Sebi issues guidelines for returning and resubmission of draft document of public issues

Markets regulator Securities and Exchange Board of India (Sebi) issued guidelines on Tuesday for returning and resubmitting the draft offer document for public issues, with the goal of providing greater clarity and consistency in disclosures as well as timely processing.

In a circular, Sebi stated that the draft offer document for a public or rights issue of securities will be scrutinised in accordance with the broad guidelines specified by it, and that the document will be returned to the issuer for resubmission.

According to the guidelines, the draft offer document must be written in simple language with visual representations of data to ensure that its contents are easily understood, and the information must be presented in a clear, concise, and intelligible format.

The draft offer document must avoid complex presentations, vague, ambiguous, and imprecise explanations, repetition of disclosures in different sections of the document, and inconsistencies in the data or facts provided in different sections of the offer document.

Furthermore, Sebi has requested that technical and complex terms used to explain the issuer company's business in the document be clarified, as well as legal and technical terminology avoided.

Sebi said in its guidelines, "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 emphasised the importance of clarity, stating that the draft document must clearly specify the exact requirement under the rule that has not been met by the issuer rather than simply referencing a regulation number.

The guidelines were issued after Sebi discovered that draft offer documents for public issues did not always meet the requirements set out in the ICDR (Issue of Capital and Disclosure Requirements) Regulations. This required revisions, causing processing delays.

The regulator stated that there will be no fees charged for the resubmission of draft documents.

"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.

In addition, the issuer company must notify its sectoral regulator, if applicable, of the return and resubmission of the draft offer document in writing.

The issuer companies and lead merchant bankers must ensure that the draft offer document is resubmitted only after addressing the insufficiency for which the paper was returned.

(With Agency Inputs)