SEBI should review underwriting rule: SAT

The Securities Appellate Tribunal(SAT) has asked The Securities and Exchange Board of India(SEBI) to review the regulations for underwriting of a public issue.This model agreement was framed in 1993 and has in operation since then.

In underwriting,the merchant banker gives an undertaking when an initial public offer(IPO) remains undersubscribed and the banker can subscribe to unsold shares.The underwriting clause which is mandatory in all SME IPOs, ensures the issue will not fall down because of the low demand from the investors.

“WE deem it proper to bring to the notice of SEBI that there is no clarity between the ICDR(Issue of Capital and Disclosure Requirements) REgulations and the model underwriting agreement prescribed by SEBI in the year 1993 in relation to the obligations to be discharged by the underwriters”,said the order by SAT.”Therefore,it would be just and proper that SEBI addresses itself on the issue expeditiously and ensure that there is clarity in relation to the obligations to be discharged by the underwriters” it added.

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