Sebi removes 1% security deposit requirement for public issues

NEW DELHI: The

Securities and Exchange Board of India

(Sebi) on Thursday issued a circular scraping the mandatory

security deposit

requirement with exchanges for

public issues

effective immediately. The market regulator said that this will help companies to streamline business operations for companies.
“In order to facilitate

ease of doing business

to issuer company, the requirement to deposit 1 per cent of the issue size available for subscription to the public with the designated stock exchange by the issuer company under… Sebi (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR Regulations) has been dispensed with,” said Sebi.
Earlier, companies planning to launch public equity share issues were required to deposit 1 per cent of the total issue size with

stock exchanges

, which was later refunded post-issue.
In February, the market watchdog had released a consultation paper suggesting the removal of the 1 per cent security deposit requirement for public or rights issues.

The regulator explained that the initial 1 per cent security deposit requirement was established to ensure issuers addressed investor grievances related to transaction matters, including refund processing, security allocation, and certificate distribution.
The regulator noted that with current reforms and frameworks for public or rights issues, including ASBA (Application Supported by Blocked Amount) UPI payment methods and mandatory demat allotment, concerns about post-issue investor complaints regarding refunds and physical certificate distribution are no longer relevant.