IPO: SECP that also include securities regarding shares.

IPO:IPO meansInitial Public Offering that refers to private companies who sell their sharesto the general public. Now the question is why they go public?  It is because sometimes they want to expand theirbusiness, to raise their capital, reward their employees so that they work hardand to make a position in the market because small companies are not well-knownso they attract new investors through it.

Mostly small companies go for it, butlarge firms also do it for trade purposes. IPO’s are issued by the approval ofSECP that also include securities regarding shares. IPO process in Pakistan:First thingyou need to determine is the need for IPO, whether it’s the right time for IPOor not. You need to check your financial statements and then make a business plan.When a company wants to go for public, first thing it needs to do is hire aninvestment bank and signs a contract that he will be liable for any loss ordamage. Basically investment banks act as an underwriters between the publicand the company through which both interacts. The investmentbank and the company discuss the issues that what they want from new investors.

Issues for example is related to raising money, they will write all thesecurity types and other issues in an underwritten agreement. You need tocarefully select the underwriter because he is responsible for the buying andselling securities to the public so he must have successful offerings. Once thedeal gets finalized, investment banks prepare a registration statement thatincludes the company’s information, background, financial statements, legalissues and also other company’s information etc. that will be submitted to securityand Exchange commission (SEC).

Then the Securitiesand Exchange Commission takes time to make sure that all the documents that aresubmitted to them are regarding the deal or not and all the information iswritten in it or not. After the approval of SEC, they announce date on whichstocks of the company will be given to the public. Meanwhile, the underwriter andcompany meets to decide the price of the stocks because that was not written inthe documents earlier and they set the price according to the current marketconditions.

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In the last,stocks are sold in the market and investors raise the money.Regulatory framework for IPO:Recently Securitiesand Exchange Commission of Pakistan has given two regulatory framework forinitial public offering after the amendments in the previous seven rules, oneis Public Offering Regulations and the second one is Public offering (RegulatedSecurities Activities Licensing) wants to provide an ease in the businesses andalso want to make efficient designs for debt and equity securities that theycan work more effectively in initial public offering process.At the sametime Central Depository Company introduced the concept of Centralized IPO withthe help of banking system to allow investors that make an appeal for subscriptionof their stocks so that they can exchange it with common stocks electronicallythrough internet, mobile phones, or ATM etc. without going to banks or standingin long ques. This process is simplified to reduce the time consumption andcost.In the newPublic Offering Regulations, if the company or its directors, sponsors orshareholders have any defaults in their credits and if that are proved by the PakistanStock Exchange then they are not eligible to make public offers as they arethey defaulters. Regulations:These are manyregulations in Pakistan but I mentioned some of it here: ü  “Act” means the Securities Act, 2015ü  An application for the subscriptionof shares in case of biddingü  “Banker to an Issue” means ascheduled bank licensed by the Commission as a Banker to an Issue.

ü  “Bid” means an intention to buy aspecified number of securities at a specified price.ü  “Bid Price” the price in a Bid for aspecified number of sharesü  Companies Act 2017ü  “Bidder” is an investor who makes abid for subscription of shares in the Book Building processü  “Consultants to the Issue” means anyperson who have license by the Commission to act as a Consultant to the Issueü  “Financial Institution”ü  “Green Shoe Option” means apre-determined number of securities to be issued by the Issuer in case ofover-subscription of the issueü  “Issuing and Paying Agent” means aFinancial Institution appointed by an Issuer of Commercial Paper under theseRegulations as an Issuing and Paying Agent.ü  “Limit Price” means a prospectiveBidder have maximum price.

ü  Limit Bid” means a bidder have thebid at a Limit Price under the Book Building methodü  “Offeror” means a person directly orindirectly offer securities to the public.ü  “Price Band” means the floor pricewith upper limit of 40%.ü  “Public Offer” means offer ofsecurities by an Issuer including an offer to the general public or a sectionof the public but does not include Private Offer or Private Placementü  Regulations” means the PublicOffering Regulations, 2017ü  “Securities” means shares and debtsecurities ü  “Schedule” means a schedule to theseRegulationsü  “Secondary Public Offering” meansoffer of securities to the general public subsequent to IPOü  “ShelfRegistration” means the authorized amount of securities to be issued over aperiod of time as specified in the Prospectus.

ü  “Sponsor”means a person who has contributed initial capital in the issuing company orhas the right to appoint majority of the directors on the board of the issuingcompany directly or indirectly.Regulatory bodies:There are 18regulatory bodies in our country but two are related to our financial sector1.      State bank of Pakistan (SBP)2.

      Securities and Exchange Commission ofPakistan (SECP)State bank of Pakistan (SBP):It isbasically responsible to make sure that financial sector of Pakistan is workingefficiently and meeting the needs of public and other institutions. To ensurethis, SBP set some goals to achieve, like working hard to support thedevelopment of banking system and to have a proper regulatory framework. Supportof SBP to the banking sectors was very important because it brings innovationand diversification in different activities regarding Banking Policy and RegulationsDepartments.Securities and Exchange Commission ofPakistan (SECP):It is thefinancial regulatory body in Pakistan that was developed to make an efficientcorporate sector and a capital market with proper risk management to protectinvestors from risk so that they can invest in Pakistan and our economic growthgrows faster.

They made SECP Act in 1997 for certain policies, functions ofSECP, power and constitution structures. SECP is also proving external serviceproviders to the corporate sectors and financial departments including charted accountants,brokers, surveyors and corporate secretaries that can be trusted for futureinvestments. The main challenge for the SECP has to develop a fair, efficient andbiased free framework based on the international legal terms and beneficial forboth investors and corporate sectors to increase the capital of Pakistan.

  

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