India
IPO marketing in India has some unique features. IPOs here target retail investors, while abroad it is institutional investors who put in their money. The noise levels are predictably higher in India because of this.
Almost 35% of the size of an issue, incidentally, is reserved for retail investors. However, institutional investors play a bigger role in IPOs today than they did in the 90s, when the retail investor was king. Earlier, issues were at par and the retail investors and institutional used to participate on equal terms. Today, issues are sold at a substantial premium to face value, and the target is no longer just the retail investor. The focus has shifted from a retail to an institutional market today. Subsequently, the role of an agency has also changed over time.
Still, important role is played by specialist IPO agencies working in tandem with companies looking to go to the market. These specialists are given the communication mandate, right from corporate advertising to public relations, stretching for about two-three months. Merchant bankers involved with IPOs recommend a list of agencies to their clients, who then decide on the latter based on experience and merit. The trend at the moment is to consolidate the entire communication portfolio with a single agency as there is synergy in the message going out to various stakeholders including retail as well as institutional investors.
Besides Concept, a clutch of agencies including Adfactors, Pressman and Sobhagya, are key players in the IPO communication business valued at about Rs 250 crore. The overall financial communication business, for the record, of which IPO communication is a part, is about Rs 1,500 crore, say observers.
IPO marketing commences almost three to four weeks before the draft red herring prospectus (DRHP) of the company is filed with Sebi. The process begins with the release of corporate ads, which continues well after the DRHP is filed. In fact, corporate advertising is permitted for a period of 21 days after the filing of the DRHP. Once the draft red herring prospectus is cleared and the date for the issue is finalised the company is debarred from making any “futuristic statements”.
Hence, the first phase is critical because the company can send an unrestricted message to prospective investors As such, the overall communication package involves media and investor relations, liaising with fund managers, brokers and analysts. Roadshows, in particular, are undertaken by corporates to build interest and intrigue for the IPO. Target centres hve to be identified for roadshows.
Typically, IPO roadshows cover all the metros in the country. However, if the company is keen to target small investors then a visit to smaller towns and cities is not ruled out either. Unlike in the 90s, when corporate advertising was permitted right up to the launch of the issue with merely a few days gap between the issue-opening date and the close of the campaign, today, it is largely PR that calls the shots.
For selection of an agency, what is most important is that an agency should be able to understand all the statutory requirements and compliance norms. It should be able to deliver results under tight deadlines and schedules. So it must have the full knowledge beforehand.
Most issuers these days do corporate advertising only if the size of the issue is large or they have goals beyond the current offering.
The cost and complexity of media options has increased and small issuers can’t afford a pan-India image build-up.
The estimates for ad spends are that the spends on IPOs vary between 0.5 and 1% of the issue size. Agencies could either charge a flat fee for the entire package or a 15% commission for ads issued and additional fees for services rendered.
The companies and the advertising agency has to try and merge the short-term objectives of the IPO with the long-term growth story of the company. How well they do it determines the return on investment in IPO advertising.
References
http://www.financialexpress.com/old/fe_full_story.php?content_id=132915
financial express, net edition, Thursday, July 06, 2006
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USA 2000
IPO as spends
A study of 12 successful companies with successful IPOs seemed to split into two distinct groups: firms that spent more than $2 million on advertising before and during the IPO, and those that parted with less than $750,000.
All of the companies either initiated or bulked up ad expenditures just before the offering. But some of them, including Drugstore.com and Priceline.com, spent significantly more than others. This group spent from $2 million to upward of $8 million on advertising in the three-month period before and including the offering. After the IPO, ad money from these big spenders tended to taper off - with the exception of iVillage, which launched into an escalating ad campaign.
Another set of companies followed a different path, spending less than $1 million on advertising before the IPO. These companies, including MarketWatch.com and TheStreet.com, had modest ad expenditures before their IPOs, and gradually increased spending after going public. One exception was NetZero, whose post-IPO ad expenditures went through the roof.
Clearly, high spending wasn't a prerequisite for a successful IPO. Foundry Networks, the only b-to-b play on the list, soared with minimal ad money.
While certain companies did not spend on Large pre-IPO ad spending, Ask Jeeves spent almost 12 percent of the eventual amount raised by its IPO on ads before and during its offering.
Advertising For The IPO
http://theindustrystandard.com/article/0,1902,13013,00.html
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Monday, December 24, 2007
Sunday, December 23, 2007
India SEBI UNDERWRITERS - RULES - 1
MINISTRY OF FINANCE
(DEPARTMENT OF ECONOMIC AFFAIRS)
NOTIFICATION
NEW DELHI 8TH OCTOBER 1993
SECURITIES AND EXCHANGE BOARD OF INDIA
(UNDERWRITERS) RULES, 1993
S O 766 (E) In exercise of the powers conferred by section 29 of the Securities and Exchange Board of India, Act 1992, (15 of 1992) the Central Government hereby makes the following regulations, namely:-
Short title and commencement
1. (1) These regulations may be called the Securities and Exchange Board of India (Underwriters) Rules, 1993.
(2) They shall come into force on the date of their publication in the Official Gazette.
Definitions
2. In these regulations, unless the context otherwise requires -
(a) "Act" means the Securities and Exchange Board of India, Act 1992 (15 of 1992);
(b) "body corporate" means a body corporate as defined in clause (7) of section 2 of the Companies Act, 1956 (1 of 1956);
(c) "certificate" means a certificate of registration granted or renewed by the Board under the regulations;
(d) "issue" means an offer of sale of securities by any body corporate or by any other person or group of persons on its or his or their behalf, as the case may be, to the public or the holders of securities of such body corporate or person or group of persons;
(e) "regulations" means the Securities and Exchange Board of India (Underwriters) Regulations 1993;
(f) "underwriter" means a person, who engages in the business of underwriting of an issue of securities of a body corporate;
(g) "underwriting" means an agreement with or without conditions to subscribe to the securities of a body corporate when the existing shareholders of such body corporate or the public do not subscribe to the securities offered to them.
Not to act as underwriter without certificate
3. (1) No person shall act as underwriter unless he holds a certificate granted by the Board under the regulations
Provided that such person, who was engaged as underwriter prior to the coming into force of the Act, may continue to carry on activity as underwriter if he has made an application for such registration under the proviso to sub-section (1) of Section 12 of the Act till the disposal of such application
(2) Notwithstanding anything contained in sub-rule (1), every stock broker or merchant banker holding a valid certificate of registration under Section 12 of the Act, shall be entitled to act as an underwriter without obtaining a separate certificate for underwriting activities which shall be governed by these rules and regulations.
Conditions for grant or renewal of certificate to underwriter
4. The Board may grant or renew a certificate to an underwriter subject to the following conditions namely;
(a) in case of any change in the status and constitution, the underwriter shall obtain prior permission of the Board to continue to act as underwriter;
(b) without prejudice to the obligations under any other, the underwriter shall enter into a valid agreement with the body corporate on whose behalf he is acting as underwriter and the said agreement amongst other things may define the allocation of duties and responsibilities between him and such body corporate and;
(c) he shall pay the amount of fees of registration in the manner provided in the regulations;
(d) he shall abide by the rules and regulations made under the Act in respect of the activities carried on by him as an underwriter.
Period of validity of the certificate
5. The certificate of registration or its renewal, as the case may be, shall be valid for a period of three years from the date of its issue to the underwriter.
SECURITIES AND EXCHANGE BOARD OF INDIA (UNDERWRITERS)
REGULATIONS 1993
CHAPTER I
PRELIMINARY
Short title and commencement
1. (1) These regulations may be called the Securities and Exchange Board of India (Underwriters) Regulations, 1993.
(2) They shall come into force on the date of their publication in the Official Gazette.
Definitions
2. (1) In these regulations, unless the context otherwise requires :-
(a) "enquiry officer" means any officer of the Board, or any other person, having experience in dealing with the problems relating to the securities market, who is appointed by the Board under Chapter V;
(b) "form" means a form specified in Schedule I;
(c) "inspecting authority" means one or more persons appointed by the Board to exercise powers conferred under Chapter IV;
(d) "principal officer" means, -
(i) in relation to a proprietary concern, the proprietor himself;
(ii) in relation to a firm or an association of persons or any body of individuals or a body corporate, a secretary, treasurer, partner, manager or director of the firm, association, or body corporate;
(iii) any person connected with the management or administration of the firm, association or the body corporate upon whom the Board has served a notice of its intention of treating him as the principal officer thereof;
(e) regulations" means Securities and Exchange Board of India (Underwriters) Regulations, 1993;
(f) rules" means Securities and Exchange Board of India (Underwriters) Rules 1993;
(2) All other words and expressions used in these regulations but not defined, and defined in the Act and the rules shall have the same meanings respectively assigned to them in the Act or the rules, as the case may be.
CHAPTER II
REGISTRATION OF UNDERWRITERS
Application for grant of certificate
3. (1) An application by an underwriter for grant of a certificate shall be made to the Board in form A.
(2) Notwithstanding anything contained in sub-regulation (1), any application made by an underwriter prior to coming into force of these regulations containing such particulars or as near thereto as mentioned in form A shall be treated as an application made in pursuance of sub-regulation (1) and dealt with accordingly.
Furnishing of further information, clarification, etc.
4. (1) The Board may require the applicant to furnish further information or clarification regarding matters relevant to underwriting to consider the application for grant of a certificate.
1*[(2) If the Board, on receipt of further information, is of the opinion that the information so furnished is not sufficient to decide on the application and seeking further information through correspondence is likely to delay the matter, it may require the applicant or its principal officer to appear before the Board in order to give an opportunity to the applicant to give further clarifications on the application made under Regulation 3].
Application to conform to the requirements -
5. Subject to the provisions of sub-regulation (2) of regulation 3 , any application, which is not complete in all respects and does not conform to the instructions specified in the form, shall be rejected:
Provided that, before rejecting any such application, the applicant shall be given an opportunity to remove within 2*[one month] such objections as may be indicated by the Board.
3*[Provided further that the Board may, on sufficient reasons being shown extend the time by another one month in order to enable the applicant to comply with the requirements of the Board].
Consideration of application
6. The Board shall take into account for considering the grant of a certificate, all matters which are relevant to or relating to underwriting and in particular the following, namely, whether the applicant -
(a) has the necessary infrastructure like adequate office space, equipments, and manpower to effectively discharge his activities;
(b) has any past experience in underwriting or has in his employment minimum two persons who had the experience in underwriting;
(c) or any person, directly or indirectly connected with the applicant has not been granted registration by the Board under the Act;
4*[Explanation :- For the purposes of this clause the Board shall take into account whether a previous application for a certificate of any person directly or indirectly connected with the applicant has been rejected by the Board or any disciplinary action has been taken against such person under the Act or any of the Rules or any of the Regulations made under the Act]
(d) fulfils the capital adequacy requirements specified in regulation 7 ;
(e) or any of its director, partner or principal officer is or has at any time been convicted for any offence involving moral turpitude or has been found guilty of any economic offence.
5*[(f) is a fit and proper person."]
Capital Adequacy Requirement
7. (1) The capital adequacy requirement referred to in sub- regulation (d) of regulation 6 shall not be less than the networth of rupees twenty lakhs;
(2) Notwithstanding anything contained in sub-regulation (1),-
(a) every stock broker, who acts as an underwriter shall fulfil the capital adequacy requirements specified by the stock exchange of which he is a member;
(b) every merchant banker, who acts as an underwriter shall fulfil the capital adequacy requirements specified in regulation 7 of the Securities and Exchange Board of India (Merchant Banker) Regulations 1992.
Explanation: For the purposes of this regulation, "networth" means -
(a) in the case of an applicant being a proprietary concern or a firm or an association of persons or any body of individuals, the value of capital contributed to such business by the applicant and the free reserves of any kind belonging to the business of the applicant; and
(b) in the case of a body corporate, the value of the paid- up capital and the free reserves as disclosed in the books of accounts of the applicant at the time of making the application under sub-regulation (1) of regulation 3 .
Procedure for registration
8. The Board on being satisfied that the applicant is eligible, shall send an intimation 6*[within one month of such satisfaction] of the applicant mentioning that he has been found eligible for the grant of certificate and grant a certificate in form B subject to payment of fees as specified in regulation 12 .
Renewal of certificate
9. (1) An underwriter may, if he so desires, make an application in form A for renewal of certificate before three months of the expiry of the period of certificate.
(2) The application for renewal of certificate under sub-regulation (1) shall be dealt with in the same manner as if it were an application for grant of a certificate made under regulation 3.
Procedure where registration is not granted
10. (1) Where an application for grant of a certificate under regulation 3 or of renewal under regulation 9 does not fulfil the requirements set out in regulation 6 , the Board may reject the application, after giving an opportunity of being heard.
(2) 7*[The decision shall be communicated by the Board within thirty days of such decision stating therein the grounds on which the application has been rejected].
(3) Any applicant may, being aggrieved by the decision of the Board under sub-regulation (2), apply within a period of thirty days from the date of receipt of such intimation, to the Board for reconsideration of its decision.
(4) On receipt of the application made under sub-regulation (3), the Board shall reconsider its decision and communicate its findings thereon as soon as possible in writing to the applicant.
Effect of refusal to grant or renew certificate
11. Any underwriter whose application for grant or renewal of a certificate has been refused by the Board shall on and from the date of the receipt of the communication under sub - regulation (2) of regulation 10 cease to act as an underwriter.
8*[Provided that if the Board is satisfied that it is in the interest of the investors, it may permit the underwriter to undertake the underwriting commitments already entered into by him during the validity period of the certificate.]
Payment of fees and the consequences of failure to pay fees
12. (1) Every applicant eligible for grant or renewal of a certificate shall pay fees in such manner and within the period specified in Schedule II:
9*[***]
Provided 10*[***] that a stock broker or a merchant banker who, has been granted a certificate under Section 12 of the Act and pays fees under the Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992 or Securities and Exchange Board of India (Merchant Bankers) Regulations 1992, shall not be required to pay fees under sub- regulation (1).
(2) Where an underwriter fails to pay the fees as provided in sub- regulation (1), the Board may suspend the certificate, whereupon the underwriter shall forthwith cease to act as an underwriter.
--------------------------------------------------------------------------------
1. Substituted for "The applicant or, its principal officer shall, if so required, appear before the Board for personal representation. Application to conform to the requirements" by Securities and Exchange Board of India (Underwriters) Amendment Regulations 1997 vide notification No . S.O.46(E) dated 17th January 1997 .
2. Substituted for "the time specified" by Securities and Exchange Board of India Amendment Regulations 1997 vide Notification No. S.O.46(E) dated 17th January, 1997.
3. Inserted by Securities and Exchange Board of India (Underwriters) Amendment Regulations, 1997 vide Notification No. S.O.46 (E) dated January 17, 1997.
4. Substituted for "The applicant or, its principal officer shall, if so required, appear before the Board for personal representation. Application to conform to the requirements" by Securities and Exchange Board of India (Underwriters) Amendment Regulations 1997 vide notification No . S.O.46(E) dated 17th January 1997 .
5. Inserted by SEBI (underwriters) Amendment Regulations, 1998 w.e.f. 5-1-1998
6. Inserted by Securities and Exchange Board of India (Underwriters) Amendment Regulations, 1997 vide Notification No. S.O.46 (E) dated January 17, 1997.
7. Substituted for, " The refusal to grant or renew the certificate shall be communicated by the Board within thirty days of such refusal to the applicant stating therein the grounds on which the application has been rejected" by Securities and Exchange Board of India (Underwriters) Amendment Regulations 1997 vide Notification No. S.O.46(E) dated 17th January, 1997.
8. Inserted by Securities and Exchange Board of India (Underwriters) Amendment Regulations, 1997 vide Notification No. S.O.46 (E) dated January 17, 1997.
9. The proviso "Provided that the Board may on sufficient cause being shown permit the underwriter to pay such fees at any time before the expiry of six months from the date on which such fees become due;" omitted by SEBI (Underwriters) Amendment Regulations, 1997 vide Notification No. S.O.46 (E) dated January 17, 1997.
10. The word "further" omitted by SEBI (Underwriters) Amendment Regulations, 1997 vide Notification No. S.O.46 (E) dated January 17, 1997.
CHAPTER III
GENERAL OBLIGATIONS AND RESPONSIBILITIES
To abide by the Code of Conduct
13. Every underwriter shall at all times abide by the Code of Conduct as specified in Schedule III.
Agreement with clients
14. Every underwriter shall enter into an agreement referred to in clause (b) of rule 4 with each body corporate on whose behalf he is acting as underwriter and the said agreement shall, amongst other things, provide for the following, namely :-
(i) the period for which the agreement shall be in force;
(ii) the amount of underwriting obligations;
(iii) the period, within which the underwriter has to subscribe to the issue after being intimated by or on behalf of such body corporate;
(iv) the amount of commission or brokerage payable to the underwriter;
(v) details of arrangements, if any, made by the underwriter for fulfilling the underwriting obligations.
General responsibilities of an underwriter
15. (1) The underwriter shall not derive any direct or indirect benefit from underwriting the issue other than the commission or brokerage payable under an agreement for underwriting.
(2) The total underwriting obligations under all the agreements referred to in clause (b) of rule 4 shall not exceed twenty times the networth referred to in regulation 7.
(3) Every underwriter, in the event of being called upon to subscribe for securities of a body corporate pursuant to an agreement referred to in clause (b) of rule 4 shall subscribe to such securities within 45 days of the receipt of such intimation from such body corporate.
To maintain proper books of accounts and records, etc.
16. (1) Subject to the provisions of any other law, every underwriter shall keep and maintain the following books of accounts and documents, namely :-
(a) in relation to underwriter being a body corporate -
(i) a copy of the balance sheet and profit and loss account as specified in sections 211 and 212 of the Companies Act, 1956 (1 of 1956);
(ii) a copy of the auditor's report referred to in section 227 of the Companies Act, 1956 (1 of 1956).
(b) in relation to an underwriter not being a body corporate -
(i) records in respect of all sums of money received and expended by them and the matters in respect of which the receipt and expenditure take place; and
(ii) their assets and liabilities.
(2) Without prejudice to sub-regulation (1), every underwriter shall, after the close of each financial year as soon as possible but not later than six months from the close of the said period furnish to the Board if so required copies of the balance sheet, profit and loss account, statement of capital adequacy requirement and such other documents as may be required by the Board under regulation 16 .
(3) Every underwriter shall also maintain the following records with respect to -
(i) details of all agreements referred to in clause (b) of rule 4;
(ii) total amount of securities of each body corporate subscribed to in pursuance of an agreement referred to in clause (b) of rule 4;
(iii) statement of capital adequacy requirements as specified in regulation 7 ;
(iv) such other records as may be specified by the Board for underwriting.
(4) Every underwriter shall intimate to the Board the place where the books of accounts, records and documents are maintained.
Period of maintenance of books of accounts, records and other documents
17. Every underwriter shall preserve the books of account and other records and documents mentioned under this chapter for a minimum period of five years.
1*[Appointment of Compliance Officer
17 A (1) Every underwriter shall appoint a compliance officer who shall be responsible for monitoring the compliance of the Act, rules and regulations, notifications, guidelines, instructions, etc. issued by the Board or the Central Government and for redressal of investors’ grievances.
(2) The compliance officer shall immediately and independently report to the Board any non-compliance observed by him]
Power to call for information
18. (1) The Board may at any time call for any information from an underwriter with respect to any matter relating to underwriting business.
(2) Where any information is called for under sub-regulation (1) it shall be the duty of the underwriter to furnish such information.
--------------------------------------------------------------------------------
1. Inserted by SEBI (Investment Advice by Intermediaries) (Amendment) Regulations, 2002, w.e.f. 29.05.2001.
(DEPARTMENT OF ECONOMIC AFFAIRS)
NOTIFICATION
NEW DELHI 8TH OCTOBER 1993
SECURITIES AND EXCHANGE BOARD OF INDIA
(UNDERWRITERS) RULES, 1993
S O 766 (E) In exercise of the powers conferred by section 29 of the Securities and Exchange Board of India, Act 1992, (15 of 1992) the Central Government hereby makes the following regulations, namely:-
Short title and commencement
1. (1) These regulations may be called the Securities and Exchange Board of India (Underwriters) Rules, 1993.
(2) They shall come into force on the date of their publication in the Official Gazette.
Definitions
2. In these regulations, unless the context otherwise requires -
(a) "Act" means the Securities and Exchange Board of India, Act 1992 (15 of 1992);
(b) "body corporate" means a body corporate as defined in clause (7) of section 2 of the Companies Act, 1956 (1 of 1956);
(c) "certificate" means a certificate of registration granted or renewed by the Board under the regulations;
(d) "issue" means an offer of sale of securities by any body corporate or by any other person or group of persons on its or his or their behalf, as the case may be, to the public or the holders of securities of such body corporate or person or group of persons;
(e) "regulations" means the Securities and Exchange Board of India (Underwriters) Regulations 1993;
(f) "underwriter" means a person, who engages in the business of underwriting of an issue of securities of a body corporate;
(g) "underwriting" means an agreement with or without conditions to subscribe to the securities of a body corporate when the existing shareholders of such body corporate or the public do not subscribe to the securities offered to them.
Not to act as underwriter without certificate
3. (1) No person shall act as underwriter unless he holds a certificate granted by the Board under the regulations
Provided that such person, who was engaged as underwriter prior to the coming into force of the Act, may continue to carry on activity as underwriter if he has made an application for such registration under the proviso to sub-section (1) of Section 12 of the Act till the disposal of such application
(2) Notwithstanding anything contained in sub-rule (1), every stock broker or merchant banker holding a valid certificate of registration under Section 12 of the Act, shall be entitled to act as an underwriter without obtaining a separate certificate for underwriting activities which shall be governed by these rules and regulations.
Conditions for grant or renewal of certificate to underwriter
4. The Board may grant or renew a certificate to an underwriter subject to the following conditions namely;
(a) in case of any change in the status and constitution, the underwriter shall obtain prior permission of the Board to continue to act as underwriter;
(b) without prejudice to the obligations under any other, the underwriter shall enter into a valid agreement with the body corporate on whose behalf he is acting as underwriter and the said agreement amongst other things may define the allocation of duties and responsibilities between him and such body corporate and;
(c) he shall pay the amount of fees of registration in the manner provided in the regulations;
(d) he shall abide by the rules and regulations made under the Act in respect of the activities carried on by him as an underwriter.
Period of validity of the certificate
5. The certificate of registration or its renewal, as the case may be, shall be valid for a period of three years from the date of its issue to the underwriter.
SECURITIES AND EXCHANGE BOARD OF INDIA (UNDERWRITERS)
REGULATIONS 1993
CHAPTER I
PRELIMINARY
Short title and commencement
1. (1) These regulations may be called the Securities and Exchange Board of India (Underwriters) Regulations, 1993.
(2) They shall come into force on the date of their publication in the Official Gazette.
Definitions
2. (1) In these regulations, unless the context otherwise requires :-
(a) "enquiry officer" means any officer of the Board, or any other person, having experience in dealing with the problems relating to the securities market, who is appointed by the Board under Chapter V;
(b) "form" means a form specified in Schedule I;
(c) "inspecting authority" means one or more persons appointed by the Board to exercise powers conferred under Chapter IV;
(d) "principal officer" means, -
(i) in relation to a proprietary concern, the proprietor himself;
(ii) in relation to a firm or an association of persons or any body of individuals or a body corporate, a secretary, treasurer, partner, manager or director of the firm, association, or body corporate;
(iii) any person connected with the management or administration of the firm, association or the body corporate upon whom the Board has served a notice of its intention of treating him as the principal officer thereof;
(e) regulations" means Securities and Exchange Board of India (Underwriters) Regulations, 1993;
(f) rules" means Securities and Exchange Board of India (Underwriters) Rules 1993;
(2) All other words and expressions used in these regulations but not defined, and defined in the Act and the rules shall have the same meanings respectively assigned to them in the Act or the rules, as the case may be.
CHAPTER II
REGISTRATION OF UNDERWRITERS
Application for grant of certificate
3. (1) An application by an underwriter for grant of a certificate shall be made to the Board in form A.
(2) Notwithstanding anything contained in sub-regulation (1), any application made by an underwriter prior to coming into force of these regulations containing such particulars or as near thereto as mentioned in form A shall be treated as an application made in pursuance of sub-regulation (1) and dealt with accordingly.
Furnishing of further information, clarification, etc.
4. (1) The Board may require the applicant to furnish further information or clarification regarding matters relevant to underwriting to consider the application for grant of a certificate.
1*[(2) If the Board, on receipt of further information, is of the opinion that the information so furnished is not sufficient to decide on the application and seeking further information through correspondence is likely to delay the matter, it may require the applicant or its principal officer to appear before the Board in order to give an opportunity to the applicant to give further clarifications on the application made under Regulation 3].
Application to conform to the requirements -
5. Subject to the provisions of sub-regulation (2) of regulation 3 , any application, which is not complete in all respects and does not conform to the instructions specified in the form, shall be rejected:
Provided that, before rejecting any such application, the applicant shall be given an opportunity to remove within 2*[one month] such objections as may be indicated by the Board.
3*[Provided further that the Board may, on sufficient reasons being shown extend the time by another one month in order to enable the applicant to comply with the requirements of the Board].
Consideration of application
6. The Board shall take into account for considering the grant of a certificate, all matters which are relevant to or relating to underwriting and in particular the following, namely, whether the applicant -
(a) has the necessary infrastructure like adequate office space, equipments, and manpower to effectively discharge his activities;
(b) has any past experience in underwriting or has in his employment minimum two persons who had the experience in underwriting;
(c) or any person, directly or indirectly connected with the applicant has not been granted registration by the Board under the Act;
4*[Explanation :- For the purposes of this clause the Board shall take into account whether a previous application for a certificate of any person directly or indirectly connected with the applicant has been rejected by the Board or any disciplinary action has been taken against such person under the Act or any of the Rules or any of the Regulations made under the Act]
(d) fulfils the capital adequacy requirements specified in regulation 7 ;
(e) or any of its director, partner or principal officer is or has at any time been convicted for any offence involving moral turpitude or has been found guilty of any economic offence.
5*[(f) is a fit and proper person."]
Capital Adequacy Requirement
7. (1) The capital adequacy requirement referred to in sub- regulation (d) of regulation 6 shall not be less than the networth of rupees twenty lakhs;
(2) Notwithstanding anything contained in sub-regulation (1),-
(a) every stock broker, who acts as an underwriter shall fulfil the capital adequacy requirements specified by the stock exchange of which he is a member;
(b) every merchant banker, who acts as an underwriter shall fulfil the capital adequacy requirements specified in regulation 7 of the Securities and Exchange Board of India (Merchant Banker) Regulations 1992.
Explanation: For the purposes of this regulation, "networth" means -
(a) in the case of an applicant being a proprietary concern or a firm or an association of persons or any body of individuals, the value of capital contributed to such business by the applicant and the free reserves of any kind belonging to the business of the applicant; and
(b) in the case of a body corporate, the value of the paid- up capital and the free reserves as disclosed in the books of accounts of the applicant at the time of making the application under sub-regulation (1) of regulation 3 .
Procedure for registration
8. The Board on being satisfied that the applicant is eligible, shall send an intimation 6*[within one month of such satisfaction] of the applicant mentioning that he has been found eligible for the grant of certificate and grant a certificate in form B subject to payment of fees as specified in regulation 12 .
Renewal of certificate
9. (1) An underwriter may, if he so desires, make an application in form A for renewal of certificate before three months of the expiry of the period of certificate.
(2) The application for renewal of certificate under sub-regulation (1) shall be dealt with in the same manner as if it were an application for grant of a certificate made under regulation 3.
Procedure where registration is not granted
10. (1) Where an application for grant of a certificate under regulation 3 or of renewal under regulation 9 does not fulfil the requirements set out in regulation 6 , the Board may reject the application, after giving an opportunity of being heard.
(2) 7*[The decision shall be communicated by the Board within thirty days of such decision stating therein the grounds on which the application has been rejected].
(3) Any applicant may, being aggrieved by the decision of the Board under sub-regulation (2), apply within a period of thirty days from the date of receipt of such intimation, to the Board for reconsideration of its decision.
(4) On receipt of the application made under sub-regulation (3), the Board shall reconsider its decision and communicate its findings thereon as soon as possible in writing to the applicant.
Effect of refusal to grant or renew certificate
11. Any underwriter whose application for grant or renewal of a certificate has been refused by the Board shall on and from the date of the receipt of the communication under sub - regulation (2) of regulation 10 cease to act as an underwriter.
8*[Provided that if the Board is satisfied that it is in the interest of the investors, it may permit the underwriter to undertake the underwriting commitments already entered into by him during the validity period of the certificate.]
Payment of fees and the consequences of failure to pay fees
12. (1) Every applicant eligible for grant or renewal of a certificate shall pay fees in such manner and within the period specified in Schedule II:
9*[***]
Provided 10*[***] that a stock broker or a merchant banker who, has been granted a certificate under Section 12 of the Act and pays fees under the Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992 or Securities and Exchange Board of India (Merchant Bankers) Regulations 1992, shall not be required to pay fees under sub- regulation (1).
(2) Where an underwriter fails to pay the fees as provided in sub- regulation (1), the Board may suspend the certificate, whereupon the underwriter shall forthwith cease to act as an underwriter.
--------------------------------------------------------------------------------
1. Substituted for "The applicant or, its principal officer shall, if so required, appear before the Board for personal representation. Application to conform to the requirements" by Securities and Exchange Board of India (Underwriters) Amendment Regulations 1997 vide notification No . S.O.46(E) dated 17th January 1997 .
2. Substituted for "the time specified" by Securities and Exchange Board of India Amendment Regulations 1997 vide Notification No. S.O.46(E) dated 17th January, 1997.
3. Inserted by Securities and Exchange Board of India (Underwriters) Amendment Regulations, 1997 vide Notification No. S.O.46 (E) dated January 17, 1997.
4. Substituted for "The applicant or, its principal officer shall, if so required, appear before the Board for personal representation. Application to conform to the requirements" by Securities and Exchange Board of India (Underwriters) Amendment Regulations 1997 vide notification No . S.O.46(E) dated 17th January 1997 .
5. Inserted by SEBI (underwriters) Amendment Regulations, 1998 w.e.f. 5-1-1998
6. Inserted by Securities and Exchange Board of India (Underwriters) Amendment Regulations, 1997 vide Notification No. S.O.46 (E) dated January 17, 1997.
7. Substituted for, " The refusal to grant or renew the certificate shall be communicated by the Board within thirty days of such refusal to the applicant stating therein the grounds on which the application has been rejected" by Securities and Exchange Board of India (Underwriters) Amendment Regulations 1997 vide Notification No. S.O.46(E) dated 17th January, 1997.
8. Inserted by Securities and Exchange Board of India (Underwriters) Amendment Regulations, 1997 vide Notification No. S.O.46 (E) dated January 17, 1997.
9. The proviso "Provided that the Board may on sufficient cause being shown permit the underwriter to pay such fees at any time before the expiry of six months from the date on which such fees become due;" omitted by SEBI (Underwriters) Amendment Regulations, 1997 vide Notification No. S.O.46 (E) dated January 17, 1997.
10. The word "further" omitted by SEBI (Underwriters) Amendment Regulations, 1997 vide Notification No. S.O.46 (E) dated January 17, 1997.
CHAPTER III
GENERAL OBLIGATIONS AND RESPONSIBILITIES
To abide by the Code of Conduct
13. Every underwriter shall at all times abide by the Code of Conduct as specified in Schedule III.
Agreement with clients
14. Every underwriter shall enter into an agreement referred to in clause (b) of rule 4 with each body corporate on whose behalf he is acting as underwriter and the said agreement shall, amongst other things, provide for the following, namely :-
(i) the period for which the agreement shall be in force;
(ii) the amount of underwriting obligations;
(iii) the period, within which the underwriter has to subscribe to the issue after being intimated by or on behalf of such body corporate;
(iv) the amount of commission or brokerage payable to the underwriter;
(v) details of arrangements, if any, made by the underwriter for fulfilling the underwriting obligations.
General responsibilities of an underwriter
15. (1) The underwriter shall not derive any direct or indirect benefit from underwriting the issue other than the commission or brokerage payable under an agreement for underwriting.
(2) The total underwriting obligations under all the agreements referred to in clause (b) of rule 4 shall not exceed twenty times the networth referred to in regulation 7.
(3) Every underwriter, in the event of being called upon to subscribe for securities of a body corporate pursuant to an agreement referred to in clause (b) of rule 4 shall subscribe to such securities within 45 days of the receipt of such intimation from such body corporate.
To maintain proper books of accounts and records, etc.
16. (1) Subject to the provisions of any other law, every underwriter shall keep and maintain the following books of accounts and documents, namely :-
(a) in relation to underwriter being a body corporate -
(i) a copy of the balance sheet and profit and loss account as specified in sections 211 and 212 of the Companies Act, 1956 (1 of 1956);
(ii) a copy of the auditor's report referred to in section 227 of the Companies Act, 1956 (1 of 1956).
(b) in relation to an underwriter not being a body corporate -
(i) records in respect of all sums of money received and expended by them and the matters in respect of which the receipt and expenditure take place; and
(ii) their assets and liabilities.
(2) Without prejudice to sub-regulation (1), every underwriter shall, after the close of each financial year as soon as possible but not later than six months from the close of the said period furnish to the Board if so required copies of the balance sheet, profit and loss account, statement of capital adequacy requirement and such other documents as may be required by the Board under regulation 16 .
(3) Every underwriter shall also maintain the following records with respect to -
(i) details of all agreements referred to in clause (b) of rule 4;
(ii) total amount of securities of each body corporate subscribed to in pursuance of an agreement referred to in clause (b) of rule 4;
(iii) statement of capital adequacy requirements as specified in regulation 7 ;
(iv) such other records as may be specified by the Board for underwriting.
(4) Every underwriter shall intimate to the Board the place where the books of accounts, records and documents are maintained.
Period of maintenance of books of accounts, records and other documents
17. Every underwriter shall preserve the books of account and other records and documents mentioned under this chapter for a minimum period of five years.
1*[Appointment of Compliance Officer
17 A (1) Every underwriter shall appoint a compliance officer who shall be responsible for monitoring the compliance of the Act, rules and regulations, notifications, guidelines, instructions, etc. issued by the Board or the Central Government and for redressal of investors’ grievances.
(2) The compliance officer shall immediately and independently report to the Board any non-compliance observed by him]
Power to call for information
18. (1) The Board may at any time call for any information from an underwriter with respect to any matter relating to underwriting business.
(2) Where any information is called for under sub-regulation (1) it shall be the duty of the underwriter to furnish such information.
--------------------------------------------------------------------------------
1. Inserted by SEBI (Investment Advice by Intermediaries) (Amendment) Regulations, 2002, w.e.f. 29.05.2001.
India SEBI UNDERWRITERS - RULES - 2
CHAPTER IV
INSPECTION AND DISCIPLINARY PROCEEDINGS
Board's right to inspect
19. (1) Where it appears to the Board so to do, it may appoint one or more persons as inspecting authority to undertake the inspection of the books of accounts, other records and documents of the underwriter for any of the purposes specified in sub-regulation (2).
(2) The purposes referred to in sub-regulation (1) shall be as follows, namely:-
(a) to ensure that the books of accounts and other records and documents are being maintained in the manner required;
(b) that the provisions of the Act, rules and regulations are being complied with;
(c) to investigate into the complaints received from investors, other underwriters or any other person on any matter having a bearing on the activities of the underwriter; and
(d) to investigate suo-moto in the interest of securities business or investors' interest into the affairs of the underwriter.
Procedure for inspection
20. (1) Before undertaking an inspection under regulation 19 the Board shall give a reasonable notice to the underwriter, for that purpose.
(2) Notwithstanding anything contained in sub-regulation (1), where the Board is satisfied that in the interest of the investors or in the public interest no such notice should be given, it may by an order in writing direct that the inspection of the affairs of the underwriter be taken up without such notice.
(3) On being empowered by the Board, the inspecting authority shall undertake the inspection and the underwriter against whom an inspection is being carried out shall be bound to discharge his obligations as provided under regulation 21 .
Obligations of underwriter on inspection by the Board
21. (1) It shall be the duty of every director, proprietor, partner, officer and employee of the underwriter who is being inspected to produce to the inspecting authority such books, accounts and other documents in his custody or control and furnish him with the statements and information relating to an underwriter within such time as the inspecting authority may require.
(2) The underwriter shall allow the inspecting authority to have a reasonable access to the premises occupied by such underwriter or by any other person, on his behalf and also extend reasonable facility for examining any books, records, documents and computer data in the possession of the underwriter or any such other person on their behalf and also provide copies of documents or other material which in the opinion of the inspecting authority are relevant for the purposes of the inspection.
(3) The inspecting authority shall in the course of inspection, be entitled to examine or record statements of any principal officer, director, partner, proprietor and employee.
(4) It shall be the duty of every director, proprietor, partner, officer or employee of the underwriter to give to the inspecting authority all assistance in connection with the inspection which the underwriter may reasonably be expected to give.
Submission of report to the Board
22. The inspecting authority shall, as soon as may be possible, submit an inspection report to the Board.
Communication of findings, etc. to the underwriter
23. (1) The Board shall after consideration of the inspection report communicate the findings to the underwriter to give him an opportunity of being heard before any action is taken by the Board on the findings of the inspecting authority.
(2) On receipt of the explanation, if any, from the underwriter the Board may call upon the underwriter to take such measures as the Board may deem fit in the interest of the securities market and for due compliance with the provisions of the Act, rules and regulations.
Appointment of Auditor
24. Notwithstanding anything contained above the Board may appoint a qualified auditor to investigate into the books of account of the affairs of the underwriter:
Provided that the auditor so appointed shall have the same powers of the inspecting authority as stated in regulation 19 and the obligation of the underwriter and his employees in regulation 21 shall be applicable to the investigation under this regulation.
Explanation: For the purposes of this regulation, the expression "qualified auditor" shall have the same meaning as given to it in section 226 of the Companies Act, 1956 (1 of 1956).
CHAPTER V
PROCEDURE FOR ACTION IN CASE OF DEFAULT
Liability for action in case of default
25. (1) An underwriter or a stock broker or a merchant banker entitled to carry on business of underwriting without obtaining a separate certificate under rule 3 who, -
(a) fails to comply with any conditions subject to which certificate has been granted;
(b) contravenes any of the provisions of the Act, rules or regulations; shall be liable to any of the penalties specified in sub- regulation (2).
(2) The penalties referred to in sub-regulation (1) may be either:
(a) suspension of registration 1*[under the grounds specified] in sub-regulation (1) of Regulation 26 after enquiry for a specified period; or
(b) cancellation of registration 2*[under the grounds specified] in sub-regulation (2) of Regulation 26.
Suspension, cancellation of certificate
26. (1) A penalty of suspension of certificate granted to an underwriter or a certificate of registration granted under section 12 of the Act to a stock broker or a merchant banker entitled to carry on business of underwriting without obtaining a certificate under rule 3, may be imposed where an underwriter or such stock broker or merchant banker -
(i) violates the provisions of the Act, rules or regulations;
(ii) does not follow the code of conduct specified at Schedule III;
(iii) (a) fails to furnish any information relating to his business as underwriter as required by the Board;
(b) furnishes wrong or false information,
(c) does not submit periodical returns as required by the Board;
(d) does not co-operate in any enquiry conducted by the Board;
(iv) indulges in manipulating or price rigging or cornering activities;
(v) is guilty of misconduct or improper or un-business like or unprofessional conduct;
(vi) fails to maintain the capital adequacy requirement in accordance with the provisions of regulation 7.
(vii) fails to pay the fees as specified in regulation 12;
(viii) violates the conditions of registration;
(ix) fails to fulfil his underwriting obligations.
Provided that the Board for reasons to be recorded in writing may in case of repeated defaults of the type mentioned above impose a penalty of cancellation of certificate on the underwriter or cancellation of certificate of registration granted under section 12 of the Act on a stock broker or a merchant banker.
(2) A penalty of cancellation of certificate granted to an underwriter or a certificate of registration granted under section 12 of the Act to a stock broker or a merchant banker entitled to carry on the business of underwriting under rule 3, may be imposed where they.
(i) indulge in deliberate manipulation or price rigging or cornering activities affecting the securities market and the investors interest;
(ii) fail to fulfil the capital adequacy referred to in regulation 7;
(iii) are guilty of fraud, or is convicted of a criminal offence;
(iv) violate any provision of Securities and Exchange Board of India (Insider Trading) Regulations, 1992; or
(v) violate the provisions of the Act, rules and regulations;
(vi) fails to fulfil more than once their underwriting obligations.
Manner of making order of suspension and cancellation of certificate
27. No order of penalty of suspension or cancellation shall be imposed except after holding an inquiry in accordance with the procedure specified in regulation 28 .
Manner of holding enquiry before suspension or cancellation
28. (1) For the purpose of holding an enquiry under regulation 27, the Board may appoint an enquiry officer.
(2) The enquiry officer shall issue to the underwriter a notice at the registered office or the principal place of business of the underwriter.
(3) The underwriter may, within thirty days from the date of receipt of such notice, furnish to the enquiry officer a reply together with copies of documentary or other evidence relied on by him or sought by the Board from the underwriter.
(4) The enquiry officer shall, give a reasonable opportunity of hearing to the underwriter to enable him to make submissions in support of his reply made under sub-regulation (3).
(5) Before the enquiry officer, the underwriter may either appear in person or through any person duly authorised by the underwriter:
Provided that no lawyer or advocate shall be permitted to represent the underwriter at the enquiry:
Provided further that where a lawyer or an advocate has been appointed by the Board as a presenting officer under sub-regulation (6), it shall be lawful for the underwriter to present its case through a lawyer or advocate.
(6) If it is considered necessary, the enquiry officer may ask the Board to appoint a presenting officer to present its case.
(7) The enquiry officer shall, after taking into account all relevant facts and submissions made by the underwriter, submit a report to the Board and recommend the penalty to be awarded as also the justification of the penalty proposed.
Show-cause notice and order
29. (1) On receipt of the report from the enquiry officer, the Board shall consider the same and issue a show-cause notice as to why the penalty as it considers appropriate should not be imposed.
(2) The underwriter shall within 3*[thirty days] of the date of the receipt of the show-cause notice send a reply to the Board.
(3) The Board after considering the reply to the show-cause notice, if received, shall as soon as possible but not later than thirty days from the receipt of the reply, if any, pass such order as it deems fit.
(4) Every order passed under sub-regulation (3) shall be self- contained and give reasons for the conclusions stated therein including justification of the penalty imposed by that order.
(5) The Board shall send a copy of the order under sub-regulation (3) to the underwriter.
Effect of suspension and cancellation of certificate granted to underwriter
30. (1) On and from the date of the suspension of the certificate or certificate of registration granted to a stock broker or a merchant banker under section 12 of the Act, the underwriter shall cease to act as an underwriter during the period of suspension:
Provided that the Board may in the interest of the investors and securities market, permit the underwriter to complete his underwriting obligations specified in the agreement referred to in clause(b) of rule 4.
(2) On and from the date of cancellation of certificate or certificate of registration granted to a stock broker or a merchant banker under section 12 of the Act, the underwriter shall with immediate effect cease to act as an underwriter.
Publication of order of suspension
31. The order of the Board passed under sub-regulation (3) of regulation 29, shall be published in atleast two daily newspapers by the Board.
Appeal to the Securities Appellate Tribunal
32. 4*[Any person aggrieved by an order of the Board made, on and after the commencement of the Securities Laws (Second Amendment) Act, 1999, (ie., after 16th December 1999), under these regulations may prefer an appeal to a Securities Appellate Tribunal having jurisdiction in the matter
--------------------------------------------------------------------------------
1. Inserted by Securities and Exchange Board of India (Underwriters) Amendment Regulations, 1997 vide Notification No.S.O.46(E) dated January 17, 1997.
2. Ibid
3. Substituted for "twenty one days" by Securities and Exchange Board of India (underwriters) Amendment Regulations 1997 vide Notification No.S.O.46(E) dated January 17, 1997.
4. Substituted for the earlier provision vide SEBI (Appeal to the Securities Appellate Tribunal) (Amendment) Regulations, 2000 vide S.O.278(E) dated March 28, 2000
--------------------------------------------------------------------------------
SCHEDULE I
FORM A
SECURITIES AND EXCHANGE BOARD OF INDIA
(UNDERWRITERS) REGULATIONS 1993
( REGULATION 3)
APPLICATION FOR REGISTRATION AS UNDERWRITER
NAME OF APPLICANT AND ITS STATUS
(Whether proprietary concern/ firm/ association of persons/ body of persons/ body corporate)
NAME AND DESIGNATION OF PRINCIPAL
OFFICER
DESIGNATION:
TELEPHONE NO.
INSTRUCTIONS :-
1. Applicants must submit a completed application form together with supporting documents to the Securities and Exchange Board of India.
2. All columns of the application should be filled in. In case a column is not relevant then `NOT APPLICABLE' should be specified.
3. Information which needs to be supplied in more details may be written on separate sheets which should be attached to the application form.
4. Original copy of form duly signed should be submitted for registration.
PART - I
GENERAL INFORMATION
1. APPLICANTS DETAILS
1.1 Name of the Applicant:
1.2 Address of Applicant:
Pin code: _____________________ Telephone No:_____________
Telex No: _____________________ Fax No: _________________
1.3 Address of the applicant for Correspondence:
Pin code: _____________________ Telephone No:_____________
Telex No: _____________________ Fax No: _________________
1.4 Address of Branch Offices (in India) of the applicant, if any:
1.5 Whether any other application under Securities and Exchange Board of India Act, 1992 has been made for grant of Certificate, if so, details thereof
2. ORGANISATION STRUCTURE :
2.1 Objects of the organisation of the applicant. (Attach extracts from relevant documents like, Partnership deed/Charter/Memorandum of Association/Articles of Association etc) in support of objects of the organisation.
2.2 Date and Place of Incorporation/Establishment of the organisation of the applicant.
Day Month Year Place
2.3 Status of the applicant (specify whether proprietary, partnership, association of persons, body of individuals, limited company - public/private, others. If listed, name the stock exchange and latest share price:-high and low.)
2.4 Organisation Chart stating the functional responsibility at various levels
2.5 Particulars of all Proprietors/ Partners/ Managers/ Officers/ Directors.
[Name, Qualification, Experience, Date of Appointment, Other directorship, (Name and ate of Appointment), Previous positions held.]
2.6 Number of employees
2.7 Name and activities of associate companies/ concerns.
Name Address/Phone number/ Type of activity/ Ownership details /Nature and Quantum of financial trading.
2.8 In case the applicant is a body corporate, please give list of major share holders (holding 5% or more voting rights)
3.0 DETAILS OF INFRASTRUCTURAL FACILITIES
3.1 Office Space (mention the extent of area and ownership details available).
3.2 Office Equipment (mention the details of electronic office equipment, typewriters, telecommunication equipment, Furniture & Fixtures, other communication facilities etc.)
4.0 BUSINESS PLAN ( FOR THREE YEARS)
4.1 History, Major achievements and present activity
5.0 FINANCIAL INFORMATION
5.1 Capital Structure (Rs. in lakhs)
Current Year Last Year Previous Year Second Year Third Year
a) Paid-up capital
b) Free reserves (excluding revaluation reserves)
c) Total (a) + (b)
d) Loans (Details)
e) Net profit (i) General
(ii)Specific
Note:- In case of partnership or proprietary concerns, please indicate capital minus drawings.
5.2 Deployment of Resources
a) Fixed Assets
b) Plant & Machinery and office equipment
c) Investments (Details should be given separately)
d) Others
5.3 Major Source of Estimated Profit from various sources (Rs. in lakhs)
Current Year Last Year Previous Year Second Year Third Year
5.4 Please enclose three years of audited annual accounts and where unaudited reports are submitted, give reasons.
5.5 Name and Address of the Principal Bankers
5.6 Name and Address of the Auditors (Internal, External & Tax auditor, if any, as applicable)
6.0 OTHER INFORMATION
6.1 Indicate involvement in any offence relating to moral turpitude/economic offenses in the last three years.
6.2 Any other information considered relevant to the nature of services rendered by the company.
PART-II
7.0 BUSINESS INFORMATION
7.1 Indicate marketing capability for Capital Issues.
7.2 Indicate How decision on Underwriting is usually taken.
7.3 Indicate various research & database facilities available.
7.4 Enclose a copy of typical contract entered with the issuer for Underwriting activity.
8.0 EXPERIENCE :
8.1 Experience in Underwriting activities. (Indicate Name of the company, Particulars of the issue, Amount of underwriting done in last three years)
8.2 Experience in other financial services rendered:- (Period, Area and Date of Commencement of Activity).
8.3 Details of all Un-settled and pending devolvement/disputes regarding Underwriting:
Nature of dispute Name of the party Pending/settled.
8.4 Indicate underwriting defaulted with any company and reasons for the same.
DECLARATION
THIS DECLARATION MUST BE SIGNED BYPRINCIPAL OFFICER/S.
I/We hereby apply for GRANT OF CERTIFICATE OF ____________________________________ REGISTRATION by the Board. I/We warrant that I/We will carry out my/our duties in accordance with the Act, Rules and Regulations. I/We warrant that I/We have truthfully and fully answered the questions above and provided all the information which might reasonably be considered relevant for the purposes of my/our grant of certificate for registration and I/We will promptly notify the Board of any changes in the information during the period that my/our registration is being considered and if my/our registration is accepted, thereafter.
I/We understand that misleading or attempting to mislead the Board shall render the applicant liable to disciplinary proceedings.
I/We certify that the above information and information supplied in the application form is true, complete and correct.
For and on behalf of
(Name of Applicant)
(Name of Applicant)
PLACE :
Date :
SCHEDULE I - FORMS
FORM B
SECURITIES AND EXCHANGE BOARD OF INDIA
(UNDERWRITERS) REGULATIONS, 1993
( Regulation 8)
CERTIFICATE OF REGISTRATION
I. In exercise of the powers conferred by sub-section (1) of section 12 of the Securities and Exchange Board of India Act, 1992, read with the rules and regulations made thereunder for the underwriters, the Board hereby grants a certificate of registration to ________________________ as an underwriter subject to the conditions in the rules and in accordance with the regulations.
II. Registration Code for the underwriter is __________
III. Unless renewed, the certificate of registration is valid from ________ to _________.
Place :
Date :
By Order
For and on behalf of
Security Exchange Board of India
SCHEDULE II
SECURITIES AND EXCHANGE BOARD OF INDIA
(UNDERWRITERS) REGULATIONS, 1993
( REGULATION 12 )
FEES
1*[1. Every underwriter shall pay a sum of Rs.5 lakhs as registration fees at the time of grant of certificate by the Board:
2. Every underwriter to keep registration in force shall pay renewal fee of Rs.2 lakhs every three years from the fourth year from the date of initial registration.
3. (a) The fee referred to in paragraph 1 shall be paid by the underwriter within fifteen days from the date of receipt of intimation from the Board under regulation 8.
(b) The fee referred to in paragraph 2 shall be paid by the underwriter within fifteen days of receipt of intimation from the Board disposing of the application for renewal made under sub-regulation (1) of regulation 9.
4. The fees specified in paragraphs 1 and 2 shall be payable by the underwriter by a demand draft in favour of "Securities and Exchange Board Of India" payable at Mumbai or at the respective regional office.]
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1. Substituted by SEBI(Underwriters) Amendment Regulations, 1999 w.e.f. 30-9-1999. Earlier paragraph 4 was substituted by the SEBI (Payment of Fees) (Amendment) Regulations, 1995, w.e.f 28.11.1995
SCHEDULE III
SECURITIES AND EXCHANGE BOARD OF INDIA
(UNDERWRITERS) REGULATIONS, 1993
CODE OF CONDUCT
[REGULATION 13]
1. Every underwriter shall maintain high standards of integrity, dignity and fairness in all his dealings with his clients and other Underwriters in the conduct of his business.
2. An underwriter shall ensure that he and his personnel will act in an ethical manner in all his dealings with a body corporate making an issue of securities (hereinafter referred to in the schedule as "the issuer").
3. Every underwriter shall, at all times, render high standards of service, exercise due diligence, ensure proper care and exercise independent professional judgement.
4. Every underwriter shall disclose to the Issuer Company his possible source or potential areas of conflict of duties and interest while providing underwriting services.
5. Underwriter shall not indulge in any unfair competition, which is likely to be harmful to the interest of other underwriters carrying on the business of underwriting or likely to place such other underwriters in a disadvantageous position in relation to the underwriter while competing for, or carrying out any assignment.
6. No underwriter shall make any statement, either oral or written, which would misrepresent -
(a) the services that the underwriter is capable of performing for the, or has rendered to other Issuer Company;
(b) his underwriting commitment.
7. No underwriter shall divulge to other Issuer, Press or any party any confidential information about his Issuer Company, which has come to his knowledge and deal in securities of any Issuer Company without making disclosure to the Board as required under the regulations and also to the Board of Directors of the Issuer Company.
8. No underwriter shall willfully make untrue statement or suppress any material fact in any documents, reports, papers or information furnished to the Board.
1*[9 (a) [An underwriter or any of his employees shall not render, directly or indirectly any investment advice about any security in the publicly accessible media, whether real-time or non-real-time, unless a disclosure of his interest including his long or short position in the said security has been made, while rendering such advice.
(b) In case, an employee of the underwriter is rendering such advice, he shall also disclose the interest of his dependent family members and the employer including their long or short position in the said security, while rendering such advice].
--------------------------------------------------------------------------------
1. Inserted by SEBI (Investment Advice by Intermediaries) (Amendment) Regulations, 2002. w.e.f. 29.5.2001.
INSPECTION AND DISCIPLINARY PROCEEDINGS
Board's right to inspect
19. (1) Where it appears to the Board so to do, it may appoint one or more persons as inspecting authority to undertake the inspection of the books of accounts, other records and documents of the underwriter for any of the purposes specified in sub-regulation (2).
(2) The purposes referred to in sub-regulation (1) shall be as follows, namely:-
(a) to ensure that the books of accounts and other records and documents are being maintained in the manner required;
(b) that the provisions of the Act, rules and regulations are being complied with;
(c) to investigate into the complaints received from investors, other underwriters or any other person on any matter having a bearing on the activities of the underwriter; and
(d) to investigate suo-moto in the interest of securities business or investors' interest into the affairs of the underwriter.
Procedure for inspection
20. (1) Before undertaking an inspection under regulation 19 the Board shall give a reasonable notice to the underwriter, for that purpose.
(2) Notwithstanding anything contained in sub-regulation (1), where the Board is satisfied that in the interest of the investors or in the public interest no such notice should be given, it may by an order in writing direct that the inspection of the affairs of the underwriter be taken up without such notice.
(3) On being empowered by the Board, the inspecting authority shall undertake the inspection and the underwriter against whom an inspection is being carried out shall be bound to discharge his obligations as provided under regulation 21 .
Obligations of underwriter on inspection by the Board
21. (1) It shall be the duty of every director, proprietor, partner, officer and employee of the underwriter who is being inspected to produce to the inspecting authority such books, accounts and other documents in his custody or control and furnish him with the statements and information relating to an underwriter within such time as the inspecting authority may require.
(2) The underwriter shall allow the inspecting authority to have a reasonable access to the premises occupied by such underwriter or by any other person, on his behalf and also extend reasonable facility for examining any books, records, documents and computer data in the possession of the underwriter or any such other person on their behalf and also provide copies of documents or other material which in the opinion of the inspecting authority are relevant for the purposes of the inspection.
(3) The inspecting authority shall in the course of inspection, be entitled to examine or record statements of any principal officer, director, partner, proprietor and employee.
(4) It shall be the duty of every director, proprietor, partner, officer or employee of the underwriter to give to the inspecting authority all assistance in connection with the inspection which the underwriter may reasonably be expected to give.
Submission of report to the Board
22. The inspecting authority shall, as soon as may be possible, submit an inspection report to the Board.
Communication of findings, etc. to the underwriter
23. (1) The Board shall after consideration of the inspection report communicate the findings to the underwriter to give him an opportunity of being heard before any action is taken by the Board on the findings of the inspecting authority.
(2) On receipt of the explanation, if any, from the underwriter the Board may call upon the underwriter to take such measures as the Board may deem fit in the interest of the securities market and for due compliance with the provisions of the Act, rules and regulations.
Appointment of Auditor
24. Notwithstanding anything contained above the Board may appoint a qualified auditor to investigate into the books of account of the affairs of the underwriter:
Provided that the auditor so appointed shall have the same powers of the inspecting authority as stated in regulation 19 and the obligation of the underwriter and his employees in regulation 21 shall be applicable to the investigation under this regulation.
Explanation: For the purposes of this regulation, the expression "qualified auditor" shall have the same meaning as given to it in section 226 of the Companies Act, 1956 (1 of 1956).
CHAPTER V
PROCEDURE FOR ACTION IN CASE OF DEFAULT
Liability for action in case of default
25. (1) An underwriter or a stock broker or a merchant banker entitled to carry on business of underwriting without obtaining a separate certificate under rule 3 who, -
(a) fails to comply with any conditions subject to which certificate has been granted;
(b) contravenes any of the provisions of the Act, rules or regulations; shall be liable to any of the penalties specified in sub- regulation (2).
(2) The penalties referred to in sub-regulation (1) may be either:
(a) suspension of registration 1*[under the grounds specified] in sub-regulation (1) of Regulation 26 after enquiry for a specified period; or
(b) cancellation of registration 2*[under the grounds specified] in sub-regulation (2) of Regulation 26.
Suspension, cancellation of certificate
26. (1) A penalty of suspension of certificate granted to an underwriter or a certificate of registration granted under section 12 of the Act to a stock broker or a merchant banker entitled to carry on business of underwriting without obtaining a certificate under rule 3, may be imposed where an underwriter or such stock broker or merchant banker -
(i) violates the provisions of the Act, rules or regulations;
(ii) does not follow the code of conduct specified at Schedule III;
(iii) (a) fails to furnish any information relating to his business as underwriter as required by the Board;
(b) furnishes wrong or false information,
(c) does not submit periodical returns as required by the Board;
(d) does not co-operate in any enquiry conducted by the Board;
(iv) indulges in manipulating or price rigging or cornering activities;
(v) is guilty of misconduct or improper or un-business like or unprofessional conduct;
(vi) fails to maintain the capital adequacy requirement in accordance with the provisions of regulation 7.
(vii) fails to pay the fees as specified in regulation 12;
(viii) violates the conditions of registration;
(ix) fails to fulfil his underwriting obligations.
Provided that the Board for reasons to be recorded in writing may in case of repeated defaults of the type mentioned above impose a penalty of cancellation of certificate on the underwriter or cancellation of certificate of registration granted under section 12 of the Act on a stock broker or a merchant banker.
(2) A penalty of cancellation of certificate granted to an underwriter or a certificate of registration granted under section 12 of the Act to a stock broker or a merchant banker entitled to carry on the business of underwriting under rule 3, may be imposed where they.
(i) indulge in deliberate manipulation or price rigging or cornering activities affecting the securities market and the investors interest;
(ii) fail to fulfil the capital adequacy referred to in regulation 7;
(iii) are guilty of fraud, or is convicted of a criminal offence;
(iv) violate any provision of Securities and Exchange Board of India (Insider Trading) Regulations, 1992; or
(v) violate the provisions of the Act, rules and regulations;
(vi) fails to fulfil more than once their underwriting obligations.
Manner of making order of suspension and cancellation of certificate
27. No order of penalty of suspension or cancellation shall be imposed except after holding an inquiry in accordance with the procedure specified in regulation 28 .
Manner of holding enquiry before suspension or cancellation
28. (1) For the purpose of holding an enquiry under regulation 27, the Board may appoint an enquiry officer.
(2) The enquiry officer shall issue to the underwriter a notice at the registered office or the principal place of business of the underwriter.
(3) The underwriter may, within thirty days from the date of receipt of such notice, furnish to the enquiry officer a reply together with copies of documentary or other evidence relied on by him or sought by the Board from the underwriter.
(4) The enquiry officer shall, give a reasonable opportunity of hearing to the underwriter to enable him to make submissions in support of his reply made under sub-regulation (3).
(5) Before the enquiry officer, the underwriter may either appear in person or through any person duly authorised by the underwriter:
Provided that no lawyer or advocate shall be permitted to represent the underwriter at the enquiry:
Provided further that where a lawyer or an advocate has been appointed by the Board as a presenting officer under sub-regulation (6), it shall be lawful for the underwriter to present its case through a lawyer or advocate.
(6) If it is considered necessary, the enquiry officer may ask the Board to appoint a presenting officer to present its case.
(7) The enquiry officer shall, after taking into account all relevant facts and submissions made by the underwriter, submit a report to the Board and recommend the penalty to be awarded as also the justification of the penalty proposed.
Show-cause notice and order
29. (1) On receipt of the report from the enquiry officer, the Board shall consider the same and issue a show-cause notice as to why the penalty as it considers appropriate should not be imposed.
(2) The underwriter shall within 3*[thirty days] of the date of the receipt of the show-cause notice send a reply to the Board.
(3) The Board after considering the reply to the show-cause notice, if received, shall as soon as possible but not later than thirty days from the receipt of the reply, if any, pass such order as it deems fit.
(4) Every order passed under sub-regulation (3) shall be self- contained and give reasons for the conclusions stated therein including justification of the penalty imposed by that order.
(5) The Board shall send a copy of the order under sub-regulation (3) to the underwriter.
Effect of suspension and cancellation of certificate granted to underwriter
30. (1) On and from the date of the suspension of the certificate or certificate of registration granted to a stock broker or a merchant banker under section 12 of the Act, the underwriter shall cease to act as an underwriter during the period of suspension:
Provided that the Board may in the interest of the investors and securities market, permit the underwriter to complete his underwriting obligations specified in the agreement referred to in clause(b) of rule 4.
(2) On and from the date of cancellation of certificate or certificate of registration granted to a stock broker or a merchant banker under section 12 of the Act, the underwriter shall with immediate effect cease to act as an underwriter.
Publication of order of suspension
31. The order of the Board passed under sub-regulation (3) of regulation 29, shall be published in atleast two daily newspapers by the Board.
Appeal to the Securities Appellate Tribunal
32. 4*[Any person aggrieved by an order of the Board made, on and after the commencement of the Securities Laws (Second Amendment) Act, 1999, (ie., after 16th December 1999), under these regulations may prefer an appeal to a Securities Appellate Tribunal having jurisdiction in the matter
--------------------------------------------------------------------------------
1. Inserted by Securities and Exchange Board of India (Underwriters) Amendment Regulations, 1997 vide Notification No.S.O.46(E) dated January 17, 1997.
2. Ibid
3. Substituted for "twenty one days" by Securities and Exchange Board of India (underwriters) Amendment Regulations 1997 vide Notification No.S.O.46(E) dated January 17, 1997.
4. Substituted for the earlier provision vide SEBI (Appeal to the Securities Appellate Tribunal) (Amendment) Regulations, 2000 vide S.O.278(E) dated March 28, 2000
--------------------------------------------------------------------------------
SCHEDULE I
FORM A
SECURITIES AND EXCHANGE BOARD OF INDIA
(UNDERWRITERS) REGULATIONS 1993
( REGULATION 3)
APPLICATION FOR REGISTRATION AS UNDERWRITER
NAME OF APPLICANT AND ITS STATUS
(Whether proprietary concern/ firm/ association of persons/ body of persons/ body corporate)
NAME AND DESIGNATION OF PRINCIPAL
OFFICER
DESIGNATION:
TELEPHONE NO.
INSTRUCTIONS :-
1. Applicants must submit a completed application form together with supporting documents to the Securities and Exchange Board of India.
2. All columns of the application should be filled in. In case a column is not relevant then `NOT APPLICABLE' should be specified.
3. Information which needs to be supplied in more details may be written on separate sheets which should be attached to the application form.
4. Original copy of form duly signed should be submitted for registration.
PART - I
GENERAL INFORMATION
1. APPLICANTS DETAILS
1.1 Name of the Applicant:
1.2 Address of Applicant:
Pin code: _____________________ Telephone No:_____________
Telex No: _____________________ Fax No: _________________
1.3 Address of the applicant for Correspondence:
Pin code: _____________________ Telephone No:_____________
Telex No: _____________________ Fax No: _________________
1.4 Address of Branch Offices (in India) of the applicant, if any:
1.5 Whether any other application under Securities and Exchange Board of India Act, 1992 has been made for grant of Certificate, if so, details thereof
2. ORGANISATION STRUCTURE :
2.1 Objects of the organisation of the applicant. (Attach extracts from relevant documents like, Partnership deed/Charter/Memorandum of Association/Articles of Association etc) in support of objects of the organisation.
2.2 Date and Place of Incorporation/Establishment of the organisation of the applicant.
Day Month Year Place
2.3 Status of the applicant (specify whether proprietary, partnership, association of persons, body of individuals, limited company - public/private, others. If listed, name the stock exchange and latest share price:-high and low.)
2.4 Organisation Chart stating the functional responsibility at various levels
2.5 Particulars of all Proprietors/ Partners/ Managers/ Officers/ Directors.
[Name, Qualification, Experience, Date of Appointment, Other directorship, (Name and ate of Appointment), Previous positions held.]
2.6 Number of employees
2.7 Name and activities of associate companies/ concerns.
Name Address/Phone number/ Type of activity/ Ownership details /Nature and Quantum of financial trading.
2.8 In case the applicant is a body corporate, please give list of major share holders (holding 5% or more voting rights)
3.0 DETAILS OF INFRASTRUCTURAL FACILITIES
3.1 Office Space (mention the extent of area and ownership details available).
3.2 Office Equipment (mention the details of electronic office equipment, typewriters, telecommunication equipment, Furniture & Fixtures, other communication facilities etc.)
4.0 BUSINESS PLAN ( FOR THREE YEARS)
4.1 History, Major achievements and present activity
5.0 FINANCIAL INFORMATION
5.1 Capital Structure (Rs. in lakhs)
Current Year Last Year Previous Year Second Year Third Year
a) Paid-up capital
b) Free reserves (excluding revaluation reserves)
c) Total (a) + (b)
d) Loans (Details)
e) Net profit (i) General
(ii)Specific
Note:- In case of partnership or proprietary concerns, please indicate capital minus drawings.
5.2 Deployment of Resources
a) Fixed Assets
b) Plant & Machinery and office equipment
c) Investments (Details should be given separately)
d) Others
5.3 Major Source of Estimated Profit from various sources (Rs. in lakhs)
Current Year Last Year Previous Year Second Year Third Year
5.4 Please enclose three years of audited annual accounts and where unaudited reports are submitted, give reasons.
5.5 Name and Address of the Principal Bankers
5.6 Name and Address of the Auditors (Internal, External & Tax auditor, if any, as applicable)
6.0 OTHER INFORMATION
6.1 Indicate involvement in any offence relating to moral turpitude/economic offenses in the last three years.
6.2 Any other information considered relevant to the nature of services rendered by the company.
PART-II
7.0 BUSINESS INFORMATION
7.1 Indicate marketing capability for Capital Issues.
7.2 Indicate How decision on Underwriting is usually taken.
7.3 Indicate various research & database facilities available.
7.4 Enclose a copy of typical contract entered with the issuer for Underwriting activity.
8.0 EXPERIENCE :
8.1 Experience in Underwriting activities. (Indicate Name of the company, Particulars of the issue, Amount of underwriting done in last three years)
8.2 Experience in other financial services rendered:- (Period, Area and Date of Commencement of Activity).
8.3 Details of all Un-settled and pending devolvement/disputes regarding Underwriting:
Nature of dispute Name of the party Pending/settled.
8.4 Indicate underwriting defaulted with any company and reasons for the same.
DECLARATION
THIS DECLARATION MUST BE SIGNED BYPRINCIPAL OFFICER/S.
I/We hereby apply for GRANT OF CERTIFICATE OF ____________________________________ REGISTRATION by the Board. I/We warrant that I/We will carry out my/our duties in accordance with the Act, Rules and Regulations. I/We warrant that I/We have truthfully and fully answered the questions above and provided all the information which might reasonably be considered relevant for the purposes of my/our grant of certificate for registration and I/We will promptly notify the Board of any changes in the information during the period that my/our registration is being considered and if my/our registration is accepted, thereafter.
I/We understand that misleading or attempting to mislead the Board shall render the applicant liable to disciplinary proceedings.
I/We certify that the above information and information supplied in the application form is true, complete and correct.
For and on behalf of
(Name of Applicant)
(Name of Applicant)
PLACE :
Date :
SCHEDULE I - FORMS
FORM B
SECURITIES AND EXCHANGE BOARD OF INDIA
(UNDERWRITERS) REGULATIONS, 1993
( Regulation 8)
CERTIFICATE OF REGISTRATION
I. In exercise of the powers conferred by sub-section (1) of section 12 of the Securities and Exchange Board of India Act, 1992, read with the rules and regulations made thereunder for the underwriters, the Board hereby grants a certificate of registration to ________________________ as an underwriter subject to the conditions in the rules and in accordance with the regulations.
II. Registration Code for the underwriter is __________
III. Unless renewed, the certificate of registration is valid from ________ to _________.
Place :
Date :
By Order
For and on behalf of
Security Exchange Board of India
SCHEDULE II
SECURITIES AND EXCHANGE BOARD OF INDIA
(UNDERWRITERS) REGULATIONS, 1993
( REGULATION 12 )
FEES
1*[1. Every underwriter shall pay a sum of Rs.5 lakhs as registration fees at the time of grant of certificate by the Board:
2. Every underwriter to keep registration in force shall pay renewal fee of Rs.2 lakhs every three years from the fourth year from the date of initial registration.
3. (a) The fee referred to in paragraph 1 shall be paid by the underwriter within fifteen days from the date of receipt of intimation from the Board under regulation 8.
(b) The fee referred to in paragraph 2 shall be paid by the underwriter within fifteen days of receipt of intimation from the Board disposing of the application for renewal made under sub-regulation (1) of regulation 9.
4. The fees specified in paragraphs 1 and 2 shall be payable by the underwriter by a demand draft in favour of "Securities and Exchange Board Of India" payable at Mumbai or at the respective regional office.]
--------------------------------------------------------------------------------
1. Substituted by SEBI(Underwriters) Amendment Regulations, 1999 w.e.f. 30-9-1999. Earlier paragraph 4 was substituted by the SEBI (Payment of Fees) (Amendment) Regulations, 1995, w.e.f 28.11.1995
SCHEDULE III
SECURITIES AND EXCHANGE BOARD OF INDIA
(UNDERWRITERS) REGULATIONS, 1993
CODE OF CONDUCT
[REGULATION 13]
1. Every underwriter shall maintain high standards of integrity, dignity and fairness in all his dealings with his clients and other Underwriters in the conduct of his business.
2. An underwriter shall ensure that he and his personnel will act in an ethical manner in all his dealings with a body corporate making an issue of securities (hereinafter referred to in the schedule as "the issuer").
3. Every underwriter shall, at all times, render high standards of service, exercise due diligence, ensure proper care and exercise independent professional judgement.
4. Every underwriter shall disclose to the Issuer Company his possible source or potential areas of conflict of duties and interest while providing underwriting services.
5. Underwriter shall not indulge in any unfair competition, which is likely to be harmful to the interest of other underwriters carrying on the business of underwriting or likely to place such other underwriters in a disadvantageous position in relation to the underwriter while competing for, or carrying out any assignment.
6. No underwriter shall make any statement, either oral or written, which would misrepresent -
(a) the services that the underwriter is capable of performing for the, or has rendered to other Issuer Company;
(b) his underwriting commitment.
7. No underwriter shall divulge to other Issuer, Press or any party any confidential information about his Issuer Company, which has come to his knowledge and deal in securities of any Issuer Company without making disclosure to the Board as required under the regulations and also to the Board of Directors of the Issuer Company.
8. No underwriter shall willfully make untrue statement or suppress any material fact in any documents, reports, papers or information furnished to the Board.
1*[9 (a) [An underwriter or any of his employees shall not render, directly or indirectly any investment advice about any security in the publicly accessible media, whether real-time or non-real-time, unless a disclosure of his interest including his long or short position in the said security has been made, while rendering such advice.
(b) In case, an employee of the underwriter is rendering such advice, he shall also disclose the interest of his dependent family members and the employer including their long or short position in the said security, while rendering such advice].
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1. Inserted by SEBI (Investment Advice by Intermediaries) (Amendment) Regulations, 2002. w.e.f. 29.5.2001.
India SEBI DIP - 1
SEBI (Disclosure and Investor Protection) Guidelines, 2000 - Amended up to December 3, 2007
Investment Banking Regulations - India - Part 1
SECURITIES AND EXCHANGE BOARD OF INDIA
(MERCHANT BANKERS) REGULATIONS, 1992
http://inv-banking.blogspot.com/2007/12/investment-banking-regulations-india_1584.html
(MERCHANT BANKERS) REGULATIONS, 1992
http://inv-banking.blogspot.com/2007/12/investment-banking-regulations-india_1584.html
Investment Banking Regulations - India - Part 2
Merchant Banking Regulations in India
SECURITIES AND EXCHANGE BOARD OF INDIA
(MERCHANT BANKERS) REGULATIONS, 1992
CONTENTS
CHAPTER I: PRELIMINARY
1. Short title and commencement
2. Definitions
CHAPTER II: REGISTRATION OF MERCHANT BANKERS
3. Application for grant of certificate
4. Application to conform to the requirements
5. Furnishing of information, clarification and personal representation
6. Consideration of application
7. Capital Adequacy Requirement
8. Procedure for Registration
9. Renewal of certificate
10. Procedure where registration is not granted
11. Effect of refusal to grant certificate
12. Payment of fees and the consequences of failure to pay fees
CHAPTER III: GENERAL OBLIGATIONS AND RESPONSIBILITIES
13. Code of Conduct
13A. Merchant banker not to associate with any business other than that of the securities market
14. Maintenance of books of accounts, records etc.
15. Submission of Half-yearly results
16. Maintenance of books of account, records and other documents
17. Report on steps taken on Auditor's report
18. Appointment of lead merchant bankers
19. Restriction on appointment of lead managers
20. Responsibilities of lead managers
21. Lead merchant banker not to associate with a merchant banker without registration
22. Underwriting obligations
23. Submission of due diligence certificate
24. Documents to be furnished to the Board
24A. Payment of fees to the Board
25. Continuance of association of lead manager with an issue
26. Acquisition of shares prohibited
27. Information to the Board
28. Disclosures to the Board
CHAPTER IV: PROCEDURE FOR INSPECTION
29. Board's right to inspect
30. Notice before inspection
31. Obligations of merchant banker on inspection by the Board
32. Submission of Report to the Board
33. Action on inspection or investigation report
34. Appointment of Auditor
CHAPTER V: PROCEDURE FOR ACTION IN CASE OF DEFAULT
35. Liability for action in case of default
SCHEDULE I: FORMS
FORM A: APPLICATION FOR GRANT OF CERTIFICATE / RENEWAL OF CERTIFICATE
FORM B: CERTIFICATE OF REGISTRATION
FORM C: DUE DILIGENCE CERTIFICATE
SCHEDULE II: FEES
SCHEDULE III: CODE OF CONDUCT FOR MERCHANT BANKERS
SCHEDULE IV
THE GAZETTE OF INDIA
EXTRAORDINARY
PART III - SECTION 4
PUBLISHED BY AUTHORITY
NOTIFICATION
THE 22 ND DAY OF DECEMBER, 1992
BOMBAY
SECURITIES AND EXCHANGE BOARD OF INDIA
(MERCHANT BANKERS) REGULATIONS, 1992
No.LE/11112/92. In exercise of the powers conferred by Section 30 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Board with the previous approval of the Central Government hereby makes the following regulations, namely: -
CHAPTER I
PRELIMINARY
Short title and commencement
1. (1) These regulations may be called the Securities and Exchange Board of India (Merchant Bankers) Regulations, 1992.
(2) They shall come into force on the date of their publication in the Official Gazette.
Definitions
2. In these regulations, unless the context otherwise requires, -
1*[******]
(b) "form " means a form specified in Schedule I;
(c) "inspecting authority" means one or more persons appointed by the Board to exercise powers conferred under Chapter IV;
(d) "principal officer " means ?
(i) proprietor, in the case of a proprietary concern;
(ii) partner, in the case of a partnership firm;
(iii) director, in the case of a body corporate, who is responsible for the activities of the merchant banker;
(e) "rules" means Securities and Exchange Board of India (Merchant Bankers) Rules, 1992;
(f) Words and expressions used and not defined in these regulations but defined in the Act and the rules shall have the meanings respectively assigned to them in the Act or the rules as the case may be.
Foot notes
1. Following clause (a) of regulation 2 was deleted by the Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 published in the Official Gazette of India dated 27.09.2002
(a) "enquiry officer" means any officer of the Board, or any other person, having experience in dealing with the problems relating to the securities market, who is authorised by the Board under Chapter V;
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CHAPTER II
REGISTRATION OF MERCHANT BANKERS
Application for grant of certificate
3. (1) An application by a person for grant of a certificate shall be made to the Board in Form A.
(2) The application under sub- regulation (1) shall be made for any one of the following categories of the merchant banker namely:-
(a) Category I, that is ?
(i) to carry on any activity of the issue management, which will inter-alia consist of preparation of prospectus and other information relating to the issue, determining financial structure, tie-up of financiers and final allotment and refund of the subscription; and
(ii) to act as adviser, consultant, manager, underwriter, portfolio manager.
(b) Category II, that is, to act as adviser, consultant, co-manager, underwriter, portfolio manager;
(c) Category III, that is to act as underwriter, adviser, consultant to an issue;
(d) Category IV, that is to act only as adviser or consultant to an issue.
2*[(2A) Notwithstanding anything contained in this regulation, with effect from 9th December, 1997,
(i) an application under sub-regulation (2) can be made only for carrying on the activities mentioned in clause (a) therein, and
(ii) an applicant can carry on the activity as underwriter only if he obtains separate certificate of registration under the provisions of Securities and Exchange Board of India (Underwriters) Regulations, 1993, and
(iii) an applicant can carry on the activity as portfolio manager only if he obtains separate certificate of registration under the provisions of Securities and Exchange Board of India (Portfolio Manager) Regulations, 1993.]
(3) Notwithstanding anything contained in sub-regulation (1), any application made by a merchant banker prior to coming into force of these regulations containing such particulars or as near thereto as mentioned in Form A shall be treated as an application made in pursuance of sub-regulation (1) and dealt with accordingly.
Application to conform to the requirements
4. Subject to the provisions of sub-regulation (3) of regulation 3, any application, which is not complete in all respects and does not conform to the instructions specified in the form, shall be rejected:
Provided that, before rejecting any such application, the applicant shall be given an opportunity to remove within the time specified such objections as may be indicated by the Board.
Furnishing of information, clarification and personal representation
5. (1) The Board may require the applicant to furnish further information or clarification regarding matters relevant to the activity of a merchant banker for the purpose of disposal of the application.
(2) The applicant or its principal officer shall, if so required, appear before the Board for personal representation.
Consideration of application
6. The Board shall take into account for considering the grant of a certificate, all matters, which are relevant to the activities relating to merchant banker and in particular the applicant complies with the following requirements, namely: -
3*[(a) the applicant shall be a body corporate other than a non- banking financial company as defined under clause (f) of section 45-I of the Reserve Bank of India Act, 1934, (2 of 1934) as amended from time to time,]
4*[Provided that the merchant banker who has been granted registration by the Reserve Bank of India to act as a Primary or Satellite dealer may carry on such activity subject to the condition that it shall not accept or hold public deposit]
5*[(aa)] the applicant has the necessary infrastructure like adequate office space, equipments, and manpower to effectively discharge his activities;]
(b) the applicant has in his employment minimum of two persons who have the experience to conduct the business of the merchant banker;
(c) a person directly or indirectly connected with the applicant has not been granted registration by the Board;
Explanation: For the purposes of this clause the expression "directly or indirectly connected" means any person being an associate, subsidiary, inter-connected or group Company of the applicant in case of the applicant being a body corporate.
(d) the applicant fulfils the capital adequacy requirement specified in regulation 7;
(e) the applicant, his partner, director or principal officer is not involved in any litigation connected with the securities market which has an adverse bearing on the business of the applicant;
(f) the applicant, his director, partner 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;
(g) the applicant has the professional qualification from an institution recognised by the Government in finance, law or business management;
6*(gg) the applicant is a fit and proper person,]
(h) grant of certificate to the applicant is in the interest of investors.
Capital Adequacy Requirement
7. (1) The capital adequacy requirement referred to in sub- regulation (d) of regulation 6 shall not be less than the net worth of the person making the application for grant of registration.
(2) For the purposes of sub- regulation (1), the networth shall be as follows, namely: -
Category Minimum Amount
Category I 7*[Rs. 5, 00, 00, 000]
Category II Rs. 50, 00, 000
Category III Rs. 20, 00, 000
Category IV Nil
Explanation: For the purposes of this regulation "networth" 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 under sub-regulation (1) of regulation 3.
Procedure for Registration
8. (1) The Board on being satisfied that the applicant is eligible shall grant a certificate in Form B 8*[******].
9*[******]
10*[******]
(4) On the grant of a certificate the applicant shall be liable to pay the fees 11*[******] in accordance with Schedule II;
12*[******]
Renewal of certificate
9. (1) Three months before expiry of the period of certificate, the merchant banker, may if he so desires, make an application for renewal in Form A.
(2) The application for renewal, under sub-regulation (1) shall be dealt with in the same manner as if it were a fresh application for grant of a certificate.
13*[Provided that in case of an application for renewal of certificate of registration, the provisions of clause (a) of regulation 6 shall not be applicable upto June 30th, 1998]
(3) The Board on being satisfied that the applicant is eligible for renewal of certificate shall grant a certificate in Form B and send intimation to the applicant 14*[***]
15*[***]
16*[***]
(6) On the grant of a certificate the applicant shall be liable to pay the fees 17*[***] in accordance with Schedule II;
18*[***]
Procedure where registration is not granted
10. (1) Where an application for grant of a certificate under regulation 3 or of renewal under regulation 9, does not satisfy the criteria set out in regulation 6, the Board may reject the application after giving an opportunity of being heard.
(2) The refusal to grant registration shall be communicated by the Board within thirty days of such refusal to the applicant stating therein the grounds on which the application has been rejected.
(3) Any applicant may, being aggrieved by the decision of the Board, under sub-regulation (1), apply within a period of thirty days from the date of receipt of such intimation to the Board for reconsideration of its decision.
(4) The Board shall reconsider an application made under sub- regulation (3) and communicate its decision as soon as possible in writing to the applicant.
Effect of refusal to grant certificate
11. Any merchant banker whose application for a certificate has been refused by the Board shall on and from the date of the receipt of the communication under sub-regulation (2) of regulation 10 cease to carry on any activity as merchant banker.
Payment of fees and the consequences of failure to pay fees
12. (1) Every applicant eligible for grant of a certificate shall pay such fees in such manner and within the period specified in Schedule II.
(2) Where a merchant banker fails to pay the Annual fees as provided in sub-regulation (1), read with Schedule II, the Board may suspend the registration certificate, whereupon the merchant banker shall cease to carry on any activity as a merchant banker for the period during which the suspension subsists.
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Foot notes
2. Sub-regulation 2A to regulation 3 was inserted by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 09.12.1997.
3. Clause (a) to regulation 6 was inserted by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 09.12.1997.
4. Proviso to clause (a) to regulation 6 was inserted by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 17.11.1999.
5. Clause (a) to regulation 6 was renumbered as (aa) by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette dated 09.12.1997.
6. Clause (gg) to regulation 6 was inserted by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 09.12.1997.
7. The figure "1, 00, 00, 000" in sub-regulation (2) of regulation 7 was Substituted by SEBI (Merchant Bankers) (Amendment) Regulations, 1995 published in the Official Gazette of India dated 07.09.1995.
8. The following part of sub-regulation (1) of regulation 8 was omitted by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official of India Gazette dated 09.12.1997
"and send an intimation to the applicant mentioning the category for which the Board has granted certificate"
9. Sub-regulation (2) of regulation 8 was omitted by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 09.12.1997.
10. Sub-regulation (3) of regulation 8 was omitted by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 09.12.1997.
11. The following part of sub-regulation (4) of regulation 8 was omitted by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 09.12.1997
"for the category for which the registration is granted"
12. Following proviso to sub-regulation (4) of regulation 8 was omitted by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 09.12.1997
"Provided that the amount of fees payable shall be proportionately reduced by the amount of fees already paid by the merchant banker for the year in which the registration is granted in the higher category."
13. Proviso to sub-regulation (2) of regulation 9 was inserted by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 21.01.1998.
14. Following part of sub-regulation (3) of regulation 9 was omitted by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 09.12.1997
"mentioning the category for which the Board has granted certificate"
15. Following sub-regulation (4) of regulation 9 was omitted by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 09.12.1997
"Notwithstanding anything contained in sub-regulation (1), where a certificate has been granted for a category lower than for what has been applied for, the applicant, may make an application to the Board at any time after the expiry of one year from the date of grant of such registration."
16. Following sub-regulation (5) of regulation 9 was omitted by the SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 09.12.1997
"An application made under sub-regulation (4) shall be considered in the same manner as an application made under regulation 3."
17. Following part of sub-regulation (6) of regulation 9 was omitted by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 09.12.1997
"for the category for which the registration is granted"
18. Following proviso to sub-regulation (6) of regulation 9 was omitted by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 09.12.1997
"Provided that the amount of fees payable shall be proportionately reduced by the amount of fees already paid by the merchant banker for the year in which the registration is granted in the higher category."
SECURITIES AND EXCHANGE BOARD OF INDIA
(MERCHANT BANKERS) REGULATIONS, 1992
CONTENTS
CHAPTER I: PRELIMINARY
1. Short title and commencement
2. Definitions
CHAPTER II: REGISTRATION OF MERCHANT BANKERS
3. Application for grant of certificate
4. Application to conform to the requirements
5. Furnishing of information, clarification and personal representation
6. Consideration of application
7. Capital Adequacy Requirement
8. Procedure for Registration
9. Renewal of certificate
10. Procedure where registration is not granted
11. Effect of refusal to grant certificate
12. Payment of fees and the consequences of failure to pay fees
CHAPTER III: GENERAL OBLIGATIONS AND RESPONSIBILITIES
13. Code of Conduct
13A. Merchant banker not to associate with any business other than that of the securities market
14. Maintenance of books of accounts, records etc.
15. Submission of Half-yearly results
16. Maintenance of books of account, records and other documents
17. Report on steps taken on Auditor's report
18. Appointment of lead merchant bankers
19. Restriction on appointment of lead managers
20. Responsibilities of lead managers
21. Lead merchant banker not to associate with a merchant banker without registration
22. Underwriting obligations
23. Submission of due diligence certificate
24. Documents to be furnished to the Board
24A. Payment of fees to the Board
25. Continuance of association of lead manager with an issue
26. Acquisition of shares prohibited
27. Information to the Board
28. Disclosures to the Board
CHAPTER IV: PROCEDURE FOR INSPECTION
29. Board's right to inspect
30. Notice before inspection
31. Obligations of merchant banker on inspection by the Board
32. Submission of Report to the Board
33. Action on inspection or investigation report
34. Appointment of Auditor
CHAPTER V: PROCEDURE FOR ACTION IN CASE OF DEFAULT
35. Liability for action in case of default
SCHEDULE I: FORMS
FORM A: APPLICATION FOR GRANT OF CERTIFICATE / RENEWAL OF CERTIFICATE
FORM B: CERTIFICATE OF REGISTRATION
FORM C: DUE DILIGENCE CERTIFICATE
SCHEDULE II: FEES
SCHEDULE III: CODE OF CONDUCT FOR MERCHANT BANKERS
SCHEDULE IV
THE GAZETTE OF INDIA
EXTRAORDINARY
PART III - SECTION 4
PUBLISHED BY AUTHORITY
NOTIFICATION
THE 22 ND DAY OF DECEMBER, 1992
BOMBAY
SECURITIES AND EXCHANGE BOARD OF INDIA
(MERCHANT BANKERS) REGULATIONS, 1992
No.LE/11112/92. In exercise of the powers conferred by Section 30 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Board with the previous approval of the Central Government hereby makes the following regulations, namely: -
CHAPTER I
PRELIMINARY
Short title and commencement
1. (1) These regulations may be called the Securities and Exchange Board of India (Merchant Bankers) Regulations, 1992.
(2) They shall come into force on the date of their publication in the Official Gazette.
Definitions
2. In these regulations, unless the context otherwise requires, -
1*[******]
(b) "form " means a form specified in Schedule I;
(c) "inspecting authority" means one or more persons appointed by the Board to exercise powers conferred under Chapter IV;
(d) "principal officer " means ?
(i) proprietor, in the case of a proprietary concern;
(ii) partner, in the case of a partnership firm;
(iii) director, in the case of a body corporate, who is responsible for the activities of the merchant banker;
(e) "rules" means Securities and Exchange Board of India (Merchant Bankers) Rules, 1992;
(f) Words and expressions used and not defined in these regulations but defined in the Act and the rules shall have the meanings respectively assigned to them in the Act or the rules as the case may be.
Foot notes
1. Following clause (a) of regulation 2 was deleted by the Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 published in the Official Gazette of India dated 27.09.2002
(a) "enquiry officer" means any officer of the Board, or any other person, having experience in dealing with the problems relating to the securities market, who is authorised by the Board under Chapter V;
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CHAPTER II
REGISTRATION OF MERCHANT BANKERS
Application for grant of certificate
3. (1) An application by a person for grant of a certificate shall be made to the Board in Form A.
(2) The application under sub- regulation (1) shall be made for any one of the following categories of the merchant banker namely:-
(a) Category I, that is ?
(i) to carry on any activity of the issue management, which will inter-alia consist of preparation of prospectus and other information relating to the issue, determining financial structure, tie-up of financiers and final allotment and refund of the subscription; and
(ii) to act as adviser, consultant, manager, underwriter, portfolio manager.
(b) Category II, that is, to act as adviser, consultant, co-manager, underwriter, portfolio manager;
(c) Category III, that is to act as underwriter, adviser, consultant to an issue;
(d) Category IV, that is to act only as adviser or consultant to an issue.
2*[(2A) Notwithstanding anything contained in this regulation, with effect from 9th December, 1997,
(i) an application under sub-regulation (2) can be made only for carrying on the activities mentioned in clause (a) therein, and
(ii) an applicant can carry on the activity as underwriter only if he obtains separate certificate of registration under the provisions of Securities and Exchange Board of India (Underwriters) Regulations, 1993, and
(iii) an applicant can carry on the activity as portfolio manager only if he obtains separate certificate of registration under the provisions of Securities and Exchange Board of India (Portfolio Manager) Regulations, 1993.]
(3) Notwithstanding anything contained in sub-regulation (1), any application made by a merchant banker prior to coming into force of these regulations containing such particulars or as near thereto as mentioned in Form A shall be treated as an application made in pursuance of sub-regulation (1) and dealt with accordingly.
Application to conform to the requirements
4. Subject to the provisions of sub-regulation (3) of regulation 3, any application, which is not complete in all respects and does not conform to the instructions specified in the form, shall be rejected:
Provided that, before rejecting any such application, the applicant shall be given an opportunity to remove within the time specified such objections as may be indicated by the Board.
Furnishing of information, clarification and personal representation
5. (1) The Board may require the applicant to furnish further information or clarification regarding matters relevant to the activity of a merchant banker for the purpose of disposal of the application.
(2) The applicant or its principal officer shall, if so required, appear before the Board for personal representation.
Consideration of application
6. The Board shall take into account for considering the grant of a certificate, all matters, which are relevant to the activities relating to merchant banker and in particular the applicant complies with the following requirements, namely: -
3*[(a) the applicant shall be a body corporate other than a non- banking financial company as defined under clause (f) of section 45-I of the Reserve Bank of India Act, 1934, (2 of 1934) as amended from time to time,]
4*[Provided that the merchant banker who has been granted registration by the Reserve Bank of India to act as a Primary or Satellite dealer may carry on such activity subject to the condition that it shall not accept or hold public deposit]
5*[(aa)] the applicant has the necessary infrastructure like adequate office space, equipments, and manpower to effectively discharge his activities;]
(b) the applicant has in his employment minimum of two persons who have the experience to conduct the business of the merchant banker;
(c) a person directly or indirectly connected with the applicant has not been granted registration by the Board;
Explanation: For the purposes of this clause the expression "directly or indirectly connected" means any person being an associate, subsidiary, inter-connected or group Company of the applicant in case of the applicant being a body corporate.
(d) the applicant fulfils the capital adequacy requirement specified in regulation 7;
(e) the applicant, his partner, director or principal officer is not involved in any litigation connected with the securities market which has an adverse bearing on the business of the applicant;
(f) the applicant, his director, partner 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;
(g) the applicant has the professional qualification from an institution recognised by the Government in finance, law or business management;
6*(gg) the applicant is a fit and proper person,]
(h) grant of certificate to the applicant is in the interest of investors.
Capital Adequacy Requirement
7. (1) The capital adequacy requirement referred to in sub- regulation (d) of regulation 6 shall not be less than the net worth of the person making the application for grant of registration.
(2) For the purposes of sub- regulation (1), the networth shall be as follows, namely: -
Category Minimum Amount
Category I 7*[Rs. 5, 00, 00, 000]
Category II Rs. 50, 00, 000
Category III Rs. 20, 00, 000
Category IV Nil
Explanation: For the purposes of this regulation "networth" 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 under sub-regulation (1) of regulation 3.
Procedure for Registration
8. (1) The Board on being satisfied that the applicant is eligible shall grant a certificate in Form B 8*[******].
9*[******]
10*[******]
(4) On the grant of a certificate the applicant shall be liable to pay the fees 11*[******] in accordance with Schedule II;
12*[******]
Renewal of certificate
9. (1) Three months before expiry of the period of certificate, the merchant banker, may if he so desires, make an application for renewal in Form A.
(2) The application for renewal, under sub-regulation (1) shall be dealt with in the same manner as if it were a fresh application for grant of a certificate.
13*[Provided that in case of an application for renewal of certificate of registration, the provisions of clause (a) of regulation 6 shall not be applicable upto June 30th, 1998]
(3) The Board on being satisfied that the applicant is eligible for renewal of certificate shall grant a certificate in Form B and send intimation to the applicant 14*[***]
15*[***]
16*[***]
(6) On the grant of a certificate the applicant shall be liable to pay the fees 17*[***] in accordance with Schedule II;
18*[***]
Procedure where registration is not granted
10. (1) Where an application for grant of a certificate under regulation 3 or of renewal under regulation 9, does not satisfy the criteria set out in regulation 6, the Board may reject the application after giving an opportunity of being heard.
(2) The refusal to grant registration shall be communicated by the Board within thirty days of such refusal to the applicant stating therein the grounds on which the application has been rejected.
(3) Any applicant may, being aggrieved by the decision of the Board, under sub-regulation (1), apply within a period of thirty days from the date of receipt of such intimation to the Board for reconsideration of its decision.
(4) The Board shall reconsider an application made under sub- regulation (3) and communicate its decision as soon as possible in writing to the applicant.
Effect of refusal to grant certificate
11. Any merchant banker whose application for a certificate has been refused by the Board shall on and from the date of the receipt of the communication under sub-regulation (2) of regulation 10 cease to carry on any activity as merchant banker.
Payment of fees and the consequences of failure to pay fees
12. (1) Every applicant eligible for grant of a certificate shall pay such fees in such manner and within the period specified in Schedule II.
(2) Where a merchant banker fails to pay the Annual fees as provided in sub-regulation (1), read with Schedule II, the Board may suspend the registration certificate, whereupon the merchant banker shall cease to carry on any activity as a merchant banker for the period during which the suspension subsists.
--------------------------------------------------------------------------------
Foot notes
2. Sub-regulation 2A to regulation 3 was inserted by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 09.12.1997.
3. Clause (a) to regulation 6 was inserted by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 09.12.1997.
4. Proviso to clause (a) to regulation 6 was inserted by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 17.11.1999.
5. Clause (a) to regulation 6 was renumbered as (aa) by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette dated 09.12.1997.
6. Clause (gg) to regulation 6 was inserted by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 09.12.1997.
7. The figure "1, 00, 00, 000" in sub-regulation (2) of regulation 7 was Substituted by SEBI (Merchant Bankers) (Amendment) Regulations, 1995 published in the Official Gazette of India dated 07.09.1995.
8. The following part of sub-regulation (1) of regulation 8 was omitted by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official of India Gazette dated 09.12.1997
"and send an intimation to the applicant mentioning the category for which the Board has granted certificate"
9. Sub-regulation (2) of regulation 8 was omitted by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 09.12.1997.
10. Sub-regulation (3) of regulation 8 was omitted by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 09.12.1997.
11. The following part of sub-regulation (4) of regulation 8 was omitted by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 09.12.1997
"for the category for which the registration is granted"
12. Following proviso to sub-regulation (4) of regulation 8 was omitted by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 09.12.1997
"Provided that the amount of fees payable shall be proportionately reduced by the amount of fees already paid by the merchant banker for the year in which the registration is granted in the higher category."
13. Proviso to sub-regulation (2) of regulation 9 was inserted by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 21.01.1998.
14. Following part of sub-regulation (3) of regulation 9 was omitted by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 09.12.1997
"mentioning the category for which the Board has granted certificate"
15. Following sub-regulation (4) of regulation 9 was omitted by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 09.12.1997
"Notwithstanding anything contained in sub-regulation (1), where a certificate has been granted for a category lower than for what has been applied for, the applicant, may make an application to the Board at any time after the expiry of one year from the date of grant of such registration."
16. Following sub-regulation (5) of regulation 9 was omitted by the SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 09.12.1997
"An application made under sub-regulation (4) shall be considered in the same manner as an application made under regulation 3."
17. Following part of sub-regulation (6) of regulation 9 was omitted by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 09.12.1997
"for the category for which the registration is granted"
18. Following proviso to sub-regulation (6) of regulation 9 was omitted by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 09.12.1997
"Provided that the amount of fees payable shall be proportionately reduced by the amount of fees already paid by the merchant banker for the year in which the registration is granted in the higher category."
Investment Banking Regulations - India - Part 3
Merchant Banking Regulations in India
SECURITIES AND EXCHANGE BOARD OF INDIA
(MERCHANT BANKERS) REGULATIONS, 1992
CONTENTS
CHAPTER III
GENERAL OBLIGATIONS AND RESPONSIBILITIES
Code of Conduct
13. Every merchant banker shall abide by the Code of Conduct as specified in Schedule III.
19*[Merchant banker not to associate with any business other than that of the securities market
13A ? No merchant banker, other than a bank or a 20*[public financial institution], who has been granted a certificate of registration under these regulations shall 21*[after June 30th, 1998] carry on any business other than that in the securities market.
Notwithstanding anything contained above, a merchant banker who prior to the date of notification of the securities and exchange board of India (Merchant Bankers) Amendment Regulations, 1997, has entered into a contract in respect of a business other than that of the securities market, may, if he so desires, discharge his obligations under such contract.
Explanation - for the purposes of this regulation:
(i) A "bank" shall mean a banking company as defined under section 5 of the Banking Regulation Act, 1949 (10 of 1949) and the corresponding new bank set up under the Banking Companies (Acquisition and Transfer of Undertaking) Act, 1970 (5 of 1970) and Banking Companies (Acquisition and Transfer of Undertaking) Act, 1980 (40 of 1980), State Bank of India Act, 1955 (23 of 1955) and State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959)
(ii) A "public financial institution" shall have the same meaning as assigned to the term under Section 4A of the Companies Act, 1956 (1 of 1956) and shall include Industrial Development Corporations and Financial Corporations established by the Central Government or State Governments as the case may be]
22*[Provided that a merchant banker who has been granted certificate of registration to act as primary or satellite dealer by Reserve Bank of India, may carry on such business as may be permitted by Reserve Bank of India]
Maintenance of books of accounts, records etc.
14. (1) Every merchant banker shall keep and maintain the following books of accounts, records and documents namely:-
(a) a copy of balance sheet as at the end of each accounting period;
(b) a copy of profit and loss account for that period;
(c) a copy of the auditor's report on the accounts for that period; and
(d) a statement of financial position.
(2) Every merchant banker shall intimate to the Board the place where the books of accounts, records and documents are maintained.
(3) Without prejudice to sub- regulation (1), every merchant banker shall, after the end of each accounting period furnish to the Board copies of the balance sheet, profit and loss account and such other documents for any other preceding five accounting years when required by the Board.
Submission of Half-yearly results
15. Every merchant banker shall furnish to the Board half-yearly unaudited financial results when required by the Board with a view to monitor the capital adequacy of the merchant banker.
Maintenance of books of account, records and other documents
16. The merchant banker shall preserve the books of accounts and other records and documents maintained under regulation 14 for a minimum period of five years.
Report on steps taken on Auditor's report
17. Every merchant banker shall within two months from the date of the auditors' report take steps to rectify the deficiencies, made out in the auditor's report.
Appointment of lead merchant bankers
18. (1) All issues should be managed by atleast one merchant banker functioning as the lead merchant banker:
Provided that, in an issue of offer of rights to the existing members with or without the right of renunciation the amount of the issue of the body corporate does not exceed rupees fifty lakhs, the appointment of a lead merchant banker shall not be essential.
(2) Every lead merchant banker shall before taking up the assignment relating to an issue, enter into an agreement with such body corporate setting out their mutual rights, liabilities and obligations relating to such issue and in particular to disclosures, allotment and refund.
Restriction on appointment of lead managers
19. The number of lead merchant bankers may not, exceed in case of any issue of Size of issue No. of Merchant Bankers
(a) Less than rupees fifty crores Two
(b) Rupees fifty crores but lessthan rupees one hundred crores Three
(c) Rupees one hundred crores but less than rupees two hundred crores Four
(d) Rupees two hundred crores but less than rupees four hundred crores Five
(e) Above Rupees four hundred crores five or more as may be agreed by the board
Responsibilities of lead managers
20. (1) No lead manager shall agree to manage or be associated with any issue unless his responsibilities relating to the issue mainly, those of disclosures, allotment and refund are clearly defined, allocated and determined and a statement specifying such responsibilities is furnished to the Board at least one month before the opening of the issue for subscription:
Provided that, where there are more than one lead merchant bankers to the issue the responsibilities of each of such lead merchant banker shall clearly be demarcated and a statement specifying such responsibilities shall be furnished to the Board at least one month before the opening of the issue for subscription.
(2) 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.
Lead merchant banker not to associate with a merchant banker without registration
21. A lead merchant banker shall not be associated with any issue if a merchant banker who is not holding a certificate is associated with the issue.
Underwriting obligations
22. (1) In respect of every issue to be managed, the lead merchant banker holding a certificate under Category I shall accept a minimum Underwriting obligation of five percent of the total underwriting commitment or rupees twenty-five lacs, whichever is less:
Provided that, if the lead merchant banker is unable to accept the minimum underwriting obligation, that lead merchant banker shall make arrangement for having the issue underwritten to that extent by a merchant banker associated with the issue and shall keep the Board informed of such arrangement.
Submission of due diligence certificate
23. The lead merchant banker, who is responsible for verification of the contents of a prospectus or the Letter of Offer in respect of an issue and the reasonableness of the views expressed therein, shall submit to the Board at least two weeks prior to the opening of the issue for subscription, a due diligence certificate in Form C.
Documents to be furnished to the Board
24. (1) The lead manager responsible for the issue shall furnish to the Board, the following documents, namely: -
(i) particulars of the issue;
(ii) draft prospectus or where there is an offer to the existing shareholders, the draft letter of offer;
(iii) any other literature intended to be circulated to the investors, including the shareholders; and
(iv) such other documents relating to prospectus or letter of offer as the case may be.
(2) The documents referred to in sub-regulation (1) shall be furnished at least two weeks prior to date of filing of the draft prospectus or the letter of offer, as the case may be, with the Registrar of Companies or with the Regional Stock Exchanges, or with both.
(3) The lead manager shall ensure that the modifications and suggestions, if any, made by the Board on the draft prospectus or the Letter of Offer as the case may be, with respect to information to be given to the investors are incorporated therein.
23*[Payment of fees to the Board
24A. The draft prospectus or draft letter of offer referred to in regulation 24 shall be submitted along with such fees and in such manner as may be specified in Schedule IV]
Continuance of association of lead manager with an issue
25. The lead manager undertaking the responsibility for refunds or allotment of securities in respect of any issue shall continue to be associated with the issue till the subscribers have received the share or debenture certificates or refund of excess application money;
Provided that where a person other than the lead manager is entrusted with the refund or allotment of securities in respect of any issue, the lead manager shall continue to be responsible for ensuring that such other person discharges the requisite responsibilities in accordance with the provisions of the Companies Act and the listing agreement entered into by the body corporate with the stock- exchange.
Acquisition of shares prohibited
26. No merchant banker or any of its directors, partner or manager or principal officer shall either on their respective accounts or through their associates or relatives enter into any transaction in securities of bodies corporate on the basis of unpublished price sensitive information obtained by them during the course of any professional assignment either from the clients or otherwise.
Information to the Board
27. Every merchant banker shall submit to the Board complete particulars of any transaction for acquisition of securities of any body corporate whose issue is being managed by that merchant banker within fifteen days from the date of entering into such transaction.
Disclosures to the Board
28. A merchant banker shall disclose to the Board as and when required, the following information, namely: -
(i) his responsibilities with regard to the management of the issue;
(ii) any change in the information or particulars previously furnished, which have a bearing on the certificate granted to it;
(iii) the names of the body corporate whose issues he has managed or has been associated with;
(iv) the particulars relating to breach of the capital adequacy requirement as specified in regulation 7;
(v) relating to his activities as a manager, underwriter, consultant or adviser to an issue as the case may be.
24*[Appointment of compliance officer
28A. (1) Every merchant banker shall appoint a compliance officer who shall be responsible for monitoring the compliance of the Act, rules and regulations, notifications, guidelines, instructions etc., issued by the Board or the Central Government and for redressal of investors? grievances.
(2) The compliance officer shall immediately and independently report to the Board any non-compliance observed by him and ensure that the observations made or deficiencies pointed out by the Board on \ in the draft prospectus or the Letter of offer as the case may be, do not recur.]
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Foot notes
19. Regulation 13A was inserted by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 06.06.1996.
20. Substituted for the words "Financial Institution" by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 06.06.1996.
21. "after June 30th, 1998" inserted by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 06.06.1996.
22. Proviso to regulation 13A was inserted by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 17.11.1999.
23. Regulation 24A inserted by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 06.06.1996.
24. Regulation 28A was inserted by SEBI (Investment advice by intermediaries) (Amendment) Regulations, 2001 published in the Official Gazette of India dated 29.05.2001.
CHAPTER IV
PROCEDURE FOR INSPECTION
Board's right to inspect
29. (1) The Board may appoint one or more persons as inspecting authority to undertake inspection of the books of accounts, records and documents of the merchant banker for any of the purposes specified in sub-regulation (2).
(2) The purposes referred to in sub-regulation (1) may be as follows namely: -
(a) to ensure that the books of account are being maintained in the manner required;
(b) that the provisions of the Act, rules, regulations are being complied with;
(c) 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
(d) to investigate suo-moto in the interest of securities business or investors interest into the affairs of the merchant banker.
Notice before inspection
30. (1) Before undertaking an inspection under regulation 29 the Board shall give a reasonable notice to the merchant banker for that purpose.
(2) Notwithstanding anything contained in sub-regulation (1), where the Board is satisfied that in the interest of the investors no such notice should be given, it may by an order in writing direct that the inspection of the affairs of the merchant banker be taken up without such notice.
(3) During the course of inspection, the merchant banker against whom an inspection is being carried out shall be bound to discharge his obligations as provided under regulation 31.
Obligations of merchant banker on inspection by the Board
31. (1) It shall be the duty of every director, proprietor, partner, officer and employee of the merchant banker, who is being inspected, to produce to the inspecting authority such books, accounts and other documents in his custody or control and furnish him with the statements and information relating to his activities as a merchant banker within such time as the inspecting authority may require.
(2) The merchant banker shall allow the inspecting authority to have reasonable access to the premises occupied by such merchant banker or by any other person on his behalf and also extend reasonable facility for examining any books, records, documents and computer data in the possession of the merchant banker or any such other person and also provide copies of documents or other materials which, in the opinion of the inspecting authority are relevant for the purposes of the inspection.
(3) The inspecting authority, in the course of inspection, shall be entitled to examine or record statements of any principal officer, director, partner, proprietor and employee of the merchant banker.
(4) It shall be the duty of every director, proprietor, partner, officer or employee of the merchant banker to give to the inspecting authority all assistance in connection with the inspection which the merchant banker may reasonably be expected to give.
Submission of Report to the Board
32. The inspecting authority shall, as soon as may be possible submit, an inspection report to the Board.
25*[Action on inspection or investigation report
33. The Board or the Chairman shall after consideration of inspection or investigation report take such action as the Board or Chairman may deem fit and appropriate including action under the Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002."
Appointment of Auditor
34. The Board may appoint a qualified auditor to investigate 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 as are mentioned in regulation 29 and the obligations of the merchant banker in regulation 31 shall be applicable to the investigation under this regulation.
Explanation: For the purposes of this regulation the expression "qualified auditor" shall have the same meaning as given in Section 226 of the Companies Act, 1956 (1 of 1956).
Foot notes
25. Following regulation 33 was substituted by the Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 published in the official Gazette of India dated 27.09.2002
Communication of findings etc. to the merchant banker
33. (1) The Board shall after consideration of the inspection report communicate the findings to the merchant banker to give him an opportunity of being heard before any action is taken by the Board on the findings of the inspecting authority.
(2) On receipt of the explanation if any, from the merchant banker, the Board may call upon the merchant banker to take such measures as the Board may deem fit in the interest of the securities market and for due compliance with the provisions of the Act, rules and regulations.
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CHAPTER V
PROCEDURE FOR ACTION IN CASE OF DEFAULT
26*[Liability for action in case of default
35. A merchant banker who ?
(a) fails to comply with any conditions subject to which certificate has been granted;
(b) contravenes any of the provisions of the Act, rules or regulations, shall be dealt with in the manner provided under the Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002."
27*[******]
Foot notes
26. Following regulation 35 was substituted by the Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 published in the official Gazette of India dated 27.09.2002
Liability for action in case of default
35. (1) A merchant banker who ?
(a) fails to comply with any conditions subject to which certificate has been granted;
(b) contravenes any of the provisions of the Act, rules or regulations;
shall be liable to any of the penalties specified in sub-regulation (2).
(2) The penalties referred to in sub-regulation (1) may be either:-
(a) suspension of registration; or
(b) cancellation of registration.
27. Following regulations 36 to 43 were omitted by the Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 published in the official Gazette of India dated 27.09.2002
Suspension of registration
36. (1) A penalty of suspension of registration of a merchant banker may be imposed where ?
(i) the merchant banker violates the provisions of the Act, rules or regulations;
(ii) the merchant banker ?
(a) fails to furnish any information relating to his activity as merchant banker as required by the Board;
(b) furnishes wrong or false information;
(c) does not submit periodical returns as required by the Board;
(d) does not co-operate in any enquiry conducted by the Board;
(iii) the merchant banker fails to resolve the complaints of the investors or fails to give a satisfactory reply to the Board in this behalf;
(iv) the merchant banker indulges in manipulating or price rigging or cornering activities;
(v) the merchant banker is guilty of misconduct or improper or unbusinesslike or unprofessional conduct which is not in accordance with the Code of Conduct specified in Schedule III;
(vi) the merchant banker fails to maintain the capital adequacy requirement in accordance with the provisions of regulation 7;
(vii) the merchant banker fails to pay the fees;
(viii) the merchant banker violates the conditions of registration;
(ix) the merchant banker does not carry out his obligations as specified in the regulation.
Cancellation of registration
37. A penalty of cancellation of registration of a merchant banker may be imposed where
(i) the merchant banker indulges in deliberate manipulation or price rigging or cornering activities affecting the securities market and the investors interest;
(ii) the financial position of the merchant banker deteriorates to such an extent that the Board is of the opinion that his continuance as merchant banker is not in the interest of investors;
(iii) the merchant banker is guilty of fraud, or is convicted of a criminal offence;
(iv) in case of repeated defaults of the nature mentioned in regulation 36 provided that the Board furnishes reasons for cancellation in writing.
Manner of making order of suspension an cancellation
38. No order of penalty of suspension or cancellation as the case may be, shall be imposed except after holding an enquiry in accordance with the procedure specified in regulation
39.
Manner of holding enquiry before suspension or cancellation
39. (1) For the purpose of holding an enquiry under regulation 38, the Board may appoint an enquiry officer.
(2) The enquiry officer shall issue to the merchant banker a notice the registered office or the principal place of business of the merchant banker.
(3) The merchant banker may, within thirty days from the date of receipt of such notice, furnish to the enquiry officer a reply together with copies of documentary or other evidence relied on by him or sought by the Board from the merchant banker.
(4) The enquiry officer shall, give a reasonable opportunity of hearing to the merchant banker to enable him to make submissions in support of his reply made under sub-regulation (3).
(5) Before the enquiry officer, the merchant banker may either appear in person or through any person duly authorised by the merchant banker:
Provided that no lawyer or advocate shall be permitted to represent the merchant banker at the enquiry:
Provided further that where a lawyer or an advocate has been appointed by the Board as a presenting officer under sub- regulation (6), it shall be lawful for the merchant banker to present its case through a lawyer or advocate.
(6) If it is considered necessary, the enquiry officer may ask the Board to appoint a presenting officer to present its case.
(7) The enquiry officer shall, after taking into account all relevant facts and submissions made by the merchant banker, submit a report to the Board and recommend the penalty to be imposed as also the grounds on the basis of which the proposed penalty is justified.
Show-cause notice and order
40. (1) On receipt of the report from the enquiry officer, the Board shall consider the same and issue a show-cause notice as to why the penalty as proposed by the enquiry officer should not be imposed.
(2) The merchant banker shall within twenty-one days of the date of the receipt of the show- cause send a reply to the Board.
(3) The Board after considering the reply to the show-cause notice, if received, shall as soon as possible but not later than thirty days from the receipt of the reply, if any, pass such order as it deems fit.
(4) Every order passed under sub- regulation (3) shall be self- contained and give reasons for the conclusions stated therein including justification of the penalty imposed by that order.
(5) The Board shall send a copy of the order under sub- regulation (3) to the merchant banker.
Effect of suspension and cancellation of registration of merchant banker
41. (1) On and from the date of the suspension of the merchant banker he shall cease to carry on any activity as a merchant banker during the period of suspension.
(2) On and from the date of cancellation the merchant banker shall with immediate effect cease to carry on any activity as a merchant banker.
Publication of order of suspension
42. The order of suspension or cancellation of certificate passed under sub-regulation (3) of regulation 40 shall be published in at least two daily newspapers by the Board.
a*[Appeal to the Securities Appellate Tribunal
43. Any person aggrieved by an order of the Board made, on and after the commencement of the Securities Laws (Second amendment) Act, 1999, (i.e., after 16th December 1999), under these regulations may prefer an appeal to a Securities Appellate Tribunal having jurisdiction in the matter]
a. Substituted for the following provision by SEBI (Appeal to the Securities Appellate Tribunal) (Amendment) Regulations, 2000 published in the official Gazette of India dated 28.03.2000
"Any person aggrieved by an order of the Board may prefer an appeal to the Central Government"
SECURITIES AND EXCHANGE BOARD OF INDIA
(MERCHANT BANKERS) REGULATIONS, 1992
CONTENTS
CHAPTER III
GENERAL OBLIGATIONS AND RESPONSIBILITIES
Code of Conduct
13. Every merchant banker shall abide by the Code of Conduct as specified in Schedule III.
19*[Merchant banker not to associate with any business other than that of the securities market
13A ? No merchant banker, other than a bank or a 20*[public financial institution], who has been granted a certificate of registration under these regulations shall 21*[after June 30th, 1998] carry on any business other than that in the securities market.
Notwithstanding anything contained above, a merchant banker who prior to the date of notification of the securities and exchange board of India (Merchant Bankers) Amendment Regulations, 1997, has entered into a contract in respect of a business other than that of the securities market, may, if he so desires, discharge his obligations under such contract.
Explanation - for the purposes of this regulation:
(i) A "bank" shall mean a banking company as defined under section 5 of the Banking Regulation Act, 1949 (10 of 1949) and the corresponding new bank set up under the Banking Companies (Acquisition and Transfer of Undertaking) Act, 1970 (5 of 1970) and Banking Companies (Acquisition and Transfer of Undertaking) Act, 1980 (40 of 1980), State Bank of India Act, 1955 (23 of 1955) and State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959)
(ii) A "public financial institution" shall have the same meaning as assigned to the term under Section 4A of the Companies Act, 1956 (1 of 1956) and shall include Industrial Development Corporations and Financial Corporations established by the Central Government or State Governments as the case may be]
22*[Provided that a merchant banker who has been granted certificate of registration to act as primary or satellite dealer by Reserve Bank of India, may carry on such business as may be permitted by Reserve Bank of India]
Maintenance of books of accounts, records etc.
14. (1) Every merchant banker shall keep and maintain the following books of accounts, records and documents namely:-
(a) a copy of balance sheet as at the end of each accounting period;
(b) a copy of profit and loss account for that period;
(c) a copy of the auditor's report on the accounts for that period; and
(d) a statement of financial position.
(2) Every merchant banker shall intimate to the Board the place where the books of accounts, records and documents are maintained.
(3) Without prejudice to sub- regulation (1), every merchant banker shall, after the end of each accounting period furnish to the Board copies of the balance sheet, profit and loss account and such other documents for any other preceding five accounting years when required by the Board.
Submission of Half-yearly results
15. Every merchant banker shall furnish to the Board half-yearly unaudited financial results when required by the Board with a view to monitor the capital adequacy of the merchant banker.
Maintenance of books of account, records and other documents
16. The merchant banker shall preserve the books of accounts and other records and documents maintained under regulation 14 for a minimum period of five years.
Report on steps taken on Auditor's report
17. Every merchant banker shall within two months from the date of the auditors' report take steps to rectify the deficiencies, made out in the auditor's report.
Appointment of lead merchant bankers
18. (1) All issues should be managed by atleast one merchant banker functioning as the lead merchant banker:
Provided that, in an issue of offer of rights to the existing members with or without the right of renunciation the amount of the issue of the body corporate does not exceed rupees fifty lakhs, the appointment of a lead merchant banker shall not be essential.
(2) Every lead merchant banker shall before taking up the assignment relating to an issue, enter into an agreement with such body corporate setting out their mutual rights, liabilities and obligations relating to such issue and in particular to disclosures, allotment and refund.
Restriction on appointment of lead managers
19. The number of lead merchant bankers may not, exceed in case of any issue of Size of issue No. of Merchant Bankers
(a) Less than rupees fifty crores Two
(b) Rupees fifty crores but lessthan rupees one hundred crores Three
(c) Rupees one hundred crores but less than rupees two hundred crores Four
(d) Rupees two hundred crores but less than rupees four hundred crores Five
(e) Above Rupees four hundred crores five or more as may be agreed by the board
Responsibilities of lead managers
20. (1) No lead manager shall agree to manage or be associated with any issue unless his responsibilities relating to the issue mainly, those of disclosures, allotment and refund are clearly defined, allocated and determined and a statement specifying such responsibilities is furnished to the Board at least one month before the opening of the issue for subscription:
Provided that, where there are more than one lead merchant bankers to the issue the responsibilities of each of such lead merchant banker shall clearly be demarcated and a statement specifying such responsibilities shall be furnished to the Board at least one month before the opening of the issue for subscription.
(2) 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.
Lead merchant banker not to associate with a merchant banker without registration
21. A lead merchant banker shall not be associated with any issue if a merchant banker who is not holding a certificate is associated with the issue.
Underwriting obligations
22. (1) In respect of every issue to be managed, the lead merchant banker holding a certificate under Category I shall accept a minimum Underwriting obligation of five percent of the total underwriting commitment or rupees twenty-five lacs, whichever is less:
Provided that, if the lead merchant banker is unable to accept the minimum underwriting obligation, that lead merchant banker shall make arrangement for having the issue underwritten to that extent by a merchant banker associated with the issue and shall keep the Board informed of such arrangement.
Submission of due diligence certificate
23. The lead merchant banker, who is responsible for verification of the contents of a prospectus or the Letter of Offer in respect of an issue and the reasonableness of the views expressed therein, shall submit to the Board at least two weeks prior to the opening of the issue for subscription, a due diligence certificate in Form C.
Documents to be furnished to the Board
24. (1) The lead manager responsible for the issue shall furnish to the Board, the following documents, namely: -
(i) particulars of the issue;
(ii) draft prospectus or where there is an offer to the existing shareholders, the draft letter of offer;
(iii) any other literature intended to be circulated to the investors, including the shareholders; and
(iv) such other documents relating to prospectus or letter of offer as the case may be.
(2) The documents referred to in sub-regulation (1) shall be furnished at least two weeks prior to date of filing of the draft prospectus or the letter of offer, as the case may be, with the Registrar of Companies or with the Regional Stock Exchanges, or with both.
(3) The lead manager shall ensure that the modifications and suggestions, if any, made by the Board on the draft prospectus or the Letter of Offer as the case may be, with respect to information to be given to the investors are incorporated therein.
23*[Payment of fees to the Board
24A. The draft prospectus or draft letter of offer referred to in regulation 24 shall be submitted along with such fees and in such manner as may be specified in Schedule IV]
Continuance of association of lead manager with an issue
25. The lead manager undertaking the responsibility for refunds or allotment of securities in respect of any issue shall continue to be associated with the issue till the subscribers have received the share or debenture certificates or refund of excess application money;
Provided that where a person other than the lead manager is entrusted with the refund or allotment of securities in respect of any issue, the lead manager shall continue to be responsible for ensuring that such other person discharges the requisite responsibilities in accordance with the provisions of the Companies Act and the listing agreement entered into by the body corporate with the stock- exchange.
Acquisition of shares prohibited
26. No merchant banker or any of its directors, partner or manager or principal officer shall either on their respective accounts or through their associates or relatives enter into any transaction in securities of bodies corporate on the basis of unpublished price sensitive information obtained by them during the course of any professional assignment either from the clients or otherwise.
Information to the Board
27. Every merchant banker shall submit to the Board complete particulars of any transaction for acquisition of securities of any body corporate whose issue is being managed by that merchant banker within fifteen days from the date of entering into such transaction.
Disclosures to the Board
28. A merchant banker shall disclose to the Board as and when required, the following information, namely: -
(i) his responsibilities with regard to the management of the issue;
(ii) any change in the information or particulars previously furnished, which have a bearing on the certificate granted to it;
(iii) the names of the body corporate whose issues he has managed or has been associated with;
(iv) the particulars relating to breach of the capital adequacy requirement as specified in regulation 7;
(v) relating to his activities as a manager, underwriter, consultant or adviser to an issue as the case may be.
24*[Appointment of compliance officer
28A. (1) Every merchant banker shall appoint a compliance officer who shall be responsible for monitoring the compliance of the Act, rules and regulations, notifications, guidelines, instructions etc., issued by the Board or the Central Government and for redressal of investors? grievances.
(2) The compliance officer shall immediately and independently report to the Board any non-compliance observed by him and ensure that the observations made or deficiencies pointed out by the Board on \ in the draft prospectus or the Letter of offer as the case may be, do not recur.]
--------------------------------------------------------------------------------
Foot notes
19. Regulation 13A was inserted by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 06.06.1996.
20. Substituted for the words "Financial Institution" by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 06.06.1996.
21. "after June 30th, 1998" inserted by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 06.06.1996.
22. Proviso to regulation 13A was inserted by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 17.11.1999.
23. Regulation 24A inserted by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 06.06.1996.
24. Regulation 28A was inserted by SEBI (Investment advice by intermediaries) (Amendment) Regulations, 2001 published in the Official Gazette of India dated 29.05.2001.
CHAPTER IV
PROCEDURE FOR INSPECTION
Board's right to inspect
29. (1) The Board may appoint one or more persons as inspecting authority to undertake inspection of the books of accounts, records and documents of the merchant banker for any of the purposes specified in sub-regulation (2).
(2) The purposes referred to in sub-regulation (1) may be as follows namely: -
(a) to ensure that the books of account are being maintained in the manner required;
(b) that the provisions of the Act, rules, regulations are being complied with;
(c) 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
(d) to investigate suo-moto in the interest of securities business or investors interest into the affairs of the merchant banker.
Notice before inspection
30. (1) Before undertaking an inspection under regulation 29 the Board shall give a reasonable notice to the merchant banker for that purpose.
(2) Notwithstanding anything contained in sub-regulation (1), where the Board is satisfied that in the interest of the investors no such notice should be given, it may by an order in writing direct that the inspection of the affairs of the merchant banker be taken up without such notice.
(3) During the course of inspection, the merchant banker against whom an inspection is being carried out shall be bound to discharge his obligations as provided under regulation 31.
Obligations of merchant banker on inspection by the Board
31. (1) It shall be the duty of every director, proprietor, partner, officer and employee of the merchant banker, who is being inspected, to produce to the inspecting authority such books, accounts and other documents in his custody or control and furnish him with the statements and information relating to his activities as a merchant banker within such time as the inspecting authority may require.
(2) The merchant banker shall allow the inspecting authority to have reasonable access to the premises occupied by such merchant banker or by any other person on his behalf and also extend reasonable facility for examining any books, records, documents and computer data in the possession of the merchant banker or any such other person and also provide copies of documents or other materials which, in the opinion of the inspecting authority are relevant for the purposes of the inspection.
(3) The inspecting authority, in the course of inspection, shall be entitled to examine or record statements of any principal officer, director, partner, proprietor and employee of the merchant banker.
(4) It shall be the duty of every director, proprietor, partner, officer or employee of the merchant banker to give to the inspecting authority all assistance in connection with the inspection which the merchant banker may reasonably be expected to give.
Submission of Report to the Board
32. The inspecting authority shall, as soon as may be possible submit, an inspection report to the Board.
25*[Action on inspection or investigation report
33. The Board or the Chairman shall after consideration of inspection or investigation report take such action as the Board or Chairman may deem fit and appropriate including action under the Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002."
Appointment of Auditor
34. The Board may appoint a qualified auditor to investigate 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 as are mentioned in regulation 29 and the obligations of the merchant banker in regulation 31 shall be applicable to the investigation under this regulation.
Explanation: For the purposes of this regulation the expression "qualified auditor" shall have the same meaning as given in Section 226 of the Companies Act, 1956 (1 of 1956).
Foot notes
25. Following regulation 33 was substituted by the Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 published in the official Gazette of India dated 27.09.2002
Communication of findings etc. to the merchant banker
33. (1) The Board shall after consideration of the inspection report communicate the findings to the merchant banker to give him an opportunity of being heard before any action is taken by the Board on the findings of the inspecting authority.
(2) On receipt of the explanation if any, from the merchant banker, the Board may call upon the merchant banker to take such measures as the Board may deem fit in the interest of the securities market and for due compliance with the provisions of the Act, rules and regulations.
--------------------------------------------------------------------------------
CHAPTER V
PROCEDURE FOR ACTION IN CASE OF DEFAULT
26*[Liability for action in case of default
35. A merchant banker who ?
(a) fails to comply with any conditions subject to which certificate has been granted;
(b) contravenes any of the provisions of the Act, rules or regulations, shall be dealt with in the manner provided under the Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002."
27*[******]
Foot notes
26. Following regulation 35 was substituted by the Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 published in the official Gazette of India dated 27.09.2002
Liability for action in case of default
35. (1) A merchant banker who ?
(a) fails to comply with any conditions subject to which certificate has been granted;
(b) contravenes any of the provisions of the Act, rules or regulations;
shall be liable to any of the penalties specified in sub-regulation (2).
(2) The penalties referred to in sub-regulation (1) may be either:-
(a) suspension of registration; or
(b) cancellation of registration.
27. Following regulations 36 to 43 were omitted by the Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 published in the official Gazette of India dated 27.09.2002
Suspension of registration
36. (1) A penalty of suspension of registration of a merchant banker may be imposed where ?
(i) the merchant banker violates the provisions of the Act, rules or regulations;
(ii) the merchant banker ?
(a) fails to furnish any information relating to his activity as merchant banker as required by the Board;
(b) furnishes wrong or false information;
(c) does not submit periodical returns as required by the Board;
(d) does not co-operate in any enquiry conducted by the Board;
(iii) the merchant banker fails to resolve the complaints of the investors or fails to give a satisfactory reply to the Board in this behalf;
(iv) the merchant banker indulges in manipulating or price rigging or cornering activities;
(v) the merchant banker is guilty of misconduct or improper or unbusinesslike or unprofessional conduct which is not in accordance with the Code of Conduct specified in Schedule III;
(vi) the merchant banker fails to maintain the capital adequacy requirement in accordance with the provisions of regulation 7;
(vii) the merchant banker fails to pay the fees;
(viii) the merchant banker violates the conditions of registration;
(ix) the merchant banker does not carry out his obligations as specified in the regulation.
Cancellation of registration
37. A penalty of cancellation of registration of a merchant banker may be imposed where
(i) the merchant banker indulges in deliberate manipulation or price rigging or cornering activities affecting the securities market and the investors interest;
(ii) the financial position of the merchant banker deteriorates to such an extent that the Board is of the opinion that his continuance as merchant banker is not in the interest of investors;
(iii) the merchant banker is guilty of fraud, or is convicted of a criminal offence;
(iv) in case of repeated defaults of the nature mentioned in regulation 36 provided that the Board furnishes reasons for cancellation in writing.
Manner of making order of suspension an cancellation
38. No order of penalty of suspension or cancellation as the case may be, shall be imposed except after holding an enquiry in accordance with the procedure specified in regulation
39.
Manner of holding enquiry before suspension or cancellation
39. (1) For the purpose of holding an enquiry under regulation 38, the Board may appoint an enquiry officer.
(2) The enquiry officer shall issue to the merchant banker a notice the registered office or the principal place of business of the merchant banker.
(3) The merchant banker may, within thirty days from the date of receipt of such notice, furnish to the enquiry officer a reply together with copies of documentary or other evidence relied on by him or sought by the Board from the merchant banker.
(4) The enquiry officer shall, give a reasonable opportunity of hearing to the merchant banker to enable him to make submissions in support of his reply made under sub-regulation (3).
(5) Before the enquiry officer, the merchant banker may either appear in person or through any person duly authorised by the merchant banker:
Provided that no lawyer or advocate shall be permitted to represent the merchant banker at the enquiry:
Provided further that where a lawyer or an advocate has been appointed by the Board as a presenting officer under sub- regulation (6), it shall be lawful for the merchant banker to present its case through a lawyer or advocate.
(6) If it is considered necessary, the enquiry officer may ask the Board to appoint a presenting officer to present its case.
(7) The enquiry officer shall, after taking into account all relevant facts and submissions made by the merchant banker, submit a report to the Board and recommend the penalty to be imposed as also the grounds on the basis of which the proposed penalty is justified.
Show-cause notice and order
40. (1) On receipt of the report from the enquiry officer, the Board shall consider the same and issue a show-cause notice as to why the penalty as proposed by the enquiry officer should not be imposed.
(2) The merchant banker shall within twenty-one days of the date of the receipt of the show- cause send a reply to the Board.
(3) The Board after considering the reply to the show-cause notice, if received, shall as soon as possible but not later than thirty days from the receipt of the reply, if any, pass such order as it deems fit.
(4) Every order passed under sub- regulation (3) shall be self- contained and give reasons for the conclusions stated therein including justification of the penalty imposed by that order.
(5) The Board shall send a copy of the order under sub- regulation (3) to the merchant banker.
Effect of suspension and cancellation of registration of merchant banker
41. (1) On and from the date of the suspension of the merchant banker he shall cease to carry on any activity as a merchant banker during the period of suspension.
(2) On and from the date of cancellation the merchant banker shall with immediate effect cease to carry on any activity as a merchant banker.
Publication of order of suspension
42. The order of suspension or cancellation of certificate passed under sub-regulation (3) of regulation 40 shall be published in at least two daily newspapers by the Board.
a*[Appeal to the Securities Appellate Tribunal
43. Any person aggrieved by an order of the Board made, on and after the commencement of the Securities Laws (Second amendment) Act, 1999, (i.e., after 16th December 1999), under these regulations may prefer an appeal to a Securities Appellate Tribunal having jurisdiction in the matter]
a. Substituted for the following provision by SEBI (Appeal to the Securities Appellate Tribunal) (Amendment) Regulations, 2000 published in the official Gazette of India dated 28.03.2000
"Any person aggrieved by an order of the Board may prefer an appeal to the Central Government"
Investment Banking Regulations - India - Part 4
Merchant Banking Regulations in India
SCHEDULE I - FORMS
FORM A
SECURITIES AND EXCHANGE BOARD OF INDIA
(MERCHANT BANKERS) REGULATIONS, 1992
(REGULATION 3)
APPLICATION FOR GRANT OF CERTIFICATE /
RENEWAL OF CERTIFICATE
ADDITIONAL INFORMATION FOR FRESH REGISTRATION
NAME OF APPLICANT
CATEGORY:
CONTACT NAME ______________________
TELEPHONE NO: _____________________
INSTRUCTIONS FOR FILLING UP FORM
1. It is important that this application form should be filled in accordance with the regulations.
2. Applicants must submit a completed application form together with appropriate supporting documents to the Board.
3. Application for registration will be considered provided it is complete in all respects.
4. Answers must be typed.
5.All signatures must be original.
6.Information which needs to be supplied in more details may be given on separate sheets which should be attached to the application form.
1. PARTICULARS OF THE APPLICANT
1.1 Name of the Applicant:
1.2 (A) Address - Principal Place of business / Registered Office of the Company.
Pin code: ______________________ Telephone No:________________
Telex No:______________________Fax No:______________________
(B) Address for Correspondence:
Pin code:______________________Telephone No:________________
Telex No:______________________Fax No:______________________
(C) Address of Branch Offices:
2. ORGANISATION STRUCTURE
(Organisation Chart separately showing functional responsibilities of Merchant Banking activities to be enclosed).
2.1 Objectives:-
(To be given in brief along with copy of Memorandum and Articles of Association).
2.2 Date and Place of Incorporation:
Day Month Year Place
2.3 Status of the Applicant:
(e.g. limited company - Private/Public, unlimited company, partnership, proprietary, others. If listed, names of Stock Exchanges and latest share price to be given).
2.4 Particulars of all Directors/Partners/Proprietors:-
Name
Qualification
Experience in Merchant Banking &
Financial Services related areas
Share in applicants firm company
Directorship in other companies
2.5 Particulars of Key Management Personnel: (Particulars of merchant banking division)
Name
Qualification
Experience with particular
reference to merchant banking
Date of appointment
Functional areas
2.6 Name and activities of associate companies/concerns
Name of Company
Address/firm
Type of activity handled
Nature of Interest of Promoter/Director
Nature and interest of applicant company
3. BUSINESS INFORMATION
3.1 History, major events and present activities:
3.2 Details of Experience in Merchant Banking activities.
3.3 Experience in other financial services rendered:-
3.4 Business handled during the last three years:
a) Issue Management
Name of client
Type of Issue
Size of Issue
Year of Issue
Times subscribed
Name of lead merchant banker
Functional responsibilities
b) Investment Adviser: -
Name of Client Year for which services are rendered
Nature of services rendered
c) Underwriting
Name of client Type and size
Amount underwritten of Issue
% age of issue under Year of Issue
Whether there was any devolvement written
d) Portfolio Management
Name of Scheme
Features of the Scheme
Number of Clients
Total Volume of Funds managed
Average Returns
e) Consultants/Advisors to the Issue
Name of the Client
Year of Issue
Type and Size of Issue
Nature of services rendered
Name of Lead Merchant Banker(s)
4. CLIENT INFORMATION
4.1 List of major clients with address
Name
Services Rendered
4.2 If the applicant is proposing to engage in Merchant Banking activities for the first time, the experience of key management personnel to be indicated.
Name of Key management personnel
Qualification
Previous positions held
Experience particularly in respect of merchant banking activities
4.2 (a) If the applicant is proposing to engage in Merchant Banking activities for the first time, business plan of the company with projected volume of activities and income for which registration is sought to be specifically given.
4.3 Details of infrastructure including computing facilities, equity research and database available with the applicant.
4.4 Any other information considered relevant to the nature of services rendered by the applicant.
5. FINANCIAL INFORMATION
5.1 Capital Structure (Rs. in lakhs)
Year prior to the preceding year of current year Preceding year Current year
a) Paid-up capital
b) Free reserves
(excluding re- valuation reserves)
c) Total (a) + (b)
Note: - 1. In case of partnership or proprietary concerns, please indicate capital minus drawings.
2. In case of partnership or proprietary concerns, please indicate the financial position, means and networth of the partners.
5.2 Deployment of Resources (Rs. in lakhs)
Year prior to the preceding year of current year Preceding year Current year
(a) Fixed Assets
(b) Plant & Machinery and
Office Equipment
(c) Quoted Investments
(d) Unquoted Investments
(e) Details of Liquid Assets
(f) Others
(Details of Investments, Loans & Advances made to Associate Companies/ firms where Promoters/ Directors have an interest be separately given).
5.3 Major Sources of Income: (Rs. in lakhs)
Year prior to the preceding year of current year Preceding year Current year *Fees charged as % of issue
(a) Issue Management
(b) Underwriting
(c) Portfolio Management
(d) Consultant/ Advisor to Issue
(e) Investment Adviser
(f) Others
*As fees charged by the merchant banker may vary from issue to issue, please indicate range within which fees have been charged.
5.4 Net Profit
Year prior to the preceding year of current year Preceding year Current year
5. 5 Dividend
Year prior to the preceding year of current year Preceding year Current year
Amount
Percentage
Note: Please enclose three years of audited annual accounts. Where unaudited reports are submitted, give reasons. If minimum networth requirement has been met after last audited annual accounts, audited statement of accounts of a later date also be submitted.
5.6 List of major shareholders (holding 5% and above of applicant directly or along with associates - applicable only to limited companies)
Shareholding as on: ______________________________
Name of shareholder
No. of Shares held
% age of total paid up capital of the company
5.7 Name and Address of the Principal bankers of the applicant.
5.8 Name and address of the Auditors.
6. OTHER INFORMATION
6.1 Details of all settled and pending disputes:
Nature of dispute Name of the party Pending/settled.
6.2 Indictment of involvement in any economic offences by the applicant or any of the Directors, or key managerial Personnel in the last three years.
DECLARATION
THIS DECLARATION MUST BE SIGNED BY TWO DIRECTORS, TWO PARTNERS OR THE SOLE PROPRIETOR AS THE CASE MAY BE
I/We hereby apply for registration. I/We warrant that I/We have truthfully and fully answered the questions above and provided all the information which might reasonably be considered relevant for the purposes of my registration. I/We declare that the information supplied in the application form is complete and correct.
For and on behalf of ------------------------------------------ (Name of Applicant)
Director/Partner or Sole Proprietor Director/Partner ___________________
(Name in Block Letters) (Name in Block Letters) _______________________
Date
FORM B
SECURITIES AND EXCHANGE BOARD OF INDIA
(MERCHANT BANKERS) REGULATIONS, 1992
(REGULATION 8
CERTIFICATE OF REGISTRATION
In exercise of the powers conferred by sub-section (1) of section 12 of the Securities and Exchange Board of India Act, 1992, read with the rules and regulations made thereunder the Board hereby grants a certificate of registration to ______________________________ as a merchant banker in Category I 28*[***] subject to the conditions in the rules and in accordance with the regulations to carry out the following activities: -
1. Management of any issue, including preparation of prospectus, gathering information relating to the Issue, determining financing structure, tie up of financiers, final allotment and refund of excess application money.
2. Investment Advisor.
29*[******]
[******]
5. Managers, Consultant or Adviser to any issue including corporate advisory services.
6. Consultant or Advisor.
(*Delete whichever are not applicable)
II. Registration Code for the merchant banker is MB / / /
III. This certificate shall be valid from _____________ to _________ and may be renewed as specified in regulation 9 of Securities and Exchange Board of India (Merchant Bankers) Regulations, 1992.
Place
Date
By Order
Sd/-
For and on behalf of Securities and Exchange Board of India
--------------------------------------------------------------------------------
FORM C
SECURITIES AND EXCHANGE BOARD OF INDIA
(MERCHANT BANKERS) REGULATIONS, 1992
(REGULATION 23)
DUE DILIGENCE CERTIFICATE
To,
SECURITIES AND EXCHANGE BOARD OF INDIA
Dear Sirs,
SUB: ISSUE OF ____________________ BY _______________________ LTD.
We, the undernoted Lead Manager(s) to the above mentioned forthcoming issue state as follows:
1. We have while finalising the draft prospectus/letter of offer pertaining to the said issue have examined various documents and other material as for adequate disclosures to the investor;
2. On the basis of such examination and the discussions with the company, its directors and other officers, other agencies, independent verification of the statements concerning objects of the issue the contents of the documents and other material furnished by the company, WE CONFIRM that:
(a) the draft prospectus/letter of offer forwarded to SEBI is in conformity with the documents, materials and papers relevant to the issue;
(b) all the legal requirements connected with the said issue have been duly complied with; and
(c) the disclosures made in the draft prospectus/letter of offer are true, fair and adequate to enable the investors to make a well informed decision as to the investment in the proposed issue.
PLACE:
DATE:
LEAD MANAGER (S) TO THE ISSUE
N. B. A list of documents and materials examined may be forwarded along with this certificate.
Foot notes
28. The figures "II/III/IV" after the word "Category I" and before the words "subject to the conditions" in paragraph 1 in Form A of Schedule I were deleted by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 06.06.1996.
29. The words "3. Underwriting of Issue" and "4. Portfolio Manager Service" after the words "1. Investment Adviser" in paragraph 1 in Form B of Schedule I were deleted by the SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 06.06.1996.
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SCHEDULE II
SECURITIES AND EXCHANGE BOARD OF INDIA
(MERCHANT BANKERS) REGULATIONS, 1992
(REGULATION 12)
FEES
30*1. Every merchant banker shall pay a sum of Rupees five lacs as registration fees at the time of the grant of certificate by the Board.
2. A merchant banker to keep registration in force shall pay renewal fee of Rs 2. 5 lacs every three years from the fourth year from the date of initial registration.
3. (a) The fee referred to in PARAGRAPH 1 shall be paid by the merchant banker within fifteen days from the date of receipt of the intimation from the Board under sub-regulation (1) of regulation 8
(b) The fee referred to in paragraph 2 shall be paid by the merchant banker within fifteen days from the date of receipt of intimation from the Board under sub-regulation (3) of regulation 9.
4. The fees specified in paragraphs1 and 2 shall be payable by merchant banker by a demand draft in favour of ?Securities and Exchange Board of India? payable at Mumbai or at the respective regional office."]
Foot notes
30. Following paragraphs 1, 2, 3 and 4 were substituted by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 30.09.1999.
"1. Every Merchant bankers shall subject to paragraphs 3 and 4 of this Schedule pay registration fees as set out below:
(a) Category I merchant banker.
A sum of Rs 2.5 lakhs to be paid annually for the first two years commencing from the date of initial registration and thereafter for the third year a sum of Rs 1 lakh to keep his registration in force;
(b) Category II Merchant banker
A sum of Rs 1.5 lakhs to be paid annually for the first two years commencing from the date of initial registration and thereafter for the third year a sum of Rs 50,000 to keep his registration in force;
(c) Category III Merchant bankers
A sum of Rs 1 lakh to be paid annually for the first two years commencing from the date of initial registration and thereafter for the third year a sum of Rs 25,000 to keep his registration in force;
(d) Category IV Merchant bankers
A sum of Rs 5,000/- to be paid annually for the first two years commencing from the date of initial registration and thereafter for the third year a sum of Rs 1000/- to keep his registration in force.
(2) Renewal fees to be paid by the Merchant banker.
(a) Category I merchant bankers
A sum of Rs 1 lakh to be paid annually for the first two years commencing from the date of each renewal and thereafter for the third year a sum of Rs 20,000 to keep his registration in force;
(b) Category II Merchant bankers
A sum of Rs 75,000/- to be paid annually for the first two years commencing from the date of each renewal and thereafter for the third year a sum of Rs 10,000 to keep his registration in force;
(c) Category III Merchant bankers
A sum of Rs 50,000/- to be paid annually for the first two years commencing from the date of each renewal and thereafter for the third year a sum of Rs 5,000 to keep his registration in force;
(d) Category IV Merchant bankers
A sum of Rs 5,000/- to be paid annually for the first two years commencing from the date of each renewal and thereafter for the third year a sum of Rs 2, 500 to keep his registration in force;
a*(3) The fees specified in paragraphs 1 and 2 above shall be paid in the following manner namely: -
(a) First installment is to be paid within 15 days from the date of intimation from the Board under regulation 8.
(b) Subsequent installments including the renewal fee to be paid on or before expiry of 12 months of each year of registration beginning from date of grant of such registration.
a. Following para 3 was substituted
The Fees specified in paragraphs 1 and 2 above, shall be payable by draft in favour of "Securities and Exchange Board of India " at Bombay or at the respective regional office.
The above para 3 originally read as follows which was substituted by SEBI (Payment of Fees) Amendment Regulations, 1995 by notification no S.O. 939 (E) dated 28.11.95.
The Fees specified in paragraphs 1 and 2 above, shall be payable by a cheque or draft in favour of "Securities and Exchange Board of India " at Bombay or at the respective regional office.
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31*[Schedule III
Securities and Exchange Board of India
(Merchant Bankers) Regulations, 1992
[Regulation 13]
CODE OF CONDUCT FOR MERCHANT BANKERS
A Merchant Banker shall make all efforts to protect the interests of investors.
A Merchant Banker shall maintain high standards of integrity, dignity and fairness in the conduct of its business.
A Merchant Banker shall fulfill its obligations in a prompt, ethical, and professional manner.
A Merchant Banker shall at all times exercise due diligence, ensure proper care and exercise independent professional judgment.
A Merchant Banker shall endeavor to ensure that-
inquiries from investors are adequately dealt with;
grievances of investors are redressed in a timely and appropriate manner;
where a complaint is not remedied promptly, the investor is advised of any further steps which may be available to the investor under the regulatory system.
A Merchant Banker shall ensure that adequate disclosures are made to the investors in a timely manner in accordance with the applicable regulations and guidelines so as to enable them to make a balanced and informed decision.
A Merchant Banker shall endeavor to ensure that the investors are provided with true and adequate information without making any misleading or exaggerated claims or any misrepresentation and are made aware of the attendant risks before taking any investment decision.
A Merchant Banker shall endeavor to ensure that copies of the prospectus, offer document, letter of offer or any other related literature is made available to the investors at the time of issue or the offer.
A Merchant Banker shall not discriminate amongst its clients, save and except on ethical and commercial considerations.
A Merchant Banker shall not make any statement, either oral or written, which would misrepresent the services that the Merchant Banker is capable of performing for any client or has rendered to any client.
A Merchant Banker shall avoid conflict of interest and make adequate disclosure of its interest.
A Merchant Banker shall put in place a mechanism to resolve any conflict of interest situation that may arise in the conduct of its business or where any conflict of interest arises, shall take reasonable steps to resolve the same in an equitable manner.
A Merchant Banker shall make appropriate disclosure to the client of its possible source or potential areas of conflict of duties and interest while acting as Merchant Banker which would impair its ability to render fair, objective and unbiased services.
A Merchant Banker shall always endeavor to render the best possible advice to the clients having regard to their needs.
A Merchant Banker shall not divulge to anybody either orally or in writing, directly or indirectly, any confidential information about its clients which has come to its knowledge, without taking prior permission of its clients, except where such disclosures are required to be made in compliance with any law for the time being in force.
A Merchant Banker shall ensure that any change in registration status / any penal action taken by the Board or any material change in the Merchant Banker?s financial status, which may adversely affect the interests of clients / investors is promptly informed to the clients and any business remaining outstanding is transferred to another registered intermediary in accordance with any instructions of the affected clients.
A Merchant Banker shall not indulge in any unfair competition, such as weaning away the clients on assurance of higher premium or advantageous offer price or which is likely to harm the interests of other Merchant Bankers or investors or is likely to place such other Merchant Bankers in a disadvantageous position while competing for or executing any assignment.
A Merchant Banker shall maintain arms length relationship between its merchant banking activity and any other activity.
A Merchant Banker shall have internal control procedures and financial and operational capabilities which can be reasonably expected to protect its operations, its clients, investors and other registered entities from financial loss arising from theft, fraud, and other dishonest acts, professional misconduct or omissions.
A Merchant Banker shall not make untrue statement or suppress any material fact in any documents, reports or information furnished to the Board.
A Merchant Banker shall maintain an appropriate level of knowledge and competence and abide by the provisions of the Act, regulations made thereunder, circulars and guidelines, which may be applicable and relevant to the activities carried on by it. The merchant banker shall also comply with the award of the Ombudsman passed under Securities and Exchange Board of India (Ombudsman) Regulations, 2003.
A Merchant Banker shall ensure that the Board is promptly informed about any action, legal proceedings etc., initiated against it in respect of material breach or non compliance by it, of any law, rules, regulations, directions of the Board or of any other regulatory body.
(a) A Merchant Banker or any of its employees shall not render, directly or indirectly, any investment advice about any security in any publicly accessible media, whether real-time or non real-time, unless a disclosure of his interest including a long or short position, in the said security has been made, while rendering such advice.
(b) In the event of an employee of the Merchant Banker rendering such advice, the merchant banker shall ensure that such employee shall also disclose the interests, if any, of himself, his dependent family members and the employer merchant banker, including their long or short position in the said security, while rendering such advice.
A Merchant Banker shall demarcate the responsibilities of the various intermediaries appointed by it clearly so as to avoid any conflict or confusion in their job description.
A Merchant Banker shall provide adequate freedom and powers to its compliance officer for the effective discharge of the compliance officer?s duties.
A Merchant Banker shall develop its own internal code of conduct for governing its internal operations and laying down its standards of appropriate conduct for its employees and officers in carrying out their duties. Such a code may extend to the maintenance of professional excellence and standards, integrity, confidentiality, objectivity, avoidance or resolution of conflict of interests, disclosure of shareholdings and interests etc.
A Merchant Banker shall ensure that good corporate policies and corporate governance are in place.
A Merchant Banker shall ensure that any person it employs or appoints to conduct business is fit and proper and otherwise qualified to act in the capacity so employed or appointed (including having relevant professional training or experience)
A Merchant Banker shall ensure that it has adequate resources to supervise diligently and does supervise diligently persons employed or appointed by it in the conduct of its business, in respect of dealings in securities market.
A Merchant Banker shall be responsible for the acts or omissions of its employees and agents in respect of the conduct of its business.
A Merchant Banker shall ensure that the senior management, particularly decision makers have access to all relevant information about the business on a timely basis.
A Merchant Banker shall not be a party to or instrumental for -
creation of false market;
price rigging or manipulation or;
passing of unpublished price sensitive information in respect of securities which are listed and proposed to be listed in any stock exchange to any person or intermediary in the securities market.
Foot notes
31. Following Schedule III was substituted by SEBI (Merchant Banker) (Amendment) Regulations, 2003 published in the Official Gazette of India dated 01.10.2003.
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SCHEDULE III
SECURITIES AND EXCHANGE BOARD OF INDIA
(MERCHANT BANKERS) REGULATIONS, 1992
CODE OF CONDUCT FOR MERCHANT BANKERS
(REGULATION 13)
1. A merchant banker in the conduct of his business shall observe high standards of integrity and fairness in all his dealings with his clients and other merchant bankers.
2. A merchant banker shall render at all times high standards of service, exercise due diligence, ensure proper care and exercise independent professional judgement.
He shall wherever necessary, disclose to the clients, possible sources of conflict of duties and interests, while providing unbiased services.
3. A merchant banker shall not make any statement or become privy to any act, practice or unfair competition, which is likely to be harmful to the interests of other merchant bankers or is likely to place such other merchant bankers in a disadvantageous position in relation to the merchant banker, while competing for or executing any assignment.
4. A merchant banker shall not make any exaggerated statement, whether oral or written, 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.
5. A merchant banker shall always endeavour to -
a. render the best possible advice to the clients having regard to the clients' needs and the environments and his own professional skill; and
b. ensure that all professional dealings are effected in a prompt, efficient and cost effective manner.
6.A merchant banker shall not -
a. divulge to other clients, press or any other party any confidential information about his client, which has come to his knowledge; and
b. deal in securities of any client company without making disclosure to the Board as required under the regulations and also to the Board of Directors of the client company.
7.A merchant banker shall endeavour to ensure that -
a. the investors are provided with true and adequate information without making any misguiding or exaggerated claims and are made aware of attendant risks before any investment decision is taken by them;
b. copies of prospectus, memorandum and related literature are made to the investors;
c. adequate steps are taken for fair allotment of securities and refund of application money without delay; and
d. complaints from investors are adequately dealt with.
8.The merchant bankers shall not generally and particularly in respect of issue of any securities be party to -
a. creation of false market;
b. price rigging or manipulation;
c. passing of price sensitive information to brokers, members of the stock exchanges and other players in the capital market or take any other action which is unethical or unfair to the investors.
a*[8A (a) A merchant banker or any of his employees shall not render, directly or indirectly, any investment advice about any security in the publicly accessible media, whether real-time or non-real-time, unless a disclosure of his interest including long or short position in the said security has been made, while rendering such advice.
(b) In case, an employee of the merchant banker is rendering such advice, he shall also disclose the interest of his dependent family members and the employer including their long or short position in the said security, while rendering such advice.]
9. A merchant banker shall abide by the provisions of the Act, rules and regulations and which may be applicable and relevant to the activities carried on by the merchant banker.
a. Paragraph 8A in Schedule III was inserted by SEBI (Investment advice by Intermediaries) (Amendment) Regulations, 2001 published in the Official Gazette of India dated 29.05.2001.
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32*[SCHEDULE IV
SECURITIES AND EXCHANGE BOARD OF INDIA
(MERCHANT BANKERS) (AMENDMENT) REGULATIONS, 1996
(SEE REGULAITON 24A)
1. Every merchant banker shall pay fees as set out below:
Size of the issue including premium and intended retention of over subscription
(Rs.) Proposed Fee per document (Rs.)
Upto 5 crores 10, 000
More than 5 crores and upto 10 crores 15, 000
More than 10 crores and upto 50 crores 25, 000
More than 50 crores and upto 100 crores 50, 000
More than 100 crores and upto 500 crores 2, 50, 000
More than 500 crores 5, 00, 000
2. Fees referred to in clause (1) above, shall be paid in the following manner:
a. The fees shall be paid along with the draft of the offer document submitted to the Board under regulation 24
b. The fees shall be payable by a draft in favour of `Securities and Exchange Board of India' at Mumbai or at the respective regional offices where the draft offer document under regulation 24 is submitted.
Foot notes
32. Schedule IV was inserted by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 06.06.1996.
For any clarification and latest updated versions visit http://www.sebi.gov.in/Index.jsp?contentDisp=SubSection&sec_id=5&sub_sec_id=5
SCHEDULE I - FORMS
FORM A
SECURITIES AND EXCHANGE BOARD OF INDIA
(MERCHANT BANKERS) REGULATIONS, 1992
(REGULATION 3)
APPLICATION FOR GRANT OF CERTIFICATE /
RENEWAL OF CERTIFICATE
ADDITIONAL INFORMATION FOR FRESH REGISTRATION
NAME OF APPLICANT
CATEGORY:
CONTACT NAME ______________________
TELEPHONE NO: _____________________
INSTRUCTIONS FOR FILLING UP FORM
1. It is important that this application form should be filled in accordance with the regulations.
2. Applicants must submit a completed application form together with appropriate supporting documents to the Board.
3. Application for registration will be considered provided it is complete in all respects.
4. Answers must be typed.
5.All signatures must be original.
6.Information which needs to be supplied in more details may be given on separate sheets which should be attached to the application form.
1. PARTICULARS OF THE APPLICANT
1.1 Name of the Applicant:
1.2 (A) Address - Principal Place of business / Registered Office of the Company.
Pin code: ______________________ Telephone No:________________
Telex No:______________________Fax No:______________________
(B) Address for Correspondence:
Pin code:______________________Telephone No:________________
Telex No:______________________Fax No:______________________
(C) Address of Branch Offices:
2. ORGANISATION STRUCTURE
(Organisation Chart separately showing functional responsibilities of Merchant Banking activities to be enclosed).
2.1 Objectives:-
(To be given in brief along with copy of Memorandum and Articles of Association).
2.2 Date and Place of Incorporation:
Day Month Year Place
2.3 Status of the Applicant:
(e.g. limited company - Private/Public, unlimited company, partnership, proprietary, others. If listed, names of Stock Exchanges and latest share price to be given).
2.4 Particulars of all Directors/Partners/Proprietors:-
Name
Qualification
Experience in Merchant Banking &
Financial Services related areas
Share in applicants firm company
Directorship in other companies
2.5 Particulars of Key Management Personnel: (Particulars of merchant banking division)
Name
Qualification
Experience with particular
reference to merchant banking
Date of appointment
Functional areas
2.6 Name and activities of associate companies/concerns
Name of Company
Address/firm
Type of activity handled
Nature of Interest of Promoter/Director
Nature and interest of applicant company
3. BUSINESS INFORMATION
3.1 History, major events and present activities:
3.2 Details of Experience in Merchant Banking activities.
3.3 Experience in other financial services rendered:-
3.4 Business handled during the last three years:
a) Issue Management
Name of client
Type of Issue
Size of Issue
Year of Issue
Times subscribed
Name of lead merchant banker
Functional responsibilities
b) Investment Adviser: -
Name of Client Year for which services are rendered
Nature of services rendered
c) Underwriting
Name of client Type and size
Amount underwritten of Issue
% age of issue under Year of Issue
Whether there was any devolvement written
d) Portfolio Management
Name of Scheme
Features of the Scheme
Number of Clients
Total Volume of Funds managed
Average Returns
e) Consultants/Advisors to the Issue
Name of the Client
Year of Issue
Type and Size of Issue
Nature of services rendered
Name of Lead Merchant Banker(s)
4. CLIENT INFORMATION
4.1 List of major clients with address
Name
Services Rendered
4.2 If the applicant is proposing to engage in Merchant Banking activities for the first time, the experience of key management personnel to be indicated.
Name of Key management personnel
Qualification
Previous positions held
Experience particularly in respect of merchant banking activities
4.2 (a) If the applicant is proposing to engage in Merchant Banking activities for the first time, business plan of the company with projected volume of activities and income for which registration is sought to be specifically given.
4.3 Details of infrastructure including computing facilities, equity research and database available with the applicant.
4.4 Any other information considered relevant to the nature of services rendered by the applicant.
5. FINANCIAL INFORMATION
5.1 Capital Structure (Rs. in lakhs)
Year prior to the preceding year of current year Preceding year Current year
a) Paid-up capital
b) Free reserves
(excluding re- valuation reserves)
c) Total (a) + (b)
Note: - 1. In case of partnership or proprietary concerns, please indicate capital minus drawings.
2. In case of partnership or proprietary concerns, please indicate the financial position, means and networth of the partners.
5.2 Deployment of Resources (Rs. in lakhs)
Year prior to the preceding year of current year Preceding year Current year
(a) Fixed Assets
(b) Plant & Machinery and
Office Equipment
(c) Quoted Investments
(d) Unquoted Investments
(e) Details of Liquid Assets
(f) Others
(Details of Investments, Loans & Advances made to Associate Companies/ firms where Promoters/ Directors have an interest be separately given).
5.3 Major Sources of Income: (Rs. in lakhs)
Year prior to the preceding year of current year Preceding year Current year *Fees charged as % of issue
(a) Issue Management
(b) Underwriting
(c) Portfolio Management
(d) Consultant/ Advisor to Issue
(e) Investment Adviser
(f) Others
*As fees charged by the merchant banker may vary from issue to issue, please indicate range within which fees have been charged.
5.4 Net Profit
Year prior to the preceding year of current year Preceding year Current year
5. 5 Dividend
Year prior to the preceding year of current year Preceding year Current year
Amount
Percentage
Note: Please enclose three years of audited annual accounts. Where unaudited reports are submitted, give reasons. If minimum networth requirement has been met after last audited annual accounts, audited statement of accounts of a later date also be submitted.
5.6 List of major shareholders (holding 5% and above of applicant directly or along with associates - applicable only to limited companies)
Shareholding as on: ______________________________
Name of shareholder
No. of Shares held
% age of total paid up capital of the company
5.7 Name and Address of the Principal bankers of the applicant.
5.8 Name and address of the Auditors.
6. OTHER INFORMATION
6.1 Details of all settled and pending disputes:
Nature of dispute Name of the party Pending/settled.
6.2 Indictment of involvement in any economic offences by the applicant or any of the Directors, or key managerial Personnel in the last three years.
DECLARATION
THIS DECLARATION MUST BE SIGNED BY TWO DIRECTORS, TWO PARTNERS OR THE SOLE PROPRIETOR AS THE CASE MAY BE
I/We hereby apply for registration. I/We warrant that I/We have truthfully and fully answered the questions above and provided all the information which might reasonably be considered relevant for the purposes of my registration. I/We declare that the information supplied in the application form is complete and correct.
For and on behalf of ------------------------------------------ (Name of Applicant)
Director/Partner or Sole Proprietor Director/Partner ___________________
(Name in Block Letters) (Name in Block Letters) _______________________
Date
FORM B
SECURITIES AND EXCHANGE BOARD OF INDIA
(MERCHANT BANKERS) REGULATIONS, 1992
(REGULATION 8
CERTIFICATE OF REGISTRATION
In exercise of the powers conferred by sub-section (1) of section 12 of the Securities and Exchange Board of India Act, 1992, read with the rules and regulations made thereunder the Board hereby grants a certificate of registration to ______________________________ as a merchant banker in Category I 28*[***] subject to the conditions in the rules and in accordance with the regulations to carry out the following activities: -
1. Management of any issue, including preparation of prospectus, gathering information relating to the Issue, determining financing structure, tie up of financiers, final allotment and refund of excess application money.
2. Investment Advisor.
29*[******]
[******]
5. Managers, Consultant or Adviser to any issue including corporate advisory services.
6. Consultant or Advisor.
(*Delete whichever are not applicable)
II. Registration Code for the merchant banker is MB / / /
III. This certificate shall be valid from _____________ to _________ and may be renewed as specified in regulation 9 of Securities and Exchange Board of India (Merchant Bankers) Regulations, 1992.
Place
Date
By Order
Sd/-
For and on behalf of Securities and Exchange Board of India
--------------------------------------------------------------------------------
FORM C
SECURITIES AND EXCHANGE BOARD OF INDIA
(MERCHANT BANKERS) REGULATIONS, 1992
(REGULATION 23)
DUE DILIGENCE CERTIFICATE
To,
SECURITIES AND EXCHANGE BOARD OF INDIA
Dear Sirs,
SUB: ISSUE OF ____________________ BY _______________________ LTD.
We, the undernoted Lead Manager(s) to the above mentioned forthcoming issue state as follows:
1. We have while finalising the draft prospectus/letter of offer pertaining to the said issue have examined various documents and other material as for adequate disclosures to the investor;
2. On the basis of such examination and the discussions with the company, its directors and other officers, other agencies, independent verification of the statements concerning objects of the issue the contents of the documents and other material furnished by the company, WE CONFIRM that:
(a) the draft prospectus/letter of offer forwarded to SEBI is in conformity with the documents, materials and papers relevant to the issue;
(b) all the legal requirements connected with the said issue have been duly complied with; and
(c) the disclosures made in the draft prospectus/letter of offer are true, fair and adequate to enable the investors to make a well informed decision as to the investment in the proposed issue.
PLACE:
DATE:
LEAD MANAGER (S) TO THE ISSUE
N. B. A list of documents and materials examined may be forwarded along with this certificate.
Foot notes
28. The figures "II/III/IV" after the word "Category I" and before the words "subject to the conditions" in paragraph 1 in Form A of Schedule I were deleted by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 06.06.1996.
29. The words "3. Underwriting of Issue" and "4. Portfolio Manager Service" after the words "1. Investment Adviser" in paragraph 1 in Form B of Schedule I were deleted by the SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 06.06.1996.
--------------------------------------------------------------------------------
SCHEDULE II
SECURITIES AND EXCHANGE BOARD OF INDIA
(MERCHANT BANKERS) REGULATIONS, 1992
(REGULATION 12)
FEES
30*1. Every merchant banker shall pay a sum of Rupees five lacs as registration fees at the time of the grant of certificate by the Board.
2. A merchant banker to keep registration in force shall pay renewal fee of Rs 2. 5 lacs every three years from the fourth year from the date of initial registration.
3. (a) The fee referred to in PARAGRAPH 1 shall be paid by the merchant banker within fifteen days from the date of receipt of the intimation from the Board under sub-regulation (1) of regulation 8
(b) The fee referred to in paragraph 2 shall be paid by the merchant banker within fifteen days from the date of receipt of intimation from the Board under sub-regulation (3) of regulation 9.
4. The fees specified in paragraphs1 and 2 shall be payable by merchant banker by a demand draft in favour of ?Securities and Exchange Board of India? payable at Mumbai or at the respective regional office."]
Foot notes
30. Following paragraphs 1, 2, 3 and 4 were substituted by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 30.09.1999.
"1. Every Merchant bankers shall subject to paragraphs 3 and 4 of this Schedule pay registration fees as set out below:
(a) Category I merchant banker.
A sum of Rs 2.5 lakhs to be paid annually for the first two years commencing from the date of initial registration and thereafter for the third year a sum of Rs 1 lakh to keep his registration in force;
(b) Category II Merchant banker
A sum of Rs 1.5 lakhs to be paid annually for the first two years commencing from the date of initial registration and thereafter for the third year a sum of Rs 50,000 to keep his registration in force;
(c) Category III Merchant bankers
A sum of Rs 1 lakh to be paid annually for the first two years commencing from the date of initial registration and thereafter for the third year a sum of Rs 25,000 to keep his registration in force;
(d) Category IV Merchant bankers
A sum of Rs 5,000/- to be paid annually for the first two years commencing from the date of initial registration and thereafter for the third year a sum of Rs 1000/- to keep his registration in force.
(2) Renewal fees to be paid by the Merchant banker.
(a) Category I merchant bankers
A sum of Rs 1 lakh to be paid annually for the first two years commencing from the date of each renewal and thereafter for the third year a sum of Rs 20,000 to keep his registration in force;
(b) Category II Merchant bankers
A sum of Rs 75,000/- to be paid annually for the first two years commencing from the date of each renewal and thereafter for the third year a sum of Rs 10,000 to keep his registration in force;
(c) Category III Merchant bankers
A sum of Rs 50,000/- to be paid annually for the first two years commencing from the date of each renewal and thereafter for the third year a sum of Rs 5,000 to keep his registration in force;
(d) Category IV Merchant bankers
A sum of Rs 5,000/- to be paid annually for the first two years commencing from the date of each renewal and thereafter for the third year a sum of Rs 2, 500 to keep his registration in force;
a*(3) The fees specified in paragraphs 1 and 2 above shall be paid in the following manner namely: -
(a) First installment is to be paid within 15 days from the date of intimation from the Board under regulation 8.
(b) Subsequent installments including the renewal fee to be paid on or before expiry of 12 months of each year of registration beginning from date of grant of such registration.
a. Following para 3 was substituted
The Fees specified in paragraphs 1 and 2 above, shall be payable by draft in favour of "Securities and Exchange Board of India " at Bombay or at the respective regional office.
The above para 3 originally read as follows which was substituted by SEBI (Payment of Fees) Amendment Regulations, 1995 by notification no S.O. 939 (E) dated 28.11.95.
The Fees specified in paragraphs 1 and 2 above, shall be payable by a cheque or draft in favour of "Securities and Exchange Board of India " at Bombay or at the respective regional office.
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31*[Schedule III
Securities and Exchange Board of India
(Merchant Bankers) Regulations, 1992
[Regulation 13]
CODE OF CONDUCT FOR MERCHANT BANKERS
A Merchant Banker shall make all efforts to protect the interests of investors.
A Merchant Banker shall maintain high standards of integrity, dignity and fairness in the conduct of its business.
A Merchant Banker shall fulfill its obligations in a prompt, ethical, and professional manner.
A Merchant Banker shall at all times exercise due diligence, ensure proper care and exercise independent professional judgment.
A Merchant Banker shall endeavor to ensure that-
inquiries from investors are adequately dealt with;
grievances of investors are redressed in a timely and appropriate manner;
where a complaint is not remedied promptly, the investor is advised of any further steps which may be available to the investor under the regulatory system.
A Merchant Banker shall ensure that adequate disclosures are made to the investors in a timely manner in accordance with the applicable regulations and guidelines so as to enable them to make a balanced and informed decision.
A Merchant Banker shall endeavor to ensure that the investors are provided with true and adequate information without making any misleading or exaggerated claims or any misrepresentation and are made aware of the attendant risks before taking any investment decision.
A Merchant Banker shall endeavor to ensure that copies of the prospectus, offer document, letter of offer or any other related literature is made available to the investors at the time of issue or the offer.
A Merchant Banker shall not discriminate amongst its clients, save and except on ethical and commercial considerations.
A Merchant Banker shall not make any statement, either oral or written, which would misrepresent the services that the Merchant Banker is capable of performing for any client or has rendered to any client.
A Merchant Banker shall avoid conflict of interest and make adequate disclosure of its interest.
A Merchant Banker shall put in place a mechanism to resolve any conflict of interest situation that may arise in the conduct of its business or where any conflict of interest arises, shall take reasonable steps to resolve the same in an equitable manner.
A Merchant Banker shall make appropriate disclosure to the client of its possible source or potential areas of conflict of duties and interest while acting as Merchant Banker which would impair its ability to render fair, objective and unbiased services.
A Merchant Banker shall always endeavor to render the best possible advice to the clients having regard to their needs.
A Merchant Banker shall not divulge to anybody either orally or in writing, directly or indirectly, any confidential information about its clients which has come to its knowledge, without taking prior permission of its clients, except where such disclosures are required to be made in compliance with any law for the time being in force.
A Merchant Banker shall ensure that any change in registration status / any penal action taken by the Board or any material change in the Merchant Banker?s financial status, which may adversely affect the interests of clients / investors is promptly informed to the clients and any business remaining outstanding is transferred to another registered intermediary in accordance with any instructions of the affected clients.
A Merchant Banker shall not indulge in any unfair competition, such as weaning away the clients on assurance of higher premium or advantageous offer price or which is likely to harm the interests of other Merchant Bankers or investors or is likely to place such other Merchant Bankers in a disadvantageous position while competing for or executing any assignment.
A Merchant Banker shall maintain arms length relationship between its merchant banking activity and any other activity.
A Merchant Banker shall have internal control procedures and financial and operational capabilities which can be reasonably expected to protect its operations, its clients, investors and other registered entities from financial loss arising from theft, fraud, and other dishonest acts, professional misconduct or omissions.
A Merchant Banker shall not make untrue statement or suppress any material fact in any documents, reports or information furnished to the Board.
A Merchant Banker shall maintain an appropriate level of knowledge and competence and abide by the provisions of the Act, regulations made thereunder, circulars and guidelines, which may be applicable and relevant to the activities carried on by it. The merchant banker shall also comply with the award of the Ombudsman passed under Securities and Exchange Board of India (Ombudsman) Regulations, 2003.
A Merchant Banker shall ensure that the Board is promptly informed about any action, legal proceedings etc., initiated against it in respect of material breach or non compliance by it, of any law, rules, regulations, directions of the Board or of any other regulatory body.
(a) A Merchant Banker or any of its employees shall not render, directly or indirectly, any investment advice about any security in any publicly accessible media, whether real-time or non real-time, unless a disclosure of his interest including a long or short position, in the said security has been made, while rendering such advice.
(b) In the event of an employee of the Merchant Banker rendering such advice, the merchant banker shall ensure that such employee shall also disclose the interests, if any, of himself, his dependent family members and the employer merchant banker, including their long or short position in the said security, while rendering such advice.
A Merchant Banker shall demarcate the responsibilities of the various intermediaries appointed by it clearly so as to avoid any conflict or confusion in their job description.
A Merchant Banker shall provide adequate freedom and powers to its compliance officer for the effective discharge of the compliance officer?s duties.
A Merchant Banker shall develop its own internal code of conduct for governing its internal operations and laying down its standards of appropriate conduct for its employees and officers in carrying out their duties. Such a code may extend to the maintenance of professional excellence and standards, integrity, confidentiality, objectivity, avoidance or resolution of conflict of interests, disclosure of shareholdings and interests etc.
A Merchant Banker shall ensure that good corporate policies and corporate governance are in place.
A Merchant Banker shall ensure that any person it employs or appoints to conduct business is fit and proper and otherwise qualified to act in the capacity so employed or appointed (including having relevant professional training or experience)
A Merchant Banker shall ensure that it has adequate resources to supervise diligently and does supervise diligently persons employed or appointed by it in the conduct of its business, in respect of dealings in securities market.
A Merchant Banker shall be responsible for the acts or omissions of its employees and agents in respect of the conduct of its business.
A Merchant Banker shall ensure that the senior management, particularly decision makers have access to all relevant information about the business on a timely basis.
A Merchant Banker shall not be a party to or instrumental for -
creation of false market;
price rigging or manipulation or;
passing of unpublished price sensitive information in respect of securities which are listed and proposed to be listed in any stock exchange to any person or intermediary in the securities market.
Foot notes
31. Following Schedule III was substituted by SEBI (Merchant Banker) (Amendment) Regulations, 2003 published in the Official Gazette of India dated 01.10.2003.
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SCHEDULE III
SECURITIES AND EXCHANGE BOARD OF INDIA
(MERCHANT BANKERS) REGULATIONS, 1992
CODE OF CONDUCT FOR MERCHANT BANKERS
(REGULATION 13)
1. A merchant banker in the conduct of his business shall observe high standards of integrity and fairness in all his dealings with his clients and other merchant bankers.
2. A merchant banker shall render at all times high standards of service, exercise due diligence, ensure proper care and exercise independent professional judgement.
He shall wherever necessary, disclose to the clients, possible sources of conflict of duties and interests, while providing unbiased services.
3. A merchant banker shall not make any statement or become privy to any act, practice or unfair competition, which is likely to be harmful to the interests of other merchant bankers or is likely to place such other merchant bankers in a disadvantageous position in relation to the merchant banker, while competing for or executing any assignment.
4. A merchant banker shall not make any exaggerated statement, whether oral or written, 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.
5. A merchant banker shall always endeavour to -
a. render the best possible advice to the clients having regard to the clients' needs and the environments and his own professional skill; and
b. ensure that all professional dealings are effected in a prompt, efficient and cost effective manner.
6.A merchant banker shall not -
a. divulge to other clients, press or any other party any confidential information about his client, which has come to his knowledge; and
b. deal in securities of any client company without making disclosure to the Board as required under the regulations and also to the Board of Directors of the client company.
7.A merchant banker shall endeavour to ensure that -
a. the investors are provided with true and adequate information without making any misguiding or exaggerated claims and are made aware of attendant risks before any investment decision is taken by them;
b. copies of prospectus, memorandum and related literature are made to the investors;
c. adequate steps are taken for fair allotment of securities and refund of application money without delay; and
d. complaints from investors are adequately dealt with.
8.The merchant bankers shall not generally and particularly in respect of issue of any securities be party to -
a. creation of false market;
b. price rigging or manipulation;
c. passing of price sensitive information to brokers, members of the stock exchanges and other players in the capital market or take any other action which is unethical or unfair to the investors.
a*[8A (a) A merchant banker or any of his employees shall not render, directly or indirectly, any investment advice about any security in the publicly accessible media, whether real-time or non-real-time, unless a disclosure of his interest including long or short position in the said security has been made, while rendering such advice.
(b) In case, an employee of the merchant banker is rendering such advice, he shall also disclose the interest of his dependent family members and the employer including their long or short position in the said security, while rendering such advice.]
9. A merchant banker shall abide by the provisions of the Act, rules and regulations and which may be applicable and relevant to the activities carried on by the merchant banker.
a. Paragraph 8A in Schedule III was inserted by SEBI (Investment advice by Intermediaries) (Amendment) Regulations, 2001 published in the Official Gazette of India dated 29.05.2001.
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32*[SCHEDULE IV
SECURITIES AND EXCHANGE BOARD OF INDIA
(MERCHANT BANKERS) (AMENDMENT) REGULATIONS, 1996
(SEE REGULAITON 24A)
1. Every merchant banker shall pay fees as set out below:
Size of the issue including premium and intended retention of over subscription
(Rs.) Proposed Fee per document (Rs.)
Upto 5 crores 10, 000
More than 5 crores and upto 10 crores 15, 000
More than 10 crores and upto 50 crores 25, 000
More than 50 crores and upto 100 crores 50, 000
More than 100 crores and upto 500 crores 2, 50, 000
More than 500 crores 5, 00, 000
2. Fees referred to in clause (1) above, shall be paid in the following manner:
a. The fees shall be paid along with the draft of the offer document submitted to the Board under regulation 24
b. The fees shall be payable by a draft in favour of `Securities and Exchange Board of India' at Mumbai or at the respective regional offices where the draft offer document under regulation 24 is submitted.
Foot notes
32. Schedule IV was inserted by SEBI (Merchant Bankers) (Amendment) Regulations, 1996 published in the Official Gazette of India dated 06.06.1996.
For any clarification and latest updated versions visit http://www.sebi.gov.in/Index.jsp?contentDisp=SubSection&sec_id=5&sub_sec_id=5
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