SEC issues new rules covering large IPO investors

The Securities and Exchange Commission (SEC) has prescribed new guidelines covering large initial public offering (IPO) investors to help boost confidence in companies planning to go public while ensuring that smaller buyers are not at a disadvantage.

The corporate watchdog on Thursday said agreements with cornerstone investors—or those who are guaranteed an allocation in the IPO—must be part of the material contracts in an issuer’s registration statement that is submitted to the SEC.

These need to be signed prior to the pricing of the IPO.

Under SEC Memorandum Circular No. 8, Series of 2024 issued on April 11, the issuer also needs to ensure that cornerstone investors “are not provided with any material information beyond what is available to the public.”

Other details, including the number of participating cornerstone investors and their profile descriptions, as well as the number and type of securities proposed to be issued or offered to them, must also be included in the final prospectus.

“A cornerstone investor may also have representation in the board of the registered issuer, provided that it owns only the minimum required number of shares for election,” the SEC said in a statement.

This comes after the regulator vowed to craft more transparent rules for cornerstone investors and ease worries that they are given undue advantages over smaller buyers.

The SEC said these big-time investors have helped stimulate demand in IPOs, and boosted confidence while delivering “positive signals” to the market.

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Juan Paolo Colet, managing director at investment bank China Bank Capital Corp., said the new guidelines struck a “reasonable balance” for all investors.

“Although cornerstones will have the advantage of preferential allocation of shares, retail investors are still protected via proper disclosures in the prospectus, equal access to material information and entry at the same IPO price,” he said in a Viber message.

The Philippine Stock Exchange is eyeing at least six IPOs this year worth about P40 billion. Last year, only three firms went public and raised a combined P13 billion. INQ