UNDERWRITER

Underwriter means a person who engages in the business of underwriting of an issue of securities of a company. An underwriter assures the issuing company to take up shares or securities to a certain limit in case the company fails to collect minimum subscription from the General Public to the expected level. 

For this arrangement, the underwriter will enter into an agreement with the issuing company and the assuring party such as a financial institution, banks, merchant banker, or broker. Underwriting is mandatory for a public issue. It is necessary for a public company which invites public subscription for its securities to ensure that its issue is fully subscribed. In case of any short – fall, it has to be made good by underwriting arrangements made in advance of the opening of the public issue. 

APPLICATION FOR REGISTRATION:

i) the applicant shall shave necessary infrastructure like adequate office space, equipments and manpower and past experience in underwriting, employing at least two persons with such experience. No person directly or indirectly connected with the applicant should have been granted registration by SEBI. SEBI 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 SEBI or any disciplinary action has been taken against such person under Act or rules or regulations; 

ii) The applicant should be a fit and proper person, fulfilling the capital adequacy requirement (at least Rs. 20,00,000/-) and no director, partner or principal officer should have been at any time convicted for an offence involving moral turpitude or found guilty of any economic offence. 

GENERAL OBLIGATION OF UNDERWRITERS:

(i) 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. 

(ii) The total underwriting obligations under all the agreements shall not exceed 20 times the Networth. 

(iii) Every underwriter in the event of being called upon to subscribe for securities of a body corporate pursuant to an agreement shall subscribe to such securities within 45 days of receipt of such intimation from such body corporate.