IPO scam alerts market, calls for early regulation

Ace Development Bank — the issue manager of Employment Promotion and Development Bank's (EPDB) Initial Public Offerings (IPOs) — has, publishing a notice, called application from the EPDB's IPOs applicants, who do not wish to take part in the share allotment process.According to the notice 'those who cannot submit original citizenship certificate at the time of cash refund after share allotment can apply now.
"Self attested photocopy of citizenship certificate is enough to apply for the IPO but to get the cash refund after the share allotment, original citizenship certificate is a must," states the Securities Issue and Registration Guideline-2057.
Though, Ace gave chance this time for those who have applied with unknown citizenship certificates' photocopies, its a temporary solution to check the submission of fake and unknown citizenship certificates to get more shares.
"Such incidents call for an urgency of new Securities Registration and Issue Regulation that is gathering dust in the ministry since last two months. The new regulation will help check such foul play," said officers at the Securities Board of Nepal (Sebon), the capital market's regulator that had uncovered a huge IPO scam that involves around eight billion rupees almost a month ago.
The EPDB had received 5,00,000 applications amounting to over eight billion rupees that the bank claimed have been oversubscribed by 66 per cent. It had floated shares worth Rs 128 million for the public."The eight billion rupees claimed to be collected is not the real money," one senior officer at the Nepal Rastra Bank (NRB), said, adding that the collection of cash do not exceed half-a-billion. "The amount is only in the papers. It's also the responsibility of central bank to do something to check such practice," he added.
Though, there has been many complaints of foul play, the Sebon has for the first time raided and confiscated the IPO application forms — from different collection centres — that had suspicious citizenship certificates.
Sebon's monitoring unit had randomly raided the collection centres and confiscated the suspected forms, after it received complaints of foul play in IPOs.
The need of the new regulation is felt even more as five of the new commercial banks are floating their shares worth Rs 1.5 billion within this fiscal year. Prime Commercial Bank has signed an agreement with the Citizen Investment Trust (CIT) as its issue manager to float the shares worth Rs 300 million to public.
Similarly, Global Bank has assigned NIDC Capital markets Ltd and Bank of Asia has assigned Nepal Merchant Banking and Finance (NMBF) as issue managers. Citizen International Bank is waiting NRB's green signal to to go public. Sunrise bank is also gearing up for its IPO issue. All the five big commercial banks will float Rs 300 million worth IPOs each making it to a total of Rs 1.5 billion IPOs soon.