Description

BSE reiterates that trading members must obtain prior physical or electronic instructions from clients before placing IPO bids on their behalf, following inspection findings of non-compliance.

Summary

BSE has issued a compliance reminder to all trading members regarding the mandatory requirement to obtain prior instructions (physical or electronic) from clients before placing IPO bids on their behalf. This circular addresses non-compliance issues identified during inspections where trading members were uploading IPO bids without obtaining prior client authorization. The notice references SEBI circulars from 2018-2019 on streamlining public issue processes and emphasizes strict adherence to prescribed procedures.

Key Points

  • Trading members must obtain prior instructions (physical or electronic) from clients before placing any IPO bids
  • Inspections revealed trading members were uploading IPO bids without obtaining prior client instructions
  • 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 online platforms using secure login credentials
  • Complete bid-cum-application forms must be submitted to designated intermediaries

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

Compliance Requirements

For Trading Members:

  • Must obtain prior instructions (physical or electronic) from clients before uploading IPO bids to Exchange platform
  • Must provide acknowledgement to investors upon application receipt
  • Must retain physical application forms (with UPI payment) for 6 months before forwarding to issuer/Registrar
  • Must maintain electronic application records for minimum 3 years
  • Must ensure secure login credentials are used for online IPO bid submissions
  • Must submit complete bid-cum-application forms to designated intermediaries

Documentation Requirements:

  • Physical forms: Retain for 6 months, then forward to issuer/Registrar
  • Electronic forms: Maintain electronic records for 3 years minimum (no printouts required)

Important Dates

  • Notice Date: October 30, 2025
  • Notice Number: 20251030-18
  • Effective Immediately: Trading members must ensure compliance with immediate effect

Referenced 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 procedures
  • Enhanced documentation and authorization processes required before bid submission
  • Potential operational delays if proper client authorization workflows not in place

Compliance Impact:

  • Non-compliance identified during inspections indicates need for immediate remedial action
  • Trading members may face regulatory scrutiny and penalties for unauthorized bid placement
  • Firms must implement robust controls to ensure prior client instructions are obtained and documented

Market Impact:

  • Reinforces investor protection in IPO application process
  • Ensures client consent is documented before bid placement
  • May reduce unauthorized or erroneous IPO bid submissions

Risk Mitigation:

  • Trading members should implement systematic checks to verify client authorization exists before bid upload
  • Enhanced audit trails for IPO bid placement activities
  • Training required for staff handling IPO applications to ensure compliance with authorization requirements

Impact Justification

High importance due to mandatory compliance requirement for all trading members handling IPO bids. Medium impact as it affects operational procedures but does not change market structure. Non-compliance was identified during inspections.