Registrationofmerchantbanker

RequirementforGrantofCertificate:

TheApplicant

ShallbeabodycorporateotherthanaNBFC.
Hasthenecessaryinfrastructuretodischargehisactivities.
Shouldhaveminimumtwoexperiencedemployeestoconductthebusinessof
merchantBanker.
Shouldfulfillthecapitaladequecyrequirementasspecified.
Hispartner,directororprincipalofficershouldnotbeinvolvedinany
litigationconnectedwiththesecuritiesmarketwhichhasanadverseeffectonthe
businessfotheapplicant.
Shouldhaveaprofessionalfromaninstitutionrecognisedbythegovernment
infinance,laworbusinessmanagement.
Shouldbeafitandaproperperson.

Categoriesofmerchantbanker

CategoryI

aTocarryonanactivityoftheissuemanagement,whichwillinteralia
consistofpreparationofprospectusandotherinformationrelatingtotheissue,
derterminingfinancialstructure,tieupoffinanciersandfinalallotmentand
refundofthesubscritioonandtoactas
advisor,consultant,manager,underwriter,portfoliomanager.(A+C+M+U+P)

CategoryII

Toactasadvisor,consultant,comanager,underwriter,portfoliomanager.
(A+C+U+P)

CategoryIII

Toactasunderwriter,advisor,consultanttoanissue.(U+A+C)
CategoryIV

Toactonlyasadvisororconsultanttoanissue.(AorC)

CapitalAdequecyRequirement

TheCapitalAdequecyRequirement(CAR)shallnotbelessthanthenetworthofthe
personmakingtheapplicationforgrantofregistration.

Thenetworthshallbeasfollows,namely:

CategoryMinimumAmountCategoryIRs.5,00,00,000Category
IIRs.50,00,000CategoryIIIRs.20,00,000CategoryIVNil

Explanation:

Forthepurposeofthisregulationnetworthmeansinthecaseofanapplicant
whichisapartnershipfirmorabodycorporate,thevalueofthecapitalcontributedto
thebusinessofsuchfirmorthepaidupcapitalofsuchbodycorporateplusfree
reservesasthecasemaybeatthetimeofmakingapplications.

ProcedureForRegistration:

TheSEBIonbeingsatisfiedthattheapplicantiseligibleshallgrantacertificatein
FormB.

Onthegrantofacertificatetheapplicantshallbeliabletopaythefeesinaccordance
withScheduleIIasshownbelow:
RegistrationFees:

MerchantBankerInitialfeesfor2YrsContinuationFeesCategoryIRs.2.5lakhsRs.1
lakhCategoryIIRs.1lakhRs.50,000.00CategoryIIIRs.1lakhRs.25,000.00Category
IVRs.5,000Rs.1,000

RenewalofCertificate:

Threemonthsbeforeexpiryoftheperiodofcertificate,themerchantbanker,mayifhe
sodesires,makeanapplicationforrenewalinFromA.

Theapplicationforrenewalshallbedealtwithinthesamemannerasifitwereafresh
applicationforgrantofacertificate.

TheSEBIonbeingsatisfiedthattheapplicantshallbeliabletopaythefeesin
accordancewithscheduleIIasshownbelow:

Renewalfees:

MerchantBankerInitialfeesfor2YrsContinuationFeesCategoryIRs.1
lakhRs.20,000CategoryIIRs.75,000Rs.10,000CategoryIIIRs.50,000Rs.5,000Category
IVRs.5,000Rs.2,500

Obligations&Responsibilities

Codeofconduct:

EverymerchantbankershallbeabidebytheCodeofConductasspecifiedbySchedule
II.

Nomerchantbanker,otherthanabankorafinancialinstitution,whohasbeen
grantedacertificateofregistrationundertheseregulationsshallafterjune30th,1998
carryonanybusinessotherthanthatinthesecuritiesmarket.

Amerchantbankerwhohasbeengrantedcertificateofregistrationtoactasprimary
dealerbyreservebankofindia,maycarryonsuchbusinessasmaybepermittedby
ReserveBankofIndia.

MaintenanceofBooksofAccounts,Records,etc.

EverymerchantbankershallkeepandmaintainthefollowingBooksof
Accounts,recordsanddocumentsnamely:

AcopyofbalancesheetandP&Laccountasattheendofeachaccounting
period;

Acopyoftheauditor'sreportontheaccountsforthatperiod;and

Astatementoffinancialposition.

EverymerchantbankershallintimatetoSEBIthatwherethebooksofaccounts,
RecordsandDocumentsaremaintained.

EveryMerchantbankershall,aftertheendofeachaccountingperiodfurnishto
theSEBIcopiesofthebalanceSheet,P&LAccountandsuchotherdocuments
foranyotherprecedingfiveaccountingyearswhenrequoiredbytheSEBI.

SubmissionofHalfYearlyResults:

EverymerchantbankershallfurnishtotheSEBIhalfyearlyunaudited
financialresultswhenrequiredbytheSEBIwithaviewtomonuitorthecapital
adequecyofthemerchantbankers.

AppointmentoftheLeadMerchantBanker:

Allissuesshouldbemanagedbyatleastonemerchantbankerfunctioningasthe
leadmanager.

Everyleadmerchantbankershallbeforetajkingupanassignmentrelatingtoan
issue,enterintoanagreementwithsuchbodycorporatesettingouttheirmutual
rights,liabilitiesandobligationsrelatingtosuchissueandinparticularto
disclosure,allotmentandrefund.
Restrictiononappointmentofleadmanagers:

Thenumberofleadmerchantbankersmaynot,exceedincaseofany
issueofsizeofissueNo.ofMerchantBankersNoofMerchantBanker

1.LessthanrupesfiftycroreTwo(2)
2.RupeesfiftycrorebutlessthanrupeesonehundredcroreThree(3)
3.RupeesonehundredcrorebutlessthanrupeestwohundredcroreFour(4)
4.RupeestwohundredcrorebutlessthanrupeesfourhundredcroreFive(5)
5.AboverupeesfourhundredcroreFiveormoreasmaybeagreedbytheSEBI.

ResponsibilitiesofLeadManager:

Noleadmanagershallagreetomanageorbeassociatedwithanyissue
unlesshisresponsibilitiesrelatingtotheissuemainly,thoseof
disclosure,allotmentandrefundareclearlydefined,allocatedanddetermined
andastatementspecifyingsuchresponsibilitiesisfurnishedtotheSEBIatleast
onemonthbeforetheopeningoftheissueforsubscription.

Incasetherearemorethanoneleadmerchantbankers,theresponsibilities
shouldbeclearlydemarcated.

Noleadmerchantbankershall,agreetomanagetheissuemadebyanybody
corporate,ifsuchbodycorporateisanassociateoftheleadmerchantbankers.

Underwritingobligations:

Inrespectofeveryissuetobemanaged,theleadmerchantbankerholdinga
certificateunderCategoryIShallacceptaminimumunderwritingobligationof
5%oftheTotalunderwritingCommitmentorrupeestwentyfivelakh,whichever
isless.

Incasetheleadmerchantbankerisunabletoaccepttheminimumunderwriting
obligation,thatleadmerchantbankershallmakearrangementsforhavingthe
issueunderwrittentothatextentbythemerchantbankerassociatedwiththe
issueandshallkeeptheSEBIinformedofsucharrangements.

Appointmentofcomplianceofficers:

Everymerchantbankershallappointacomplianceofficerwhoshallbe
responsibleformoniteringthecomplianceoftheact,rulesandregulations,
notification,guidelines,instructionsetcissuedbytheSEBIorthecentral
governmentandforredressalofinvestorsgrievances.

ThecompliaofficershallimmediatelyandindependentlyreporttotheSEBIany
nonComplianceobservedbyhimandensurethattheobservationsmadeor
deficienciespointedasthecasemaybe,donotrecur.

ProcedureofInspection

SEBI'sRighttoinspect:

TheSEBImayappointoneormorepersonsasinspectingauthoritytoundertake
inspectionof

Thebooksofaccounts,
Recordsand
Documentsofthemerchantbanker.

PurposeofInspection...

toensurethatthebooksofaccountsarebeingmaitainedinthemannerrequired;
toensuretheprovisionsoftheAct,Rules,Regulationsarebeingcompliedwith;

toinvestigateintothecomplaintsreceivedfrominvestors,othermerchant
bankersoranyotherpersononanymatterhavingabearingontheactivitiesof
themerchantbanker;and

toinvestigateintothecomplaintsreceivedfrominvestors,othermerchant
bankersoranyotherpersononanymatterhavingabearingontheactivitiesof
themerchantbanker;and

toinvestigatesuomotointheinterestofsecuritiesbusinessorinvestorsinterest
intiotheaffairsofthemerchantbanker.

NoticeBeforeinspection

Beforeundertakinganinspectionunderregulation29theSEBIshallgivea
reasonablenoticetothemerchantbankerforthatpurpose.

Duringthecourseofinspection,themerchantbankeragainstwhoman
inspectionisbeingcarriedoutshallbeboundtodischargehisobligations.

SubmissionofReporttoSEBI

Theinspectingauthorityshall,assoonasmaybepossiblesubmitaninspection
reporttoSEBI.

ActiononinspectionorInvestigationreport:

TheSEBIorthechairmanshallafterconsiderationofinspectionor
investigationreporttakesuchactionastheSEBIorchairmanmaydeemfitand
appropriateincludingactionundertheSEBI.

AppointmentofAuditors:

TheSEBImayappointaqualifiedauditortoinvestigatetheBooksofaccounts
ortheaffairsofthemerchantbankerprovidedthattheauditorsoappointed
shallhavethesamepowersoftheinspectingauthority.

ProcedureforActionincaseofDefault:

SuspensionofRegistration:

Apenaltyofsuspensionofregistrationofamerchantbankermaybeimposed
where

ThemerchantbankerviolatestheprovisionoftheAct,rulesorRegulations:

Themerchantbanker

*FailstoFurnishanyinformationrelatingtohisactivityasmerchantbanker
asrequiredbytheSEBI;
*furnisheswrongorfalseinformation;
*doesnotsubmitperiodicalreturnsasrequiredbySEBI;
*doesnotcooperateinanyinquiryconductedbytheSEBI

Themerchantbankerfailstoresolvethecomplaintsoftheinvestorsorfailsto
giveasatisfactoryreplytotheSEBIinhisbehalf;

Themerchantbankerindulgesinmanipulatingorpriceriggingorconcerning
activities;

Themerchantbankerfailstomaintainthecapitaladequecyrequirement;

Themerchantbankerfailstopaythefees;

ThemerchantbankerviolatestheconditionsofRegistration;

Themerchantbankerdoesnotcarryouthisobligationsasspecifiedinthe
regulation.

CancellationofRegistration:
Apenaltyofcancellationofregistrationofamerchantbankermaybeimposedif

Themerchantbankerindulgesindeliberatemanipulationorpriceriggingor
corneringactivitiesaffectingthesecuritiesmarketandtheinvestorsinterest;

Thefinancialpositionofthemerchantbankerdeterioratestosuchextentthatthe
SEBIisoftheopinionthathiscontinuanceasmerchntbankerisnotinthe
interestofinvestors;

Themerchantbankerisguiltoffraud,orisconvictedofacriminaloffence;

ShowCausenoticeandorder:

Onreceiptofthereportfromtheenquiryofficer,theSEBIshallconsiderthesame
andissueashowcausenoticeastowhythepenaltyasproposedbytheenquiry
officershoulenotbeimposed.

Themerchantbankershallwithintwentyonedaysofthedateofthereceiptof
theshowcausesendareplytotheSEBI.

TheSEBIafterconsideringthreplytotheShowCausenotice,ifreceived,shall
assoonaspossiblebutnotlaterthanthirddaysfromthereceiptofthereply,if
any,passsuchorderasitdeemsfit.

Everyorderpassedshallbeselfcontainedandgivenreasonsfortheconclusions
statedthereinincludingjustificationofthepenaltyimposedbythatorder.

TheSEBIshallsendacopyoftheordertothemerchantbanker.

EffectofSuspension&CancellationofregistrationofMerchant
Bankers:

Onandfromthedateofthesuspensionofthemerchantbanker,heshallceaseto
carryonanyactivityasamerchantbankerduringtheperiodofsuspension.
Onandfromthedateofcancellationthemerchantbankershallwithimmediate
effectceasetocarryonanyactivityasamerchantbanker.

PublicationofOrderofSupension:

Theorderofsuspensionorcancellationofcertificatepassedshallbepublishedin
atleasttwodailynewspaperbySEBI.

AnypersonaggrievedbyanorderoftheSEBImade,onandafterthe
commencementofthesecuritiesLaws(Secondamendment)Act,1999,(i.e.,after
16thdecember1999),undertheseregulationsmaypreferanappealtoa
SecuritiesAppellateTribunalhavingjurisdictioninthematter.

Source:

http://www.slideshare.net/amarranu/merchantbankersregulationsfinal