3.1 Types of Primary Market Placement
3.2 Intermediaries
3.3 Prospectus, Documentation, Announcements
3.4 Distribution, Clearing and Settlement
3.1 TYPES OF PRIMARY MARKET PLACEMENT
Securities are issued in the primary market by one or more of the following methods:
Public Issue
An offer to the public by an issuer through a prospectus for subscription. This is the most common method of primary market placement in Bangladesh.
Private Placement
An offer to specific known persons selected by the sponsors for procuring subscription.
Right Issue
An offer in which existing shareholders are offered new securities in proportion to their existing holdings.
Offer for Sale
An invitation to the general public to purchase the stock of a company through an intermediary.
3.2 INTERMEDIARIES
Stock Exchange member companies, merchant and commercial banks, insurance companies, investment and finance companies work as intermediaries to play the following roles:
Manager to the Issue
The manager to the issue prepares the prospectus and is responsible for ensuring full
and fair disclosure about the issue and the issuer. The issue manager has to impart a Due
Diligence Certificate which is published along with the prospectus.
Underwriters justify the price of the issue and guarantee purchase of any non-subscribed portion. Members of the Exchanges, Merchant banks and Insurance Companies are the leading underwriters.
3.3 PROSPECTUS, DOCUMENTATION, ANNOUNCEMENTS
A prospectus is required when a company intends to issue any shares or debentures or publicly offer for sale of any securities. A draft prospectus is submitted to Securities and Exchange Commission (SEC) for confirmation of compliance with SEC guidelines for disclosure. The prospectus must also be checked by the Stock Exchanges before publication in the national dailies.
The prospectus details the amount and type of securities, offer price per unit and on aggregate basis, the amount of commissions, the amount of proceed to the company, identity of the sponsors, the underwriters and the issue manager.
3.4 DISTRIBUTION, CLEARING AND SETTLEMENT
Within 10 days of publication of the prospectus the company applies for listing on a stock exchange. In the case of over- subscription, a lottery takes place. The company shall inform all successful applicants within 4 weeks from the date of subscription closing. At the same time unsuccessful applicants will be refunded with the application money within 4 weeks from the closing of subscription. Share Certificates are issued within 90 days of issuance of allotment letter.
Allotment Letters shall not be traded.
For the holder of an allotment letter, endorsement/renunciation shall not be permissiable.