Description

BSE reiterates requirement for trading members to obtain prior instructions (physical or electronic) from clients before placing IPO bids on their behalf.

Summary

BSE has issued a compliance reminder to trading members regarding IPO bid placement procedures. Inspections revealed that some trading members were uploading IPO bids on the Exchange platform without obtaining prior instructions from clients. The circular reiterates that trading members must obtain prior instructions (physical or electronic) from clients before placing IPO bids, in accordance with SEBI circulars from 2018 and 2019.

Key Points

  • Trading members must obtain prior instructions (physical or electronic) from clients before placing IPO bids
  • Investors must submit complete bid-cum-application forms to designated intermediaries
  • Intermediaries must provide acknowledgement to investors upon receipt of application (counter foil or application number)
  • Physical application forms with UPI payment mechanism must be retained for 6 months, then forwarded to issuer/Registrar
  • Electronic form records must be maintained for minimum 3 years (printouts not required)
  • Clients can submit IPO bids through trading member’s online platform using secure login credentials
  • Recent inspections found trading members uploading bids without prior client instructions

Regulatory Changes

No new regulatory changes introduced. This circular reiterates existing requirements from:

  • SEBI Circular SEBI/HO/CFD/DIL2/CIR/P/2018/138 dated November 1, 2018
  • SEBI Circular SEBI/HO/CFD/DIL2/CIR/P/2019/76 dated June 28, 2019
  • SEBI Circular SEBI/HO/CFD/DCR2/CIR/P/2019/133 dated November 8, 2019
  • Exchange Circular 20191111-7 dated November 11, 2019

These circulars relate to “Streamlining the process of public issue of equity shares and convertibles.”

Compliance Requirements

For Trading Members:

  • Must obtain prior instructions (physical or electronic) from clients before placing any IPO bids
  • Must provide acknowledgement to investors when accepting applications
  • Must retain physical application forms (UPI payment) for 6 months before forwarding to issuer/Registrar
  • Must maintain electronic records of applications for minimum 3 years
  • Must ensure compliance with prescribed procedures for IPO bid placement

For Investors:

  • Must submit complete bid-cum-application form to designated intermediaries
  • Can submit bids through trading member’s online platform using secure credentials

Important Dates

  • Circular Date: October 30, 2025
  • Notice Number: 20251030-18
  • Effective: Immediate compliance required

Reference Circulars:

  • November 1, 2018: SEBI/HO/CFD/DIL2/CIR/P/2018/138
  • June 28, 2019: SEBI/HO/CFD/DIL2/CIR/P/2019/76
  • November 8, 2019: SEBI/HO/CFD/DCR2/CIR/P/2019/133
  • November 11, 2019: Exchange Circular 20191111-7

Impact Assessment

Operational Impact:

  • Trading members must review and strengthen their IPO bid placement processes
  • Enhanced documentation requirements for client instructions before bid submission
  • Potential operational delays if proper authorization workflows are not in place

Compliance Impact:

  • Non-compliance has been identified during recent inspections, indicating enforcement focus
  • Trading members found uploading bids without client authorization may face regulatory action
  • Heightened scrutiny on IPO bid handling procedures

Investor Protection:

  • Strengthens investor protection by ensuring bids are placed only with explicit client authorization
  • Reduces risk of unauthorized trading activity in IPO segment
  • Maintains audit trail of client instructions for dispute resolution

Market Impact:

  • Limited direct market impact as this is a procedural compliance matter
  • Ensures integrity of IPO bidding process
  • May improve investor confidence in IPO application process

Impact Justification

Critical compliance requirement for all trading members handling IPO bids. Non-compliance observed during inspections makes this a high priority enforcement matter, though impact is limited to operational processes rather than market-wide effects.