Allocation of Offered Share Certificates etc. to Customers (Basic Principles)
UBS Securities Japan Co., Ltd.
UBSSJ, with respect to the underwriting business, responds to issuers’ various capital raising needs, perceives investors’ various needs and provides various relevant products which respond to market mechanisms.
When underwriting and handling primary or secondary offerings or conducting secondary offerings (“Offering”) of share certificates, etc. to reflect investor demand with respect to pricing, UBSSJ, as a basic principle, strives to understand demand trends and conduct appropriate Offerings and fair allocations.
UBSSJ ascertains the level of investor demand by book building and uses this information to adjust deal size and fair pricing. Paying attention to suitability rules, UBSSJ determines allocations taking into consideration degree of interest, the investor’s degree of knowledge regarding the risk of the products, relationship with UBSSJ, investment stance (whether long-term or short-term investment, whether it is likely to contribute to the formation of a smooth secondary market, etc.).
With respect to allocations to individual clients in the initial public offerings of share certificates and trust beneficiary securities of foreign stocks, UBSSJ ensures that share or unit should in principle be allocated on a pro-rata basis even if the quantity of shares or units subscribed by individual clients should exceed the quantity of shares or units scheduled to be allocated to them, in order to prevent excessively concentrated or unfair allocations, while considering the factors enumerated in the preceding paragraph. Thus, UBSSJ will not in principle allocate shares or units by lottery, except that, if the individual clients in the lowest 10 percentile, sequenced from the individual client who subscribed the least quantity of shares or units, of all the individual clients subscribed to the shares or units is expected to be allocated less than one share or unit, one tenth of the quantity of shares or units scheduled to be allocated to individual investors will be allocated by lottery, in accordance with the procedures set forth in Annex.
UBSSJ decides on allocatees from among those clients that have provided indications of interest during the book building, as well as those that have subscribed for allocation separately from the book building. Note, however, that if the quantity of share certificates, etc. that clients have indicated interest in and/or subscribed falls below the quantity of share certificates, etc. scheduled to be allocated, UBSSJ may allocate the residual share certificates, etc. to the clients that have not indicated interest in or subscribed the share certificates, etc., while taking such client’s trading relationship with UBSSJ into consideration.
If UBSSJ builds a book or allocates share certificates, etc. under the principles different from those indicated above, UBSSJ will notify to clients the change and grounds therefore.
UBSSJ complies with the Financial Instrument and Exchange Act and rules made by self-regulatory organizations. For instance, UBSSJ does not allocate share certificates, etc. in order to compensate investors’ losses or add to investors’ profits. UBSSJ stipulates in its internal rules (see the Internal Rules) that UBSSJ shall not allocate share certificates, etc. to:
- any person/company designated by the issuing company in principle;
- Employees of UBSSJ
- anyone that provides special benefits to UBSSJ or anyone where an allocation would be viewed as socially unfair;
- any association involved in organised crime or any member thereof, or anyone deemed harmful to society such as Sokai-ya;
- a single client in an excessively concentrated fashion.
- Additionally for IPO shares UBSSJ shall not make unfair allocation, e.g. a purchase of another financial instrument to be conditioned, etc.
UBSSJ has made internal rule for proper allocation and makes efforts to comply with.
If it is ascertained that clients are identified to be one of the above defined persons, UBSSJ will not accept indication of interest in, or subscription for the share certificates, etc.
Based on the above basic policy, UBSSJ contributes to smooth corporate fund raising and to the development of security markets through fair allocations.
Allocation Procedures for lottery
Because UBSSJ specializes in wholesale and wealth management businesses, share certificates or Trust Beneficiary Securities of Foreign Stock in initial public offerings may not in principle be allocated by lottery, except that, if the individual clients in the lowest 10 percentile, sequenced from the individual client who subscribed the least quantity of the shares or units, of all the individual clients subscribed to the shares or units is expected to be allocated less than one share or unit, one tenth of the quantity of the shares or units scheduled to be allocated to the individual investors shall be allocated in the following manner. The rest nine tenths shall be allocated in accordance with the Basic Principles.
- The percentage of allotment determined by lottery is one tenth of the quantity of shares or units scheduled to be allocated to the individual clients.
- In order to make allocations as widely as possible, the quantity of shares or units allocated per individual client by the lottery shall be the difference between allocated quantity by book building and quantity of indication of interest/subscriptions to shares or units (hereinafter, Indication/Subscription) up to 5 shares. No subscription to shares or units is made for the lottery. The allocation process by the lottery is repeated until all shares or units allotted to the lottery are allocated to individual clients. The lottery terminates when the quantity of the residual shares or units becomes less than the quantity of the shares or units that the winner is entitled to, in which case the winner shall be allocated the residual quantity, regardless of the entitled quantity.
- Wealth Management Department assigns random numbers to Indication/Subscription from individual investors where one random number is assigned to one Indication/Subscription.
- Following the procedure of (2) above, Wealth Management Department shall decide the winning numbers by lottery with the attendance of Compliance Department and then treat the individual clients with Indication/Subscriptions assigned those winning numbers as allocatees.
- On the day or the following business day of lottery, Wealth Management Department shall inform the individual clients, who are determined as allocatees as above, of the quantity of shares or units allocated by the lottery and the settlement method as originally agreed with them.
- Upon completion of allocation, Wealth Management Department shall maintain the records of allocation numbers of the lottery, including the reasons of the cases, if any where the winning ration is lowered or the lottery is cancelled, as well as the record of allocations determined by the method other than the lottery.