SEBON plans to introduce ASBA system from mid-January

Kathmandu, November 9

Securities Board of Nepal (SEBON) has announced Applications Supported by Blocked Amount (ASBA) system is being implemented on a voluntary basis from mid-January next year. The capital market regulator has said it plans to make the system mandatory after a few months of its launch.

In the ASBA system, investors’ money equivalent to subscription of initial public offering (IPO) or follow-on public offer (FPO) gets blocked until the allotment of the shares.

SEBON has said the decision to implement the ASBA system is a part of its initiative to modernise the country’s capital and secondary market. “Implementation of the ASBA system will simplify and shorten the IPO and stocks issuance process,” reads a media release issued by the capital market regulator today.

Currently, money of investors is debited from their account as soon as they apply for the IPO or the FPO. The money is held by the issue manager until shares are allotted to the applicants. While it takes at least 70 days at present for a company to complete its IPO process, the allotment will be completed within 20 days once the ASBA system is implemented, as per SEBON.

Banks and financial institutions (BFIs) will be invited to become members of the system in which they will be instructed to block the money in the account of investors who authorise the issue manager to block their money while applying for the IPO or FPO.

After ASBA system is implemented, the money of the applicant for any issue is debited from his or her bank account only after the applicant is selected in the allotment. If the applicant is not selected in the allotment, the bank, upon the instruction of issue manager, will unblock the money.

While submitting the application form for the IPO or FPO, the investor will authorise the issue manager to block his or her money in the bank account for subscription of the IPO or FPO. The system also ensures that the applicant investor has the amount of subscription in his or her account until the shares are allotted.

To utilise the system, the investor should have opened an account at the bank that uses the ASBA platform.