SEC revises IPO allocations for small retail investors

The Securities and Exchange Commission of Sri Lanka (SEC) at its 286th Meeting held on 7 September 2011, has decided to revise the IPO allocation to retail investors especially with regard to larger issues.

In a statement it said the following directive in respect of share allotments to the retail investor for an initial public offering of a particular share class, the value of which is Rs. 3 billion and above in order to further facilitate the fair allotment of shares to the Retail Individual Investor Category in large scale initial public offerings.



The Colombo Stock Exchange (CSE) has been directed to ensure that entities that make an initial listing application of a particular share class, the value of which is Rs. 3 billion and above to the CSE, adopts the following guidelines stated herein with regard to the minimum allotment of such shares to the retail individual investor category on the closure of its initial public offering:

1. Forty percentum (40%) of the offered shares of a particular share class or shares to the maximum value of Rupees One billion five hundred million (Rs.1,500,000,000) of the offered shares of that share class, whichever is lower, to be initially made available for allotment to the Retail Individual Investor Category.

Retail Individual Investor in this instance shall mean an individual investor who subscribes up to a value of Rs. 200,000 in a particular share class in respect of an initial public offering, the value of which is Rupees Three billion (Rs. 3,000,000,000) or above.

2. In determining the basis of allotment within the Retail Individual Investor Category, the smaller subscribers shall be given priority.

3. The percentage of allocation of shares of a particular share class to the Unit Trust Investor Category and the allotment of undersubscribed shares of that share class in the Unit Trust Investor Category to the Retail Individual Investor Category and vice versa shall remain as per SEC directive dated 10 March 2011. (SEC/LEG/11/03/36)

The CSE is further directed to amend the CSE listing Rules incorporating the aforesaid guidelines for all IPOs of a particular share class the value of which is Rupees Three billion (Rs. 3,000,000,000) or above.

The above said directive shall be effective from 14 September 2011.

In respect of share allotments in initial public offerings of a particular share class, the value of which is below Rupees Three billion (Rs. 3,000,000,000), the guidelines set out in SEC directive dated 10 March 2011 (SEC/LEG/11/03/36) shall apply.

SEC said this directive will be subject to review by the Commission periodically.