Overview
- SEBI, which issued a circular Wednesday, allowed depositories to tag pledged shares as nontransferable for the lock-in period when a normal lock-in cannot be created.
- Depositories have upgraded their systems to apply the tag and to auto-lock shares on pledge invocation or release for the rest of the lock-in period.
- Issuers must amend their Articles of Association, inform lenders or pledgees about the restriction, and add clear disclosures in IPO offer documents.
- SEBI has directed stock exchanges, depositories, merchant bankers, and issuers to monitor and ensure compliance with the new mechanism.
- ICDR rules already lock most non-promoter pre-issue shares for six months after an IPO, and this fix addresses prior gaps that led to lender-led sales and sharp price swings.