Introduction
The Securities and Exchange Board of India Act, 1992, serves as the primary authority for the regulation of the Indian securities market. Under Section 11(1), the Board is mandated to protect investor interests and promote market development. Within this statutory framework, the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR Regulations), function as the governing code for capital issuance. The Master Circular, updated as of February 09, 2026, consolidates all relevant directives for merchant bankers, stock exchanges, and listed entities, providing a singular reference point for compliance. This regulatory consolidation rescinds previous circulars while maintaining the legal validity of all actions, obligations, and penalties incurred under the prior regime.
Statutory Penalties and Enforcement Under ICDR Regulations
Enforcement of the ICDR Regulations is primarily anchored in Regulations 297 and 298, which define the liability for contravention and the subsequent actions available to stock exchanges. Stock exchanges are empowered to impose standardized fines to ensure market discipline and the timely execution of corporate actions. A significant area of compliance involves the completion of bonus issues.
Under Regulation 295(1), if an issuer does not require shareholders’ approval for the capitalization of profits, the bonus issue must be completed within fifteen days of board approval. If shareholders’ approval is required, completion must occur within two months from the board meeting date. Failure to meet these timelines results in a fine of twenty thousand rupees per day of non-compliance.
Furthermore, Regulation 162 imposes a daily fine of twenty thousand rupees if a listed entity fails to complete the conversion of convertible securities and allot shares within eighteen months from the date of allotment. Compliance is also strictly monitored for further issues of equity shares under Schedule XIX, which requires an issuer to apply for listing within twenty days of allotment.
Once listing approval is granted, the entity must apply for trading approval within seven working days. All realized fines are credited to the Investor Protection Fund of the relevant stock exchange. For bonus issues specifically, approvals for the listing and trading of promoters’ bonus shares are withheld until the requisite fine is paid, although shares allotted to public investors may be approved to maintain market liquidity.
Streamlining Rights Issues and Rights Entitlements
The rights issue process is structured to maximize efficiency and reduce the time elapsed between board approval and the commencement of trading. Regulation 42(2) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, requires at least three working days of advance notice to stock exchanges before the record date. Regulation 84(1) of the ICDR Regulations mandates that newspaper advertisements disclosing the completion of dispatch must be finished at least two days before the issue opens. The entire rights issue process must be completed within twenty-three working days from the date of board approval, as per Regulation 85.
A major procedural mandate is the dematerialization of Rights Entitlements (REs). These entitlements are credited to the demat accounts of eligible shareholders before the issue opening date using a separate International Securities Identification Number (ISIN). REs are tradable on the secondary market platform of stock exchanges using a T+1 rolling settlement system, allowing investors to renounce their entitlements through exchange trading or off-market transfers. Trading in REs commences with the opening of the issue and concludes at least three working days prior to the closure of the rights issue. All applications for rights issues must be made through the Application Supported by Blocked Amount (ASBA) facility.
Disclosure Standards and the Abridged Prospectus
Transparency in public offerings is maintained through rigorous disclosure requirements in offer documents. Regulation 34(1) specifies that the abridged prospectus must contain the salient features of the Red Herring Prospectus (RHP) to facilitate informed decision-making. The format for these disclosures emphasizes clarity and the avoidance of technical jargon. Quick Response (QR) codes are mandatory on the front page of the abridged prospectus, the outside cover page, and price band advertisements. Scanning this code must lead directly to the download of the full prospectus or RHP.
Merchant bankers and issuers carry the legal responsibility to ensure that disclosures are accurate and not misleading. Qualitative statements must be substantiated with Key Performance Indicators (KPIs) and other quantitative factors. From April 1, 2025, KPI disclosures in draft offer documents must follow industry standards formulated by the Industry Standards Forum (ISF), which includes representatives from ASSOCHAM, CII, and FICCI. This standardized approach prevents the use of promotional or unsubstantiated qualitative claims in primary market documentation.
Mandatory Audiovisual Presentations in Public Issues
The introduction of mandatory audiovisual (AV) presentations for public issues represents a shift in how salient disclosures are communicated to the public. From October 01, 2024, all Draft Red Herring Prospectuses (DRHP) filed with SEBI must be accompanied by an AV presentation. This AV must be bilingual (English and Hindi) and approximately ten minutes in duration. It must cover material disclosures regarding the company, risk factors, capital structure, objects of the offer, and financial information. The content must be factual, non-promotional, and compliant with the publicity guidelines in Schedule IX of the ICDR Regulations.
The AV must include a disclosure advising investors not to rely on unauthorized information from “finfluencers” or social media platforms. It must be uploaded on the websites of the issuer and the Association of Investment Bankers of India (AIBI) within five working days of filing the DRHP. Links to the AV must be accessible through the QR code in offer-related documents and on stock exchange websites. The AV must be updated with final information, such as the issue price and opening dates, when the price band advertisement is published.
Compensation Framework for Retail Individual Investors
While the ASBA facility has reduced refund-related complaints, failures in allotment can still occur due to technical or procedural errors. Chapter 5 of the Master Circular establishes a uniform policy for calculating minimum compensation for Retail Individual Investors (RIIs) who suffer an opportunity loss due to failures by Self-Certified Syndicate Banks (SCSBs). These failures include the failure to make bids in the exchange system after funds are blocked or the rejection of applications despite timely submission.
The mandated formula for compensation is:
Compensation = (Listing price – Issue Price) x Number of shares that would have been allotted x Probability of allotment
The listing price is defined as the highest opening price on the day of listing across recognized stock exchanges. For issues subscribed between 90-100%, applicants are compensated for all shares they would have been allotted. No compensation is payable if the listing price is lower than the issue price. Applicants may seek redressal within three months of the listing date, and SCSBs must resolve the grievance within fifteen days, failing which interest at fifteen percent per annum is applicable for the delay.
Accelerated Timelines for Listing and Bonus Shares
The timeline for listing specified securities after the closure of a public issue is reduced to three working days (T+3). This timeline must be disclosed in offer documents and prominently featured in pre-issue and issue closing advertisements. For Direct Bank ASBA and Syndicate ASBA, SCSBs must verify that the PAN in the application matches the PAN linked to the bank account before blocking funds. The registrar undertakes third-party verification by matching demat account PANs with bank account PANs; mismatches result in invalid applications.
The process for bonus issues is also streamlined to enable trading by T+2, where T is the record date. Issuers must apply for in-principle approval under Regulation 28(1) of the LODR Regulations within five working days of the board meeting. The record date (T) is fixed along with a deemed date of allotment on T+1. Issuers must submit documents to depositories for the credit of bonus shares by 12 P.M. on T+1, allowing trading to commence on T+2. Any delay in compliance with these timelines attracts the standard daily penalties.
Conclusion
The comprehensive regulatory framework provided by the SEBI ICDR Regulations and the consolidated Master Circular ensures a structured and transparent environment for capital issuance in India. By mandating accelerated listing timelines, such as T+3 for IPOs and T+2 for bonus shares, SEBI has significantly enhanced market efficiency. The integration of robust disclosure standards, including mandatory audiovisual presentations and KPI substantiation, ensures that investors have access to factual and verified information. Furthermore, the standardized penalty regime and the investor compensation framework reinforce the statutory commitment to market integrity and investor protection.
The compliance architecture governing intermediaries under the SEBI 2026 Framework for RTAs: Legal Overview & Duties operates in close alignment with the disclosure and capital-raising standards prescribed under the 2018 issue of capital and disclosure regime, ensuring regulatory consistency across the securities issuance lifecycle.
