NISM Series IIA: Chapter X — Roles and Responsibilities in a Public Issue

To ensure the integrity, efficiency, and transparency of primary market capital raising, the Securities and Exchange Board of India (SEBI) has clearly defined and laid out the roles and responsibilities of every market constituent involved in a public issue. A foundational regulatory requirement is that all constituents participating in the execution of an issue must be formally registered with SEBI under the relevant rules applicable to their specific functions.

1. The Central Role of the Registrar and Share Transfer Agent (RTA)

The Registrar and Share Transfer Agent (RTA) is one of the most critical intermediaries in a public offer of shares. The issuer appoints the RTA in consultation with the Lead Manager to the issue, and they enter into a formal, legally binding agreement detailing the RTA's exact responsibilities.

The scope of an RTA's operational activities is highly structured and spans three sequential chronological phases:

1. Before the issue opens (Pre-Issue Work).
2. During the period of the issue (Issue Operations).
3. After the issue closes (Post-Issue Work).

2. Pre-Issue Responsibilities of the RTA

Prior to the opening of the bidding window for a public offer, the RTA must establish the legal, transactional, and electronic framework required to process applications, block funds, and coordinate between depositories and banks.

A. Execution of Key Operational Agreements

The RTA must execute several critical agreements to define responsibilities and instructions across all participating entities:

• The Escrow Agreement: The RTA enters into an Escrow Agreement with the issuing Company, the Selling Shareholders, the Book Running Lead Managers (BRLMs), and the Bankers to the Offer. Under this agreement, the RTA is responsible for issuing the requisite operational instructions to the Bankers.
• The Share Escrow Agreement: If applicable, the RTA enters into a Share Escrow Agreement with the Company and the Selling Shareholders. Under this contract, the Selling Shareholders are required to open a designated electronic share escrow account ("Share Escrow Account") prior to the formal filing of the Red Herring Prospectus (RHP).
• Syndicate and Underwriting Agreements: The RTA formally signs the Syndicate Agreement (with the Company, Selling Shareholders, and BRLMs) and the Underwriting Agreement (with the Company) to establish the distribution and risk-guarantee parameters.

B. Depository Coordination & Dematerialisation

• Liaising for ISIN and Tripartite Agreements: The RTA acts on behalf of the company to obtain the unique International Securities Identification Number (ISIN) from the national depositories and coordinates the finalisation of the tripartite agreements required between the Company and the depositories.
• Dematerialising Existing Holdings: The RTA is responsible for liaising with the Company to ensure that all equity shares held by existing shareholders (including the promoters) in physical form are fully dematerialised before the issue begins.

C. Directing Banks and Intermediaries

• Detailed Instructions to SCSBs: The RTA must provide comprehensive, detailed instructions to the Self-Certified Syndicate Banks (SCSBs) regarding fund blocking, reconciliation, and reporting protocols.
• ASBA Formats for Designated Intermediaries: The RTA provides and specifies the exact file and data format in which the Designated Intermediaries must capture and submit information in relation to Applications Supported by Blocked Amount (ASBA).
• Intimation of Fees and Commissions: The RTA provides formal intimations regarding the exact processing fees payable to the SCSBs for handling syndicate ASBA, as well as the brokerage and selling commissions payable to the members of the Syndicate, Registered Brokers, RTAs, and CDPs.

3. Post-Issue Responsibilities of the RTA

Once the bidding window closes, the RTA is solely responsible for procuring certificates, reconciling accounts, identifying successful bidders, and managing the lock-in of pre-issue shares.

A. Procurement and Verification of Bank Certificates

• The Two-Day Collection Mandate: The RTA has the sole responsibility to procure and collect the final collections/blocking certificates from all participating SCSBs (including the syndicate SCSBs) within two working days from the official closure of the offer.
• Verification of Accuracy: While collecting these final certificates, the RTA must physically check and verify the accuracy of the date and data printed on such certificates.

B. Bidder Demographic & Allocation Management

• Retrieving Bidder Demographics: The RTA must obtain the verified demographic details of the individual bidders directly from the depositories to ensure correct name, PAN, and address matches.
• Enforcing Promoter Lock-In: To comply with SEBI Issue of Capital and Disclosure Requirements (ICDR) Regulations, the RTA must issue formal, direct instructions to the depositories to execute and carry out the mandatory lock-in on the pre-Offer share capital.

4. Bankers to the Issue & Anchor Investor Management

The Bankers to the Issue are specialized banking entities appointed directly by the Issuer.

• Primary Responsibility: They are appointed specifically to manage and govern the collection of funds from Anchor Investors.
• Escrow Account Operations: All funds received from Anchor Investors are collected and held in a dedicated, secure escrow account opened specifically for this purpose.

5. Applications Supported by Blocked Amount (ASBA)

The Mandatory Nature of ASBA

To eliminate the delay and risk associated with physically refunding application money, SEBI made Applications Supported by Blocked Amount (ASBA) the mandatory mode of payment in all public issues. This rule has been strictly applicable to all categories of investors since January 1, 2016.

Definition of ASBA

ASBA is an application for subscription to a public issue that contains an explicit, legally binding authorization to the investor’s bank to block the specified application money within their personal bank account.

The ASBA Process Flow

1. Submission: The investor submits the completed ASBA application form either physically or through electronic means to their respective SCSB.
2. Fund Blocking: The SCSB blocks the exact application money in the investor’s bank account. This blocked amount remains untouched in the account and cannot be withdrawn by the investor.
3. Bidding Window Lifespan: The money remains blocked until:
   • The Basis of Allotment is finalized.
   • The issue is officially withdrawn by the company.
   • The application is formally withdrawn by the applicant.
4. RTA Calculations: Once the Basis of Allotment is finalized, the RTA applies the allotment rules to determine:
   • The exact number of shares, if any, to be allotted to each ASBA investor.
   • The specific amount of money to be appropriated (debited) for the allotted shares.
5. Unblocking and Settlement: The RTA sends instructions to the SCSB to debit the appropriated amount from the investor's account and to instantly unblock the remaining balance (in cases of partial or zero allotment), making the funds immediately available to the investor.

6. Brokers to the Issue, Syndicate Members & Designated Intermediaries

Brokers to the Issue and Syndicate Members are registered members of recognized stock exchanges who are appointed to act as the retail collection network for public offers.

Key Responsibilities

• Collection of Applications: They are appointed to facilitate and drive the physical collection of application forms and electronic bids from the public.
• Verification of Payment Instruments: They are responsible for collecting the bid/application forms and verifying that each application is accompanied by a valid, active payment instrument (or ASBA instruction).
• Commission Structure: They are paid a collection-based commission for their services, which is calculated and distributed depending directly upon the volume and value of collections they secure.

Summary Reference Table: Constituent Roles and Timelines

Key Terms Glossary

• Self-Certified Syndicate Bank (SCSB): A bank that is certified by SEBI to offer ASBA services, capable of blocking and unblocking funds in investors' accounts upon instructions from the RTA.
• Escrow Account: A temporary bank account opened specifically to hold the funds collected from certain investor categories (like Anchor Investors) until allotment is finalized.
• Demographic Details: The personal identification details of bidders (such as PAN, bank account numbers, and addresses) held electronically by depositories.
• Promoter Lock-In: A regulatory restriction enforced by the depository, upon instruction from the RTA, to freeze promoter shares for a specified duration post-issue.
• Designated Intermediaries: Intermediaries (such as brokers, sub-brokers, and depository participants) authorized by SEBI to collect ASBA applications.

Chapter Key Takeaways

1. Registration is Mandatory: Every single institutional constituent involved in a public issue must hold a valid registration certificate issued by SEBI.
2. Dual Role of the RTA: The RTA is the operational anchor, executing structural agreements before the issue opens and taking sole responsibility for final bank reconciliation and depository coordination after the issue closes.
3. Strict 2-Day Certificate Mandate: The RTA must procure the final collections/blocking certificates from all participating SCSBs within exactly two working days of the public issue closing.
4. No Refunds Under ASBA: Refund transactions are eliminated under ASBA because the money never leaves the investor's bank account; the SCSB simply blocks the funds and performs a clean debit/unblock action after the allotment is finalized.
5. Anchor Funds are Distinct: Unlike retail and HNI investors who use ASBA, Anchor Investors have their funds managed through an escrow account controlled by the designated Bankers to the Issue.