Sebi issues guidelines for returning draft document of public issues

Markets regulator Sebi on Tuesday came out with guidelines for returning the draft offer document for public issues and its resubmission in a bid to provide greater clarity and consistency in the disclosures as well as for timely processing.

In a circular, Sebi said the draft offer document for public issue or rights issue of securities will be scrutinized based on the broad guidelines specified by it and accordingly, such document will be returned to the issuer for resubmission.

Under the guidelines, the draft offer document is required to be prepared in simple language with visual representation of data to ensure ease of understanding of its contents and the information needs to be presented in a clear, concise, and intelligible manner.

The draft offer document needs to avoid complex presentations; vague and ambiguous and imprecise explanations; repetition of disclosures in different sections of the document and inconsistency in the data or facts provided in different sections of the offer document.

In addition, Sebi has asked to avoid legal and technical terminology and also directed to clarify technical and complex terms used to explain the business of the issuer company in the document.

"The risk factors are appropriately worded in simple, clear and unambiguous language to bring out clearly the risk to the investor, without undermining the same," Sebi said.

Emphasizing the importance of clarity, Sebi said that draft document will have to clearly specify the exact requirement under the rule which has not been met by the issuer instead of merely referencing a regulation number.

The guidelines came after Sebi observed that draft offer documents for public issues sometimes didn't meet the requirements specified in ICDR (Issue of Capital and Disclosure Requirements) Regulations. This led to the need for revisions, causing delays in processing.

On resubmission of draft document, the regulator said that there will be no requirement for payment of any fees on account of resubmission of such papers.

"The issuer, within two days of resubmission of draft offer document with the Board, shall make a public announcement in the mode and manner as prescribed under ICDR Regulations, as applicable, and the issuer shall also include a disclosure that it is a resubmitted document," Sebi said.

Also, the issuer company will have to make written intimation to its sectoral regulator, if any, informing about the return and resubmission of the draft offer document.

The issuer companies as well as lead merchant bankers will have to ensure that the draft offer document is resubmitted only after addressing insufficiency for which the draft paper was returned.