Financial Markets and Services – Sathya Dayalan
Origin of Merchant Banking
Century merchant bankers were traders of
commodities and acted as bankers to the kings
of European states.
They Financed the continental wars and
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.
Managers to the issue or Merchant
Advise on the capital structure, instrument of
Assessing and appraisal of project report.
Appointment of bankers, underwriters,
brokers, registrars, printers and advertisement
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.
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,
Factors to select a MB
Trained & committed manpower.
Concern & interest of clients.
Liaison and networking.
Relationship & Contacts.
Factors to select a client.
record of the company.
Track record of the promoters.
Financial strength of the promoters and the
Economic viability of the project.
Prime Objectives of MB
long term funds to the projects or
Project counseling- loan syndication, project
appraisal and arrangement of Working
Deciding the capital structure.
Corporate advisory & issue mgmt.
placements with NRI’s and FII’s.
Brought out deals.
Financial engineering- M&A’s, capital
SEBI (MB) Regulations, 1992
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
Code of conduct continued……..
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)
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.
best possible advice to the client
having regard to the clients needs and the
environment and his own professional skill;
that all professional dealings are
effected in a prompt, efficient and cost
MB shall not divulge to other clients, press or
any other party any confidential information
about his client, which has come to his
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.
investors with true and adequate
information without making any misguiding or
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
The MB shall not generally and particularly in respect of issue of any securities be
of false market
rigging or manipulation
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.
Non-Compliance and Defaults.
SEBI (MB) Regulations 1992
Chapter II – Registration of MB
Chapter III – General Obligations and
Chapter IV – Procedure for Inspection.
Chapter V – Procedure for Action in case of
Schedule – 1 Forms
A – Application for Grant
of Certificate/Renewal of
Form B – Certificate of
Form C – Due diligence