, you should know about the: Applicability of ICDR Regulations · Specific Provisions related to Public Issues and Rights Issues · Role of merchant banker as an advisor · Role of a merchant banker as an underwriter · General obligation of merchant bankers with respect to public and rights issue

What the Regulations do. They lay down general conditions for capital market issuances like public and rights issuances; eligibility requirements; general obligations of the issuer and intermediaries in public and rights issuances; regulations governing preferential issues, qualified institutional placements and bonus issues by listed companies; the issue of IDRs, together with detailed requirements laid out with respect to disclosure and process requirements for capital market transactions by listed and unlisted companies.

And who carries the burden. While the eligibility and disclosure obligations are applicable to the Issuer, in capital market transactions, the role of the merchant banker/ lead manager/ book runner is extremely important since they perform the role of agents in capital market transactions and are registered entities with SEBI. In fact, SEBI holds the merchant banker responsible and accountable for any deficiencies/ lapses in such capital market transactions.

The issuer discloses; the merchant banker answers for the disclosure.

14.1 Applicability

SEBI ICDR applies to:

• (a) an initial public offer by an unlisted issuer.
• (b) a rights issue by a listed issuer.
• (c) a further public offer by a listed issuer.
• (d) a preferential issue by a listed issuer.
• (e) a qualified institutions placement by a listed issuer.
• (f) an initial public offer of Indian depository receipts.
• (g) a rights issue of Indian depository receipts.
• (h) an initial public offer by a small and medium enterprise.
• (i) a listing on the innovators' growth platform through an issue or without an issue.
• (j) a bonus issue by a listed issuer.

Ten heads — note (i), which covers listing through an issue or without an issue.

And one exclusion: the regulations shall not apply to the issue of securities under specified regulation of SEBI SAST Regulations 2011 — namely Regulation 9, sub-regulation 1, clause (b), (d) and (e).

14.2 Eligibility for an IPO and a rights issue

Regulation 5 — an issuer shall not be eligible to make an initial public offer, if –

(a) the issuer, any of its promoters, promoter group or directors or selling shareholders are debarred from accessing the capital market by the Board.

(b) any of the promoters or directors of the issuer is a promoter or director of any other company which is debarred from accessing the capital market by the Board.

(c) the issuer or any of its promoters or directors is a wilful defaulter or a fraudulent borrower.

(d) any of its promoters or directors is a fugitive economic offender.

And one structural bar: an issuer is not eligible if there are any outstanding convertible securities or any other right which would entitle any person with any option to receive equity shares of the issuer.

Regulation 61 — an entity shall not be eligible to make a rights issue of specified securities, if –

(a) if the issuer, any of its promoters, promoter group or directors of the issuer are debarred from accessing the capital market by the Board.

(b) if any of the promoters or directors of the issuer is a promoter or director of any other company which is debarred from accessing the capital market by the Board.

(c) if any of its promoters or directors is a fugitive economic offender.

(d) if the equity shares of the issuer are suspended from trading as a disciplinary measure as on the reference date.

Compare the two lists. The IPO list bars a wilful defaulter or a fraudulent borrower outright; the rights issue list does not — instead, an issuer shall make disclosures in the draft letter of offer and letter of offer, if the issuer or any of its promoters or directors is a wilful defaulter or a fraudulent borrower. And the rights issue list adds a bar where the shares are suspended from trading as a disciplinary measure.

Disqualification is not permanent. The restrictions under (a) and (b) above will not apply to the persons or entities mentioned therein who were debarred in the past by the Board and the period of debarment is already over as on the date of filing of the draft letter of offer with the stock exchange(s).

14.2.1 Allocation of responsibilities

The lead merchant bankers are required to make inter-se allocation of responsibilities pertaining to the activities or sub-activities to be carried out under these regulations and disclose the same in the offer document, as notified under Schedule I.

The lead manager(s) shall prepare a schedule, listing the activity-wise allocation of responsibilities relating to the issue, the name of the lead manager responsible for each set of activities or sub-activities, and disclose the same in the offer document.

Where responsibility is joint and several, a co-ordinator designated from amongst the lead manager(s) shall furnish to SEBI when called for, information, report, rationales, etc. on matters relating to such activity.

Five groups of activity:

a. Capital structuring with the relative components and formalities such as the composition of debt and equity, type of instruments, etc.

b. Drafting and design of the offer document, application form and abridged prospectus, and of the advertisement or publicity material including newspaper advertisements.

c. Selection of various intermediaries/agencies connected with the issue, such as registrars to the issue, printers, advertising agencies, bankers to the issue, collection centres.

d. Marketing of the issue, covering formulating marketing strategies, preparation of publicity budget, arrangements for the selection of (i) media, (ii) centres for holding conferences of media, stockbrokers, investors, etc., (iii) brokers to the issue, and (iv) underwriters and underwriting arrangement, quantum and distribution of publicity and issue material.

e. Post-issue activities, including essential follow-up with bankers to the issue and self-certified syndicate banks to get quick estimates of subscription and advising the issuer about the closure of the issue, finalisation of the basis of allotment after weeding out multiple applications, a listing of instruments, the despatch of certificates or Demat credit and refunds/unblocking and co-ordination with various agencies connected with the post-issue activity.

Note the boundary between (d) and (e) — centres for holding conferences of media, stockbrokers, investors is a marketing activity, while finalisation of the basis of allotment is a post-issue one. That distinction is exactly what the first review question tests.

And three accountability rules. The designated lead manager:

• shall be responsible for ensuring compliance with these regulations and other requirements and formalities specified by the Registrar of Companies, the Board and the stock exchanges.
• shall be responsible for ensuring that all intermediaries fulfil their obligations and functions as specified in their agreements with the issuer.
• in case of under-subscription in an issue, the lead manager responsible for underwriting arrangements shall be responsible for invoking underwriting obligations and ensuring that the notice for devolvement... is issued.

14.2.2 Disclosures

Public issues — Regulation 24. The draft offer document and offer document shall contain all material disclosures which are true and adequate to enable the applicants to take an informed investment decision.

The lead manager(s) shall exercise due diligence and satisfy themselves about all aspects of the issue including the veracity and adequacy of disclosure in the draft offer document and the offer document, and shall call upon the issuer, its promoters and its directors or in case of an offer for sale, also the selling shareholders, to fulfil their obligations as disclosed by them.

And a freshness rule: the lead managers shall ensure that the information contained in the draft offer document and offer document and the particulars as per restated audited financial statements in the offer document are not more than six months old from the issue opening date.

Six months — the same limit applies to a letter of offer.

Public comment — Regulation 26. The draft offer document filed with SEBI shall be made available to the public for comments for a period of at least twenty-one days from the date of publication of the public announcement by hosting it on the websites of the issuer, SEBI, stock exchanges where specified securities are proposed to be listed and lead manager(s) associated with the issue.

Four websites, twenty-one days.

Rights issues — Regulation 70. The draft letter of offer and letter of offer shall contain all material disclosures which are true and adequate. This means:

• disclosures as per Part B of Schedule VI.
• information and audited financials not more than six months old from the issue opening date.
• disclosure if the issuer or any of its promoters or directors is a wilful defaulter or a fraudulent borrower.
• disclosure of the process of crediting rights entitlements in the demat account and renunciation thereof.

Regulation 71 — filing. The issuer shall file the draft letter of offer with the stock exchange(s). With it, the issuer submits:

• for individual promoters, the Permanent Account Number, bank account number, and passport number.
• for a body corporate promoter, its Permanent Account Number, bank account number, company registration number or equivalent, and the address of the Registrar of Companies.
• for convertible debt instruments, a due diligence certificate from the debenture trustee as per Form B of Schedule V.

The letter of offer is filed with the stock exchanges/ the designated stock exchange and with the Board for information and dissemination on the Board's website, along with the fees specified in Schedule III.

14.2.3 Pricing

Public issue. The issuer shall determine the price of equity shares, and in case of convertible securities, the coupon rate and the conversion price, in consultation with the lead manager(s) or through the book-building process, book building following Schedule XIII.

The issuer may mention a price or a price band in the offer document (in case of a fixed price issue) and a floor price or a price band in the red herring prospectus (in case of a book-built issue) and determine the price at a later date before filing the prospectus with the Registrar of Companies. However, the prospectus filed with the Registrar of Companies shall contain only one price or the specific coupon rate.

The band has two limits. The cap on the price band, and the coupon rate in case of convertible debt instruments, shall be less than or equal to one hundred and twenty per cent of the floor price. The cap of the price band shall be at least one hundred and five percent of the floor price.

Between 105 per cent and 120 per cent of the floor — wide enough to discover a price, narrow enough not to be meaningless.

And a floor beneath the floor: the floor price or the final price shall not be less than the face value of the specified securities.

Announcement: at least two working days before the opening of the issue in the pre-issue and price band advertisement in the format specified under Part A of Schedule X in the same newspapers in which the public announcement was published.

Differential pricing. The issuer may offer at different prices, subject to:

a) retail individual investors or retail individual shareholders or employees entitled for reservation... may be offered specified securities at a price not lower than by more than ten per cent of the price at which net offer is made to other categories of applicants, excluding anchor investors.

b) in case of a book-built issue, the price of the specified securities offered to the anchor investors shall not be lower than the price offered to other applicants.

c) in case of a composite issue, the price of the specified securities offered in the public issue may be different from the price offered in rights issue and justification for such price difference shall be given in the offer document.

d) In case the issuer opts for the alternate method of book building, the issuer may offer the specified securities to its employees at a price not lower than by more than ten per cent of the floor price.

**And: discount, if any, shall be expressed in rupee terms in the offer document.

Note limb (b). Anchor investors may never be favoured on price — a rule aimed squarely at the risk that early institutional demand is bought.

Rights issue — Regulation 73. The Issuer shall decide the issue price, before determining the record date, which shall be determined in consultation with the designated stock exchange. The issue price shall not be less than the face value of the specified securities. The issuer shall disclose the issue price in the letter of offer filed with SEBI and the stock exchange(s).

14.2.4 Availability of issue material

Public issue — Regulation 36. The issuer shall ensure availability of the offer document and other issue material including application forms to stock exchanges, syndicate members, registrar to issue, registrar and share transfer agents, depository participants, stockbrokers, underwriters, bankers to the issue, and Self Certified Syndicate Banks (SCSBs) before the opening of the issue.

Rights issue — Regulation 77. The same availability, with investors' associations added, and: the letter of offer, along with application form, shall be dispatched through registered post or speed post or by courier service or by electronic transmission to all the existing shareholders at least three days before the date of opening of the issue, and it shall also be provided by the issuer to any existing shareholder who makes a request.

Regulation 77A: the rights entitlements shall be credited to the Demat account of the shareholders before the date of opening of the issue, and allotment of specified securities shall be made in the dematerialized form only.

14.2.5 Underwriting

Where a public issue is made through book building:

(a) the issue shall be underwritten by lead manager(s) and syndicate member(s) — provided that at least seventy-five per cent. of the net offer proposed to be compulsorily allotted to qualified institutional buyers... shall not be underwritten.

(b) the issuer must, prior to the filing of the prospectus, enter into an underwriting agreement with the lead manager(s) and syndicate member(s), indicating therein the number of specified securities they shall subscribe to on account of rejection of bids, either by themselves or by procuring subscription, at a price which shall not be less than the issue price, disclosing the agreement in the prospectus.

(c) to cover under-subscription, an agreement must be entered prior to the filing of the red herring prospectus, indicating the maximum number of specified securities they shall subscribe to, disclosed in the red herring prospectus.

(d) if the syndicate member(s) fail to fulfil their underwriting obligations, the lead manager(s) shall fulfil the underwriting obligations.

(e) the lead manager(s) and syndicate member(s) shall not subscribe to the issue in any manner except for fulfilling their underwriting obligations.

(f) the lead managers shall undertake minimum underwriting obligations as specified in the... (Merchant Bankers) Regulations, 1992.

(g) where the issue is required to be underwritten, the underwriting obligations should be at least to the extent of minimum subscription.

Rights issue: if the issuer desires to have the issue underwritten, it shall appoint merchant bankers or stock brokers, registered with the Board, to act as underwriters. However, the issue can be underwritten only to the extent of entitlement of shareholders other than the promoters and promoter group.

14.2.6 to 14.2.8 Post-issue

Post-issue advertisement. The lead managers must ensure that an advertisement is released. It gives details relating to subscription, basis of allotment, number, value and percentage of all applications including ASBA, number, value and percentage of successful allottees..., date of completion of dispatch of refund orders... or instructions to self-certified syndicate banks by the Registrar, date of dispatch of certificates or date of credit of specified securities... and date of filing of listing application. It must appear within ten days from the date of completion of the various activities in at least one English national daily newspaper with wide circulation, one Hindi national daily newspaper with wide circulation and one regional language daily newspaper with wide circulation at the place where the registered office of the issuer is situated. The details are also placed on the websites of the stock exchanges.

Post-issue responsibilities. The responsibility of the lead manager(s) shall continue until completion of the issue process and for any issue related matter thereafter; they shall regularly monitor redressal of investor grievances; and they shall continue to be responsible for post-issue activities till the applicants have received, credit to their Demat account or refund of application monies and listing or trading permission is obtained.

**They must coordinate with the registrars and other intermediaries to monitor the flow of applications from self-certified syndicate banks, processing of the applications including an application form for ASBA and other matters till the basis of allotment is finalised, credit of the specified securities to the dematerialised accounts of the allottees... and unblocking of ASBA accounts/ dispatch of refund orders are completed and securities are listed.

On ASBA and UPI: considering that ASBA has been mandated for all applicants in the public issue, the application money is not transferred but only blocked in the account of the investor and is debited only upon allotment and unblocked if there is no/part allotment. After UPI, intermediaries are responsible to compensate the investors for any delay in unblocking of amounts in the ASBA accounts exceeding 4 working days from the bid/issue closing date, SEBI having directed refunds to investors to be made within 4 working days.

Reporting failures: any act of omission or commission on the part of any of the intermediaries noticed by the lead manager(s) shall be duly reported by them to SEBI.

Devolvement: the lead manager(s) shall ensure that the notice for devolvement containing the obligation of the underwriters is issued within ten days from the date of closure of the issue; and for undersubscribed underwritten issues they shall furnish information to SEBI in respect of underwriters who have failed to meet their underwriting devolvement in SEBI specified format Schedule XVIII.

Post-issue reports.

Seven days for a public issue; three working days and fifteen days for a rights issue.

14.3 The merchant banker as advisor

The merchant banker(s) advises the Issuer Company on all matters related to the public issue, including but not limited to the activities mentioned in the inter-se allocation of responsibilities. It is the responsibility of the issuer company to appoint one or more merchant bankers, at least one of whom is the lead merchant banker and also appoint other intermediaries in consultation with the lead merchant banker.

The merchant banker is responsible for carrying out due diligence on the issuer company and ensure that the disclosures made in the offer document are true, fair, accurate and complete, filing due diligence certificates with SEBI at various stages during the issue process covering its promoters, directors, group entities and relates to all aspects including business, legal and financial diligence.

What that work looks like in practice:

A detailed due diligence checklist based on ICDR requirements and what is important for investors to receive through the prospectus. It draws on inputs from the legal counsels and other experts. It includes formats of certificates that the merchant banker(s) seeks from the Company, formats of consents from all intermediaries involved, details from the group and associate companies, promoters, directors — the disclosure requirements themselves being given in the Schedule VIII of the ICDR.

Policing publicity. The merchant banker is also required to keep a tab on the public communications, publicity materials, advertisements and any research report by the issuer company, and all publicity material, public communications etc. need to be approved by the lead merchant banker responsible for the marketing of the issue. The principle: all advertisements should be truthful and fair and should not be manipulative or deceptive or distorted and should not contain any statement, promise or forecast which is untrue or misleading. There should be no "conditioning" of the market. All advertising by the issuer company should be consistent with past practices.

Financial diligence. As an integral part of the financial due diligence, the merchant banker(s) meet with the auditors of the issuer company and discuss information required to be disclosed in the offer document. In accordance with requirements under Schedule VI of the ICDR, the information required includes audited consolidated or unconsolidated financial statements.

Consolidated or unconsolidated — which is why the second review question is False.

A site visit, whose objects are to get an appreciation of the business of the company, the manufacturing process, machinery and equipment, plant layout, environment issues etc.

And drafting, based on board minutes, shareholder meeting minutes, land and property agreements, e-forms of the directors under Companies Act, loan documents, agreements with shareholders, agreements with customers, litigation-related documents, documents filed with the ROC and discussions with the promoters and management.

Two further obligations. The merchant bankers shall disclose the track record of the performance of the public issues managed by them... for a period of three financial years from the date of listing for each public issue managed, on the website with a reference in the offer document. And SEBI's General Order – SEBI (Framework for rejection of Draft Offer Documents), 2012 notifies the broad framework followed by SEBI for rejection of Offer Documents, which merchant bankers must take note of... before filing the draft offer document with SEBI.

14.4 Documents before the opening of the issue

In order to maintain maximum possible transparency in the issue process and to safeguard the interests of the investors, SEBI requires the lead merchant banker to submit documents regarding the issue process and the issuer's financial health.

With the draft offer document (Regulation 25):

• a certificate, confirming that an agreement has been entered into between the issuer and the lead merchant bankers.
• a due diligence certificate.
• a due diligence certificate from the debenture trustee in case of an issue of convertible debt instruments.

After SEBI's observations — or after the stipulated period if none is issued:

• a statement certifying that all changes, suggestions and observations made by SEBI have been incorporated in the offer document.
• a due diligence certificate at the time of filing the prospectus with the Registrar of Companies.
• a copy of the resolution passed by the board of directors of the issuer for allotting specified securities to promoters towards amount received against promoters' contribution, before the opening of the issue.
• a certificate from a statutory auditor, before opening of the issue, certifying that promoters' contribution has been received in accordance with these regulations, with the names and addresses of the promoters who have contributed... and the amount paid and credited to the issuer's bank account by each of them.
• a further due diligence certificate... in the event the issuer has made a disclosure of any material development by issuing a public notice.

And with the stock exchange: the issuer submits the Permanent Account Number (PAN), bank account number and passport number of its promoters.

Post-issue reach: the post-issue merchant banker shall be responsible for the post-issue activities till the subscribers have received the securities certificates, credit to their Demat account / refund of the application money and till the listing agreement is entered into by the issuer with the stock exchange and the listing / trading permission is obtained. And the responsibility of the lead merchant banker shall continue even after the completion of the issue process.

Two compliance officers: the issuer is required to appoint a compliance officer, who shall in addition to the compliance officer of the merchant banker be responsible for monitoring the compliance of the securities law and investor grievances redressal.

Draft offer document made public. It must be hosted on the website of the issuer, SEBI, the recognized Stock Exchanges on which the issue is to be listed and the website of the merchant bankers associated with the issue for at least 21 days. Afterwards the lead merchant bankers file with SEBI a statement giving information of the comments received by them or the issuer on the draft offer document during that period and the consequential changes, if any.

And the public must be told it is there. The issuer within two days of filing the draft offer document with SEBI shall make a public announcement in one English national daily newspaper with wide circulation, one Hindi national daily newspaper with wide circulation and one regional language newspaper with wide circulation at the place where the registered office of the issuer is situated, disclosing to the public the fact of filing of draft offer document with SEBI and inviting the public to give their comments.

Consistency is required: the offer documents hosted on websites must have contents... the same as the versions as filed with the Registrar of Companies, SEBI and the stock exchanges; and the lead manager(s) and the stock exchanges shall provide copies of the offer document to the public as and when requested and may charge a reasonable sum.

14.5 The merchant banker as underwriter

Underwriting is an agreement with or without conditions to subscribe to the securities of an issuer when the existing shareholders of such issuer or the public do not subscribe to the securities offered to them, and an underwriter is a person who engages in the business of underwriting of an issue of securities of a body corporate.

For a public issue other than through book building, or a rights issue, the issuer wishing to underwrite has to appoint merchant bankers or stock brokers, registered with the Board. For a book-built issue, it shall be underwritten by the lead manager(s) and syndicate members, save that seventy-five per cent of the net offer to public proposed to be compulsorily allotted to qualified institutional buyers (QIBs)... cannot be underwritten.

And the chain of responsibility: in case where the syndicate member fails to fulfil its underwriting obligation, the lead manager(s) shall fulfil the underwriting obligations, while the lead manager(s) and syndicate members shall not subscribe to the issue in any manner except for fulfilling their underwriting obligations.

Minimum subscription

Regulation 45: the minimum subscription to be received in an issue shall be at least ninety per cent of the offer through offer document except in case of an offer for sale of specified securities, subject to allotment of the minimum number of specified securities as specified in SCRR 1957.

Ninety per cent — the third review question.

And if it is not reached: all application moneys received shall be refunded to the applicants forthwith, but not later than four days of the closure of the issue.

Rights issues too: Regulation 86(1)... require that the minimum subscription to be received in the right issue shall be at least ninety per cent of the offer through the offer document.

With one relaxation: the amendment dated September 28, 2020 removes the mandatory requirement of a minimum 90% subscription in case the issue is for the purpose of financing other than capital expenditure for a project, provided that the promoters undertake to subscribe fully to their portion of rights entitlement.

14.6 The rights issue circular of January 2020

SEBI Circular No. SEBI/HO/CFD/DIL2/CIR/P/2020/13 dated January 22, 2020 streamlined the rights issue process.

Notice period shortened: the advance notice to stock exchanges under Regulation 42(2) of LODR Regulations was reduced from at least 7 working days to at least 3 working days (excluding the date of intimation and the record date).

Dispatch advertisement: the newspaper advertisement disclosing the date of completion of dispatch must be completed at least 2 days before the date of opening of the issue.

Dematerialised Rights Entitlements.

• The letter of offer must disclose the process of credit of REs in the Demat account and renunciation thereof.
• REs shall be credited to the Demat account of eligible shareholders in dematerialized form.
• The REs with a separate ISIN shall be credited... before the date of opening of the issue, against the shares held by them as on the record date.
• Physical shareholders shall be required to provide their Demat account details to Issuer / Registrar to the Issue for credit of REs not later than two working days prior to the issue closing date, such that credit of REs in their Demat account takes place at least one day before the issue closing date.

Trading of REs: they shall be traded on the secondary market platform of Stock exchanges, with T+1 rolling settlement, similar to the equity shares, trading commenc[ing] along with the opening of the issue and... closed at least three working days prior to the closure of the rights issue. Holders shall be able to renounce their entitlements by trading on stock exchange platform or off-market transfer.

Payment: application for a rights issue shall be made only through the ASBA facility, and no withdrawal of application shall be permitted by any shareholder after the issue closing date.

Mechanics worth knowing. A common application form goes to shareholders as on the record date with the details of the rights entitlements... separately, usable both by shareholders or renouncee, uploaded by the registrar on its website — and in terms of Regulation 78... the investor also has the option to make an application in writing on plain paper.

A separate ISIN shall be obtained by the issuer for credit of REs, specified while announcing the record date, and the ISIN of REs shall be kept frozen (for debit) in the depository system till the date of opening of the issue.

In case of fractional entitlements of REs, the fractional part shall be ignored by rounding down the entitlement.

**Where a shareholder's Demat account... is frozen or Demat account details are not available, including shares held in an unclaimed suspense account or the account of IEPF Authority, then REs shall be credited in a suspense escrow Demat account of the Company with intimation to the shareholder.

The issuer shall intimate issue closing date to the depositories at least one day before the issue closing date, and the depositories shall suspend the ISIN of REs for transfers, from the issue closing date.

And what becomes of unused entitlements: REs which are neither renounced nor subscribed by the shareholders shall lapse after the closure of the Rights Issue, the issuer ensuring that REs that are lapsed are extinguished from the depository system once securities are allotted, after which the ISIN for REs shall be permanently deactivated.

Applications are made using the ASBA facility through the Self Certified Syndicate Banks (SCSB) network during the issue period. There is only one application form for REs available in a particular Demat account. Correction of bid data as collated by the SCSB after issue closing shall be completed on the issue closure date itself. Finally, the registrar reconciles valid ASBA applications, funds blocked and REs Demat holding list before crediting shares based on basis of allotment approved by the designated stock exchange.

14.7 General obligations of merchant bankers

1. Prohibition on payment of incentives. Any person connected with the issue, shall not offer any incentive, whether direct or indirect, in any manner, whether in cash or kind or services or otherwise to any person for making an application in the rights issue, except for fees or commission for services rendered in relation to the issue.

2. Public communications and research reports must comply with Schedule IX, contain only such information as contained in the draft offer document/offer document, and satisfy fourteen conditions:

(a) It shall be truthful, fair and shall not be manipulative or deceptive or distorted and it shall not contain any statement, promise or forecast which is untrue or misleading.

(b) reproduction must be in full and disclose all relevant facts not to be restricted to select extracts.

(c) it shall be set forth in a clear, concise and understandable language.

(d) no issue slogans or brand names for the issue except the normal commercial name of the issuer or commercial brand names of its products already in use or disclosed.

(e) no slogans, expletives or non-factual and unsubstantiated titles.

(f) financial data must carry data for the past three years... along with particulars relating to revenue, net profit, share capital, reserves / other equity..., earnings per share, dividends and the book values.

(g) no technical, legal or complex language and excessive details which may distract the investor.

(h) no statements which promise or guarantee rapid increase in revenue or profits.

(i) no models, celebrities, fictional characters, landmarks, caricatures or the likes.

(j) no television crawlers (advertisements which run simultaneously with the programme in a narrow strip at the bottom of the television screen).

(k) television advertisements shall advise the viewers to refer to the draft offer document or offer document... for the risk factors.

(l) highlights must advise readers to refer to risk factors in not less than point seven sizes.

(m) billboard or banner advertisements must contain information as specified in Part D of Schedule X.

(n) advertisements with highlights or other information shall prominently advise the viewers to refer to the draft offer document and offer document for details and risk factors.

And the crucial prohibition: during the period the issue is open for subscription, no advertisement shall be released giving an impression that the issue has been fully subscribed or oversubscribed, or indicating investors' response to the issue.

No exception, and no intimation route — which is why the fourth review question is False.

A compliance certificate in Part E of Schedule X is submitted by the lead managers for the period between the date of filing the draft offer document / draft letter of offer and the date of closure of the issue, covering news reports in newspapers mentioned in these regulations and in print and electronic media controlled by a media group where the media group has a private treaty or shareholders' agreement with the issuer or promoters of the issuer.

And closure must be verified: an announcement regarding the closure of the issue should be made only after the lead merchant banker is satisfied that at least 90 per cent of the offer through the offer document have been subscribed and a certificate regarding that have been obtained from the registrar to the issue — and not before the issue closure date except for the issue closing advertisement.

3. Publicly available documents — website contents must match the printed copies filed with the RoC, SEBI and the stock exchanges, with copies furnished on request for a reasonable sum of money.

4. Investor grievances — the post-issue lead merchant bankers should look into the post-issue activities such as allotment, refund, dispatch and giving instructions to the syndicate members, Self-Certified Syndicate Banks and other intermediaries, and monitor the redress of the investor grievances.

5. Post-issue reports as above.

6. Post-issue advertisements as above, and it is the responsibility of the post-issue merchant banker to ensure that the issuer company, advisors, brokers or any other entity connected with the issue do not publish any advertisements which state that issue has been over-subscribed.

7. Co-ordination with other intermediaries — the post-issue merchant banker must maintain close coordination with the registrars to the issue and arrange to depute its officers to the offices of various intermediaries at regular intervals after the closure of the issue, monitoring:

• (a) the flow of application from collecting bank branches.
• (b) processing of the applications including the application form for ASBA.
• (c) other related matters till the basis of allotment is finalized.
• (d) dispatch of security certificates and refund orders are completed and securities are listed.

On devolvement, the notice must issue within a period of ten days from the date of closure of the issue. And the post-issue merchant banker must confirm to the bankers to issue that all formalities in connection with the issue have been completed and that the banker is free to release the money to the issuer or release the money for refund in case of failure of the issue.

8. Miscellaneous — information and audited financials not more than 6 months old from the issue opening date; dispatch of refund orders, allotment letters and share certificates... by way of registered post or certificate of posting; and payment of interest to the applicants for delayed dispatch of allotment letters, refund orders, etc. as per the disclosures made in the offer document.

Case 14.1 — SEBI settlement order, M/s Network 18 Media. A complaint in March 2017 alleged that the company failed to disclose IMT as a 'promoter' in its draft letter of offer and letter of offer filed way back in 2012, in a rights issue whose draft letter of offer was dated March 1, 2012, and the letter of offer was dated August 31, 2012.

The finding. IMT had indirectly acquired joint control over NW18 by way of Single Unit Agreement (SUA) in November 2011, whereby IMT along with the holding companies of NW18 and the promoters of NW18 had agreed to act as 'single unit' in managing the matters of NW18 and acquired the right to appoint the majority of the board of directors — the common objective being owning and controlling at least 51 per cent equity share capital of the company.

So IMT qualified to be a Person Acting in Concert (PAC) with the promoter entities... in terms of the SAST... norms, and because DCPL, the trustee of IMT, was wholly-owned by Raghav Bahl and his wife Ritu Kapur, who were the promoters of the company, IMT qualified to be included in the promoter group of the firm as per ICDR... Regulations.

**Being part of the promoter group, IMT was required to be disclosed, under the promoter category by the company in its draft letter of offer and letter of offer.

Outcome. After a show cause notice in January 2020 and a settlement application in July 2020, SEBI's High-Powered Advisory Committee... recommended the case for settlement upon payment of Rs 1.56 crore towards settlement charges, which the company remitted.

The chapter's review questions confirm four things. Of the activities listed, only finalisation of the basis of allotment is a post-issue activity coordinated by the lead merchant banker. It is False that only audited and consolidated financial statements need be prepared, since audited consolidated or unconsolidated financial statements may be required. Minimum subscription is 90 per cent of the offer through the offer document. And it is False that an advertisement suggesting full subscription or oversubscription may be issued while the issue is open, even with prior intimation to SEBI.