Page 84 - DCOM304_INDIAN_FINANCIAL_SYSTEM

Unit 5: Primary Market

During the period the issue is open to public for subscription, the applicants may: Notes
1. Approach the brokers of the stock exchange(s) through which the securities are offered
through the online system, to place an order for subscribing to the securities. Every
broker should accept orders from all clients who place orders through him;
2. Directly send the application forms, along with the cheque/demand draft for the sum
payable towards the application money, to the registrar to the issue or place the order to
subscribe through a broker under the online system. In the case of issue of capital of `10
crore or above, the registrar to the issue should open centres for collection of direct
applications at the four metropolitan centres situated at Delhi, Chennai, Kolkata and
Mumbai.
The broker should collect the client registration form from the applicants, duly filled and signed,
before placing the order in the system as per the "Know Your Client" rule as specified by the SEBI
and as may be modified from time to time. He should, thereafter, enter the buy order in the
system on behalf of the clients and enter details including the name, address, telephone number
and category of the applicant, the number of shares applied for, beneficiary ID, DP code and so
on, and give an order number/order confirmation slip to the applicant.

The applicant may withdraw applications according to the Companies Act, 1956.
The broker may collect an amount to the extent of 100 per cent of the application money as
margin money from the client before he places an order on their behalf. He should open a
separate bank account (Escrow Account) with the clearing house bank for primary market issues
in which the amount collected from clients as margin money should be deposited. At the end of
each day, while the issue is open for subscription, he should download/forward the order data
to the registrar to the issue. On the date of closure of the issue, the final status of orders received
should be sent to the registrar to the issue/company.
On the closure of the issue, the designated stock exchange, along with the lead merchant banker
and registrars to the issue, should ensure that the basis of allocation is finalized in a fair and
proper manner according to the basis of allotment norms. These may be modified from time to
time. After the finalization of the basis of allocation, the registrar to the issue/company should
send the computer file containing the allocation details, that is, the allocation numbers, allocated
quantity and so on of the successful applicants to the exchange to be processed, generate the
broker-wise pay in obligation and send the file to member brokers. On receipt of the basis of
allocation data, the brokers should immediately intimate the fact of allocation to their clients/
applicants. They should ensure that each successful client/applicant submits the duly filled in
and signed application form to them along with the amount payable towards the application
money. The amount already paid by the applicant as margin money would be adjusted towards
the total allocation money payable. The broker should, thereafter, hand over the application
forms of the successful applicants, who have paid the application money, to the exchange to
submit the same to the registrar to the issue/company for their records.
The broker would refund the margin money, collected earlier, within three days of receipt of
basis of allocation to the applicants who did not receive allocation. He should give details of the
amount received from each client and the names of clients who have not paid the application
money, and also give a soft copy of this data to the exchange. On the pay-in day, the broker
should deposit the amount collected from the clients in the escrow account opened for primary
issues with the clearing house/bank. The clearing house would debit the primary issue account
of each broker and credit the amount so collected from each broker to the 'Issue Account'.
In the event of successful applicants failing to pay the application money, the broker through
whom such clients placed the order should bring in the funds to make good the latter's default.
The broker who does not bring in the funds would be declared defaulter by the exchange and

LOVELY PROFESSIONAL UNIVERSITY 79