The Securities and Exchange Board of India has decided to allow seven banned brokerages to start distributing initial public offers and follow-on public offers.
Sebi had acted against 10 brokerages after over 10,000 investors failed to get shares in last year's Coal India IPO in spite of legitimate applications.
The brokerages had blamed technical glitches for this.
Industry officials confirmed the Sebi move.
"With some IPOs being launched next week, this is a big relief for these brokerages," said a senior investment banker.
A number of big public issues, including Future Ventures' Rs. 750 crore IPO, Muthoot Finance's Rs. 800-1,000 crore issue and SAIL's Rs. 8,000-crore FPO, are expected to hit the market in a couple of months.
The three brokerages still under the ban are Edelweiss Securities, SMC Global Securities and J M Financial.
"Sebi has looked at what these brokerages have done to resolve investor complaints. The other three are likely to get the approval soon, perhaps this week itself," said a senior official of a brokerage.
Industry estimates that around 70
per cent complaints have been resolved.
In February, Sebi had asked six lead managers to Coal India's IPO to not enlist brokerages that had not compensated the affected investors. Industry officials said the average amount per investor was Rs. 12,000-15,000. The 10 brokers had to pay a total of Rs. 10-15 crore.
Brokerages say they want Sebi to look at certain issues. "We are trying to resolve some issues with the market regulator's stance through the lead managers," said the president of a leading broking house.
Brokerages say the investor might have taken the application from one broker and submitted it though a different broker.
"Sebi says I have to compensate investors who have taken the application from me," said the head of a brokerage.
The Sebi order came despite a disclaimer in the offer document that "neither our company, the selling shareholder nor any member of the syndicate is liable to the bidders for any failure in downloading the bids due to faults in any software/hardware system or otherwise."
Investment banks and brokerages fear the compensation policy may be misused by investors.