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Securities and Exchange Board of India

DIVISION CHIEF

PRIMARY MARKET INTERMEDIARIES DIVISION

PMD/SU/12024/99

June 01, 1999

RRTI CIRCULAR NO. 2(1999-2000)

All Registrars to an issue and share transfer agents

Dear Sir,

 Sub : Treatment of stock-invests, after basis of allotment is finalised.

As per our Circular PMD/Cir. 11006/92, dated November 02, 1992, regarding handling of applications accompanied by stock-invests, point no. 8 states that “Registrars shall deposit the stock invest, duly filled in and sorted out “issuer bank branch wise”, with the company’s banker whose name shall be intimated to him in advance by the company and who will take further steps to realise the amount of the stock- invest from the issuing bank through banking channel and credit the company’s account”.

It has been noticed during the inspections of the RTI/STAs, carried out by us, that the issuer company is able to utilise the money received from the applications accompanied by stock-invests, as soon as the basis of allotment is finalised i.e. much before the despatch of the share certificates/listing of the shares on the stock exchanges. This is on account of the fact that the stock-invests are deposited with the company’s banker and not in the issue account and thus, the company has access to the issue funds before the listing of the issue, defeating the very purpose of having a separate issue account.

A company should receive the subscription money only after the listing of the shares at all the stock exchanges is complete in all respects. This is ensured by keeping the subscription money in a separate “issue account” with the bankers to the issue, from where it is released only after the company/Iead manager provides conclusive evidence that the shares have been listed at all the stock exchanges mentioned in the prospectus.

In view of the above, point no. 8 of our circular no. PMD/Cir. 11006/92, dated November 02, 1992, regarding handling of applications accompanied by stock-invests, will read as follows:

“The successful/partially successful applicants’ stock invests would, after encashing, be deposited in the separate bank account, where the cash and other monies received from other investors are deposited. “

 This circular comes into effect immediately.

Yours faithfully,

D RAVIKUMAR

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