New Company
- is one which has not completed 12
months of commercial production and
no audited results are available
- where the promoters do not have a
track record


New company set up by an existing company
- existing co. has 5 yrs track record of
consistent profitability
- holds not less than half of the share capital in
the new entity

Private and closely held companies
- has track record of consistent
profitability for at least 3 years.
- provided lead managers have been
consulted as regards the issue prce

Existing listed companies
FREE PRICING provided promoters contribution is
a) 50% on first Rs.100 crores of issue
b) 40% on next Rs.200 crores of issue
c) 30% on next Rs. 300 crores of issue
d) 15% on the balance amount

Reservation of issues under public subscription- made in
the following manner
 Permanent employees ……………… 10%
 Indian mutual funds …………............ 20%
 Foreign Institutional Investors………..15%
 Development Financial Institutions…..20%
 Shareholders group of companies…...10%

Composite Issues by listed companies
- Differential pricing between public and
right shareholders allowed provided
- justification for the same is given in the
offer document

Lock in period
5 years for promoter’s contribution from
- Allotment Date
- From the date of commercial production
“ Whichever is late”
Current lock in period – reduced to 1 year

Abridged prospectus is attached with
every application made before SEBI
 Risk factors highlighted in the
 Project cost and issue objective stated in
the prospectus
 Company’s management, past history,
and present business highlighted in the

Incase of issue at premium, justification
for the same to be stated
 Minimum of 30 collection centre's for
the issue
 Collection agents not authorized to
collect application money in cash

Quantum of issue not to exceed the
amount stated in the prospectus under
any circumstances
 Compliance report to be submitted to
SEBI within 45 days from the closure of
the issue
 Minimum number of shares per
application fixed at 500 shares

Allotments to be made in tradeable lots

Issues by way of bonus, rights etc to be
made in such an order as to minimize
odd lots
 Capital issue to be fully paid up within
120 days

Refund of amount to be made to
investors within 120 days if minimum
subscription of 90% has not been
 Mandatory underwriting
 Increase in listing limit from 3 crores to 5
 Gap between closure date of various
issue not to exceed 30 days

Adequate disclosure to be made in the
application regarding the terms and
conditions of redemption and other
relevant features of the instrument

Stock Exchange:
- Board of directors to be reconstituted to
include non-members, public
representatives, government
representatives to the extent of 50% of
total members
- Capital adequacy norms laid out for
various members of stock exchanges
depending on their turnover

- Working hours fixed uniformly for all
stock exchanges
- All recognized stock exchanges to
inform about the transactions within a
period of 24 hours.

For the brokers:
- Registration of brokers and sub brokers
made compulsory
- Capital adequacy norms laid out to ensure
financial solvency of the brokers
- Audit of broker’s book and filing of audit
report made mandatory
- 5% cap for brokers to underwrite the issue


Disclosure of transaction price and
brokerage, before SEBI made
mandatory in the contract notes issued
to client.

FII’s allowed to invest in all securities traded in
primary and secondary markets.
 No restriction on the volume of investments for
the purpose of entry of FII’s
 FII holding in a single company not to exceed
ceiling of 5% of equity capital of the company.
 Disinvestment allowed only through stock
exchanges in India

Tax slabs for FII’s
- 10% on long term capital
- 30% on short term capital gain
- 20% on dividend and interest

General Guidelines:
 Mutual fund shall be established in the
form of trusts under Indian Trust Act
and will be authorized for business by
 Mutual funds shall be operated only by
established Asset Management
Companies setup for the purpose

At least 50% of the board of AMC must
be independent directors with no
interest in the sponsoring organization
 The minimum net worth to be
maintained at all times is prescribed at
Rs 5 crore
 SEBI vested with powers to withdraw
authorization given to AMC incase
investor interests are not taken care of

Business Activities :
 The AMC and the trustees to be treated
as separate legal entities
 AMC not to undertake any activity
other than management of a fund.

Scheme specific guidelines:
 Each scheme to be registered with SEBI
before the same is floated in the market.
 Minimum size of the funs:
- 20 crores incase of closed end scheme
- 50 crores incase of open end scheme

Closed end schemes not to be kept open for
subscription for a period of 45 days or more
 Entire subscription amount to be returned to
investors incase actual subscription does cross 60%
of the target amount.
 Closed end schemes to be listed on the stock
exchanges for the purpose of liquidity.
 Separate and responsible fund manager for each of
the schemes

Investment norms
 Mutual fund investment in a single
script should not exceed 5%of the total
scheme amount
 Ceiling limit of 5% can be increased
upto 10% as allowed by SEBI
 No mutual fund can invest 15% of the
corpus amount in a single industry

Income distribution:
90 % of the gain accrued on the mutual
fund to be distributed to beneficiaries

Disclosure and Reporting:
 SEBI vested with wide powers to call for
any information at any point of time as
deemed necessary by SEBI.
 SEBI empowered to lay down accounting
policies, format and contents of financial
 Common advertising code for all mutual
funds can be fixed by SEBI

Provision for the same should exist in
the Articles of Association of the Co. If
not, a resolution should be passed in
the General Body meeting for
capitalization of profits. Such proposal
should be recommended by the Board
of Directors and then the same should
be approved in the General Body

Bonus issue should be made only out of free
reserves built out of genuine profits.
 Reserves created out of revaluation of fixed
assets are not permitted to be capitalised.
 Declaration of bonus issue in lieu of dividend is
not permitted.
 Bonus shares are not allowed until the existing
partly shares are fully paid up.

Bonus issue is not permitted if the company has
defaulted in respect of payment of statutory dues to
employees such as provident fund, gratuity, bonus etc.
 Bonus issue will not be permitted if the company has
defaulted on the payment of interest to the debenture
 No bonus issue can be made within a period of 12
months from the date of public/rights issue.

A company announcing bonus issue after approval
of Board of Directors must implement the proposals
within a period 6 months from the date of such
proposal and the company shall not have the option
of changing the decision.
 Consequent to the issue of bonus shares, if the
subscribed and paid up shared capital exceeds the
authorised share capital, a resolution shall be
passed in the general body meeting for increasing
the authorised share capital

Issue of bonus shares is subject to the
condition that no bonus shall be made
which will dilute the right of a
debenture holder.

New issues:
 The issuing Co. should provide fair and
correct information.
 Allotment process should be fair and
not tainted by any bias.
 The draft prospectus is thoroughly
scrutinised for full and fair disclosure.
 There is no delay in refunds to

Underwriting is done to inspire confidence
in the minds of the investors.
 Risk factors are duly highlighted in the
 Listing is done in a timely manner
transparency is ensured.
 Both, stock exchange and companies are
responsible for investor protection.

All the parties in the new issue viz
merchant bankers, collecting banks are
responsible for investor protection.
 Appointment of SEBI representatives to
supervise the allotment process.

Regulation of Insider Trading:
A penalty of up to Rs 5 lakhs for those who
indulge in insider trading.
Investor Education:
A book published by SEBI on investor
A common code of advertisements to ensure
investors are not mislead

Grievance Cell:
Set up to handle investor complaints.
Stock Invest Scheme:
Banks act as DP’s incase of new issues.