Innovation. Soon, a hybrid rights product, simpler IPO filing: SEBI chief

Madhabi Puri Buch, Chairperson, Securities Exchange Board of India on Friday outlined plans to introduce a product that is a combination of a rights issue and preferential allotment in addition to several tech-driven initiatives to simplify processes and foster innovation.

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The regulator plans to introduce a product that is a combination of a rights issue and preferential allotment. The entire end-to-end process for this product can be completed in 23 days as compared to the 42 days taken for preferential allotment. There will be no separate requirement for SEBI approval nor will it be mandatory to appoint a merchant banker.

“You get the best of both worlds,” said chairperson Madhabi Puri Buch. “We have taken it to our advisory committee and have received a positive response. We will be out with a consultation paper soon.”

The second key innovation will be the introduction of a “demystified IPO document,” a template-based approach aimed at simplifying the listing process. “We are creating a template fill-in-the-blank IPO document,” said Buch addressing FICCI’s 21st Annual Capital Markets Conference, CAPAM 2024 on Friday. “If you find some difficulty, there will be a separate column to articulate this complexity. The document will be precise, and meaningful and any variation will be explained separately. It will bring down the approval time and make it a lot easier for the young companies waiting to list.”

AI processing

SEBI is implementing artificial intelligence for processing public documents, including IPO documents. “We are working, as we speak, on AI-based processing of IPO documents,” Buch said.

To address the concerns around the disclosure of Key Performance Indicators (KPIs) in offer documents, SEBI has referred the matter to the Industry Standards Forum (ISF). “We have now shared our concerns, and the industry has shared their concerns,” the Chairperson explained, expressing confidence in finding a “win-win situation.”

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In a move to accelerate market entry for new players, SEBI is working to speed up the registration process for intermediaries. “Just in the last one month, we have got 118 applications for new registrations, reflecting the vibrancy of the sector,” said Buch.

A performance validation agency, a new institution designed to enhance transparency and credibility in the market, will be up and running soon. “NSE has done some brilliant work. This new institution will allow any market participant to have their performance claims validated, whether they are algorithm providers, investment advisors, or research analysts. This initiative leverages advanced technology to provide a scalable solution for performance validation,” the SEBI chairperson said.

SEBI is rapidly embracing supervisory technology (SupTech) and urged market participants to adopt regulatory technology (RegTech). “We are rapidly adopting SupTech... a lot of supervision we now do, and it’s not just market surveillance, it’s inspection, and all of that is now using technology,” Buch said.

She lauded the success of the ISF, which has played a crucial role in developing industry standards across various sectors. “The industry standards forum across the spectrum has been such a learning experience for us,” the Chairperson noted, adding that the regulator is now formalising the ISF as part of its regulatory architecture.