SEBI frowns on payment of incentives in any form to investors for subscribing to public issue of debt securities by brokers/distributors.
SEBI has asked the brokers/distributors to stop offering any incentive, whether direct or indirect, in any manner, whether in cash or kind or services or otherwise to any individual for making an application for allotment of the public issues of debt securities. Many companies such as NHAI, IFCI and others are planning to raise thousands of crore from retail investors through tax free bonds.
This move comes after SEBI was informed by the market participants that some brokers/distributors are passing on part of their brokerage/commission to the final investor for subscription to such public issue of debt. According to SEBI in its note, passing on part of the brokerage/commission gives an unfair advantage/bargaining power to a certain set of investors and distributors while on the other hand it also adds to the cost of issuance for the company.
