UPSC Articles
Draft Red Herring Prospectus (DRHP)
Part of: Prelims and GS-III Economy
Context: The Union government has filed a draft red herring prospectus with the SEBI for selling 5% of its shares in the Life Insurance Corporation (LIC) of India.
Key takeaways
- A Draft Red Herring Prospectus (DRHP) is a document that is prepared to introduce a new business or product to a potential investor.
- This is not a final document for an investor.
- It is a way of demonstrating value and providing investors with enough information for them to decide whether they want to invest in the company or not.
- SEBI is required to assess the facts stated in the DRHP and recommend changes if required, before giving the share sale a green signal.
The Securities and Exchange Board of India (SEBI)
- It is the regulator of the securities and commodity market in India owned by the Government of India.
- It was established in 1988 and given statutory status through the SEBI Act, 1992.
- SEBI is responsible to the needs of three groups:
- Issuers of securities
- Investors
- Market intermediaries
- Functions:
- Quasi-legislative – drafts regulations
- Quasi-judicial – passes rulings and orders
- Quasi-executive – conducts investigation and enforcement action
- Powers:
- To approve by−laws of Securities exchanges.
- To require the Securities exchange to amend their by−laws.
- Inspect the books of accounts and call for periodical returns from recognised Securities exchanges.
- Inspect the books of accounts of financial intermediaries.
- Compel certain companies to list their shares in one or more Securities exchanges.
- Registration of Brokers and sub-brokers
News Source: TH
