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THE GAZETTE OF INDIA BOMBAY 22nd DECEMBER,1992 MINISTRY OF FINANCE BOMBAY 22nd DECEMBER,1992
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THE GAZETTE OF INDIA No.LE/11112/92. In exercise of the powers conferred by Section 30 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Board with the previous approval of the Central Government, hereby makes the following regulations, namely :-
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THE GAZETTE OF INDIA
EXTRAORDINARY
PART III - SECTION 4
PUBLISHED BY AUTHORITY
BOMBAY 22nd DECEMBER,1992
SECURITIES AND EXCHANGE BOARD OF INDIA
NOTIFICATION
BOMBAY 22nd DECEMBER,1992
SECURITIES AND EXCHANGE BOARD OF INDIA
(MERCHANT BANKERS) REGULATIONS, 1992
No.LE/11112/92. In exercise of the powers conferred by Section 30 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Board with the previous approval of the Central Government, hereby makes the following regulations, namely :-
CHAPTER I
PRELIMINARY
(2) They shall come into force on the date of their publication in the Official Gazette.
2. In these regulations, unless the context otherwise requires,-
(c)"inspecting authority
" means one or more persons appointed by the Board to exercise powers
conferred under Chapter IV;
(d) "principal officer " means -
(i) proprietor, in the case of a proprietary concern;
(ii) partner, in the case of a partnership firm;
(iii) director, in the case of a body corporate, who is responsible for the activities of the merchant banker;
CHAPTER II
REGISTRATION OF MERCHANT BANKERS
3. (1) An application by a person for grant of a certificate shall be made to the Board in Form A .
(2) The application under sub- regulation (1) shall
be made for any one of the following categories of the merchant banker namely:-
(a)Category I, that is –
(i) to carry on any activity of the issue management, which will inter-alia consist of preparation of prospectus and other information relating to the issue, determining financial structure, tie-up of financiers and final allotment and refund of the subscription; and
(ii) to act as adviser, consultant, manager, underwriter, portfolio manager.
(b) Category II, that is, to act
as adviser, consultant, co- manager, underwriter, portfolio manager;
(c) Category III, that is to act as underwriter, adviser, consultant to an
issue;
(d) Category IV, that is to act only as adviser or consultant to an issue.
1[(2A) Notwithstanding anything
contained in this regulation, with effect from 9th December, 1997,
(i) an application under sub-regulation (2) can be made only for carrying on the activities mentioned in clause(a) therein, and
(ii) an applicant can carry on the activity as underwriter only if he obtains separate certificate of registration under the provisions of Securities and Exchange Board of India (Underwriters) Regulations, 1993, and
(iii) an applicant can carry on the activity as portfolio manager only if he obtains separate certificate of registration under the provisions of Securities and Exchange Board of India (Portfolio Manager)Regulations, 1993.]
(3) Notwithstanding anything contained in sub-regulation (1), any application made by a merchant banker prior to coming into force of these regulations containing such particulars or as near thereto as mentioned in Form A shall be treated as an application made in pursuance of sub-regulation (1) and dealt with accordingly.
(4) Subject to the provisions of sub-regulation (3) of regulation 3, any application, which is not complete in all respects and does not conform to the instructions specified in the form, shall be rejected:
Provided that, before rejecting any such application, the applicant shall be given an opportunity to remove within the time specified such objections as may be indicated by the Board.
5. (1) The Board may require the applicant to furnish further information or clarification regarding matters relevant to the activity of a merchant banker for the purpose of disposal of the application.
(2) The applicant or its principal officer shall, if so required, appear before the Board for personal representation.
6. The Board shall take into account for considering the grant of a certificate, all matters which are relevant to the activities relating to merchant banker and in particular the applicant complies with the following requirements, namely:-
2[(a) the applicant shall be a body corporate other than a non- banking financial company as defined under clause (f) of section 45-I of the Reserve Bank of India Act, 1934, (2 of 1934) as amended from time to time,]
3[ Provided that the merchant banker who has been granted registration by the Reserve Bank of India to act as a Primary or Satellite dealer may carry on such activity subject to the condition that it shall not accept or hold public deposit]
4[(aa)] the applicant has the necessary infrastructure like adequate office space, equipments, and manpower to effectively discharge his activities;
(b) the applicant has in his employment minimum of two persons who have the experience to conduct the business of the merchant banker;
(c) a person directly or indirectly connected with the applicant has not been granted registration by the Board;
Explanation:
For the purposes of this clause the expression "directly or indirectly connected" means any person being an associate, subsidiary, inter-connected or group Company of the applicant in case of the applicant being a body corporate.
(d) the applicant fulfils the capital adequacy requirement specified in regulation 7;
(e) the applicant, his partner, director or principal officer is not involved in any litigation connected with the securities market which has an adverse bearing on the business of the applicant;
(f) the applicant, his director, partner or principal officer has not at any time been convicted for any offence involving moral turpitude or has been found guilty of any economic offence;
(g) the applicant has the professional qualification from an institution recognised by the Government in finance, law or business management;
5[(gg) the applicant is a fit and proper person,]
(h) grant of certificate to the applicant is in the interest of investors.
7. (1) The capital adequacy requirement referred to in sub- regulation (d) of regulation 6 shall not be less than the net worth of the person making the application for grant of registration.
(2) For the purposes of sub- regulation (1), the
networth shall be as follows, namely :-
|
Category |
Minimum Amount |
|
Category I |
[Rs.5,00,00,000;]6 |
|
Category II |
Rs.50,00,000; |
|
Category III |
Rs.20,00,000 |
|
Category IV |
Nil |
Explanation:
For the purposes of this regulation "networth" means in the case of an applicant which is a partnership firm or a body corporate, the value of the capital contributed to the business of such firm or the paid up capital of such body corporate plus free reserves as the case may be at the time of making application under sub-regulation(1)of regulation 3.
8.(1)The Board on being satisfied that the applicant is eligible shall grant a certificate in Form B. 7[***].
(2) [omitted by the Securities and Exchange Board of India( Merchant Bankers) Amendment Regulations, 1997 with effect from December 9, 1997 vide S.O.No. 837(E) ]
(3)[omitted by the Securities and Exchange Board of India( Merchant Bankers) Amendment Regulations, 1997 with effect from December 9, 1997 vide S.O.No. 837(E) ]
(4) On the grant of a certificate the applicant shall be liable to
pay the fees 8[***] in
accordance with Schedule II;
9[***]
9. (1) Three months before expiry of the period of certificate, the merchant banker, may if he so desires, make an application for renewal in Form A.
(2) The application for renewal, under sub-regulation (1) shall be dealt with in the same manner as if it were a fresh application for grant of a certificate.
10[Provided that in case of an application for renewal of certificate of registration, the provisions of clause (a) of regulation 6 shall not be applicable upto June 30th , 1998]
(3)The Board on being satisfied that the applicant is eligible for renewal of certificate shall grant a certificate in Form B and send an intimation to the applicant 11[***]
(4) [omitted by the Securities and Exchange Board of India( Merchant Bankers) Amendment Regulations, 1997 with effect from December 9, 1997 vide S.O.No. 837(E) ]
(5) [omitted by the Securities and Exchange Board of India( Merchant Bankers) Amendment Regulations, 1997 with effect from December 9, 1997 vide S.O.No. 837(E) ]
(6) On the grant of a certificate the applicant shall be liable to pay the fees 12[***] in accordance with Schedule II;
13[***]
10. (1) Where an application for grant of a certificate under regulation 3 or of renewal under regulation 9, does not satisfy the criteria set out in regulation 6, the Board may reject the application after giving an opportunity of being heard.
(2) The refusal to grant registration shall be communicated by the Board within thirty days of such refusal to the applicant stating therein the grounds on which the application has been rejected.
(3) Any applicant may, being aggrieved by the decision of the Board,under sub-regulation (1), apply within a period of thirty days from the date of receipt of such intimation to the Board for reconsideration of its decision.
(4) The Board shall reconsider an application made under sub- regulation (3) and communicate its decision as soon as possible in writing to the applicant.
11. Any merchant banker whose application for a certificate has been refused by the Board shall on and from the date of the receipt of the communication under sub-regulation (2) of regulation 10 cease to carry on any activity as merchant banker.
12. (1) Every applicant eligible for grant of a certificate shall pay such fees in such manner and within the period specified in Schedule II.
(2) Where a merchant banker fails to pay the Annual fees as provided in sub-regulation (1), read with Schedule II, the Board may suspend the registration certificate, whereupon the merchant banker shall cease to carry on any activity as a merchant banker for the period during which the suspension subsists.
1 Inserted by the Securities
and Exchange Board of India (Merchant Bankers)Amendment Regulations, 1997 w.e.f
9th December, 1997 vide S.O 837(E).
2 Inserted by the Securities
and Exchange Board of India (Merchant Bankers) Regulations, 1997 , w.e.f 9th
December, 1997, vide S.O.837 (E).
3Inserted by the Securities
and Exchange Board of India (Merchant Bankers)(Second Amendment) Regulations,
1999 w.e.f. November, 17, 1999 vide S.O.1119(E).
4Renumbered at the place of
earlier clause (a), ibid.
5Inserted ibid.
6Substituted for "Rs.
1, 00,00,000" by Securities and Exchange Board of India (Merchant Bankers)
Amendment Regulation 1995, w.e.f September 7, 1995 vide F..NO. SEBI./LE-1/9/95.
7 The words "and send
an intimation to the applicant mentioning the category for which the Board has
granted certificate" omitted by Securities and Exchange Board of India
(Merchant Bankers) Amendment Regulations, 1997 w.e.f. 9th December,
1997 vide S.O.837(E).
8The words "for the
category for which the certificate is granted" omitted, ibid
9Proviso omitted, ibid.
10Inserted by the Securities
and Exchange Board of India (Merchant Bankers)Amendment Regulations, 1998 w.e.f
January 21, 1998, vide S.O.74 (E).
11The words "mentioning
the category for which the Board has granted certificate" omitted by the
Securities and Exchange Board of India (Merchant Bankers) Amendment
Regulations, 1997, w.e.f 9th December 1997, vide S.O.837(E).
12The words "for the
category for which the registration is granted" omitted, ibid.
13proviso omitted, ibid.
SCHEDULE I - FORMS
FORM A
SECURITIES
AND EXCHANGE BOARD OF INDIA
(MERCHANT BANKERS) REGULATIONS, 1992
(regulation 3)
APPLICATION
FOR GRANT OF CERTIFICATE /
RENEWAL OF CERTIFICATE
NAME OF APPLICANT
CATEGORY : I 18[***]
CONTACT NAME______________________
TELEPHONE NO:_____________________
INSTRUCTIONS FOR FILLING UP FORM
1. PARTICULARS OF THE APPLICANT
1.1 Name of the Applicant:
1.2(A) Address - Principal Place of business / Registered Office of the Company.
Pin code:______________________Telephone No:________________
Telex No:______________________Fax No:______________________
(B) Address for Correspondence:
Pin code:______________________Telephone No:________________
Telex No:______________________Fax No:______________________
(C) Address of Branch Offices:
2. ORGANISATION STRUCTURE
(Organisation Chart separately showing functional responsibilities of Merchant Banking activities to be enclosed).
2.1 Objectives:-
(To be given in brief along with copy of Memorandum and Articles of Association).
2.2 Date and Place of Incorporation:
Day Month Year Place
2.3 Status of the Applicant:
(e.g. limited company - Private/Public, unlimited company, partnership, proprietary, others. If listed, names of Stock Exchanges and latest share price to be given).
2.4 Particulars of all Directors/Partners/Proprietors:-
|
Name Qualification |
Experience in Merchant Banking & Financial Services related areas |
Share in applicants firm company |
Directorship in other companies |
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2.5 Particulars of Key Management Personnel: (Particulars of merchant
banking division)
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Name |
Qualification |
Experience with particular reference to merchant banking |
Date of appointment |
Functional areas |
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2.6 Name and activities of associate companies/concerns
|
Name of Company Address/firm |
Type of activity handled |
Nature of Interest of Promoter /Director |
Nature and interest of applicant company |
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3. BUSINESS INFORMATION
3.1 History, major events and present activities:
3.2 Details of Experience in Merchant Banking activities.
3.3 Experience in other financial services rendered:-
3.4 Business handled during the last three years:
a) Issue Management
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Name of client |
Type of Issue |
Size of Issue |
Year of Issue |
Times subscribed |
Name of lead merchant banker |
Functional responsibilities |
|
1 |
2 |
3 |
4 |
5 |
6 |
7 |
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b) Investment Adviser: -
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Name of Client Year for which services are rendered |
Nature of services rendered |
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c) Underwriting
|
Name of client |
Type and size |
Amount underwritten of Issue % age of issue under |
Year of Issue |
Whether there was any devolvement written |
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d) Portfolio Management
|
Name of Scheme |
Features of the Scheme |
Number of Clients |
Total Volume of Funds managed |
Average Returns |
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e) Consultants/Advisors to the Issue
|
Name of the Client |
Year of Issue |
Type and Size of Issue |
Nature of services rendered |
Name of Lead Merchant Banker(s) |
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4. CLIENT INFORMATION
4.1 List of major clients with address
|
Name |
Services Rendered |
4.2 If the applicant is proposing to engage in Merchant Banking activities for
the first time, the experience of key management personnel to be indicated.
|
Name of Key management personnel |
Qualification |
Previous Positions held |
Experience particularly in respect of merchant banking activities |
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4.2 (a) If the applicant is proposing to engage in Merchant Banking activities for the first time, business plan of the company with projected volume of activities and income for which registration is sought to be specifically given.
4.3 Details of infrastructure including computing
facilities, equity research and database available with the applicant.
4.4 Any other information considered relevant to the nature of services rendered by the applicant.
5. FINANCIAL INFORMATION
5.1 Capital Structure (Rs. in lakhs)
|
Year prior to the preceding year of current year |
Preceding year |
Current year |
a) Paid-up capital
b) Free reserves
(excluding re- valuation reserves)
c) Total (a) + (b)
Note:- 1. In case of partnership or proprietary concerns, please indicate capital minus drawings.
2. In case of partnership or proprietary concerns, please indicate the financial position, means and networth of the partners.
5.2 Deployment of Resources (Rs. in lakhs)
|
Year prior to the preceding year of current year |
Preceding year |
Current year |
(a) Fixed Assets
(b) Plant & Machinery and Office Equipment
(c) Quoted Investments
(d) Unquoted Investments
(e) Details of Liquid Assets
(f) Others
(Details of Investments, Loans & Advances made to
Associate Companies/ firms where Promoters/ Directors have an interest be
separately given).
5.3 Major Sources of Income: (Rs. in lakhs)
|
Year prior to the preceding year of current year |
Preceding year |
* Fees charged as % of issue |
|
|
|
|
(a) Issue Management
(b) Underwriting
(c) Portfolio Management
(d) Consultant/ Advisor to Issue
(e) Investment Adviser
(f) Others
*As fees charged by the merchant banker may vary from issue to issue, please indicate range within which fees have been charged.
5.4 Net Profit
|
Year prior to the preceding year of current year |
Preceding year |
Current year |
5.5 Dividend
|
Year prior to the preceding year of current year |
Preceding year |
Current year |
Amount
Percentage
Note:
Please enclose three years of audited annual accounts.
Where unaudited reports are submitted, give reasons. If minimum networth
requirement has been met after last audited annual accounts, audited statement
of accounts of a later date also be submitted.
5.6 List of major shareholders (holding 5% and above of
applicant directly or along with associates - applicable only to limited
companies)
Shareholding as on : ______________________________
|
Name of shareholder |
No.of Shares held |
% age of total paid up capital of the company |
5.7 Name and Address of the Principal bankers of the applicant.
5.8 Name and address of the Auditors.
6. OTHER INFORMATION
6.1 Details of all settled and pending disputes:
|
Nature of dispute |
Name of the party |
Pending/settled. |
6.2 Indictment of involvement in any economic offences by the applicant or any of the Directors, or key managerial Personnel in the last three years.
DECLARATION
THIS DECLARATION MUST BE SIGNED BY TWO DIRECTORS, TWO
PARTNERS OR THE SOLE PROPRIETOR AS THE CASE MAY BE.
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I/We hereby apply for registration. I/We warrant that I/We have truthfully and fully answered the questions above and provided all the information which might reasonably be considered relevant for the purposes of my registration. I/We declare that the information supplied in the application form is complete and correct.
For and on behalf of
--------------------------------------------------------------------------------
(Name of Applicant)
Director/Partner or Sole Proprietor Director/Partner
____________________________________________________________
(Name in Block Letters) (Name in Block Letters)
________________________ __________________________________
Date Date
18the words "APPLIED FOR - II/III/IV" omitted by
Securities and Exchange Board of India (Merchant Bankers) Amendment Regulations,
1997 w.e.f 9th December 1997 vide S.O.837(E)
FORM B
SECURITIES AND EXCHANGE BOARD OF INDIA
(MERCHANT BANKERS) REGULATIONS, 1992
(regulation 8)
CERTIFICATE OF REGISTRATION
In exercise of the powers conferred by sub-section (1) of section 12 of the Securities and Exchange Board of India Act, 1992, read with the rules and regulations made thereunder the Board hereby grants a certificate of registration to
___________________________________________________as a
merchant banker in Category I 19[***] subject to
the conditions in the rules and in accordance with the regulations to carry out
the following activities:-
1. Management of any issue, including preparation of prospectus, gathering information relating to the Issue, determining financing structure, tie up of financiers, final allotment and refund of excess application money.
2 . Investment Advisor.
3. 20[***]
4.21 [***]
5. Managers, Consultant or Adviser to any issue including corporate advisory services.
6. Consultant or Advisor.
(*Delete whichever are not applicable)
II. Registration Code for the merchant banker is MB / / /
III. This certificate shall be valid from _____________ to _________ and may be renewed as specified in regulation 9 of Securities and Exchange Board of India (Merchant Bankers) Regulations, 1992.
Place
Date
By Order
Sd/-
For and on behalf of Securities and Exchange Board of India
19The figures ‘II/III/IV’ ommitted by the Securities
and Exchange Board of India(Merchant Bankers) Amendment Regulations, 1997 w.e.f
9th December, 1997 vide S.O.837(E) read with Corrigendum vide S.O.869(E)dated
15th December, 1997.
20The words "3.Underwriting of Issue" omitted, ibid.
21The words "4. Portfolio
Management Services" omitted, ibid.
FORM C
SECURITIES AND EXCHANGE BOARD OF INDIA
(MERCHANT BANKERS) REGULATIONS,1992
(regulation 23)
DUE DILIGENCE CERTIFICATE
To
SECURITIES AND EXCHANGE BOARD OF INDIA
Dear Sirs,
SUB :ISSUE OF ________________________________
BY _______________________________________LTD.
We, the undernoted Lead Manager(s) to the above mentioned forthcoming issue state as follows:
1. We have while finalising the draft prospectus/letter of offer pertaining to the said issue have examined various documents and other material as for adequate disclosures to the investor;
2. On the basis of such examination and the discussions with the company, its directors and other officers, other agencies, independent verification of the statements concerning objects of the issue the contents of the documents and other material furnished by the company,
WE CONFIRM that:
(a) the draft prospectus/letter of offer forwarded to SEBI is in conformity with the documents, materials and papers relevant to the issue;
(b) all the legal requirements connected with the said issue have been duly complied with; and
(c) the disclosures made in the draft prospectus/letter of offer are true, fair and adequate to enable the investors to make a well informed decision as to the investment in the proposed issue.
PLACE:
DATE:
LEAD MANAGER (S) TO THE ISSUE
N. B. A list
of documents and materials examined may be forwarded along with this
certificate.
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SCHEDULE II
SECURITIES AND EXCHANGE BOARD OF INDIA
(MERCHANT BANKERS) REGULATIONS, 1992
(Regulation 12)
FEES
22[ " 1. Every merchant banker shall pay a sum of Rupees five lacs as registration fees at the time of the grant of certificate by the Board.
2. A merchant banker to keep registration in force shall pay renewal fee of Rs 2.5 lacs every three years from the fourth year from the date of initial registration.
3. (a) The fee referred to in paragraph 1 shall be paid by the merchant banker within fifteen days from the date of receipt of the intimation from the Board under sub- regulation (1) of Regulation 8.
(b) The fee referred to in paragraph 2, shall be paid by the merchant banker within fifteen days from the date of receipt of intimation from the Board under sub -regulation (3) of Regulation 9.
4. The fees specified in paragraphs1 and 2,shall be payable by merchant banker by a demand draft in favour of ‘Securities and Exchange Board of India’ payable at Mumbai or at the respective regional office."]
22Substituted by the Securities and Exchange Board of India
(Merchant Bankers) Amendment Regulations, 1999 for the existing paragraphs(1),
(2), (3) and (4) w.e.f. September 30, 1999 vide S.O.799(E)
CHAPTER III
GENERAL OBLIGATIONS AND RESPONSIBILITIES
13. Every merchant banker shall abide by the Code of Conduct as specified in Schedule III.
Notwithstanding anything contained above, a merchant banker who prior to the date of notification of the securities and exchange board of India (Merchant Bankers) Amendment Regulations, 1997, has entered into a contract in respect of a business other than that of the securities market, may, if he so desires, discharge his obligations under such contract .
16[Provided that a merchant banker who has been granted certificate of registration to act as primary or satellite dealer by Reserve Bank of India, may carry on such business as may be permitted by Reserve Bank of India]
Explanation - for the purposes of this regulation:
14. (1) Every merchant banker shall keep and maintain the following books of accounts, records and documents namely :-
(a) a copy of
balance sheet as at the end of each accounting period;
(b) a copy of profit and loss account for that period;
(c) a copy of the auditor's report on the accounts for that
period; and
(d) a statement of financial position.
(2) Every merchant banker shall intimate to the Board the place where the books of accounts, records and documents are maintained.
(3) Without prejudice to sub- regulation (1), every merchant banker shall, after the end of each accounting period furnish to the Board copies of the balance sheet, profit and loss account and such other documents for any other preceding five accounting years when required by the Board.
15. Every merchant banker shall furnish to the Board half-yearly unaudited financial results when required by the Board with a view to monitor the capital adequacy of the merchant banker.
16. The merchant banker shall preserve the books of accounts and other records and documents maintained under regulation 14 for a minimum period of five years.
17. Every merchant banker shall within two months from the date of the auditors' report take steps to rectify the deficiencies, made out in the auditor's report.
18. (1) All issues should be managed by atleast one merchant banker functioning as the lead merchant banker:
Provided that, in an issue of offer of rights to the existing members with or without the right of renunciation the amount of the issue of the body corporate does not exceed rupees fifty lakhs, the appointment of a lead merchant banker shall not be essential.
(2) Every lead merchant banker shall before taking up the assignment relating to an issue, enter into an agreement with such body corporate setting out their mutual rights, liabilities and obligations relating to such issue and in particular to disclosures, allotment and refund.
19. The number of lead merchant bankers
may not, exceed in case of any issue of –
|
Size of issue |
No. of Merchant Bankers |
|
(a)Less than rupees fifty crores |
Two |
|
(b)Rupees fifty crores but less than rupees one hundred crores |
Three |
|
(c)Rupees one hundred crores but less than rupees two hundred crores |
Four |
|
(d)Rupees two hundred crores but less than rupees four hundred crores |
Five |
|
(e)Above Rupees four hundred crores |
five or more as may be agreed by the board. |
20.(1) 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 and a statement specifying such responsibilities is furnished to the Board atleast one month before the opening of the issue for subscription:
Provided that, where there are more than one lead merchant bankers to the issue the responsibilities of each of such lead merchant banker shall clearly be demarcated and a statement specifying such responsibilities shall be furnished to the Board atleast one month before the opening of the issue for subscription.
(2) No lead merchant banker shall, agree to manage the issue made by any body corporate, if such body corporate is an associate of the lead merchant banker.
21. A lead merchant banker shall not be associated with any issue if a merchant banker who is not holding a certificate is associated with the issue.
22. (1) In respect of every issue to be managed, the lead merchant banker holding a certificate under Category I shall accept a minimum Underwriting obligation of five percent of the total underwriting commitment or rupees twenty-five lacs, whichever is less:
Provided that, if the lead merchant banker is unable to accept the minimum underwriting obligation,that lead merchant banker shall make arrangement for having the issue underwritten to that extent by a merchant banker associated with the issue and shall keep the Board informed of such arrangement.
23. The lead merchant banker, who is responsible for verification of the contents of a prospectus or the Letter of Offer in respect of an issue and the reasonableness of the views expressed therein, shall submit to the Board atleast two weeks prior to the opening of the issue for subscription, a due diligence certificate in Form C.
24. (1) The lead manager responsible for the issue shall furnish to the Board, the following documents, namely:-
(i)
particulars of the issue;
(ii) draft prospectus or
where there is an offer to the existing shareholders, the draft letter of offer;
(iii) any other literature intended to be circulated to
the investors, including the shareholders; and
(iv)
such other documents relating to prospectus or letter of offer as the case may
be.
(2) The documents referred to in sub-regulation (1) shall be furnished atleast two weeks prior to date of filing of the draft prospectus or the letter of offer, as the case may be, with the Registrar of Companies or with the Regional Stock Exchanges, or with both.
(3) The lead manager shall ensure that the modifications and suggestions, if any, made by the Board on the draft prospectus or the Letter of Offer as the case may be, with respect to information to be given to the investors are incorporated therein.
24A. The draft prospectus or draft letter of offer referred to in regulation 24 shall be submitted along with such fees and in such manner as may be specified in Schedule IV].
25. The lead manager undertaking the responsibility for refunds or allotment of securities in respect of any issue shall continue to be associated with the issue till the subscribers have received the share or debenture certificates or refund of excess application money;
Provided that where a person other than the lead manager is entrusted with the refund or allotment of securities in respect of any issue, the lead manager shall continue to be responsible for ensuring that such other person discharges the requisite responsibilities in accordance with the provisions of the Companies Act and the listing agreement entered into by the body corporate with the stock- exchange.
26. No merchant banker or any of its directors, partner or manager or principal officer shall either on their respective accounts 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.
27. Every merchant banker shall submit to the Board complete particulars of any transaction for acquisition of securities of any body corporate whose issue is being managed by that merchant banker within fifteen days from the date of entering into such transaction.
28. A merchant banker shall disclose to the Board as and when required, the following information, namely:-
(i) his responsibilities with regard to the management of
the issue;
(ii) any change in the information or
particulars previously furnished, which have a bearing on the certificate
granted to it;
(iii)the names of the body corporate
whose issues he has managed or has been associated with;
(iv)the particulars relating to breach of the capital
adequacy requirement as specified in regulation 7;
(v)
relating to his activities as a manager, underwriter, consultant or adviser to
an issue as the case may be.
14Inserted by the Securities and Exchange Board of India
(Merchant Bankers) Amendment Regulations, 1997 w.e.f 9th December, 1997 vide S.O.837 (E), read with
Corrigendum vide S.O.869(E) dated 15th December,
1997.
15Inserted by the Securities and Exchange Board of India
(Merchant Bankers) Amendment Regulations, 1998 w.e.f January 21, 1998 vide
S.O.74(E)
16Inserted by the Securities and Exchange Board of India
(Merchant Bankers)(Second Amendment) Regulations, 1999 w.e.f. November, 17, 1999
vide S.O.1119(E).
17Inserted by Securities and Exchange Board of India
(Merchant Bankers) Amendment Regulations,1996 w.e.f June 6, 1996 vide S. O. NO.
396 (E)
SCHEDULE III
SECURITIES AND EXCHANGE BOARD OF INDIA
(MERCHANT BANKERS) REGULATIONS, 1992
CODE
OF CONDUCT FOR MERCHANT BANKERS
(Regulation
13)
integrity and fairness in all his dealings with his clients
and other merchant bankers.
F. NO. 20/15/SE/92
G.V. RAMAKRISHNA
CHAIRMAN
SECURITIES AND EXCHANGE BOARD OF INDIA
23Added by Securities and Exchange Board of Indai
(Merchant Bankers) Amendment Regulations, 1996, w.e.f June 6, 1996 vide S.O.NO.
396 (E)
CHAPTER IV
PROCEDURE FOR INSPECTION
29. (1) The Board may appoint one or more persons as inspecting authority to undertake inspection of the books of accounts, records and documents of the merchant banker for any of the purposes specified in sub-regulation (2).
(2) The purposes referred to in sub-regulation (1) may be as follows namely :-
30. (1) Before undertaking an inspection under Regulation 29 the Board shall give a reasonable notice to the merchant banker for that purpose.
(2) Notwithstanding anything contained in sub-regulation (1), where the Board is satisfied that in the interest of the investors no such notice should be given, it may by an order in writing direct that the inspection of the affairs of the merchant banker be taken up without such notice.
(3) During the course of inspection, the merchant banker against whom an inspection is being carried out shall be bound to discharge his obligations as provided under Regulation 31.
31. (1)It shall be the duty of every director, proprietor, partner, officer and employee of the merchant banker, who is being inspected, to produce to the inspecting authority such books, accounts and other documents in his custody or control and furnish him with the statements and information relating to his activities as a merchant banker within such time as the inspecting authority may require.
(2)The merchant banker shall allow the inspecting authority to have reasonable access to the premises occupied by such merchant banker or by any other person on his behalf and also extend reasonable facility for examining any books, records, documents and computer data in the possession of the merchant banker or any such other person and also provide copies of documents or other materials which, in the opinion of the inspecting authority are relevant for the purposes of the inspection.
(3) The inspecting authority, in the course of inspection, shall be entitled to examine or record statements of any principal officer, director, partner, proprietor and employee of the merchant banker.
(4) It shall be the duty of
every director, proprietor, partner, officer or employee of the merchant banker
to give to the inspecting authority all assistance in connection with the
inspection which the merchant banker may reasonably be expected to give.
32. The inspecting authority shall, as soon as may be possible submit, an inspection report to the Board.
33. (1) The Board shall after
consideration of the inspection report communicate the findings to the merchant
banker to give him an opportunity of being heard before any action is taken by
the Board on the findings of the inspecting authority.
(2) On receipt of the
explanation if any, from the merchant banker, the Board may call upon the
merchant banker to take such measures as the Board may deem fit in the interest
of the securities market and for due compliance with the provisions of the Act,
rules and regulations.
34. The Board may appoint a qualified auditor to investigate into the books of account or the affairs of the merchant banker:
Provided that the auditor so appointed shall have the same powers of the inspecting authority as are mentioned in Regulation 29 and the obligations of the merchant banker in Regulation 31 shall be applicable to the investigation under this regulation.
Explanation:
For the purposes of this regulation the expression "qualified auditor" shall have the same meaning as given in Section 226 of the Companies Act, 1956 (1 of 1956).
CHAPTER V
PROCEDURE FOR ACTION IN CASE OF DEFAULT
35.(1) A merchant banker who –
(a)fails to
comply with any conditions subject to which certificate has been granted;
(b)contravenes any of the provisions of the Act, rules or
regulations; shall be liable to any of the penalties specified in sub-regulation
(2).
(2) The penalties referred to in sub-regulation (1) may be either:-
36. (1) A penalty of suspension of registration of a merchant banker may be imposed where-
(i) the
merchant banker violates the provisions of the Act, rules or regulations;
(ii) the merchant banker -
(a)fails to furnish any information relating to his
activity as merchant banker as required by the Board;
(b) furnishes wrong or false information;
(c) does not submit periodical returns as required by the
Board;
(d)does not co-operate in any enquiry conducted
by the Board;
(iii)
the merchant banker fails to resolve the complaints of the investors or fails to
give a satisfactory reply to the Board in this behalf;
(iv) the merchant banker indulges in manipulating or price rigging or cornering activities;
(v) the merchant banker is guilty of misconduct or improper or unbusinesslike or unprofessional conduct which is not in accordance with the Code of Conduct specified in ScheduleIII;
(vi) the merchant banker fails to maintain the capital adequacy requirement in accordance with the provisions of Regulation 7;
(vii) the merchant banker
fails to pay the fees;
(viii) the merchant banker
violates the conditions of registration;
(ix) the
merchant banker does not carry out his obligations as specified in the
regulation.
37. A penalty of cancellation of registration of a merchant banker may be imposed where -
(i) the merchant banker indulges in deliberate manipulation or price rigging or cornering activities affecting the securities market and the investors interest;
(ii) the financial position of the merchant banker deteriorates to such an extent that the Board is of the opinion that his continuance as merchant banker is not in the interest of investors;
(iii) the merchant banker is guilty of fraud, or is convicted of a criminal offence;
(iv) in case of repeated defaults of the nature mentioned in Regulation 36 provided that the Board furnishes reasons for cancellation in writing.
38. No order of penalty of suspension or cancellation as the case may be, shall be imposed except after holding an enquiry in accordance with the procedure specified in Regulation 39 .
39. (1) For the purpose of holding an enquiry under Regulation 38 , the Board may appoint an enquiry officer.
(2) The enquiry officer shall issue to the merchant banker a notice at the registered office or the principal place of business of the merchant banker.
(3) The merchant banker may, within thirty days from the date of receipt of such notice, furnish to the enquiry officer a reply together with copies of documentary or other evidence relied on by him or sought by the Board from the merchant banker.
(4) The enquiry officer shall, give a reasonable opportunity of hearing to the merchant banker to enable him to make submissions in support of his reply made under sub-regulation (3).
(5) Before the enquiry officer, the merchant banker may either appear in person or through any person duly authorised by the merchant banker:
Provided that no lawyer or advocate shall be permitted to represent the merchant banker at the enquiry:
Provided further that where a lawyer or an advocate has been appointed by the Board as a presenting officer under sub- regulation (6),it shall be lawful for the merchant banker to present its case through a lawyer or advocate.
(6) If it is considered necessary, the enquiry officer may ask the Board to appoint a presenting officer to present its case.
(7) The enquiry officer shall, after taking into account all relevant facts and submissions made by the merchant banker, submit a report to the Board and recommend the penalty to be imposed as also the grounds on the basis of which the proposed penalty is justified.
40. (1) On receipt of the report from the enquiry officer, the Board shall consider the same and issue a show-cause notice as to why the penalty as proposed by the enquiry officer should not be imposed.
(2) The merchant banker shall within twenty-one days of the date of the receipt of the show- cause send a reply to the Board.
(3) The Board after considering the reply to the show-cause notice, if received, shall as soon as possible but not later than thirty days from the receipt of the reply, if any, pass such order as it deems fit.
(4) Every order passed under sub- regulation (3) shall be self- contained and give reasons for the conclusions stated therein including justification of the penalty imposed by that order.
(5) The Board shall send a copy of the order under sub- regulation (3) to the merchant banker.
41. (1) On and from the date of the suspension of the merchant banker he shall cease to carry on any activity as a merchant banker during the period of suspension.
(2) On and from the date of cancellation the merchant banker shall with immediate effect cease to carry on any activity as a merchant banker.
42. The order of suspension or cancellation of certificate passed under sub-regulation (3) of regulation 40 , shall be published in atleast two daily newspapers by the Board.
43. [Any person aggrieved by an order of the Board made, on and after the commencement of the Securities Laws (Second Amendment) Act, 1999, (ie., after 16th December 1999), under these regulations may prefer an appeal to a Securities Appellate Tribunal having jurisdiction in the matter]18
18Substituted for the earlier provision vide SEBI ( Appeal to the Securities Appellate Tribunal) (Amendments) Regulations,2000
THE GAZETTE OF INDIA
EXTRAORDINARY
PART II – SECTION 3 – SUB SECTION (i)
PUBLISHED BY AUTHORITY
NEW DELHI 22nd DECEMBER, 1992
MINISTRY OF FINANCE
(DEPARTMENT OF ECONOMIC AFFAIRS)
NOTIFICATION
NEW DELHI 22nd DECEMBER, 1992
SECURITIES AND EXCHANGE BOARD OF INDIA
(MERCHANT BANKERS) RULES, 1992
G.S.R. 937 (E) In exercise of the powers conferred by section 29 of the Securities and Exchange Board of India , Act 1992 (15 of 1992), the Central Government hereby makes the following rules, namely :-
Short title and commencement : 1.(1) These rules may be called the Securities and Exchange Board of India (Merchant Bankers) Rules, 1992
(2) They shall come into force on the date of their publication in the Official Gazette.
Definitions : 2. In these rules, unless the context otherwise requires :-
No person to act as merchant Banker without registration : 3.No person shall carry on any activitiy as a merchant banker unless he holds a certificate granted by the Board under the regulations.
Provided that such person, who were engaged as merchant banker prior to the coming into force of the Act, may continue to carry on activity as merchant banker if he has made an application for such registration till the disposal of such application.
Conditions of grant or renewal Of certificate to merchant Banker : 4. The Board may grant or renew a certificate to a merchant banker subject to the following conditions , namely;