SEC facilitates retail investors
Approves new rules to broad-base share ownership:
The Securities and Exchange Commission of Sri Lanka (SEC) decided to
facilitate a fair allocation of shares to retail individual investors
and licensed Sri Lankan unit trusts during Initial Public Offerings (IPOs),
a SEC press release said yesterday.
The SEC has observed that the recent Initial Public Offerings (IPOs)
were heavily oversubscribed due to investors using the bank guarantee
option to submit IPO applications for a very large quantity of shares.
CSE trading floor
This has resulted in a majority of retail investors being allotted a
small portion of the shares applied and has not created a level playing
field in the Primary Market thereby hindering the process of broad
basing share ownership in the country, the press release said.
The Commission approved several rules to mitigate this situation.
Under these new rules a minimum of 40 percent of the offered shares
(for a particular share class) in a public offer has to be initially
made available for allotment to retail individual investors.
A retail individual investor shall be defined as an individual
investor who applies (for a particular share class) for up to a maximum
of 3,000 shares or for a value of not more than Rs 100,000 whichever is
Applicants submitting applications under other investor categories
shall not make applications under the retail individual investor
A minimum of 10 percent of the offered shares (for a particular share
class) in a public offer is to be initially made available for allotment
to Sri Lankan growth or balanced unit trust funds licensed by the
Securities and Exchange Commission of Sri Lanka (SEC) comprising not
less than 500 unit holders resident in Sri Lanka making up of at least
50 percent of the fund (unit trust investor category). This rule will be
subjected to compliance with SEC Directive made under Circular No.
01/2009 dated January 7, 2009.
In the event of an under-subscription in the unit trust investor
category and an over-subscription in other investor categories, the
oversubscription in the retail individual investor category shall be
given first priority in allotment of under-subscribed shares, the
statement said. In the event of an under-subscription in the retail
individual investor category and an over-subscription in other investor
categories, over-subscription in the unit trust investor category shall
be given first priority in the allotment of under-subscribed shares.
These rules will be effective from March 15, 2011, the statement
Subsequent to a consultative process with the Colombo Stock Exchange
(CSE), the Colombo Stock Brokers Association (CSBA) and IPO Managers,
the SEC has decided to facilitate a fair allocation of shares to retail
individual investors and licensed Sri Lankan unit trusts during IPOs.
Daily News Business interviewed some of the experts in the industry
to get their comments on the new regulation.
The Unit Trust Association of Sri Lanka President, S Jeyavarman said
the unit trust industry is very pleased with the move by the Securities
and Exchange Commission (SEC). “This will help small investors who are
not going for the Initial Public Offerings (IPO’s) directly and it is a
good opportunity for the unit trust industry to participate in IPOs. It
will also help the unit trust industry to own a reasonable amount of
shares as we hold the shares for a long-term. Investing on IPO’s via
unit trust ensure the investors secure shares where they could really
enjoy the benefits of the investment,” he said.
Asha Philips Managing Director, Dimuthu Abeysekara said the directive
is encouraging. It is important to give prominence to small investors
too. That encourages and provides confidence to them. During the past
one and half years many new CDS accounts were opened due to IPOs and
small investors, he said. C de S