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Securities Exchange Board of India
(Merchant Bankers) Regulations, 1992




Prepared By:
Amar Ranu (905)
Deepak Thakkar (909)
Kumar Dhananjay Rakesh (917)
Shakti Shatpathy (930)
Under Guidance of :
Prof. Dr. Rachana Baid
Indian Institute of Capital Markets
Contents
 Introduction

 Registration

 Obligations &
 Responsibilities

 Procedure for
 Inspection

 Procedure for Action
 incase of Default
Securities Exchange Board of India
(Merchant Bankers) Regulations, 1992                                  Introduction
                                         Origination of Merchant Bankers in India
       Introduction
                                                    Nature of Merchant Banking
       Registration
                                       Merchant Banker’s Core Business Portfolio
       Obligations &
       Responsibilities                                     Need for Regulation

       Procedure for                                                   Definition
       Inspection

       Procedure for Action
       incase of Default
Securities Exchange Board of India
(Merchant Bankers) Regulations, 1992                                 Introduction
                                         Origination of Merchant Bankers in India
       Introduction
                                                    Nature of Merchant Banking
       Registration
                                       Merchant Banker’s Core Business Portfolio
       Obligations &
       Responsibilities                                     Need for Regulation

       Procedure for                                                   Definition
       Inspection

       Procedure for Action
       incase of Default
Securities Exchange Board of India
(Merchant Bankers) Regulations, 1992                                                        Introduction
                                                                  Origination of Merchant Bankers in India
       Introduction
                                        Merchant banking activity was formally initiated into the Indian
                                       capital Markets in 1967.
       Registration
                                        Started with various services like management of capital issues,
       Obligations &                   production planning and system design to market research and
                                       management consulting services to meet the requirements of small
       Responsibilities                and medium sector rather than large sector.
       Procedure for
                                        Citibank Setup its merchant banking division in 1970. The various
       Inspection
                                       tasks performed by this divisions namely assisting new entrepreneur,
                                       evaluating new projects, raising funds through borrowing and issuing
       Procedure for Action            equity.
       incase of Default
                                        Indian banks Started banking Services as a part of multiple services
                                       they offer to their clients from 1972.

                                        State bank of India started the merchant banking division in 1972.
                                       In the Initial years the SBI's objective was to render corporate advice
                                       And Assistance to small and medium entrepreneurs.
Securities Exchange Board of India
(Merchant Bankers) Regulations, 1992                                 Introduction
                                         Origination of Merchant Bankers in India
       Introduction
                                                    Nature of Merchant Banking
       Registration
                                       Merchant Banker’s Core Business Portfolio
       Obligations &
       Responsibilities                                     Need for Regulation

       Procedure for                                                   Definition
       Inspection

       Procedure for Action
       incase of Default
Securities Exchange Board of India
(Merchant Bankers) Regulations, 1992                                                        Introduction
                                                                              Nature of Merchant Banking
       Introduction
                                        The services of merchant bank cover project counseling, pre
                                       investment activities, feasibility studies, project reports, design of
       Registration                    capital structure, issue management, underwriting, loan syndication,
                                       mobilization of funds, foreign currency finance, mergers,
       Obligations &                   amalgamation, takeover, venture capital and public deposits.
       Responsibilities
                                        Merchant banking is skill based activities and involves serving
       Procedure for                   financial need of every client.
       Inspection
                                        The depth and sophistication in merchant banking business are
                                       improving since the avenues for raising funds are widening and
       Procedure for Action
                                       demands for funds is increasing.
       incase of Default
                                        Merchant bankers can turn to any of the activities depending upon
                                       resources, such as capital, foreign tie-ups for overseas activities and
                                       skills.
Securities Exchange Board of India
(Merchant Bankers) Regulations, 1992                                 Introduction
                                         Origination of Merchant Bankers in India
       Introduction
                                                    Nature of Merchant Banking
       Registration
                                       Merchant Banker’s Core Business Portfolio
       Obligations &
       Responsibilities                                     Need for Regulation

       Procedure for                                                   Definition
       Inspection

       Procedure for Action
       incase of Default
Securities Exchange Board of India
(Merchant Bankers) Regulations, 1992                                                                         Introduction
                                                                          Merchant Banker’s Core Business Portfolio
       Introduction                                                 Core Business Portfolio



       Registration
                                                    Non-fund Based                                      Fund Based
                                        Merchant Banking Services for                  Underwriting
       Obligations &                   Management of public offers of equity
       Responsibilities                and debt instruments                             Market Making

                                        Right issues                                   Bought out deals
       Procedure for                                                                    Proprietary investment and trading in
                                        Open offer under the takeover code
       Inspection                                                                       equities, bonds and derivatives.
                                        Buyback offers

       Procedure for Action            Advisory and Transaction services in
       incase of Default                Project financing

                                        Syndicated loans

                                        Private Equity/Venture capital

                                        Business Advisory

                                        Financial Restructuring

                                        Corporate re-organisations such as
                                       mergers and demergers, hive-offs, asset
                                       sales, divestitures
                                        Acquisition, strategic sale, buyouts and
                                       takeovers
Securities Exchange Board of India
(Merchant Bankers) Regulations, 1992                                 Introduction
                                         Origination of Merchant Bankers in India
       Introduction
                                                    Nature of Merchant Banking
       Registration
                                       Merchant Banker’s Core Business Portfolio
       Obligations &
       Responsibilities                                     Need for Regulation

       Procedure for                                                   Definition
       Inspection

       Procedure for Action
       incase of Default
Securities Exchange Board of India
(Merchant Bankers) Regulations, 1992                                                      Introduction
                                                                                       Need for Regulation
       Introduction

       Registration                     The merchant banker's regulations, which regulate the raising of
                                       funds in the primary market, would assure for the issuer market for
       Obligations &                   raising resources at low cost, effectively and easily, ensure high
       Responsibilities                degree of protection of investors interest.

       Procedure for                    The regulations provide for the merchant bankers a dynamic and
       Inspection                      competitive market with the high standard of professional
                                       competence, dignity, integrity and solvency.
       Procedure for Action
                                       The regulations promote a primary market, which is fair, efficient,
       incase of Default
                                       and flexible, and inspire confidence.
Securities Exchange Board of India
(Merchant Bankers) Regulations, 1992                                 Introduction
                                         Origination of Merchant Bankers in India
       Introduction
                                                    Nature of Merchant Banking
       Registration
                                       Merchant Banker’s Core Business Portfolio
       Obligations &
       Responsibilities                                     Need for Regulation

       Procedure for                                                   Definition
       Inspection

       Procedure for Action
       incase of Default
Securities Exchange Board of India
(Merchant Bankers) Regulations, 1992                                                  Introduction
                                                                                            Definition
       Introduction

       Registration

       Obligations &                   quot;Any person who is engaged in the business of issue management
       Responsibilities                either by making arrangements regarding selling, buying or
                                       subscribing to securities has manager, consultant, advisor or
       Procedure for                   rendering corporate advisory services in relation to such issue
       Inspection                      managementquot;.

       Procedure for Action
       incase of Default
Securities Exchange Board of India
(Merchant Bankers) Regulations, 1992    Registration of Merchant Bankers
                                           Categories of the Merchant Bankers
       Introduction
                                       Requirements for Granting of Certificate
       Registration
                                                Capital Adequacy Requirement
       Obligations &
       Responsibilities                             Procedure for Registration

       Procedure for                                     Renewal of Certificate
       Inspection

       Procedure for Action
       incase of Default
Securities Exchange Board of India
(Merchant Bankers) Regulations, 1992    Registration of Merchant Bankers
                                           Categories of the Merchant Bankers
       Introduction
                                       Requirements for Granting of Certificate
       Registration
                                                Capital Adequacy Requirement
       Obligations &
       Responsibilities                             Procedure for Registration

       Procedure for                                     Renewal of Certificate
       Inspection

       Procedure for Action
       incase of Default
Securities Exchange Board of India
(Merchant Bankers) Regulations, 1992                           Registration of Merchant Bankers
                                                                               Categories of Merchant Bankers
       Introduction
                                       (a) Category I
                                        to carry on any activity of the issue management, which will inter-
       Registration
                                           alia consist of preparation of prospectus and other information
                                           relating to the issue, determining financial structure, tie-up of
       Obligations &                       financiers and final allotment and refund of the subscription; and
       Responsibilities                 to act as adviser, consultant, manager, underwriter, portfolio
                                           manager.
       Procedure for
       Inspection                      (b) Category II
                                           To act as adviser, consultant, co-manager, underwriter, portfolio
       Procedure for Action                manager
       incase of Default
                                       (c) Category III
                                           To act as underwriter, adviser, consultant to an issue

                                       (d) Category IV
                                           To act only as adviser or consultant to an issue.
Securities Exchange Board of India
(Merchant Bankers) Regulations, 1992    Registration of Merchant Bankers
                                           Categories of the Merchant Bankers
       Introduction
                                       Requirements for Granting of Certificate
       Registration
                                                Capital Adequacy Requirement
       Obligations &
       Responsibilities                             Procedure for Registration

       Procedure for                                     Renewal of Certificate
       Inspection

       Procedure for Action
       incase of Default
Securities Exchange Board of India
(Merchant Bankers) Regulations, 1992                           Registration of Merchant Bankers
                                                                     Requirements for Granting of Certificate
       Introduction                    The Applicant . . . .

       Registration                     shall be a body corporate other than a NBFC

                                        has the necessary infrastructure to effectively discharge his
       Obligations &                     activities.
       Responsibilities
                                        Should have minimum two experienced employees to conduct the
       Procedure for                     business of the merchant banker.
       Inspection                       Should fulfill the capital adequacy requirement as specified.

       Procedure for Action  his partner, director or principal officer should not be involved in any
       incase of Default      litigation connected with the securities market which has an adverse
                                           bearing on the business of the applicant.

                                        his partner, director or principal officer has not at any time been
                                         convicted for any offence involving moral turpitude or has been
                                         found guilty of any economic offence.

                                        Should have the professional qualification from an institution
                                         recognized by the Government in finance, law or business
                                         management.

                                        Should be a fit and proper person.
Securities Exchange Board of India
(Merchant Bankers) Regulations, 1992    Registration of Merchant Bankers
                                           Categories of the Merchant Bankers
       Introduction
                                       Requirements for Granting of Certificate
       Registration
                                                Capital Adequacy Requirement
       Obligations &
       Responsibilities                             Procedure for Registration

       Procedure for                                     Renewal of Certificate
       Inspection

       Procedure for Action
       incase of Default
Securities Exchange Board of India
(Merchant Bankers) Regulations, 1992                         Registration of Merchant Bankers
                                                                           Capital Adequacy Requirements
       Introduction
                                        The Capital Adequacy Requirement(CAR) shall not be less than the
                                         net worth of the person making the application for grant of
       Registration                      registration.

       Obligations &                      The net worth shall be as follows, namely: -
                                                 Category               Minimum Amount
       Responsibilities
                                             1) Category I             Rs. 5, 00, 00, 000
       Procedure for                         2) Category II            Rs. 50, 00, 000
                                             3) Category III           Rs. 20, 00, 000
       Inspection
                                             4) Category IV            Nil
       Procedure for Action             Explanation:
       incase of Default                 For the purposes of this regulation quot;net worthquot; means in the case of
                                         an applicant which is a partnership firm or a body corporate, the
                                         value of the capital contributed to the business of such firm or the
                                         paid up capital of such body corporate plus free reserves as the
                                         case may be at the time of making application.
Securities Exchange Board of India
(Merchant Bankers) Regulations, 1992    Registration of Merchant Bankers
                                           Categories of the Merchant Bankers
       Introduction
                                       Requirements for Granting of Certificate
       Registration
                                                Capital Adequacy Requirement
       Obligations &
       Responsibilities                             Procedure for Registration

       Procedure for                                     Renewal of Certificate
       Inspection

       Procedure for Action
       incase of Default
Securities Exchange Board of India
(Merchant Bankers) Regulations, 1992                         Registration of Merchant Bankers
                                                                                    Procedure for Registration
       Introduction
                                        The SEBI on being satisfied that the applicant is eligible shall grant a
                                       certificate in Form B.
       Registration
                                        On the grant of a certificate the applicant shall be liable to pay the
       Obligations &                   fees in accordance with Schedule II as shown below:
       Responsibilities
       Procedure for                   Registration Fees
       Inspection                      Merchant          Initial Fees for 2 Continuation
                                       Banker            Yrs                Fees
       Procedure for Action            Category I        Rs. 2.5 Lakhs      Rs. 1 Lakh
       incase of Default               Category II             Rs. 1 Lakh                Rs. 50,000
                                       Category III            Rs. 1 Lakh                Rs. 25,000
                                       Category IV             Rs. 5000                  Rs. 1000
Securities Exchange Board of India
(Merchant Bankers) Regulations, 1992    Registration of Merchant Bankers
                                           Categories of the Merchant Bankers
       Introduction
                                       Requirements for Granting of Certificate
       Registration
                                                Capital Adequacy Requirement
       Obligations &
       Responsibilities                             Procedure for Registration

       Procedure for                                     Renewal of Certificate
       Inspection

       Procedure for Action
       incase of Default
Securities Exchange Board of India
(Merchant Bankers) Regulations, 1992                         Registration of Merchant Bankers
                                                                                       Renewal of Certificate
       Introduction
                                        Three months before expiry of the period of certificate, the
                                         merchant banker, may if he so desires, make an application for
       Registration                      renewal in Form A.

                                        The application for renewal shall be dealt within the same manner
       Obligations &                     as if it were a fresh application for grant of a certificate.
       Responsibilities
                                        The SEBI on being satisfied that the applicant is eligible for
       Procedure for                     renewal of certificate shall grant a certificate in Form B and send
       Inspection                        intimation to the applicant.

       Procedure for Action             On the grant of a certificate the applicant shall be liable to pay the
       incase of Default                 fees in accordance with Schedule II as shown below:

                                       Renewal Fees
                                       Merchant                Initial Fees for 2 Continuation
                                       Banker                  Yrs                Fees
                                       Category I              Rs. 1 Lakh         Rs. 20,000
                                       Category II             Rs. 75,000               Rs. 10,000
                                       Category III            Rs. 50,000               Rs. 5,000
                                       Category IV             Rs. 5000                 Rs. 2500
Securities Exchange Board of india
(Merchant Bankers) Regulations, 1992                     Obligations & Responsibilities
                                                                           Code of Conduct
       Introduction
                                            Maintenance of Books of Accounts, Records, etc.
       Registration
                                                           Submission of Half Yearly Results
       Obligations &
       Responsibilities                Appointment of Lead Merchant Bankers & Restrictions

       Procedure for                                      Responsibilities of Lead Managers
       Inspection
                                                                  Underwriting Obligations
       Procedure for Action
       incase of Default                               Appointment of Compliance Officers
Securities Exchange Board of india
(Merchant Bankers) Regulations, 1992                     Obligations & Responsibilities
                                                                           Code of Conduct
       Introduction
                                            Maintenance of Books of Accounts, Records, etc.
       Registration
                                                           Submission of Half Yearly Results
       Obligations &
       Responsibilities                Appointment of Lead Merchant Bankers & Restrictions

       Procedure for                                      Responsibilities of Lead Managers
       Inspection
                                                                  Underwriting Obligations
       Procedure for Action
       incase of Default                               Appointment of Compliance Officers
Securities Exchange Board of india
(Merchant Bankers) Regulations, 1992                          Obligations & Responsibilities
                                                                                      Code of conduct
       Introduction
                                        Every merchant banker shall abide by the Code of Conduct
                                         as specified in Schedule III.
       Registration
                                        No merchant banker, other than a bank or a public
       Obligations &                     financial institution, who has been granted a certificate of
       Responsibilities                  registration under these regulations shall after June 30th,
                                         1998 carry on any business other than that in the
       Procedure for
                                         securities market.
       Inspection

       Procedure for Action             A merchant banker who has been granted certificate of
       incase of Default                 registration to act as primary dealer by Reserve Bank of
                                         India, may carry on such business as may be permitted by
                                         Reserve Bank of India.
Securities Exchange Board of india
(Merchant Bankers) Regulations, 1992                     Obligations & Responsibilities
                                                                           Code of Conduct
       Introduction
                                            Maintenance of Books of Accounts, Records, etc.
       Registration
                                                           Submission of Half Yearly Results
       Obligations &
       Responsibilities                Appointment of Lead Merchant Bankers & Restrictions

       Procedure for                                      Responsibilities of Lead Managers
       Inspection
                                                                  Underwriting Obligations
       Procedure for Action
       incase of Default                               Appointment of Compliance Officers
Securities Exchange Board of india
(Merchant Bankers) Regulations, 1992                          Obligations & Responsibilities
                                                        Maintenance of Books of Accounts, Records, etc.
       Introduction
                                        Every merchant banker shall keep and maintain the
       Registration                      following books of accounts, records and documents
                                         namely:-
       Obligations &                     (a) a copy of balance sheet and P&L account as at the end
       Responsibilities                  of each accounting period;
                                         (b) a copy of the auditor's report on the accounts for that
       Procedure for                     period; and
       Inspection                        (c) a statement of financial position.

       Procedure for Action             Every merchant banker shall intimate to the SEBI the place
       incase of Default                 where the books of accounts, records and documents are
                                         maintained.
                                        Every merchant banker shall, after the end of each
                                         accounting period furnish to the SEBI copies of the balance
                                         sheet, profit and loss account and such other documents
                                         for any other preceding five accounting years when
                                         required by the SEBI.
Securities Exchange Board of india
(Merchant Bankers) Regulations, 1992                     Obligations & Responsibilities
                                                                           Code of Conduct
       Introduction
                                            Maintenance of Books of Accounts, Records, etc.
       Registration
                                                           Submission of Half Yearly Results
       Obligations &
       Responsibilities                Appointment of Lead Merchant Bankers & Restrictions

       Procedure for                                      Responsibilities of Lead Managers
       Inspection
                                                                  Underwriting Obligations
       Procedure for Action
       incase of Default                               Appointment of Compliance Officers
Securities Exchange Board of india
(Merchant Bankers) Regulations, 1992                         Obligations & Responsibilities
                                                                    Submission of Half Yearly Results
       Introduction
                                        Every merchant banker shall furnish to the SEBI half-
       Registration                      yearly unaudited financial results when required by the
                                         SEBI with a view to monitor the capital adequacy of the
                                         merchant banker.
       Obligations &
       Responsibilities
       Procedure for
       Inspection

       Procedure for Action
       incase of Default
Securities Exchange Board of india
(Merchant Bankers) Regulations, 1992                     Obligations & Responsibilities
                                                                           Code of Conduct
       Introduction
                                            Maintenance of Books of Accounts, Records, etc.
       Registration
                                                           Submission of Half Yearly Results
       Obligations &
       Responsibilities                Appointment of Lead Merchant Bankers & Restrictions

       Procedure for                                      Responsibilities of Lead Managers
       Inspection
                                                                  Underwriting Obligations
       Procedure for Action
       incase of Default                               Appointment of Compliance Officers
Securities Exchange Board of india
(Merchant Bankers) Regulations, 1992                           Obligations & Responsibilities
                                                                Appointment of Lead merchant Bankers
       Introduction
                                          All issues should be managed by at least one merchant
                                           banker functioning as the lead merchant banker.
       Registration                       Every lead merchant banker shall before taking up the
                                           assignment relating to an issue, enter into an agreement
       Obligations &                       with such body corporate setting out their mutual rights,
       Responsibilities                    liabilities and obligations relating to such issue and in
                                           particular to disclosures, allotment and refund.
       Procedure for
       Inspection                                          Restriction on appointment of lead managers
                                        The number of lead merchant bankers may not, exceed in
       Procedure for Action              case of any issue of Size of issue No. of Merchant Bankers
       incase of Default                 (a) Less than rupees fifty crore - Two (2)
                                         (b) Rupees fifty crore but less than rupees one hundred crore

                                              - Three(3)
                                          (c) Rupees one hundred crore but less than rupees two
                                              hundred crore - Four (4)
                                          (d) Rupees two hundred crore but less than rupees four
                                               hundred crore - Five (5)
                                          (e) Above Rupees four hundred crore five or more as may be
                                               agreed by the SEBI
Securities Exchange Board of india
(Merchant Bankers) Regulations, 1992                     Obligations & Responsibilities
                                                                           Code of Conduct
       Introduction
                                            Maintenance of Books of Accounts, Records, etc.
       Registration
                                                           Submission of Half Yearly Results
       Obligations &
       Responsibilities                Appointment of Lead Merchant Bankers & Restrictions

       Procedure for                                      Responsibilities of Lead Managers
       Inspection
                                                                  Underwriting Obligations
       Procedure for Action
       incase of Default                               Appointment of Compliance Officers
Securities Exchange Board of india
(Merchant Bankers) Regulations, 1992                          Obligations & Responsibilities
                                                                     Responsibilities of Lead Managers
       Introduction
                                        No lead manager shall agree to manage or be associated
                                         with any issue unless his responsibilities relating to the
       Registration                      issue mainly, those of disclosures, allotment and refund
                                         are clearly defined, allocated and determined and a
       Obligations &                     statement specifying such responsibilities is furnished to
       Responsibilities                  the SEBI at least one month before the opening of the
                                         issue for subscription:
       Procedure for
       Inspection                       Incase there are more than one lead merchant bankers,
                                         the responsibilities should be clearly demarcated .
       Procedure for Action
       incase of Default
                                        No lead merchant banker shall, agree to manage the issue
                                         made by any body corporate, if such body corporate is an
                                         associate of the lead merchant banker.
Securities Exchange Board of india
(Merchant Bankers) Regulations, 1992                     Obligations & Responsibilities
                                                                           Code of Conduct
       Introduction
                                            Maintenance of Books of Accounts, Records, etc.
       Registration
                                                           Submission of Half Yearly Results
       Obligations &
       Responsibilities                Appointment of Lead Merchant Bankers & Restrictions

       Procedure for                                      Responsibilities of Lead Managers
       Inspection
                                                                  Underwriting Obligations
       Procedure for Action
       incase of Default                               Appointment of Compliance Officers
Securities Exchange Board of india
(Merchant Bankers) Regulations, 1992                            Obligations & Responsibilities
                                                                                 Underwriting Obligations
       Introduction
                                        In respect of every issue to be managed, the lead merchant
                                         banker holding a certificate under Category I shall accept a
       Registration                      minimum Underwriting obligation of five percent of the total
                                         underwriting commitment or rupees twenty-five lakh, whichever
       Obligations &                     is less.
       Responsibilities
                                        Incase the lead merchant banker is unable to accept the
       Procedure for                     minimum underwriting obligation, that lead merchant banker
                                         shall make arrangement for having the issue underwritten to that
       Inspection
                                         extent by a merchant banker associated with the issue and shall
                                         keep the SEBI informed of such arrangement.
       Procedure for Action
       incase of Default
Securities Exchange Board of india
(Merchant Bankers) Regulations, 1992                     Obligations & Responsibilities
                                                                           Code of Conduct
       Introduction
                                            Maintenance of Books of Accounts, Records, etc.
       Registration
                                                           Submission of Half Yearly Results
       Obligations &
       Responsibilities                Appointment of Lead Merchant Bankers & Restrictions

       Procedure for                                      Responsibilities of Lead Managers
       Inspection
                                                                  Underwriting Obligations
       Procedure for Action
       incase of Default                               Appointment of Compliance Officers
Securities Exchange Board of india
(Merchant Bankers) Regulations, 1992                            Obligations & Responsibilities
                                                                   Appointment of Compliance Officers
       Introduction
                                        Every merchant banker shall appoint a compliance officer
                                         who shall be responsible for monitoring the compliance of
       Registration
                                         the Act, rules and regulations, notifications, guidelines,
                                         instructions etc., issued by the SEBI or the Central
       Obligations &                     Government and for redressal of investors’ grievances.
       Responsibilities
                                        The compliance officer shall immediately and independently
       Procedure for
                                         report to the SEBI any non-compliance observed by him and
       Inspection
                                         ensure that the observations made or deficiencies pointed
       Procedure for Action              out by the SEBI in the draft prospectus or the Letter of offer
       incase of Default                 as the case may be, do not recur.
Securities Exchange Board of India
(Merchant Bankers) Regulations, 1992         Procedure for Inspection
                                                  SEBI’s right to inspect
       Introduction
                                               Notice before inspection
       Registration
                                       Submission of Reports to the SEBI
       Obligations &
       Responsibilities                        Appointment of Auditors

       Procedure for
       Inspection

       Procedure for Action
       incase of Default
Securities Exchange Board of India
(Merchant Bankers) Regulations, 1992         Procedure for Inspection
                                                  SEBI’s right to inspect
       Introduction
                                               Notice before inspection
       Registration
                                       Submission of Reports to the SEBI
       Obligations &
       Responsibilities                        Appointment of Auditors

       Procedure for
       Inspection

       Procedure for Action
       incase of Default
Securities Exchange Board of India
(Merchant Bankers) Regulations, 1992                                     Procedure for Inspection
                                                                                 SEBIs right to Inspect
       Introduction                     The SEBI may appoint one or more persons as inspecting
                                         authority to undertake inspection of
       Registration
                                            the books of accounts,
                                            records and
       Obligations &                        documents of the merchant banker.
       Responsibilities
                                          Purpose of Inspection . . .
       Procedure for
       Inspection                           to ensure that the books of account are being maintained
                                             in the manner required;
       Procedure for Action
       incase of Default                    to ensure the provisions of the Act, rules, regulations are
                                             being complied with;

                                            to investigate into the complaints received from investors,
                                             other merchant bankers or any other person on any
                                             matter having a bearing on the activities of the merchant
                                             banker; and

                                            to investigate suo-moto in the interest of securities
                                             business or investors interest into the affairs of the
                                             merchant banker.
Securities Exchange Board of India
(Merchant Bankers) Regulations, 1992         Procedure for Inspection
                                                  SEBI’s right to inspect
       Introduction
                                               Notice before inspection
       Registration
                                       Submission of Reports to the SEBI
       Obligations &
       Responsibilities                        Appointment of Auditors

       Procedure for
       Inspection

       Procedure for Action
       incase of Default
Securities Exchange Board of India
(Merchant Bankers) Regulations, 1992                                  Procedure for Inspection
                                                                             Notice before Inspection
       Introduction
                                        Before undertaking an inspection under regulation 29 the SEBI
                                         shall give a reasonable notice to the merchant banker for that
       Registration                      purpose.

                                        During the course of inspection, the merchant banker against
       Obligations &                     whom an inspection is being carried out shall be bound to
       Responsibilities                  discharge his obligations.
       Procedure for
       Inspection

       Procedure for Action
       incase of Default
Securities Exchange Board of India
(Merchant Bankers) Regulations, 1992         Procedure for Inspection
                                                  SEBI’s right to inspect
       Introduction
                                               Notice before inspection
       Registration
                                       Submission of Reports to the SEBI
       Obligations &
       Responsibilities                        Appointment of Auditors

       Procedure for
       Inspection

       Procedure for Action
       incase of Default
Securities Exchange Board of India
(Merchant Bankers) Regulations, 1992                                Procedure for Inspection
                                                                  Submission of Reports to the SEBI
       Introduction                     The inspecting authority shall, as soon as may be possible
                                         submit an inspection report to the SEBI.
       Registration

       Obligations &                                     Action on inspection or investigation report
       Responsibilities
                                        The SEBI or the Chairman shall after consideration of
       Procedure for                     inspection or investigation report take such action as the
       Inspection                        SEBI or Chairman may deem fit and appropriate including
                                         action under the Securities and Exchange Board of India.
       Procedure for Action
       incase of Default
Securities Exchange Board of India
(Merchant Bankers) Regulations, 1992         Procedure for Inspection
                                                  SEBI’s right to inspect
       Introduction
                                               Notice before inspection
       Registration
                                       Submission of Reports to the SEBI
       Obligations &
       Responsibilities                        Appointment of Auditors

       Procedure for
       Inspection

       Procedure for Action
       incase of Default
Securities Exchange Board of India
(Merchant Bankers) Regulations, 1992                                Procedure for Inspection
                                                                            Appointment of Auditors
       Introduction
                                        The SEBI may appoint a qualified auditor to investigate
       Registration                      into the books of account or the affairs of the merchant
                                         banker provided that the auditor so appointed shall
                                         have the same powers of the inspecting authority
       Obligations &
       Responsibilities
       Procedure for
       Inspection

       Procedure for Action
       incase of Default
Securities Exchange Board of india
(Merchant Bankers) Regulations, 1992           Procedure for Action in case of Default
                                                                  Suspension of Registration
       Introduction
                                                                 Cancellation of Registration
       Registration
                                                               Show-cause notice and order
       Obligations &
       Responsibilities                Effect of Suspension & cancellation of Registration of
                                                                           Merchant Bankers
       Procedure for
       Inspection                                         Publication of Order of Suspension

       Procedure for Action
       incase of Default
Securities Exchange Board of india
(Merchant Bankers) Regulations, 1992           Procedure for Action in case of Default
                                                                  Suspension of Registration
       Introduction
                                                                 Cancellation of Registration
       Registration
                                                               Show-cause notice and order
       Obligations &
       Responsibilities                Effect of Suspension & cancellation of Registration of
                                                                           Merchant Bankers
       Procedure for
       Inspection                                         Publication of Order of Suspension

       Procedure for Action
       incase of Default
Securities Exchange Board of india
(Merchant Bankers) Regulations, 1992                  Procedure for Action in case of Default
                                                                               Suspension of Registration
       Introduction                    A penalty of suspension of registration of a merchant banker may be
                                          imposed where –
                                        The merchant banker violates the provisions of the Act, rules or
       Registration                       regulations;
                                        The merchant banker –
       Obligations &                      (a) fails to furnish any information relating to his activity as
       Responsibilities                       merchant banker as required by the SEBI;
       Procedure for                      (b) furnishes wrong or false information;
       Inspection                         (c) does not submit periodical returns as required by the SEBI.
                                          (d) does not co-operate in any enquiry conducted by the SEBI.
       Procedure for Action
       incase of Default                The merchant banker fails to resolve the complaints of the investors
                                         or fails to give a satisfactory reply to the SEBI in this behalf;
                                        The merchant banker indulges in manipulating or price rigging or
                                         cornering activities;
                                        The merchant banker fails to maintain the capital adequacy
                                         requirement;
                                        The merchant banker fails to pay the fees;
                                        The merchant banker violates the conditions of registration;
                                        The merchant banker does not carry out his obligations as specified
                                         in the regulation.
Securities Exchange Board of india
(Merchant Bankers) Regulations, 1992           Procedure for Action in case of Default
                                                                  Suspension of Registration
       Introduction
                                                                 Cancellation of Registration
       Registration
                                                               Show-cause notice and order
       Obligations &
       Responsibilities                Effect of Suspension & cancellation of Registration of
                                                                           Merchant Bankers
       Procedure for
       Inspection                                         Publication of Order of Suspension

       Procedure for Action
       incase of Default
Securities Exchange Board of india
(Merchant Bankers) Regulations, 1992                 Procedure for Action in case of Default
                                                                            Cancellation of Registration
       Introduction
                                       A penalty of cancellation of registration of a merchant banker
                                       may be imposed if
       Registration
                                       The merchant banker indulges in deliberate manipulation or
                                       price rigging or cornering activities affecting the securities
       Obligations &
                                       market and the investors interest;
       Responsibilities
       Procedure for                   The financial position of the merchant banker deteriorates to
       Inspection                      such an extent that the SEBI is of the opinion that his
                                       continuance as merchant banker is not in the interest of
       Procedure for Action            investors;
       incase of Default
                                       The merchant banker is guilty of fraud, or is convicted of a
                                       criminal offence;
Securities Exchange Board of india
(Merchant Bankers) Regulations, 1992           Procedure for Action in case of Default
                                                                  Suspension of Registration
       Introduction
                                                                 Cancellation of Registration
       Registration
                                                               Show-cause notice and order
       Obligations &
       Responsibilities                Effect of Suspension & cancellation of Registration of
                                                                           Merchant Bankers
       Procedure for
       Inspection                                         Publication of Order of Suspension

       Procedure for Action
       incase of Default
Securities Exchange Board of india
(Merchant Bankers) Regulations, 1992                Procedure for Action in case of Default
                                                                         Show-cause notice and order
       Introduction
                                        On receipt of the report from the enquiry officer, the SEBI
                                         shall consider the same and issue a show-cause notice as to
       Registration                      why the penalty as proposed by the enquiry officer should
                                         not be imposed.
       Obligations &                    The merchant banker shall within twenty-one days of the
       Responsibilities                  date of the receipt of the show- cause send a reply to the
       Procedure for                     SEBI.
       Inspection                       The SEBI after considering the reply to the show-cause
                                         notice, if received, shall as soon as possible but not later
       Procedure for Action              than thirty days from the receipt of the reply, if any, pass
       incase of Default                 such order as it deems fit.
                                        Every order passed shall be self- contained and give reasons
                                         for the conclusions stated therein including justification of
                                         the penalty imposed by that order.
                                        The SEBI shall send a copy of the order to the merchant
                                         banker.
Securities Exchange Board of india
(Merchant Bankers) Regulations, 1992           Procedure for Action in case of Default
                                                                  Suspension of Registration
       Introduction
                                                                 Cancellation of Registration
       Registration
                                                                Show-cause notice and order
       Obligations &
       Responsibilities                Effect of Suspension & Cancellation of Registration of
                                                                           Merchant Bankers
       Procedure for
       Inspection                                         Publication of Order of Suspension

       Procedure for Action
       incase of Default
Securities Exchange Board of india
(Merchant Bankers) Regulations, 1992                Procedure for Action in case of Default
                                                 Effect of Suspension & cancellation of Registration of
       Introduction                                                                 Merchant Bankers

       Registration                     On and from the date of the suspension of the merchant
                                         banker, he shall cease to carry on any activity as a
       Obligations &                     merchant banker during the period of suspension.
       Responsibilities
                                        On and from the date of cancellation the merchant banker
       Procedure for                     shall with immediate effect cease to carry on any activity
       Inspection                        as a merchant banker.
       Procedure for Action
       incase of Default
Securities Exchange Board of india
(Merchant Bankers) Regulations, 1992           Procedure for Action in case of Default
                                                                  Suspension of Registration
       Introduction
                                                                 Cancellation of Registration
       Registration
                                                               Show-cause notice and order
       Obligations &
       Responsibilities                Effect of Suspension & cancellation of Registration of
                                                                           Merchant Bankers
       Procedure for
       Inspection                                         Publication of Order of Suspension

       Procedure for Action
       incase of Default
Securities Exchange Board of india
(Merchant Bankers) Regulations, 1992                Procedure for Action in case of Default
                                                                    Publication of Order of Suspension
       Introduction

                                        The order of suspension or cancellation of certificate
       Registration
                                         passed shall be published in at least two daily newspapers
                                         by the SEBI.
       Obligations &
       Responsibilities                 Any person aggrieved by an order of the SEBI made, on
       Procedure for                     and after the commencement of the Securities Laws
       Inspection                        (Second amendment) Act, 1999, (i.e., after 16th December
                                         1999), under these regulations may prefer an appeal to a
       Procedure for Action              Securities Appellate Tribunal having jurisdiction in the
       incase of Default                 matter.
Thank You

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Merchant Bankers Regulations

  • 1. Securities Exchange Board of India (Merchant Bankers) Regulations, 1992 Prepared By: Amar Ranu (905) Deepak Thakkar (909) Kumar Dhananjay Rakesh (917) Shakti Shatpathy (930) Under Guidance of : Prof. Dr. Rachana Baid Indian Institute of Capital Markets
  • 2. Contents Introduction Registration Obligations & Responsibilities Procedure for Inspection Procedure for Action incase of Default
  • 3. Securities Exchange Board of India (Merchant Bankers) Regulations, 1992 Introduction Origination of Merchant Bankers in India Introduction Nature of Merchant Banking Registration Merchant Banker’s Core Business Portfolio Obligations & Responsibilities Need for Regulation Procedure for Definition Inspection Procedure for Action incase of Default
  • 4. Securities Exchange Board of India (Merchant Bankers) Regulations, 1992 Introduction Origination of Merchant Bankers in India Introduction Nature of Merchant Banking Registration Merchant Banker’s Core Business Portfolio Obligations & Responsibilities Need for Regulation Procedure for Definition Inspection Procedure for Action incase of Default
  • 5. Securities Exchange Board of India (Merchant Bankers) Regulations, 1992 Introduction Origination of Merchant Bankers in India Introduction  Merchant banking activity was formally initiated into the Indian capital Markets in 1967. Registration  Started with various services like management of capital issues, Obligations & production planning and system design to market research and management consulting services to meet the requirements of small Responsibilities and medium sector rather than large sector. Procedure for  Citibank Setup its merchant banking division in 1970. The various Inspection tasks performed by this divisions namely assisting new entrepreneur, evaluating new projects, raising funds through borrowing and issuing Procedure for Action equity. incase of Default  Indian banks Started banking Services as a part of multiple services they offer to their clients from 1972.  State bank of India started the merchant banking division in 1972. In the Initial years the SBI's objective was to render corporate advice And Assistance to small and medium entrepreneurs.
  • 6. Securities Exchange Board of India (Merchant Bankers) Regulations, 1992 Introduction Origination of Merchant Bankers in India Introduction Nature of Merchant Banking Registration Merchant Banker’s Core Business Portfolio Obligations & Responsibilities Need for Regulation Procedure for Definition Inspection Procedure for Action incase of Default
  • 7. Securities Exchange Board of India (Merchant Bankers) Regulations, 1992 Introduction Nature of Merchant Banking Introduction  The services of merchant bank cover project counseling, pre investment activities, feasibility studies, project reports, design of Registration capital structure, issue management, underwriting, loan syndication, mobilization of funds, foreign currency finance, mergers, Obligations & amalgamation, takeover, venture capital and public deposits. Responsibilities  Merchant banking is skill based activities and involves serving Procedure for financial need of every client. Inspection  The depth and sophistication in merchant banking business are improving since the avenues for raising funds are widening and Procedure for Action demands for funds is increasing. incase of Default  Merchant bankers can turn to any of the activities depending upon resources, such as capital, foreign tie-ups for overseas activities and skills.
  • 8. Securities Exchange Board of India (Merchant Bankers) Regulations, 1992 Introduction Origination of Merchant Bankers in India Introduction Nature of Merchant Banking Registration Merchant Banker’s Core Business Portfolio Obligations & Responsibilities Need for Regulation Procedure for Definition Inspection Procedure for Action incase of Default
  • 9. Securities Exchange Board of India (Merchant Bankers) Regulations, 1992 Introduction Merchant Banker’s Core Business Portfolio Introduction Core Business Portfolio Registration Non-fund Based Fund Based  Merchant Banking Services for Underwriting Obligations & Management of public offers of equity Responsibilities and debt instruments Market Making  Right issues Bought out deals Procedure for Proprietary investment and trading in  Open offer under the takeover code Inspection equities, bonds and derivatives.  Buyback offers Procedure for Action Advisory and Transaction services in incase of Default  Project financing  Syndicated loans  Private Equity/Venture capital  Business Advisory  Financial Restructuring  Corporate re-organisations such as mergers and demergers, hive-offs, asset sales, divestitures  Acquisition, strategic sale, buyouts and takeovers
  • 10. Securities Exchange Board of India (Merchant Bankers) Regulations, 1992 Introduction Origination of Merchant Bankers in India Introduction Nature of Merchant Banking Registration Merchant Banker’s Core Business Portfolio Obligations & Responsibilities Need for Regulation Procedure for Definition Inspection Procedure for Action incase of Default
  • 11. Securities Exchange Board of India (Merchant Bankers) Regulations, 1992 Introduction Need for Regulation Introduction Registration  The merchant banker's regulations, which regulate the raising of funds in the primary market, would assure for the issuer market for Obligations & raising resources at low cost, effectively and easily, ensure high Responsibilities degree of protection of investors interest. Procedure for  The regulations provide for the merchant bankers a dynamic and Inspection competitive market with the high standard of professional competence, dignity, integrity and solvency. Procedure for Action The regulations promote a primary market, which is fair, efficient, incase of Default and flexible, and inspire confidence.
  • 12. Securities Exchange Board of India (Merchant Bankers) Regulations, 1992 Introduction Origination of Merchant Bankers in India Introduction Nature of Merchant Banking Registration Merchant Banker’s Core Business Portfolio Obligations & Responsibilities Need for Regulation Procedure for Definition Inspection Procedure for Action incase of Default
  • 13. Securities Exchange Board of India (Merchant Bankers) Regulations, 1992 Introduction Definition Introduction Registration Obligations & quot;Any person who is engaged in the business of issue management Responsibilities either by making arrangements regarding selling, buying or subscribing to securities has manager, consultant, advisor or Procedure for rendering corporate advisory services in relation to such issue Inspection managementquot;. Procedure for Action incase of Default
  • 14. Securities Exchange Board of India (Merchant Bankers) Regulations, 1992 Registration of Merchant Bankers Categories of the Merchant Bankers Introduction Requirements for Granting of Certificate Registration Capital Adequacy Requirement Obligations & Responsibilities Procedure for Registration Procedure for Renewal of Certificate Inspection Procedure for Action incase of Default
  • 15. Securities Exchange Board of India (Merchant Bankers) Regulations, 1992 Registration of Merchant Bankers Categories of the Merchant Bankers Introduction Requirements for Granting of Certificate Registration Capital Adequacy Requirement Obligations & Responsibilities Procedure for Registration Procedure for Renewal of Certificate Inspection Procedure for Action incase of Default
  • 16. Securities Exchange Board of India (Merchant Bankers) Regulations, 1992 Registration of Merchant Bankers Categories of Merchant Bankers Introduction (a) Category I  to carry on any activity of the issue management, which will inter- Registration alia consist of preparation of prospectus and other information relating to the issue, determining financial structure, tie-up of Obligations & financiers and final allotment and refund of the subscription; and Responsibilities  to act as adviser, consultant, manager, underwriter, portfolio manager. Procedure for Inspection (b) Category II To act as adviser, consultant, co-manager, underwriter, portfolio Procedure for Action manager incase of Default (c) Category III To act as underwriter, adviser, consultant to an issue (d) Category IV To act only as adviser or consultant to an issue.
  • 17. Securities Exchange Board of India (Merchant Bankers) Regulations, 1992 Registration of Merchant Bankers Categories of the Merchant Bankers Introduction Requirements for Granting of Certificate Registration Capital Adequacy Requirement Obligations & Responsibilities Procedure for Registration Procedure for Renewal of Certificate Inspection Procedure for Action incase of Default
  • 18. Securities Exchange Board of India (Merchant Bankers) Regulations, 1992 Registration of Merchant Bankers Requirements for Granting of Certificate Introduction The Applicant . . . . Registration  shall be a body corporate other than a NBFC  has the necessary infrastructure to effectively discharge his Obligations & activities. Responsibilities  Should have minimum two experienced employees to conduct the Procedure for business of the merchant banker. Inspection  Should fulfill the capital adequacy requirement as specified. Procedure for Action  his partner, director or principal officer should not be involved in any incase of Default litigation connected with the securities market which has an adverse bearing on the business of the applicant.  his partner, director or principal officer has not at any time been convicted for any offence involving moral turpitude or has been found guilty of any economic offence.  Should have the professional qualification from an institution recognized by the Government in finance, law or business management.  Should be a fit and proper person.
  • 19. Securities Exchange Board of India (Merchant Bankers) Regulations, 1992 Registration of Merchant Bankers Categories of the Merchant Bankers Introduction Requirements for Granting of Certificate Registration Capital Adequacy Requirement Obligations & Responsibilities Procedure for Registration Procedure for Renewal of Certificate Inspection Procedure for Action incase of Default
  • 20. Securities Exchange Board of India (Merchant Bankers) Regulations, 1992 Registration of Merchant Bankers Capital Adequacy Requirements Introduction  The Capital Adequacy Requirement(CAR) shall not be less than the net worth of the person making the application for grant of Registration registration. Obligations &  The net worth shall be as follows, namely: - Category Minimum Amount Responsibilities 1) Category I Rs. 5, 00, 00, 000 Procedure for 2) Category II Rs. 50, 00, 000 3) Category III Rs. 20, 00, 000 Inspection 4) Category IV Nil Procedure for Action  Explanation: incase of Default For the purposes of this regulation quot;net worthquot; means in the case of an applicant which is a partnership firm or a body corporate, the value of the capital contributed to the business of such firm or the paid up capital of such body corporate plus free reserves as the case may be at the time of making application.
  • 21. Securities Exchange Board of India (Merchant Bankers) Regulations, 1992 Registration of Merchant Bankers Categories of the Merchant Bankers Introduction Requirements for Granting of Certificate Registration Capital Adequacy Requirement Obligations & Responsibilities Procedure for Registration Procedure for Renewal of Certificate Inspection Procedure for Action incase of Default
  • 22. Securities Exchange Board of India (Merchant Bankers) Regulations, 1992 Registration of Merchant Bankers Procedure for Registration Introduction  The SEBI on being satisfied that the applicant is eligible shall grant a certificate in Form B. Registration  On the grant of a certificate the applicant shall be liable to pay the Obligations & fees in accordance with Schedule II as shown below: Responsibilities Procedure for Registration Fees Inspection Merchant Initial Fees for 2 Continuation Banker Yrs Fees Procedure for Action Category I Rs. 2.5 Lakhs Rs. 1 Lakh incase of Default Category II Rs. 1 Lakh Rs. 50,000 Category III Rs. 1 Lakh Rs. 25,000 Category IV Rs. 5000 Rs. 1000
  • 23. Securities Exchange Board of India (Merchant Bankers) Regulations, 1992 Registration of Merchant Bankers Categories of the Merchant Bankers Introduction Requirements for Granting of Certificate Registration Capital Adequacy Requirement Obligations & Responsibilities Procedure for Registration Procedure for Renewal of Certificate Inspection Procedure for Action incase of Default
  • 24. Securities Exchange Board of India (Merchant Bankers) Regulations, 1992 Registration of Merchant Bankers Renewal of Certificate Introduction  Three months before expiry of the period of certificate, the merchant banker, may if he so desires, make an application for Registration renewal in Form A.  The application for renewal shall be dealt within the same manner Obligations & as if it were a fresh application for grant of a certificate. Responsibilities  The SEBI on being satisfied that the applicant is eligible for Procedure for renewal of certificate shall grant a certificate in Form B and send Inspection intimation to the applicant. Procedure for Action  On the grant of a certificate the applicant shall be liable to pay the incase of Default fees in accordance with Schedule II as shown below: Renewal Fees Merchant Initial Fees for 2 Continuation Banker Yrs Fees Category I Rs. 1 Lakh Rs. 20,000 Category II Rs. 75,000 Rs. 10,000 Category III Rs. 50,000 Rs. 5,000 Category IV Rs. 5000 Rs. 2500
  • 25. Securities Exchange Board of india (Merchant Bankers) Regulations, 1992 Obligations & Responsibilities Code of Conduct Introduction Maintenance of Books of Accounts, Records, etc. Registration Submission of Half Yearly Results Obligations & Responsibilities Appointment of Lead Merchant Bankers & Restrictions Procedure for Responsibilities of Lead Managers Inspection Underwriting Obligations Procedure for Action incase of Default Appointment of Compliance Officers
  • 26. Securities Exchange Board of india (Merchant Bankers) Regulations, 1992 Obligations & Responsibilities Code of Conduct Introduction Maintenance of Books of Accounts, Records, etc. Registration Submission of Half Yearly Results Obligations & Responsibilities Appointment of Lead Merchant Bankers & Restrictions Procedure for Responsibilities of Lead Managers Inspection Underwriting Obligations Procedure for Action incase of Default Appointment of Compliance Officers
  • 27. Securities Exchange Board of india (Merchant Bankers) Regulations, 1992 Obligations & Responsibilities Code of conduct Introduction  Every merchant banker shall abide by the Code of Conduct as specified in Schedule III. Registration  No merchant banker, other than a bank or a public Obligations & financial institution, who has been granted a certificate of Responsibilities registration under these regulations shall after June 30th, 1998 carry on any business other than that in the Procedure for securities market. Inspection Procedure for Action  A merchant banker who has been granted certificate of incase of Default registration to act as primary dealer by Reserve Bank of India, may carry on such business as may be permitted by Reserve Bank of India.
  • 28. Securities Exchange Board of india (Merchant Bankers) Regulations, 1992 Obligations & Responsibilities Code of Conduct Introduction Maintenance of Books of Accounts, Records, etc. Registration Submission of Half Yearly Results Obligations & Responsibilities Appointment of Lead Merchant Bankers & Restrictions Procedure for Responsibilities of Lead Managers Inspection Underwriting Obligations Procedure for Action incase of Default Appointment of Compliance Officers
  • 29. Securities Exchange Board of india (Merchant Bankers) Regulations, 1992 Obligations & Responsibilities Maintenance of Books of Accounts, Records, etc. Introduction  Every merchant banker shall keep and maintain the Registration following books of accounts, records and documents namely:- Obligations & (a) a copy of balance sheet and P&L account as at the end Responsibilities of each accounting period; (b) a copy of the auditor's report on the accounts for that Procedure for period; and Inspection (c) a statement of financial position. Procedure for Action  Every merchant banker shall intimate to the SEBI the place incase of Default where the books of accounts, records and documents are maintained.  Every merchant banker shall, after the end of each accounting period furnish to the SEBI copies of the balance sheet, profit and loss account and such other documents for any other preceding five accounting years when required by the SEBI.
  • 30. Securities Exchange Board of india (Merchant Bankers) Regulations, 1992 Obligations & Responsibilities Code of Conduct Introduction Maintenance of Books of Accounts, Records, etc. Registration Submission of Half Yearly Results Obligations & Responsibilities Appointment of Lead Merchant Bankers & Restrictions Procedure for Responsibilities of Lead Managers Inspection Underwriting Obligations Procedure for Action incase of Default Appointment of Compliance Officers
  • 31. Securities Exchange Board of india (Merchant Bankers) Regulations, 1992 Obligations & Responsibilities Submission of Half Yearly Results Introduction  Every merchant banker shall furnish to the SEBI half- Registration yearly unaudited financial results when required by the SEBI with a view to monitor the capital adequacy of the merchant banker. Obligations & Responsibilities Procedure for Inspection Procedure for Action incase of Default
  • 32. Securities Exchange Board of india (Merchant Bankers) Regulations, 1992 Obligations & Responsibilities Code of Conduct Introduction Maintenance of Books of Accounts, Records, etc. Registration Submission of Half Yearly Results Obligations & Responsibilities Appointment of Lead Merchant Bankers & Restrictions Procedure for Responsibilities of Lead Managers Inspection Underwriting Obligations Procedure for Action incase of Default Appointment of Compliance Officers
  • 33. Securities Exchange Board of india (Merchant Bankers) Regulations, 1992 Obligations & Responsibilities Appointment of Lead merchant Bankers Introduction  All issues should be managed by at least one merchant banker functioning as the lead merchant banker. Registration  Every lead merchant banker shall before taking up the assignment relating to an issue, enter into an agreement Obligations & with such body corporate setting out their mutual rights, Responsibilities liabilities and obligations relating to such issue and in particular to disclosures, allotment and refund. Procedure for Inspection Restriction on appointment of lead managers  The number of lead merchant bankers may not, exceed in Procedure for Action case of any issue of Size of issue No. of Merchant Bankers incase of Default (a) Less than rupees fifty crore - Two (2) (b) Rupees fifty crore but less than rupees one hundred crore - Three(3) (c) Rupees one hundred crore but less than rupees two hundred crore - Four (4) (d) Rupees two hundred crore but less than rupees four hundred crore - Five (5) (e) Above Rupees four hundred crore five or more as may be agreed by the SEBI
  • 34. Securities Exchange Board of india (Merchant Bankers) Regulations, 1992 Obligations & Responsibilities Code of Conduct Introduction Maintenance of Books of Accounts, Records, etc. Registration Submission of Half Yearly Results Obligations & Responsibilities Appointment of Lead Merchant Bankers & Restrictions Procedure for Responsibilities of Lead Managers Inspection Underwriting Obligations Procedure for Action incase of Default Appointment of Compliance Officers
  • 35. Securities Exchange Board of india (Merchant Bankers) Regulations, 1992 Obligations & Responsibilities Responsibilities of Lead Managers Introduction  No lead manager shall agree to manage or be associated with any issue unless his responsibilities relating to the Registration issue mainly, those of disclosures, allotment and refund are clearly defined, allocated and determined and a Obligations & statement specifying such responsibilities is furnished to Responsibilities the SEBI at least one month before the opening of the issue for subscription: Procedure for Inspection  Incase there are more than one lead merchant bankers, the responsibilities should be clearly demarcated . Procedure for Action incase of Default  No lead merchant banker shall, agree to manage the issue made by any body corporate, if such body corporate is an associate of the lead merchant banker.
  • 36. Securities Exchange Board of india (Merchant Bankers) Regulations, 1992 Obligations & Responsibilities Code of Conduct Introduction Maintenance of Books of Accounts, Records, etc. Registration Submission of Half Yearly Results Obligations & Responsibilities Appointment of Lead Merchant Bankers & Restrictions Procedure for Responsibilities of Lead Managers Inspection Underwriting Obligations Procedure for Action incase of Default Appointment of Compliance Officers
  • 37. Securities Exchange Board of india (Merchant Bankers) Regulations, 1992 Obligations & Responsibilities Underwriting Obligations Introduction  In respect of every issue to be managed, the lead merchant banker holding a certificate under Category I shall accept a Registration minimum Underwriting obligation of five percent of the total underwriting commitment or rupees twenty-five lakh, whichever Obligations & is less. Responsibilities  Incase the lead merchant banker is unable to accept the Procedure for minimum underwriting obligation, that lead merchant banker shall make arrangement for having the issue underwritten to that Inspection extent by a merchant banker associated with the issue and shall keep the SEBI informed of such arrangement. Procedure for Action incase of Default
  • 38. Securities Exchange Board of india (Merchant Bankers) Regulations, 1992 Obligations & Responsibilities Code of Conduct Introduction Maintenance of Books of Accounts, Records, etc. Registration Submission of Half Yearly Results Obligations & Responsibilities Appointment of Lead Merchant Bankers & Restrictions Procedure for Responsibilities of Lead Managers Inspection Underwriting Obligations Procedure for Action incase of Default Appointment of Compliance Officers
  • 39. Securities Exchange Board of india (Merchant Bankers) Regulations, 1992 Obligations & Responsibilities Appointment of Compliance Officers Introduction  Every merchant banker shall appoint a compliance officer who shall be responsible for monitoring the compliance of Registration the Act, rules and regulations, notifications, guidelines, instructions etc., issued by the SEBI or the Central Obligations & Government and for redressal of investors’ grievances. Responsibilities  The compliance officer shall immediately and independently Procedure for report to the SEBI any non-compliance observed by him and Inspection ensure that the observations made or deficiencies pointed Procedure for Action out by the SEBI in the draft prospectus or the Letter of offer incase of Default as the case may be, do not recur.
  • 40. Securities Exchange Board of India (Merchant Bankers) Regulations, 1992 Procedure for Inspection SEBI’s right to inspect Introduction Notice before inspection Registration Submission of Reports to the SEBI Obligations & Responsibilities Appointment of Auditors Procedure for Inspection Procedure for Action incase of Default
  • 41. Securities Exchange Board of India (Merchant Bankers) Regulations, 1992 Procedure for Inspection SEBI’s right to inspect Introduction Notice before inspection Registration Submission of Reports to the SEBI Obligations & Responsibilities Appointment of Auditors Procedure for Inspection Procedure for Action incase of Default
  • 42. Securities Exchange Board of India (Merchant Bankers) Regulations, 1992 Procedure for Inspection SEBIs right to Inspect Introduction  The SEBI may appoint one or more persons as inspecting authority to undertake inspection of Registration  the books of accounts,  records and Obligations &  documents of the merchant banker. Responsibilities  Purpose of Inspection . . . Procedure for Inspection  to ensure that the books of account are being maintained in the manner required; Procedure for Action incase of Default  to ensure the provisions of the Act, rules, regulations are being complied with;  to investigate into the complaints received from investors, other merchant bankers or any other person on any matter having a bearing on the activities of the merchant banker; and  to investigate suo-moto in the interest of securities business or investors interest into the affairs of the merchant banker.
  • 43. Securities Exchange Board of India (Merchant Bankers) Regulations, 1992 Procedure for Inspection SEBI’s right to inspect Introduction Notice before inspection Registration Submission of Reports to the SEBI Obligations & Responsibilities Appointment of Auditors Procedure for Inspection Procedure for Action incase of Default
  • 44. Securities Exchange Board of India (Merchant Bankers) Regulations, 1992 Procedure for Inspection Notice before Inspection Introduction  Before undertaking an inspection under regulation 29 the SEBI shall give a reasonable notice to the merchant banker for that Registration purpose.  During the course of inspection, the merchant banker against Obligations & whom an inspection is being carried out shall be bound to Responsibilities discharge his obligations. Procedure for Inspection Procedure for Action incase of Default
  • 45. Securities Exchange Board of India (Merchant Bankers) Regulations, 1992 Procedure for Inspection SEBI’s right to inspect Introduction Notice before inspection Registration Submission of Reports to the SEBI Obligations & Responsibilities Appointment of Auditors Procedure for Inspection Procedure for Action incase of Default
  • 46. Securities Exchange Board of India (Merchant Bankers) Regulations, 1992 Procedure for Inspection Submission of Reports to the SEBI Introduction  The inspecting authority shall, as soon as may be possible submit an inspection report to the SEBI. Registration Obligations & Action on inspection or investigation report Responsibilities  The SEBI or the Chairman shall after consideration of Procedure for inspection or investigation report take such action as the Inspection SEBI or Chairman may deem fit and appropriate including action under the Securities and Exchange Board of India. Procedure for Action incase of Default
  • 47. Securities Exchange Board of India (Merchant Bankers) Regulations, 1992 Procedure for Inspection SEBI’s right to inspect Introduction Notice before inspection Registration Submission of Reports to the SEBI Obligations & Responsibilities Appointment of Auditors Procedure for Inspection Procedure for Action incase of Default
  • 48. Securities Exchange Board of India (Merchant Bankers) Regulations, 1992 Procedure for Inspection Appointment of Auditors Introduction  The SEBI may appoint a qualified auditor to investigate Registration into the books of account or the affairs of the merchant banker provided that the auditor so appointed shall have the same powers of the inspecting authority Obligations & Responsibilities Procedure for Inspection Procedure for Action incase of Default
  • 49. Securities Exchange Board of india (Merchant Bankers) Regulations, 1992 Procedure for Action in case of Default Suspension of Registration Introduction Cancellation of Registration Registration Show-cause notice and order Obligations & Responsibilities Effect of Suspension & cancellation of Registration of Merchant Bankers Procedure for Inspection Publication of Order of Suspension Procedure for Action incase of Default
  • 50. Securities Exchange Board of india (Merchant Bankers) Regulations, 1992 Procedure for Action in case of Default Suspension of Registration Introduction Cancellation of Registration Registration Show-cause notice and order Obligations & Responsibilities Effect of Suspension & cancellation of Registration of Merchant Bankers Procedure for Inspection Publication of Order of Suspension Procedure for Action incase of Default
  • 51. Securities Exchange Board of india (Merchant Bankers) Regulations, 1992 Procedure for Action in case of Default Suspension of Registration Introduction A penalty of suspension of registration of a merchant banker may be imposed where –  The merchant banker violates the provisions of the Act, rules or Registration regulations;  The merchant banker – Obligations & (a) fails to furnish any information relating to his activity as Responsibilities merchant banker as required by the SEBI; Procedure for (b) furnishes wrong or false information; Inspection (c) does not submit periodical returns as required by the SEBI. (d) does not co-operate in any enquiry conducted by the SEBI. Procedure for Action incase of Default  The merchant banker fails to resolve the complaints of the investors or fails to give a satisfactory reply to the SEBI in this behalf;  The merchant banker indulges in manipulating or price rigging or cornering activities;  The merchant banker fails to maintain the capital adequacy requirement;  The merchant banker fails to pay the fees;  The merchant banker violates the conditions of registration;  The merchant banker does not carry out his obligations as specified in the regulation.
  • 52. Securities Exchange Board of india (Merchant Bankers) Regulations, 1992 Procedure for Action in case of Default Suspension of Registration Introduction Cancellation of Registration Registration Show-cause notice and order Obligations & Responsibilities Effect of Suspension & cancellation of Registration of Merchant Bankers Procedure for Inspection Publication of Order of Suspension Procedure for Action incase of Default
  • 53. Securities Exchange Board of india (Merchant Bankers) Regulations, 1992 Procedure for Action in case of Default Cancellation of Registration Introduction A penalty of cancellation of registration of a merchant banker may be imposed if Registration The merchant banker indulges in deliberate manipulation or price rigging or cornering activities affecting the securities Obligations & market and the investors interest; Responsibilities Procedure for The financial position of the merchant banker deteriorates to Inspection such an extent that the SEBI is of the opinion that his continuance as merchant banker is not in the interest of Procedure for Action investors; incase of Default The merchant banker is guilty of fraud, or is convicted of a criminal offence;
  • 54. Securities Exchange Board of india (Merchant Bankers) Regulations, 1992 Procedure for Action in case of Default Suspension of Registration Introduction Cancellation of Registration Registration Show-cause notice and order Obligations & Responsibilities Effect of Suspension & cancellation of Registration of Merchant Bankers Procedure for Inspection Publication of Order of Suspension Procedure for Action incase of Default
  • 55. Securities Exchange Board of india (Merchant Bankers) Regulations, 1992 Procedure for Action in case of Default Show-cause notice and order Introduction  On receipt of the report from the enquiry officer, the SEBI shall consider the same and issue a show-cause notice as to Registration why the penalty as proposed by the enquiry officer should not be imposed. Obligations &  The merchant banker shall within twenty-one days of the Responsibilities date of the receipt of the show- cause send a reply to the Procedure for SEBI. Inspection  The SEBI after considering the reply to the show-cause notice, if received, shall as soon as possible but not later Procedure for Action than thirty days from the receipt of the reply, if any, pass incase of Default such order as it deems fit.  Every order passed shall be self- contained and give reasons for the conclusions stated therein including justification of the penalty imposed by that order.  The SEBI shall send a copy of the order to the merchant banker.
  • 56. Securities Exchange Board of india (Merchant Bankers) Regulations, 1992 Procedure for Action in case of Default Suspension of Registration Introduction Cancellation of Registration Registration Show-cause notice and order Obligations & Responsibilities Effect of Suspension & Cancellation of Registration of Merchant Bankers Procedure for Inspection Publication of Order of Suspension Procedure for Action incase of Default
  • 57. Securities Exchange Board of india (Merchant Bankers) Regulations, 1992 Procedure for Action in case of Default Effect of Suspension & cancellation of Registration of Introduction Merchant Bankers Registration  On and from the date of the suspension of the merchant banker, he shall cease to carry on any activity as a Obligations & merchant banker during the period of suspension. Responsibilities  On and from the date of cancellation the merchant banker Procedure for shall with immediate effect cease to carry on any activity Inspection as a merchant banker. Procedure for Action incase of Default
  • 58. Securities Exchange Board of india (Merchant Bankers) Regulations, 1992 Procedure for Action in case of Default Suspension of Registration Introduction Cancellation of Registration Registration Show-cause notice and order Obligations & Responsibilities Effect of Suspension & cancellation of Registration of Merchant Bankers Procedure for Inspection Publication of Order of Suspension Procedure for Action incase of Default
  • 59. Securities Exchange Board of india (Merchant Bankers) Regulations, 1992 Procedure for Action in case of Default Publication of Order of Suspension Introduction  The order of suspension or cancellation of certificate Registration passed shall be published in at least two daily newspapers by the SEBI. Obligations & Responsibilities  Any person aggrieved by an order of the SEBI made, on Procedure for and after the commencement of the Securities Laws Inspection (Second amendment) Act, 1999, (i.e., after 16th December 1999), under these regulations may prefer an appeal to a Procedure for Action Securities Appellate Tribunal having jurisdiction in the incase of Default matter.

Editor's Notes

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