Sebi proposes audiovisual details for IPO disclosures — why is it important

• Sebi has said in a draft circular that the disclosures made in the DRHP and RHP of public issues shall be made available in AV format as well
  
• Key information in such disclosures includes details about the issuer company, its business operations, financial performance, and other information relevant to the investor
  
• The effort could be to ensure that investors are not dependent on investment advice provided on social media by finfluencers
  

In 2023, the Indian IPO market was on a roll with over 200 companies across industries participating in initial public offerings (IPOs). And the bumper listing of a (very) few of them means many investors want to have a slice of the IPO pie.

The DHRP (Draft Herring Prospectus) is the initial document outlining the IPO. Knowing the details of DHRP is crucial for investors to assess the company's risks and potential rewards before investing in the IPO. In such disclosures, key information typically includes details about the issuer company, its business operations, financial performance, and other material information relevant to investors.

Disclosures in DHRP and RHP to to be made in AV format

Sebi has said in a draft circular that ‘the disclosures made in the DRHP and Red Herring Prospectus (RHP) of public issues shall be made available in Audio Visual (AV) format for ease in understanding of the salient features of public issues.’

Moreover, the new regulation mandates that such AV should be published in the public domain by the lead manager to the public issue in bilingual versions i.e., English and Hindi. The Hindi version shall contain the text in the Devanagari script.

“The purpose behind SEBI's initiative to encourage RHPs and DHRPs to make disclosures available in audio-visual format is to enhance transparency and accessibility for investors. By providing information in a visual format, issuers can effectively communicate key details about their public offerings, thereby enabling greater investor understanding and engagement,” says Mahavir Lunawat, Chairman of the Association of Investment Bankers of India (AIBI).

This aligns with SEBI's overarching objective of promoting investor confidence and protection within the capital markets. This move aims to provide investors with standardised, reliable video disclosures, reducing reliance on unauthorised sources. By presenting this information in a standardised audio-visual format, issuers can ensure consistency, transparency and clarity in their communication, facilitating informed decision-making by investors.

Investors should stay away from unsolicited advice

One of the main reasons behind Sebi’s decision is to protect the interests of investors and limit the possibility of them falling prey to unsolicited advice on the internet.

Sebi has asked companies to start the audio-visual presentation with the following disclaimer, “Investors are advised not to rely on any other document, content or information provided on the offer on the internet/online websites/social media platforms/micro-blogging platforms and by the finfluencers since the same is not approved/commissioned/paid by the company or its promoter(s)/directors/KMPs in any manner.”

Sebi has been warning investors not to follow investment advice from individuals who may be suggesting investment options, commonly known as finfluencers. In recent months, there have been instances of unregistered finfluencers being banned as well.

In October 2023, The market regulator banned finfluencer Mohammad Nasiruddin Ansari, also known as 'Baap of Chart’, along with two others since they were providing or providing investment advice without proper registration. In May 2023, Sebi fined a YouTuber and options trader ₹6.5 crore for allegedly violating investment advisor norms.

“SEBI's guidance is aimed at safeguarding investor interests and promoting reliance on verified and official disclosures. By encouraging investors to prioritise information from authenticated sources, SEBI aims to promote trust and confidence in the integrity of the capital markets, ultimately empowering investors to make well-informed decisions based on reliable information,” says Lunawat.

Investors should thus make well-informed investment decisions, especially when it comes to investing in IPOs, and not be carried away by any investment advice on social media. It is always better to err on the side of caution when it comes to your hard-earned money.