SEC moves to raise lock-in period over abuse

Mohammad Mufazzal

The securities regulator is going to increase the lock-in period for shares, which are issued under pre-IPO placement, in a move to stop abuse of the system and increase the supply of shares in the capital market, officials said.

The Securities and Exchange Commission (SEC) will seek public opinions before enhancing the lock-in period.

The SEC already discussed the issue in a recent meeting and also sat with both bourses of the country Tuesday to know their opinions about it.

The move came after abuse of the pre-IPO placement by a few companies in the name of raising capital before going public.

A high official of the SEC said an increased lock-in period for shares under pre-IPO placement would help stop any such abuse in future.

"At the same time, the initiative will help increase the supply of shares in the capital market," he said.

Another high official of the SEC also confessed that some abuses occurred during pre-IPO placement by some companies.

"We will give our decision in this connection within a very short time," he said.

Recently, three companies applied to the SEC seeking permission to raise capital through pre-IPO placement.

Under the existing rules, the lock-in period for an institutional investor owning a stake, which is less than five percent, is one year.

And the lock-in period for one owning more than five per cent stake is three years.

However, the SEC official said the regulator would publish advertisements in newspapers seeking public opinions in this connection. Taking the opinions into consideration, the SEC would fix the new lock-in period.

"The regulator will take a decision based on the opinions in the interest of the capital market," he said.

On March 17, the SEC extended the lock-in period for placement of mutual funds (MFs) from six months to one year.