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  • 1. Merchant Banking Financial Markets and Services – Sathya Dayalan
  • 2. Origin of Merchant Banking  13th Century merchant bankers were traders of commodities and acted as bankers to the kings of European states. They Financed the continental wars and coastal trades. They lent their names to lesser known traders by accepting bills through which they guaranteed that the holder of the bill would receive full payment.
  • 3. Managers to the issue or Merchant Bankers  Advise on the capital structure, instrument of issue.  Pricing  Assessing and appraisal of project report.  Appointment of bankers, underwriters, brokers, registrars, printers and advertisement agents.  Holding brokers-Underwriters,
  • 4.  Press and investor conferences.  Deciding the pattern of advertisement.  Deciding the collection branches where application can be received or collected.  Deciding on the dates of opening and closing of the subscription list.  Obtain daily report of the applications and amounts collected at branches.
  • 5.  Obtaining subscription to the issue.  Obtain consent of the Stock Exchange and get basis of allotment approved. Looking at the above roles of the MB a company should choose one after a lot of research into his integrity, expertise, competence.
  • 6. Factors to select a MB  Ethics and integrity.  Reputation.  Trained & committed manpower.  Concern & interest of clients.  Liaison and networking.  Relationship & Contacts.  Infrastructure.  Past performance.
  • 7. Factors to select a client.  Track record of the company.  Track record of the promoters.  Professional management.  Financial strength of the promoters and the company.  Economic viability of the project.
  • 8. Prime Objectives of MB  Providing long term funds to the projects or companies.  Project counseling- loan syndication, project appraisal and arrangement of Working capital.  Deciding the capital structure.  Portfolio Management  Underwriting  Corporate advisory & issue mgmt.
  • 9. Emerging Areas.  Private placements with NRI’s and FII’s.  Brought out deals.  Market Making  OTC  NSE  Forex  Financial engineering- M&A’s, capital restructuring.
  • 10. SEBI (MB) Regulations, 1992  Code of Conduct for MB Observe high standards of integrity and fairness in all his dealings. Render high standard of service, exercise due diligence, proper care, exercise independent judgment & disclose conflict of interest while providing unbiased service.
  • 11. Code of conduct continued…….. Not make any statement or become privy to any act, practice or unfair competition, likely to harm the interest of other MB or is likely to place such other MB in a disadvantageous position in relation to the MB, while competing for or executing any assignment. (Harmful statement while solicitation & execution)
  • 12.  Not make exaggerated statements, written or oral, to the client either about the qualification or the capability to render certain services or his achievements in regard to services rendered to other clients.  Render best possible advice to the client having regard to the clients needs and the environment and his own professional skill;  Ensure that all professional dealings are effected in a prompt, efficient and cost effective manner.
  • 13. A MB shall not divulge to other clients, press or any other party any confidential information about his client, which has come to his knowledge.  Deal in securities of the client company without making disclosure to the board as required under the regulation and also to the Board of Directors of the client company.  Provide investors with true and adequate information without making any misguiding or
  • 14. exaggerated claims and are aware of attendant risks before any investment decisions are made.  Ensure copies of prospectus, memorandum and related literature are made available to investors. Fair allotment of securities and refund of application money without delay. Investor complaints are adequately dealt with. 
  • 15.  The MB shall not generally and particularly in respect of issue of any securities be party to  Creation  Price of false market rigging or manipulation  Passing of price sensitive information or take any other action which is unethical or unfair to the investors. A MB shall abide by the provisions of the Act, rules and regulations which may be applicable and relevant to the activities carried on by the merchant banker.
  • 16. Non-Compliance and Defaults.  Type 1  Type 2  Type 3  Type 4 General Defaults. Minor Defaults. Major Defaults. Serious Defaults.
  • 17. SEBI (MB) Regulations 1992  Chapter I –Preliminary  Chapter II – Registration of MB  Chapter III – General Obligations and Responsibilities.  Chapter IV – Procedure for Inspection.  Chapter V – Procedure for Action in case of Default.
  • 18. Schedule – 1 Forms  Form A – Application for Grant of Certificate/Renewal of Certificate.  Form B – Certificate of Registration.  Form C – Due diligence certificate.
  • 19. Schedule 2 – Fees Schedule 3 – Code for Merchant Bankers.
  • 20. Qualities of a good MB  Leadership  Aggressive action  Co-operative and friendliness  Contacts  Attitude towards problem solving  Inquisitiveness for new skills, information and knowledge