Securities and Exchange Broad of India
DEPUTY GENERAL MANAGER
CORPORATION FINANCE DEPARTMENT
DIVISION OF ISSUES AND LISTING
SEBI/CFD/DIL/DIP/14/2005/25/1
January 25, 2005
To All Registered Merchant Bankers Dear Sirs,
Sub.: Amendments to the SEBI (Disclosure and Investor Protection) {DIP} Guidelines, 2000
1.0 SEBI, under the provision of Section 11(1) of SEBI Act, 1992 is hereby issuing amendments to SEBI (DIP) Guidelines, 2000 (hereinafter referred as “the guidelines”).The amendments are detailed in Annexure I and are summarized under the following broad categories:
1.1 Order of presentation of disclosures in prospectus
1.1.1 At present, the guidelines provide for the disclosure requirements. However, there is no mention of order in which such disclosures should appear in the prospectus. The prospectuses in general do not follow a uniform pattern of presentation of disclosures and contain lot of repetitions.
1.1.2 In order to address the aforesaid issue, SEBI has decided to amend Section
I of Chapter VI of the guidelines. Clauses of Section I have been rearranged in the same order in which disclosures should appear in the prospectus. All the disclosure requirements specified under Schedule II of the Companies Act, 1956 have been retained either under the same heading or under new headings. Few requirements / sections have been added to make the prospectus more effective like summary, table of contents, industry review, etc. Repetitive disclosures are to be avoided by giving cross references to the extent possible. An annexure indicating order of presentation of disclosures in the prospectus has been inserted in the guidelines for easy understanding.
1.1.3 The standard order of presentation is not intended to reduce the flexibility to the issuer to include other disclosures not mentioned in the guidelines. Issuers are free to make additional disclosures, so long as they are not inconsistent with the guidelines. Further, the said disclosures should be, to the extent possible, within the broad headings as specified in Section I of Chapter VI of the guidelines.
1.2 Requirements pertaining to abridged prospectus
1.2.1 At present, Section II of Chapter VI of the guidelines lays down the disclosure requirements in the abridged prospectus.
1.2.2 In order to achieve the objective of making the abridged prospectus more readable, the guidelines have been amended vide this circular. The amendments include increasing the readability / visual impact of the contents of the abridged prospectus, deleting the repetitive disclosures, etc. The sequence of items followed shall be the same as appearing in the prospectus. The disclosures in abridged prospectus are as per Form 2A of the Companies Act, 1956, supplemented by such information as is considered most relevant for the prospective retail investors.
1.3 Requirements pertaining to issue advertisements
1.3.1 At present, Clause 11.3.1 (XI) of the guidelines, pertaining to book built issues, requires an issuer to publish an advertisement in newspaper, containing the features as specified in Form 2A of the Companies Act, 1956.
1.3.2 The pre-issue advertisement plays an important role in creating awareness about the issue. However, the cost involved in publishing the entire Form 2A, i.e., abridged prospectus in the newspaper was reported to be too high. In view of this and also in view of the fact that abridged prospectuses are available to investors along with the application form, the guidelines have been amended vide this circular. Pre-issue advertisement has been made mandatory for all public issues (fixed or book built). The issue advertisements (pre-issue advertisements, issue opening or closing advertisements) shall contain the minimum details prescribed in the formats specified in the guidelines. The issue advertisements like issue closing or opening advertisement, would continue to be optional.
1.3.3 The issuer company has an option of including additional disclosures in these advertisements so long as they are not inconsistent with the guidelines and subject to the same being in compliance with the principles and code of advertisements laid down in Chapter IX of the guidelines.
1.3.4 Any Bill Board Advertisement in regard to an issue shall not contain
information other than as stipulated in the formats specified in the guidelines.
1.4 Removal of restrictions on appointment of co-managers, advisors, etc.
1.4.1 Clause 5.4.2.1 of the guidelines restricts the number of co-managers and advisors which can be appointed in an issue. The same has been removed vide this circular. Disclosure(s) pertaining to issue expenses have been enhanced.
2.0 Applicability
2.1 The amendments stated in (1.1) and (1.2) above are applicable to all those issues where draft offer documents are filed on or after 30 days from the date of this circular i.e with effect from February 25, 2005.
2.2 The amendments stated at (1.3) and (1.4) are applicable to all those issues where observations are issued by SEBI on or after the date of this circular.
3.0 You are directed to ensure compliance with the provisions of SEBI (DIP)
Guidelines, 2000 and the amendments thereof.
4.0 This circular, along with the annexure, is available on SEBI website at www.sebi.gov.in. Full text of the guidelines, including the amendments issued vide this circular, is also available on SEBI website under Primary Market Section.
Yours faithfully,
Neelam Bhardwaj
