The proposed changes to the IPO (initial public offering) regulations have prompted the stock market regulator to solicit public feedback.

On March 24, the securities regulator received a set of proposals from the task group established to advise market reforms. These recommendations were intended to modernize regulatory frameworks, improve market efficiency, and guarantee openness in order to draw quality companies to the equities market.

In a statement released on Monday, the Bangladesh Securities and Exchange Commission (BSEC) asked individuals and market participants to send their thoughts by April 15 via email to suggestion.iporules@sec.gov.bd. “On receiving public opinions, the securities regulator will give its final approval for amendments to the public issue rules,” said Mohaimiul Haque, assistant spokesperson of the BSEC.

The task force established by the securities regulator in October of the previous year has put forward recommendations across eight key areas aimed at ensuring equitable pricing, expediting the listing process for interested companies, attracting new investors, increasing the availability of high-quality stocks, enhancing audit standards, empowering stock exchanges, and improving operational and cost efficiency.

To tackle the shortage of quality stocks, it has suggested allowing direct listings for multinational corporations and large enterprises with annual revenues exceeding Tk 10 billion. Currently, only state-owned companies are permitted to directly list on the stock exchanges.

Additionally, the task force has recommended reducing the minimum offload requirement for direct listings from 25 percent to 10 percent, facilitating easier access for well-performing companies. It has also proposed that large firms with outstanding bank loans exceeding Tk 10 billion be mandated to list.

Furthermore, the task force has advised establishing a minimum pre-IPO capital requirement of Tk 300 million for the fixed-price method and Tk 500 million for the book-building method.Currently, the minimum pre-IPO paid-up capital is Tk 150 million under the fixed price method while the amount is Tk 300 million under the book building method.

To ensure the fair price of primary shares, the task force suggested reinstating the Dutch Auction method, a price discovery mechanism where the auctioneer starts with the highest asking price and lower it until it reaches an optimum price.

The advisory panel also suggested imposing a three-month lock-in period on half of the holdings of institutional investors, meaning they will not be able to sell that many shares for that period since the debut trading. The provision is expected to encourage them to make well-thought-out decisions during the bidding for price discovery.

To accelerate the IPO process, the task force proposed cutting the time for new listings to six months. At present, it takes one year to three years for a firm to list.

The taskforce also proposed a 15 per cent quota for high net-worth individuals in IPO schemes in a way to incentivize them.

It suggested removal of 10 per cent circuit breaker for the first three days upon listing so that the post-IPO euphoria is allowed to subside and people do not get caught by purchasing shares at high prices.

There should be no discount on the cut-off price for general investors, said the task force, adding that the issuer should not be deprived of expected premiums unnecessarily. Presently, general investors receive IPO shares at a discounted rate below the cut-off price.

The task force has also recommended omission of the minimum prior equity investment requirement of Tk 50,000 for investors to apply for IPO shares.

To improve audit quality, the panel said a list of 20 eligible auditors may be prepared.

It stated that in order for more institutes to participate in undersubscribed portions of initial public offerings (IPOs), the BSEC should permit them to do so and select the most suitable underwriters. The task force recommended that if a stock exchange disapproves of an IPO, the BSEC should not authorize it in order to empower the stock exchanges. It further stated that recommendations rather than observations should be accepted by the bourses. Additionally, the task force recommended that cross-border IPO subscriptions be introduced for bonds, stocks, and other financial instruments. It stated that the obligation to distribute printed copies of prospectuses should be eliminated in order to improve operational and financial efficiency.