GRANT OF CERTIFICATE OF REGISTRATION:
(i) Applicant shall be a Body Corporate other than NBFC;
(ii) Applicant has in his employment a minimum of two persons who have the experience to conduct the business of Merchant Banker;
(iii) Applicant, his partner, director or principal officer is not involved in any Litigation connected with securities market which has an adverse bearing on the business of applicant;
(iv) Applicant has the professional qualification from an Institution recognized by the Government in Finance, Law or Business Management;
CAPITAL ADEQUACY: The Capital Adequacy requirement shall be a Networth of not less than 5 Crores.
“Net Worth” means the sum of paid up capital and free reserves of the applicant at the time of making application.
RESPONSIBILITIES OF LEAD MANAGERS:
▪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.
▪A statement specifying such responsibilities is furnished to SEBI at least 1 month before the opening of the issue for subscription
▪But where there are more than 1 Lead Merchant Banker to the issue the responsibility of each such LMB shall clearly be demarcated and the statement specifying such responsibilities shall be furnished to SEBI at least 1 month before the opening of issue for subscription.
MERCHANT BANKER NOT TO ACT AS SUCH FOR AN ASSOCIATE: A Merchant Banker shall not lead manage any issue or be associated with any activity undertaken under any regulations made by SEBI, if:
▪He is a promoter or
▪A director or
▪An associate
of the issuer of securities or of any person making an offer to sell or purchase securities.
However, a MB who is an associate of such issuer or person may be appointed, if he is involved only in marketing of issue or offer.
A MB shall be deemed to be an “Associate of the issuer or person” if:
(i) either of them controls, directly or indirectly through its subsidiary or holding, not less than 15% of voting rights in the other; or
(ii) either of them, directly or indirectly, by itself or in combination with other persons, exercises control over the other; or
(iii) there is a common director, excluding nominee director, amongst the issuer, its subsidiary or holding company and the MB.
MINIMUM UNDERWRITING OBLIGATION: In respect of every issue to be managed, the LMB holding a certificate of Category 1 shall accept a minimum underwriting obligation of 5% of total underwriting commitment or Rs. 25 Lakhs whichever is less; but if the LMB is unable to accept the minimum underwriting obligation, that LMB shall make arrangement for having the issue underwritten to that extent by a MB associated with the issue and shall keep SEBI informed of such arrangement.
In case of issue made in accordance with Chapter XB of SEBI (ICDR) regulations, 2009, the MB shall itself or jointly with other MB associated with the issues, underwrite at least 15% of the issue size.
PROHIBITION TO ACQUIRE SHARES:
▪No MB or any of its Directors, partners or manager or principal officer shall either on their own account 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.
▪Every MB to submit to SEBI complete particulars of any transaction for acquisition of securities of any body corporate whose whose issue is being managed by that MB, within 15 days from the date of entering into such transaction.
▪In case of any transaction for acquisition of securities made in pursuance of underwriting or market making obligation in accordance with Chapter XA of SEBI (ICDR) Regulations, 2009 the complete particulars of the transactions shall be submitted to SEBI on quarterly basis.
Every MB to appoint a compliance officer who shall be responsible for:
▪Monitoring the compliance of the Act, rules and regulations, notification guidelines, instructions, etc issued by SEBI or CG and
▪For Redressal of investor grievances. Compliance officer is required to immediately and independently report to SEBI, any non-compliance observed by him and ensure that observations made or deficiencies pointed out by SEBI on/in the draft prospectus or letter of offer as the case may be, do not occur.
PROCEDURE FOR INSPECTION:
▪SEBI empowers to appoint one or more persons as Inspecting Authority to undertake inspection of books of accounts, records, etc of the MB, to ensure that such books and records are maintained in the prescribed manner, the provisions of SEBI act and rules and obligations thereunder are complied with to investigate into complaints from investors, other MB or other persons on any matter having a bearing on activities of MB and to investigate Suo Moto in the interest of securities market business or investors interest into the working of the MB.
▪On Completion of inspection, the Inspecting Authority shall submit an Inspection Report to SEBi. SEBI or Chairman shall after consideration of inspection or investigation report take such action as SEBI or chairman may deem fit and appropriate.
▪SEBI may appoint a qualified auditor to investigate into the books of account or the affairs of the MB and such auditor shall have the same powers of the inspecting authority as referred above.
PROCEDURE FOR ACTION AGAINST MB IN CASE OF DEFAULT: Following actions may be taken:
▪Suspension of certificate of registration for a specified period;
▪Cancellation of certificate of registration;
▪Prohibiting the notice to take up any new assignment or contract or launch a new scheme for a specified period;
▪Debarring a principal officer of notice from being employed or associated with any registered intermediary for the specified period in the order;
▪Debarring a branch or an officer of the notice from carrying out activities for the specified period;
▪Warning the notice.
CODE OF CONDUCT FOR MERCHANT BANKERS
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