SECP initiates final consultation on IPO Regulation reforms

April 10, 2025 (MLN): The Securities and Exchange Commission of Pakistan (SECP) has issued draft amendments to the Public Offering Regulations, 2017 and Public Offering (Regulated Securities Activities Licensing) Regulations, 2017, initiating a final round of public consultation.

These regulations serve as the key framework governing the public offer of shares, debt securities, and units of REIT Schemes.

The notification of these draft amendments follows an extensive SECP-driven consultation process, according to the press release.

The process included multiple sessions with major stakeholders such as the Pakistan Stock Exchange (PSX), Central Depository Company (CDC), and National Clearing Company of Pakistan Limited (NCCPL).

Other participants included listed issuers, consultants, securities brokers, banks, Development Finance Institutions (DFIs), potential IPO companies, REIT Management Companies, shariah advisors, credit rating companies, Pakistan Stock Broker Association, and the Mutual Funds Association of Pakistan (MUFAP).

The proposed amendments are designed to tackle both demand and supply side IPO issues.

Key changes include streamlining the IPO process, reducing IPO processing time to 14 working days, eliminating duplication in listing and prospectus application, and facilitating faster and more cost-effective capital access for issuers.

The amendments also aim to introduce a more efficient price discovery mechanism, simplify and enhance disclosure requirements, expand outreach, and improve the IPO experience through better utilization of technology and market infrastructure.

Significant changes are also proposed in the book building mechanism.

The traditional concept of a book runner is to be replaced, enabling all eligible participants to place bids directly and onboard bidders during the book building process.

The existing 100% book building mechanism is proposed to be discontinued to encourage underwriter participation in the retail segment at the strike price.

Additionally, the minimum bid amount is set to increase from Rs1 million to Rs5m, while the book building price band is to be reduced from 40% to 20%.

To enhance retail investor participation, a new clawback provision is introduced, allowing allocation to the retail segment to be increased up to 25% in the event of oversubscription.

Banks will be permitted to act as Consultant to the Issue (CTI) for public equity offerings, provided they establish a separate subsidiary for this function within five years.

The role of CTIs will also be expanded to include a stronger, more effective assessment of the issuer and offering documents.

The amendments propose customized procedures and disclosure requirements for the public offering of REIT units, GEM companies, short-term debt securities, and listing of shares of local companies abroad, aiming to diversify available capital market asset classes.

A simplified regulatory review process for supplements to the prospectus under shelf registration arrangements is also being introduced to facilitate the issuance of short-term corporate debt securities.

For secondary offerings by already listed companies and issuance of debt securities, the amendments aim to simplify disclosure requirements and make the appointment of a CTI optional.

Technology-driven enhancements are also central to the proposed reforms.

These include the introduction of QR codes for accessing the prospectus and financial accounts, and the acceptance of electronic signatures.

Additionally, there will be a complete transition to e-IPO applications from July 1, 2025, along with the submission of listing and prospectus applications through the online PRIDE platform.

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