SEBI may come up with a milder Safety Net Mechanism - Indian IPO Blog

Sunday, January 13, 2013

SEBI may come up with a milder Safety Net Mechanism

Market regulator SEBI plans to introduce the safety net mechanism in the form proposed by it in the discussion paper. SEBI Chairman U K Sinha had said a few days ago “Our discussion paper is in the public domain. My personal sense is that we must introduce safety net mechanism, may be in milder form, primarily to give a signal not about returning money but that the pricing has been right,”

According to the discussion paper, the safety net mechanism would be triggered in the case of those IPOs whose price has fallen by more than 20 per cent from the issue price. This new safety net mechanism would be a mandatory one.

Market regulator SEBI's board will discuss this week safeguarding a part of funds invested by small investors in IPOs, as also the steps required for dealing with the promoters failing to comply with minimum public shareholding in listed companies. The board of Sebi (Securities and Exchange Board of India) is scheduled to meet on January 18, 2013.

While it may be uncertain as to when SEBI introduces mandatory safety net, it may be a milder form of mandatory safety net that may be introduced. There is already a voluntary safety net mechanism available for IPO investors

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