DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH
Name : MAJOR K. SIVA KUMAR
Designation : HEAD OF SECTION
Branch : Diploma in Commercial and
Computer Practice
Institute : Government Polytechnic, Srikakulam
Year/Semester : V Semester
Subject : Banking
Subject Code : CCP504(B)
Topic : Lead Banks and Merchant Banking
Duration : 50 Mts
Sub Topic : Regulatory framework of SEBI
Teaching aids : PPT and Animations
CCP504(B).88 1
Regulatory Frame work of SEBI
on Merchant Bank :
Objectives:-

On completion of this period, you would be able

to:

 Understand the action of SEBI in case of

default by merchant bankers.

CCP504(B).88 2
Recap :
In the previous class you have learnt the
obligations and responsibilities of Merchant
Bankers.
They are:
 The merchant bankers have to abide by the
rules framed by SEBI
 The should not involve in unfair practices
 The should not exaggerate the facts
 The should provide true and correct
information to the investors

CCP504(B).88 3
Known to Unknown :

1. Merchant bankers are liable for punishment

in case of default
a) Yes
b) No

CCP504(B).88 4
Known to Unknown (Contd..) :

2. How SEBI penalize the merchant bankers

a) By suspension of registration
b) By prizing
c) By rewarding
d) None

CCP504(B).88 5
Known to Unknown (Contd..) :

3. Merchant Bankers have to furnish

a) True and correct information
b) False information
c) News form news papers
d) None

CCP504(B).88 6
Regulatory Framework of SEBI :

In this class you will know the action by SEBI in case

of default by Merchant Bankers.

CCP504(B).88 7
Regulatory Framework of SEBI :

 A merchant banker who fails to comply with any

conditions subject to which the certificate of
registration has been granted by the SEBI is liable
to any of the following two penalties:
 Suspension of registration.
 Cancellation of Registration.

CCP504(B).88 8
Suspension of Registration :
A penalty of suspension of registration of a
merchant banker may be imposed where the
merchant banker:
 Violates the provisions of the SEBI Act, rules or
regulations.
 Fails to furnish any information relating to his
activity as merchant banker as required by SEBI.

CCP504(B).88 9
Suspension of Registration :
 Furnishes wrong information
 Does not submit periodical returns as required by
the SEBI
 Does not cooperate in any enquiry conducted by
the SEBI
 Fails to resolve the complaints of the investors or
fails to give a satisfactory reply to the SEBI in this
behalf

CCP504(B).88 10
Suspension of Registration :
 Indulges in manipulating or price rigging or
cornering activities.
 Is guilty of misconduct or improper or un
business like unprofessional conduct which is
not in accordance with the code of conduct
under the regulations.
 Fails to maintain the capital adequacy
requirement in accordance with the provisions
of the regulations.

CCP504(B).88 11
Suspension of Registration :

 Fails to pay the fees.

 Violates the conditions of registration.
 Does not carry out his obligations as specified
in the regulations.

CCP504(B).88 12
Cancellation of Registration :

A Penalty of cancellation of registration of merchant

banker may be imposed in the following conditions:
 If the merchant banker indulges in deliberate
manipulation or price rigging or cornering
activities affecting the securities market and the
investors interests.
 When the financial Position of the merchant
banker deteriorates to such an extent that SEBI
is of the opinion that his continuance as
merchant banker is not in the interest of
investors. CCP504(B).88 13
Cancellation of Registration :
 The merchant banker is guilty of fraud, or is convicted of
a criminal offence.
 In case of repeated defaults of the nature leading to
suspension of registration provided that the SEBI
furnishes reasons for cancellation in writing.
 On and from the date of suspension and cancellation of
registration of the merchant banker, he ceases to carry
on any activity as a merchant banker. The order of
suspension of cancellation of certificate is published in at
least two daily newspapers by the SEBI
CCP504(B).88 14
Summary :

 If a merchant banker fails to comply the rules

and regulations imposed by SEBI, he is liable
for two types of penalties
 Suspension of registration
 Cancellation of registration

CCP504(B).88 15
Summary (Contd..) :

 On and from the date of suspension and

cancellation of registration, the merchant banker
should not carryout any activity relating to
merchant banking
 SEBI has to publish the order of
suspension/cancellation in at least two daily
news papers

CCP504(B).88 16
Quiz :

1. A merchant banker who does not comply with

the rules framed by SEBI is subject to how
many types of penalties ?
a) Four
b) Two
c) None
d) one

CCP504(B).88 17
Quiz :

2. Suspension of registration is made in which of

the following cases ?
a) Violation of Provisions of SEBI Act
b) Furnishes wrong information
c) Non-submission of Periodical returns
d) All the above

CCP504(B).88 18
Quiz :

3. Cancellation of registration is made in which of

the following situation ?
a) When a merchant banker is guilty of
fraud
b) Indulges in Price rigging
c) Bad financial Position
d) Both A and C

CCP504(B).88 19
Quiz :

4. The order of cancellation is published in at least

a) Two daily newspapers
b) Three daily newspapers
c) One daily newspaper
d) None

CCP504(B).88 20
Quiz :

5. Can a merchant banker carryout his activities

as merchant banker after suspension /
cancellation ?
a) Yes
b) No

CCP504(B).88 21
Frequently Asked Questions :

1. Describe the action by SEBI in case of default

by merchant bankers ?

CCP504(B).88 22
Assignment :

1. Know the names various merchant bankers in

India.
2. Collect the data on their activities.
3. Study the Prospectus of any company and
observe the various items furnished in
Prospectus. Observe who are the Lead
Managers, Bankers, Brokers and Underwriters
to the issue.

CCP504(B).88 23