Registrationofmerchantbanker

RequirementforGrantofCertificate:
TheApplicant
ShallbeabodycorporateotherthanaNBFC.
Hasthenecessaryinfrastructuretodischargehisactivities.
Shouldhaveminimumtwoexperiencedemployeestoconductthebusinessof
merchantBanker.
Shouldfulfillthecapitaladequecyrequirementasspecified.
Hispartner,directororprincipalofficershouldnotbeinvolvedinanylitigation
connectedwiththesecuritiesmarketwhichhasanadverseeffectonthebusiness
fotheapplicant.
Shouldhaveaprofessionalfromaninstitutionrecognisedbythegovernmentin
finance,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:
Forthepurposeofthisregulation etworthmeansinthecaseofanapplicant
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
SEBIisoftheopinionthat hiscontinuanceasmerchntbankeris not inthe
interestofinvestors;
Themerchantbankerisguiltoffraud,orisconvictedofacriminaloffence;

ShowCausenoticeandorder:
Onreceiptofthereportfromtheenquiryofficer,theSEBIshallconsiderthesame
andissueashowcausenoticeastowhythepenaltyasproposedbytheenquiry
officershoulenotbeimposed.
Themerchantbankershallwithintwentyonedaysofthedateofthereceiptof
theshowcausesendareplytotheSEBI.
TheSEBIafterconsideringthreplytotheShowCausenotice,ifreceived,shall
assoonaspossiblebutnotlaterthanthirddaysfromthereceiptofthereply,if
any,passsuchorderasitdeemsfit.
Everyorderpassedshallbeselfcontainedandgivenreasonsfortheconclusions
statedthereinincludingjustificationofthepenaltyimposedbythatorder.
TheSEBIshallsendacopyoftheordertothemerchantbanker.

Effect of Suspension & Cancellation of registration of Merchant

Bankers:
Onandfromthedateofthesuspensionofthemerchantbanker,heshallceaseto
carryonanyactivityasamerchantbankerduringtheperiodofsuspension.
Onandfromthedateofcancellationthemerchantbankershallwithimmediate

effectceasetocarryonanyactivityasamerchantbanker.

PublicationofOrderofSupension:
Theorderofsuspensionorcancellationofcertificatepassedshallbepublishedin
atleasttwodailynewspaperbySEBI.
Any person aggrieved by an order of the SEBI made, on and after the
commencementofthesecuritiesLaws(Secondamendment)Act,1999,(i.e.,after
16th december 1999), under these regulations may prefer an appeal to a
SecuritiesAppellateTribunalhavingjurisdictioninthematter.
Source:
http://www.slideshare.net/amarranu/merchantbankersregulationsfinal