The Securities and Exchange Commission of Pakistan (SECP) has released proposed amendments to the Public Offering Regulations from 2017 and the Public Offering (Regulated Securities Activities Licensing) Regulations also from 2017. These revisions aim to initiate a concluding phase of public consultation. These regulatory frameworks outline essential guidelines for publicly offering shares, debt securities, and units within REIT schemes.
The notification of proposed changes comes after an extensive consultation initiated by the SECP involving numerous meetings with major stakeholders such as PSX, CDC, NCCPL, publicly-listed entities, consultants, brokerage firms, banking institutions, development finance institutions, prospective IPO companies, real estate investment trust management organizations, Shariah advisers, credit-rating agencies, Pakistan Securities Dealers’ Association, and MUFAP. These suggested modifications aim to tackle both demand-side and supply-side challenges related to initial public offerings (IPOs). They propose streamlining the IPO procedure, decreasing processing times from start to finish down to just 14 business days, eliminating redundancies during listing applications and prospectuses submissions, aiding businesses in gaining quicker and less costly entry into financial markets, implementing a superior pricing evaluation system, refining disclosure stipulations for greater transparency, boosting communication efforts, and enhancing overall ease throughout the entire IPO experience via advanced technological integration and robust market frameworks.
Proposals have been made to enhance the democratic nature of the book-building process by eliminating the role of bookrunners. This change would permit eligible participants to submit bids directly throughout the book-building phase and facilitate the inclusion of more bidders. Additionally, the full utilization of the book-building method will likely be phased out to promote broader involvement from underwriters regarding the retail component at the specified price point. Moreover, the minimum bidding threshold is set to rise from Rs. 1 million to Rs. 5 million, accompanied by a reduction in the permissible price range for book building from 40% down to 20%. To boost retail engagement further, a novel clawback clause has been suggested, allowing allocations to the retail sector to increase as high as 25%, provided there’s an excess demand shown through oversubscription during the initial public offering (IPO).
Banks are permitted to serve as CTIs for the public issuance of equity securities, provided that they establish a separate subsidiary for this purpose within five years. Additionally, the responsibilities of CTIs would be expanded to include conducting more rigorous and efficient evaluations of issuers and their public offering documents. New tailored procedures and disclosure standards are being implemented specifically for the public offerings of REIT units, GEM company stocks, short-term debt instruments, and listings of domestic firms outside Pakistan. These changes aim to broaden the range of capital market assets available.
In an effort to encourage shelf registration setups and ease the issuance of short-term corporate debt instruments, a streamlined regulatory examination procedure for updating the prospectus has been suggested. Additionally, secondary offerings by companies already listed on stock exchanges and the issuance of debt securities would be made more accessible through reduced disclosure requirements and making the designation of Certified Testing Institutes (CTIs) optional for these deals. The proposal further promotes leveraging technological advancements to enhance efficiency throughout the Initial Public Offering (IPO) process. This includes adopting QR codes as a means to access prospectuses and financial statements, transitioning entirely to electronic IPO submissions beginning July 1, 2025, recognizing digital signatures, and processing listings and prospectus filings using the web-based system known as PRIDE.
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