Syndicate members are commercial or investment banks, usually registered with market regulator, Sebi in India, or registered as brokers with stock exchanges, responsible for underwriting IPOs. They work as intermediaries between the issuer company and investors who bid for IPO stocks. Investors submit their bids via Syndicate Members appointed by the issuer company.
They are also responsible for circulating copies of the red herring prospectus along with the application form to potential investors. After receiving the bids for IPO shares, Syndicate Members enter the bidding details into the electronic bidding system and generate a transaction registration slip (‘TRS’) for each price and demand option and give the same to the bidder.
While bidding for the shares, a bidder can revise the bid any number of times during the period defined. However, for any revision(s) in the bid, the investor must use the services of the same Syndicate Member through whom one had placed the original bid.
At the time of registering each bid, the members of the Syndicate enters the following details of the investor in the on-line system:
Name of the investor
Investor Category: Individual, Corporate, NRI, FII, or Mutual Fund etc.
Numbers of equity shares bid for
Application form number
Whether margin amount has been paid upon submission of application form
Depository participant identification number
Client Identification number of the beneficiary account of the bidder
The Syndicate Member deposits all the money received in the escrow account opened by the issuer company. The application form along with other supporting documents are then sent to the registrar of the issue for further processing.
What Is a Syndicate?
A syndicate is a temporary alliance of businesses that joins together to manage a large transaction, which would be difficult, or impossible, to effect individually. Syndication makes it easy for companies to pool their resources and share risks, as when a group of investment banks works together to bring a new issue of securities to the market. There are different types of syndicates, such as underwriting syndicates, banking syndicates, and insurance syndicates.
The brokerage firms that are members of the syndicate are in charge of sending out IPO applications, receiving completed applications from investors, and promptly updating the information on the stock exchange’s IPO shares bidding platform. Some projects are so big that no one organisation can have all the knowledge required to finish them quickly. Large construction projects like the construction of a stadium, roadway, bridge, or railroad frequently involve this. Companies may band together as a syndicate in certain cases so that each company can contribute its unique skills to the project. Syndicates are typically regarded as partnerships or corporations for tax purposes.
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