Page 50 - DCOM507_STOCK_MARKET_OPERATIONS

Unit 3: Primary Market and Secondary Market

The broker would refund the margin money, collected earlier, within three days of receipt of Notes
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
action, as prescribed under its bylaws, would be initiated against him. In such a case, if the
minimum subscription as disclosed in the prospectus is not received, the issue proceeds would
be refunded to the applicants.

The subscriber should have an option to receive the security certificates or hold the securities in
dematerialized form as specified in the SEBI guidelines.
The exchange concerned should not use the Settlement/Trade Guarantee Fund of the exchange
for honouring the brokers’ commitment in case of failure of a broker to bring in funds.
On payment and receipt of the sum payable on applicants for the amount towards minimum
subscription, the company should allot the shares to the applicants as per these guidelines. The
registrar to the issue should post the share certificate to the investors or, instruct the depository
to credit the depository account of each investor. The allotment of securities should be made not
later than 15 days from the closure of the issue, failing which interest at 15 per cent would be
paid to the investors.
The cases of applicants who have applied, directly or by post, to the registrar to the issue and
have not received allocation, he (the registrar) should arrange to refund the application monies
paid by them within the time prescribed.
The brokers and other intermediaries engaged in the process of offering shares through the
online system should maintain the following records for a period of five years: (i) orders
received, (ii) applications received, (iii) details of allocation and allotment, (iv) details of margin
collected and refunded, and (v) details of refund of application money.

Notes The SEBI would have the right to carry out an inspection of the records, books and
documents relating to the above, of any intermediary connected with the system and
every intermediary in the system should at all times cooperate with the inspection. In
addition, the stock exchange(s) has/have the right of supervision and inspection of the
activities of its connected member brokers.

3.2.7 Book-Building

Book-building means a process by which a demand for the securities proposed to be issued by
a body corporate is elicited and built-up and the price for such securities is assessed for the
determination of the quantum of such securities to be issued by means of a notice/circular/
advertisement/document or information memoranda or offer document. A company proposing
to issue capital through book-building has to comply with the requirements as given in the
following paragraphs:

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