Companies will have to pay commission to brokers for the submission of investors' IPO forms even if the public offer is withdrawn, and listings will not be allowed till the time this payment is made.
In its guidelines for submission of initial public offer applications through a nationwide network of brokers, physically or electronically, market regulator Sebi has made provisions for payment of a commission to such brokers by the IPO-bound companies.
Once the broker accepts the application, he would be responsible for uploading the bid on the stock exchange platform and would be made liable for not uploading the bid even after accepting the application.
Sebi has asked the stock exchanges to take action against such brokers and in case of repeated offence, stringent action can be taken by the stock exchanges against those brokers.
As per the measures proposed by Sebi, which have been approved by its board and would be soon notified, the commission would be payable based on applications that have been considered eligible for the purpose of allotment.
Brokers would be adequately compensated by the issuer, so that they will be interested in directly or indirectly marketing the issue as well.
Based on the total commission payable as calculated by the Registrar, the company would disburse the amount to the exchange before listing and the exchange in turn would pay to the brokers through clearing corporation within two days from the receipt of money from the issuer.
However, the listing would be withheld by the exchanges till the time issuer pays brokers' commission to the exchange.
Also, the companies would be liable to pay the brokers for their activity even if they withdraw the public issue during the issue period.
The decision to increase the reach of IPOs through nation-wide broker network of stock exchanges in electronic form is a major policy initiative undertaken by Sebi for its primary market reforms.
Currently, public offers are largely distributed through a syndicate network comprising various brokers and sub-brokers with payments done through either cheques or ASBA mechanism (use of banking channels).
The new facility will be extended to 1,038 locations where at least one of the clearing banks has a branch.
Investors can approach any of the brokers in these locations to submit their application forms.
The stock exchanges would provide for download of application forms on their websites, and also facilitate investors to view the status online.