(1) Merchant banking originated in the 13th century when traders financed wars and trades as bankers to European kings. (2) Modern merchant bankers advise companies on capital structure, pricing, and managing public offerings. (3) The SEBI Regulations provide the code of conduct for merchant bankers, requiring integrity and protecting investors and clients.

1. Financial Markets and Services -
Kiran Bindu
Merchant
Banking

2. Financial Markets and Services -
Kiran Bindu
Origin of Merchant Banking
13th Century merchant bankers were traders of
commodities and acted as bankers to the kings
of European states.
They Financed the continental wars and
coastal trades.
They lent their names to lesser known traders
by accepting bills through which they
guaranteed that the holder of the bill would
receive full payment.

3. Financial Markets and Services -
Kiran Bindu
Managers to the issue or Merchant
Bankers
Advise on the capital structure, instrument of
issue.
Pricing
Assessing and appraisal of project report.
Appointment of bankers, underwriters,
brokers, registrars, printers and advertisement
agents.
Holding brokers-Underwriters,

4. Financial Markets and Services -
Kiran Bindu
Press and investor conferences.
Deciding the pattern of advertisement.
Deciding the collection branches where
application can be received or collected.
Deciding on the dates of opening and
closing of the subscription list.
Obtain daily report of the applications and
amounts collected at branches.

5. Financial Markets and Services -
Kiran Bindu
Obtaining subscription to the issue.
Obtain consent of the Stock Exchange and
get basis of allotment approved.
Looking at the above roles of the MB a
company should choose one after a lot of
research into his integrity, expertise,
competence.

6. Financial Markets and Services -
Kiran Bindu
Factors to select a MB
Ethics and integrity.
Reputation.
Trained & committed manpower.
Concern & interest of clients.
Liaison and networking.
Relationship & Contacts.
Infrastructure.
Past performance.

7. Financial Markets and Services -
Kiran Bindu
Factors to select a client.
Track record of the company.
Track record of the promoters.
Professional management.
Financial strength of the promoters and the
company.
Economic viability of the project.

8. Financial Markets and Services -
Kiran Bindu
Prime Objectives of MB
Providing long term funds to the projects or
companies.
Project counseling- loan syndication, project
appraisal and arrangement of Working
capital.
Deciding the capital structure.
Portfolio Management
Underwriting
Corporate advisory & issue mgmt.

9. Financial Markets and Services -
Kiran Bindu
Emerging Areas.
Private placements with NRI’s and FII’s.
Brought out deals.
Market Making
OTC
NSE
Forex
Financial engineering- M&A’s, capital
restructuring.

10. Financial Markets and Services -
Kiran Bindu
SEBI (MB) Regulations, 1992
Code of Conduct for MB
Observe high standards of integrity and
fairness in all his dealings.
Render high standard of service, exercise
due diligence, proper care, exercise
independent judgment & disclose conflict
of interest while providing unbiased
service.

11. Financial Markets and Services -
Kiran Bindu
Code of conduct continued……..
Not make any statement or become privy
to any act, practice or unfair competition,
likely to harm the interest of other MB or
is likely to place such other MB in a
disadvantageous position in relation to the
MB, while competing for or executing any
assignment. (Harmful statement while
solicitation & execution)

12. Financial Markets and Services -
Kiran Bindu
Not make exaggerated statements, written or
oral, to the client either about the qualification
or the capability to render certain services or
his achievements in regard to services rendered
to other clients.
Render best possible advice to the client
having regard to the clients needs and the
environment and his own professional skill;
Ensure that all professional dealings are
effected in a prompt, efficient and cost
effective manner.

13. Financial Markets and Services -
Kiran Bindu
A MB shall not divulge to other clients, press or
any other party any confidential information
about his client, which has come to his
knowledge.
Deal in securities of the client company without
making disclosure to the board as required under
the regulation and also to the Board of Directors
of the client company.
Provide investors with true and adequate
information without making any misguiding or

14. Financial Markets and Services -
Kiran Bindu
 exaggerated claims and are aware of
attendant risks before any investment
decisions are made.
 Ensure copies of prospectus,
memorandum and related literature are
made available to investors.
Fair allotment of securities and refund of
application money without delay.
Investor complaints are adequately dealt
with.

15. Financial Markets and Services -
Kiran Bindu
• The MB shall not generally and particularly in
respect of issue of any securities be party to
Creation of false market
Price rigging or manipulation
Passing of price sensitive information or take
any other action which is unethical or unfair
to the investors.
A MB shall abide by the provisions of the
Act, rules and regulations which may be
applicable and relevant to the activities
carried on by the merchant banker.

16. Financial Markets and Services -
Kiran Bindu
Non-Compliance and Defaults.
Type 1 General Defaults.
Type 2 Minor Defaults.
Type 3 Major Defaults.
Type 4 Serious Defaults.

17. Financial Markets and Services -
Kiran Bindu
SEBI (MB) Regulations 1992
Chapter I –Preliminary
Chapter II – Registration of MB
Chapter III – General Obligations and
Responsibilities.
Chapter IV – Procedure for Inspection.
Chapter V – Procedure for Action in case of
Default.

18. Financial Markets and Services -
Kiran Bindu
Schedule – 1 Forms
Form A – Application for Grant of
Certificate/Renewal of Certificate.
Form B – Certificate of Registration.
Form C – Due diligence certificate.

19. Financial Markets and Services -
Kiran Bindu
• Schedule 2 – Fees
• Schedule 3 – Code for Merchant Bankers.

20. Financial Markets and Services -
Kiran Bindu
Qualities of a good MB
Leadership
Aggressive action
Co-operative and friendliness
Contacts
Attitude towards problem solving
Inquisitiveness for new skills, information
and knowledge