Recently, the Securities and Exchange Board of India (SEBI) abolished the mandatory requirement of a security deposit with exchanges before a public issue.
- Previously, companies launching a public equity issue had to deposit 1% of the issue size with stock exchanges, which was refunded after the issue.
Objective
- This change aims to facilitate ease of doing business for issuer companies, effective immediately, by removing the security deposit requirement under the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR Regulations).
Purpose of the Security Deposit
- The security deposit was previously required to help issuers address investor complaints, such as refunding application money, allotting securities, and dispatching certificates.
Reforms Addressing Investor Concerns
- With reforms such as ASBA (Application Supported by Blocked Amount), UPI payments, and mandatory demat allotments, issues like refund delays and non-dispatch of physical certificates no longer pose concerns for investors after a public or rights issue.
Formation and Evolution of SEBI
- The Securities and Exchange Board of India (SEBI) was initially formed as a non-statutory body on April 12, 1988.
- It became a statutory body in 1992, when the SEBI Act, 1992, came into force on January 30, 1992.