New Delhi: In a move to tighten the noose around merchant bankers misquoting the IPO figures, Sebi wants them the investors about their past record in handling the public offers and also keep the prices at realistic level.

Sebi has expressed its displeasure in very clear terms to the merchant bankers over the cases where IPOs have been priced in such a manner that there is little left on table for
the public investors in terms of potential returns, a senior official said.

At the same time, the regulator is also not happy with the hard-selling of these overpriced IPOs to the retail investors in a manner that 'good returns' are assured from investment in such share sales, even if the pricing is beyond rational levels, he added.

As a remedial measure, Sebi wants the merchant bankers to prominently disclose to the investors their track records, which would comprise of the performance of shares vis-a-vis
the price in the IPOs managed by them.

At the same time, Sebi would also ask the bankers to furnish the details of due diligence conducted by them before arriving at a proposed share price or price band for the IPO-bound companies.

Sebi is in favour of merchant bankers devising their own code of conduct in terms of disclosure of their track records, rational pricing of the IPOs and avoiding any unnecessary hype over these offers, the official said.

However, if the merchant bankers fail to come out with a self-regulatory framework in this regard or do not comply with these norms, Sebi would bring out its own set of rules to rein
in the erring bankers, he added.

Sebi has communicated its intentions to the merchant bankers through their industry body Association of Merchant Bankers in India (AMBI) in a recent round of meetings.

The AMBI will be discussing the matter among its members in next few days and would approach Sebi with its proposed plan of action later this month, a senior merchant banker
said.

Sebi is also not happy with the over-hyping of public issues through misleading advertisements and media reports outside the regulatory ambit.

The regulator has previously considered bringing out a discussion paper on the matter, wherein it wanted to seek public comments on draft regulations to curb the menace of
over-pricing and over-hyping of the public offers.

However, the merchant bankers had told Sebi that they were ready for their own set of self-regulatory measures.

The issue about disclosing track record of merchant bankers and maintenance of records of due diligence by the merchant bankers was also discussed at Sebi's last board meeting and the regulator is taking the matter as of immediate importance.

Sources said that the Sebi could propose stringent actions against the erring bankers with regard to over-pricing, unnecessary hype and violations of a standard code of conduct and business ethic.

The matter holds significance in the backdrop of Sebi warning the merchant bankers against creating a big hype in the case of the last year's mega IPO of Coal India, which raised an estimated over Rs 15,000 crore through the country's biggest ever IPO that was heavily over-subscribed.

Although, the Coal India IPO was widely considered as a well-priced public offer, a number of other IPOs in past couple of years, especially by the private companies, have been criticised severely for being over-priced.

Besides the pricing of the offers, Sebi could also propose ways to discourage the bankers from quoting near-zero fees to get the mandate for managing the public offers, sources said.

Whenever Sebi comes across any offence on part of merchant bankers, it has been so far dealing with them on case-to-case basis and explanations have been sought.

However, there are no formulated guidelines on this matter and Sebi has decided to frame such regulations after coming across repeated violations on this front, the sources
said.

Agencies