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INDIAN FINANCIAL SYSTEM
Meaning
A system that aims at establishing and providing a regular,
efficient and cost effective linkage between depositors and investors is
known as Financial System.
Seekers of Funds(mainly business firm
and government)
Suppliers of funds
(mainly households)
Flow of funds(Saving)
Flow of financial Services
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Features of Financial System
It provide linkage between depositors and investors.
It facilitate expansion of financial marketIt promotes efficient allocation of financial resources
It influences both quality and the pace of economic
development
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An overview of Indian Financial System:
Financial Financial Financial Financial
Markets Institution Instruments Services
Financial Markets:It is a place where financial assets are created or
transferred.
(i)Money Market
(ii) Capital Market
(iii) Government Securities Market
(iv) Foreign Exchange Market.
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(i)Money Market:
The money market is a wholesale debt market forlow-risk, highly-liquid, short-term instrument.
I t consists of following sub-markets:
1. Call money market
2. Bill market.
3. Short-term government securities.4. Collateral loan market.
(ii)Capital Market:
=> The capital market is designed to finance the long-term investments.
=> The capital market deals with new issue and transferof existing securities.
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Capital marketCapital Market in
India
Governmentsecurity (Gill-
edged market)
Industrial securitymarket
New issuesmarket
and
Old issue market
Developmentfinancial
Institution
IFCI
ICICI
SFCs
IDBIIIBI
UTI
FinancialIntermediaries
Merchant banks
Mutual fundsLeasing companies
Venture capitalist
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(iii) Government Securities Market
It is a market where government securities are traded.
(iv) Foreign Exchange Market:Purchase and sale of national currencies.
The Forex market deals with the multicurrency
requirements, which are met by the exchange of
currencies. Depending on the exchange rate that isapplicable, the transfer of funds takes place in this
market. This is one of the most developed and integrated
market across the globe.
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Most Traded
currenciesApril 2011
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Most Traded Currencies
April 2011.
84.9%
39.1%
19.0%
12.9%
6.4%
7.6%
5.3%
2.2%
2.4%
1.3%
1.6%
1.3%
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Traded only 0.9%
during April 2011
But
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Financial Institution:
=> Institution that provide credit and credit related
services are called financial institution.
=> Financial institutions are the intermediaries who
facilitates smooth functioning of the financial system by
making investors and borrowers meet. They mobilize
savings of the surplus units and allocate them inproductive activities promising a better rate of return.
Functions:
=> Collecting deposits and lend loan to trade.Examples: NABARD, EXIM bank, IDBI, etc.,
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Structure of Banking in India
Scheduledbank
Commercial
bank
Public sector(27)
Nationalizedbanks (19)
State bank ofIndia & its
associates (8)
Private sector(30)
Foreign banks(40)
Regional Ruralbanks (196)
Co-operative
bank
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Characteristics of Financial Institutions
1. Saving Mobilizer
2. Participants3. Dealers
4. Generators
5. Regulation
6. Types
7. Special institutions
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Financial Services:
=> It is concerned with the design and delivery of
advice and financial products to individual and businesses.
=> This service is regulated by SEBI, RBI, Government
of India. It comprise of various functions and services that
provide by the financial institutions in a financial system.
Services are:Leasing, Hire Purchasing, Factoring, Forfeiting, Mutual
Fund, Bill discounting, Credit cards, underwriting,
Brokerage, Portfolio Management, Housing Finance, etc.,
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Financial Instrument:
Financial instrument in the Indian financial system may
be categorized into(i)Money market instrument:
=> Treasury Bill
=> Bill of Exchange.
=> Commercial paper
=> Certificate of deposits
(ii) Capital market instrument:
=> Equity shares
=> Preference Shares.
=> Different type of debentures.
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Merchant bankers as lead managers
Sl.no Size of the issue Maximum number
of lead managers
1 Less than 50 crores 2
2 50 100 crores 3
3 100 200 crores 4
4 200 400 crores 5
5 Above 400 crores 5 or more as
prescribed by SEBI
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Merchant Banking
Definition :
In banking, a merchant bank is a financial institution
primarily engaged in offering financial services and advice to
corporations and wealthy individuals on how to use their money.
According to Cox, D. merchant banking is defined as,
merchant banks are the financial institutions providing
specialist services which generally include the acceptance of bills
of exchange, corporate finance, portfolio management and other
banking services.
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Merchant Banking in India
Till early 1960s there was no merchant banking inthe Indian banking system. It was the Grindlays Bankwhich started merchant banking services as far backas 1967 in India. Others to follow were Citibank
(1970), SBI (1972)
The boom in the capital market in mid 1970s withthe introduction of FERA 1973 encouraged otherbanks and financial institutions to set up MB
divisions.
=> In 1973, SBI started the merchant banking and itwas followed by ICICI.
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=>Private financial brokers also started private MB
organizations
=> Between 1974 and 1985, the merchant banker has
promoted lot of companies.
=> However they were brought under the control of SEBI
in 1992
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Merchant Banking in India-
Institutional Structure
Merchant Banking Divisions
Foreign
Banks
Indian
Banks
Financial
Institutions
Private
Merchant
Bankers
Subsidiary Division in
Bank
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Recent Developments in Merchant Banking
=> The Merchant Banking was at its best during 1985-1992 beingwhen there were many new issues. It is expected that 2010 that it
is going to be party time for merchant banks, as many new issueare coming up.
=> The foreign investors both in the form of portfolioinvestment and through foreign direct investments are venturingin Indian Economy. It is increasing the scope of merchant bankers
in many ways.
=> Disinvestment in the government sector in the country gives abig scope to the merchant banks to function as consultants.
New financial instruments are introduced in the market time
and again. This basically provides more and more opportunity tothe merchant banks.
The mergers and corporate restructuring along with MOU andMOA are giving immense opportunity to the merchant bankers
for consultancy jobs.
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Challenges faced by Merchant Banker in India
1. SEBI guideline has restricted their operations to Issue Management and Portfolio
Management to some extent. So, the scope of work is limited.
2. In efficiency of the clients are often blamed on to the merchant banks, so they
are into trouble without any fault of their own.
3. The net worth requirement is very high in categories I and II specially, so many
professionally experienced person/ organizations cannot come into the picture.
4. Poor New issues market in India is drying up the business of the merchant
bankers.Thus the merchant bankers are those financial intermediary involved with
the activity of transferring capital funds to those borrowers who are interested in
borrowing.
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Functions of Merchant Banking
(i) Corporate counseling:
Corporate counseling covers counseling in the form of project
counseling, capital restructuring, project management, public issuemanagement, loan syndication, working capital fixed deposit, lease
financing, acceptance credit etc., The scope of corporate counseling is
limited to giving suggestions and opinions to the client and help
taking actions to solve their problems.(ii) Project counseling
Project counseling is a part of corporate counseling and
relates to project finance. It broadly covers the study of the project,
offering advisory assistance on the viability and procedural steps forits implementation.
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(iii)Capital Structure
Here the Capital Structure is worked out i.e., the capital
required, raising of the capital, debt-equity ratio, working capital
requirements, etc.,(iv)Portfolio Management
It refers to the effective management of Securities i.e., the
merchant banker helps the investor in matters pertaining to
investment decisions. Taxation and inflation are taken into accountwhile advising on investment in different securities. Investments are
done in such a way that it ensures maximum returns and minimum
risks.
(v) Issue ManagementManagement of issues refers to effective marketing of
corporate securities viz., equity shares, preference shares and
debentures or bonds by offering them to public.
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(vi) Credit Syndication
Credit Syndication refers to obtaining of loans from single
development finance institution or a syndicate or consortium. Merchant
Banks help corporate clients to raise syndicated loans from commercials
banks.
(vii) Working Capital
The Companies are given Working Capital finance, depending
upon their earning capacities in relation to the interest rate prevailing in
the market.(viii)Venture Capital
Venture Capital is a kind of capital requirement which carries
more risks and hence only few institutions come forward to finance. The
merchant banker looks in to the technical competency of the
entrepreneur for venture capital finance.
(ix)Fixed Deposit
Merchant bankers assist the companies to raise finance by way of
fixed deposits from the public.
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(x)Other Functions
Treasury Management- Management of short term fund requirements by
client companies.
Stock broking- helping the investors through a network of service units
Servicing of issues
Small Scale industry counseling- counseling SSI units on marketing and
finance
Equity research and investment counseling
Assistance to NRI investors - the NRI investors are brought to the notice of
the various investment opportunities in the country.
Foreign Collaboration
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LEGAL AND REGULATORY FRAMEWORK
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SEBI Regulations on merchant bankers
I. Registration of Merchant Bankers
A. Application for Grant of CertificateAn application by a person for grant of a certificate shall be made to
the Board in Form A. The application shall be made for any one of
the following categories :
Category I- To carry on any activity of the issue managementCategory II- To act as adviser, consultant, co-manager, underwriter,
portfolio manager
Category III- To act as underwriter, adviser, consultant to an issue.
Category IV- To act only as adviser or consultant to an issueWith effect from 9th December, 1997, an application can be
made only for carrying on the activities mentioned in category I.
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B. Conformance to Requirements:
Subject to the provisions of the regulations, any application, whichnot complete in all respects and does not conform to the instructions
specified in the form, shall be rejected.C. Furnishing of Information:
The Board may require the applicant to furnish further informationor clarification regarding matter relevant to the activity of amerchant banker for the purpose of disposal of the application.
D. Consideration of Application:
The Board shall take into account for considering the grant of acertificate , applicant complies with the following requirements:
That the applicant shall be a body corporate
act as Primary or Satellite Dealer
That the applicant has the necessary infrastructure
employment minimum of two persons who have the experienceto conduct the business of the merchant banker
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That the applicant fulfils the capital adequacy as specified
principal officer is not involved in any litigation connected with
the securities marketofficer has not at any time been convicted for any offence
That the applicant has the professional qualification
That the applicant is a fit and proper person
That the grant of certificate to the applicant is in the interest of
investors.
E. Capital Adequacy Requirement
Category Minimum Amount
Category I Rs.5,00,00,000
Category II Rs.50,00,000
Category III Rs.20,00,000
Category IV Nil
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F. Procedure for Registration:
The Board on being satisfied that the applicant is eligible shall granta certificate in Form B. On the grant of a certificate the applicantshall be liable to pay the fees in accordance with Schedule II.
G. Renewal of Certificate:
Three months before expiry of the period of certificate, the merchantbanker, may if he so desired, make an application for renewal in Form
A. The application for renewal shall be dealt with in the same manneras if it were a fresh application for grant of a certificate
H. Procedure where Registration is not Granted
The refusal to grant registration shall be communicated by the Boardwithin thirty days of such refusal to the applicant stating therein thegrounds on which the application has been rejected.
Any applicant may, apply within a period of thirty days from the dateof receipt of such intimation to the Board for reconsideration for itsdecision.
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I. Effect of Refusal to Grant Certificate:
Any merchant banker whose application for a certificate has been
refused by the Board can cease to carry on any activity as merchantbanker.
J. Payment of Fees:
Every applicant eligible for grant of a certificate shall pay such fees in
such manner and within the period specified in Schedule II. Where amerchant banker fails to any annual fees as the Board may suspend
the registration certificate .
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General Obligations.
A. Sole Function
1. Merchant Banker not to associate with any business other thatthat of the securities market.
2. No merchant banker, other than a bank or a public financial
institution, who has been granted certificate of registration under
these regulations, shall after June 30th, 1998 carry on anybusiness other than that in the securities market.
B. Maintenance of Books
1. A copy ofbalance sheet as at the end of each accounting period;
2. A copy ofprofit and loss account for that period;3. A copy of the auditors report on the accounts for that period; and
4. A statement of financial position
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C. Submission of Half-yearly Results
Every merchant banker shallfurnish to the Board half-yearly
unaudited financial results when required by the Board with a viewto monitor the capital adequacy of the merchant banker.
D. Preservation of Books of Account, Records, etc.,
The merchant banker shallpreserve the books of accounts
and other records and documents maintained under regulation 14for a minimum period of five years.
E. Report on Steps taken on Auditor's Report
Every merchant banker shall within two months from the
date of the auditors report take steps to rectify the deficiencies,made out in the auditors report.
F.Appointment of Lead Merchant Bankers
All issues should be managed by at least one merchant
banker functioning as the lead merchant banker
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G. Restriction on Appointment of Lead Managers
The number of lead merchant bankers may not, exceed in
case of any issue of the following:Size of Issue Number of Merchant Bankers
Less than Rs. 50 Crores Two
Above Rs. 50 Crores but less than Rs.100 Crores Three
Above Rs. 100 Crores but less that Rs.200 Crores Four
Above Rs.200 Crores but less that Rs.400 Crores Five
Above Rs.400 Crores Five or more as
agreed by SEBI
H. Responsibilities of Lead Managers
Specifying such responsibilities is furnished to the Board at
least one month before the opening of the issue for subscription
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I. Underwriting Obligations
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 lakhs whichever is less.
J. Submission of Due Diligence Certificate
shall submit to the Board at least two weeks prior to the opening of
the issue for subscription, a due diligence certificate in Form C.K. Documents to be furnished to the Board
1. Particulars of the issue;
2. Draft prospectus or where there is an offer to the existing shareholders,
the draft letter of offer;3. Any other literature intended to be circulated to the investors, including
the shareholders; and
4. Such other documents relating to prospectus or letter of offer as the
case may be.
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L. Payment of fees to the Board
The draft prospectus or draft letter of offer referred to in
regulation 24 shall be submitted along with such fees and in suchmanner as may be specified in Schedule IV.
M. Continuance of Association of Lead Manager
The lead manager undertaking the responsibility for refunds
or allotment of securities in respect of any issue shall continue to beassociated with the issues till the subscriber have received the share
or debenture certificates orrefund of excess application money.
N.Acquisition of shares Prohibited
Relative enter into transaction in securities of bodiescorporate on the basis ofunpublished price sensitive information
obtained by them during the course of any professional assignment
either from the clients or otherwise
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O. Information to the Board
Every merchant banker shallsubmit to the Board complete
particulars of any transaction for acquisition of securities of anybody corporate whose issue is being managed by that merchant
banker within fifteen days from the date of entering into such
transaction.
P. Disclosures to the Board
1. His responsibilities with regard to the management of the issue;
2. The names of the body corporate whose issues he has managed
or has been associated with;
3. The particulars relating to breach of the capital adequacyrequirement as specified in regulation 7;
4. Relating to his activities as a manager, underwriter, consultant
or adviser to an issue as the case may be.
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Q.Appointment of Compliance Officer
Every merchant banker shall appoint a compliance officer
who shall be responsible formonitoring the compliance of the Act,rules and regulations notifications, guidelines, instructions etc.,
issued by the board or the Central Government and for redressed of
investors grievances.
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II. Procedure For Inspection
A. Board's Right to inspect
The Board may appoint one or more persons as inspectingauthority to undertake inspection of the books ofaccounts, recordsand documents of the merchant banker
1. To ensure that the books of account are being maintained in themanner required;
2. To ensure that the provisions of the Act, rules, regulations arebeing complied with;
3. To investigate into the complaints received from investors,
4. Investors interest in the affairs of the merchant banker.
B. Notice before inspectionBefore undertaking an inspection under regulation 29 the
Board shall give a reasonable notice to the merchant bankerforthat purpose.
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C. Obligations of Merchant Banker on Inspection
It shall be the duty of every director, proprietor, partner,
officer and employee of the merchant banker, who is being
inspected, toproduce 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.
D. Submission of Report to the Board
The inspecting authority shall, as soon as possible submit, aninspection report to the Board.
E.Action on Inspection or Investigation Report
The Board of the Chairman shall after consideration of
inspection or investigation report take such action and the board orchairman may deem fit and appropriate including action under the
Securities and Exchange Board of India Regulations, 2002.
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F.Appointment of Auditor
The Board may appoint a qualified auditor to investigate
into the books of accountor the affairs of the merchant banker.G. Communication of findings
The Board shall after consideration of the inspection report
communicate the findings to the merchant bankerto give him an
opportunity of being heard before any action is taken by the Boardon the findings of the inspecting authority .
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III. Procedure For Action Incase Of Default
A. Liability for Action in case of Default
A merchant banker who fails to comply with any conditionssubject to which certificate has been granted, and contravenes any ofthe provisions of the Act rules or regulations shall be dealt with inthe manner provided under the Securities and Exchange Board ofIndia Regulations, 2002.
B. Suspension of RegistrationA penalty for suspension of registration of a merchant banker
may be imposed under the following circumstances:
violates the provisions
fails to furnish any informationfails to resolve the complaints
indulges in manipulation
guilty of misconduct
fails to maintain
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E. Manner of Holding Enquiry before Suspension or Cancellation.
For the purpose of holding an enquiry under regulation 38,
the board may appoint an enquiry officer . The enquiry officer shallissue to the merchant banker a notice the registered office or the
principal place of business of the merchant banker. 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.
F. Show case Notice and Order
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.
The merchant banker shall within twenty-one days of the date of the
receipt of the show-cause send a reply to the Board.
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G. Effect of Suspension and Cancellation
On and from the date of the suspension of their merchant
banker he shall cease to carry on any activity as a merchant bankerduring the period of suspension.
H.Appeal to the Securities Appellate Tribunal
Any person aggrieved by an order of the board may, on and
after the commencement of the /securities Laws (secondamendment) Act, 1999, under these regulations may prefer an
appeal to a Securities Appellate Tribunal having jurisdiction in the
matter.
I. Fees
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 .
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Every Merchant banker shall pay registration fees as set out below :
1. Category I; A sum of Rs. 2.5 lakhs to be paid annually for the first
two years , third year a sum of Rs. 1 lakh2. Category II ; A sum of Rs. 1.5 lakhs to be paid annually for the
first two years , third year a sum of Rs. 50,000
3. Category III; A sum of Rs.1 lakh to be paid annually for the first
two years, third year a sum of Rs.25,0004. Category IV; A sum of Rs.5,000/- to be paid annually for the first
two years , third year a sum of Rs.1000/-
Renewal Fees :
1. Category I :A sum of Rs.1 lakh to be paid annually for the firsttwo years, third year a sum of Rs.20,000/-
2. Category II: A sum of Rs.75,000/- to be paid annually for the first
two years, third year a sum of Rs.10,000/-
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3. Category III : A sum of s.50,000/ to be paid annually for the first
two years, third year a sum of Rs.5,000/-
4. Category IV: A sum of Rs.5,000/- to be paid annually for the firsttwo years, third year a sum of Rs.2,500/-
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IV. CODE OF CONDUCT FOR MERCHANT BANKERS
The SEBI regulations have outlined the following code ofconduct for the merchant bankers operation in India ;
protect the interests of investors
High standards of integrity
Prompt, ethical
Due Diligence
Grievances of investors are redressed
Adequate disclosure
True and adequate information
Copies of the prospectus
Shall not discriminate among its clients
Misrepresent the service
Avoid conflict of interest
Resolve any conflict
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Appropriate disclosure
Best possible advice
Shall not divulge
Shall not indulge in any unfair competition
Maintain arms length relationships
Internal control procedures
Shall not make untrue statement
Maintain an appropriate level of knowledge
Board is promptly informed
Any investment advice
Demarcate the responsibility
Provide adequate freedom Own internal code of conduct
Good corporate policies
Business is fit and proper
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Adequate resources
Responsible for the acts and omission
Relevant informationShall not be a party
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Provision relating to Companies Act
The various regulations which govern the merchant bankers on thecapital issue are prescribed by the companies act, and the other
enactments mentioned below:1. Provisions of the Companies Act, 1956
a. Prospectus (Sec. 55 to 68A)
b. Allotment (Sec. 55 to 75)
c. Commissions and discounts (Sec. 76 & 77)d. Issue of shares at premium and at discount (Sec. 78 & 79)
e. Issue and redemption of preference shares (Sec. 80 & 80A)
f. further issues of capital (Sec. 81)
g. Nature, numbering and certificate of shares (Sec. 82 to 84)
h. Kinds of share capital and prohibition on issue of any other kind ofshares (Sec. 85 & 86)
i. Matters to be specified in prospectus and reports to be set out therein(Schedule 11)
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2. The Securities Contracts (Regulations) Act, 1957 regarding
transactions in securities
3. The Securities Contracts (Regulation)Rules, 1957.4. Adequacy and quality of personnel employed by them and also the
available infrastructure.
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SEBI Guidelines
Operational Guidelines
SEBI has pronounced the following guidelines for merchant bankers1. Submission of offer document :
The offer documents ofissue size up to Rs. 20 crores shall be
filed by lead merchant bankerswith the concerned regional office of
the Boardunder the jurisdiction of which the registered office of theissuer company falls.
The lead merchant banker shall make available 10 copies of
the draft offer document to the Board and 25 copies to the stock
exchange(s) where the issue is proposed to be listed.The lead merchant banker and the Stock Ex change(s) may
charge a reasonable charge for providing a copy of the draft offer
document.
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f. Any inquiry/investigation being conducted by the Board
g. Period up to which registration/renewal fees has been paid
h. Whether any promoter/group and/or associate company of theissuer company is associated with securities-related business
and registered with SEBI
i. If any one or more of these persons/entities are registered with
SEBI, their respective registration numbersj. If registration has expired, reasons for non-renewal
k. Details of any enquiry/investigation conducted by SEBI at any
time
l. Penalty imposed by SEBIm. Outstanding fees payable to SEBI by these entities, if any
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2. Dispatch of issue material :
Lead merchant bankers shall ensure that whenever there is a
reservation for NRIs, 10 copies of the prospectus together with 1000application forms are dispatched in advance of the issue opening
date, directly along with a letter addressed in person to Adviser (NRI),
Indian Investment Centre, Jeevan Vihar Building Sansad Marg, New
Delhi. Twenty copies of the prospectus and application forms shall be
dispatched in advance of the issue opening date to the various
Investors Associations.
3. Underwriting
While selecting underwriters and finalizing underwriting
arrangement, lead merchant bankers shallensure that the
underwriters do not overexpose themselves so that it becomes
difficult to fulfill their underwriting commitments.
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4. Compliance obligations
The merchant banker shall ensure compliance with the following
post-issue obligationsa. Association of resource personnel :
In case ofover-subscription in public issues, a Board
nominated public representative shall be associated in the process of
finalization of the basis of allotment. Honorarium at a minimum ofRs.500/- per day, plus normal conveyance charges shall be paid to
them.
b. Redressal of investor grievances
The merchant bankers shallassign high priority to investorgrievances, and take all preventive steps to minimize the number of
complaints. The lead merchant banker shall set up a proper
grievance monitoring and redressal system in co-ordination with
the issuers and the Registrars to Issue.
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c. Submission of post issue monitoring reports
The concerned lead merchant banker shall submit, in duplicate, thePost Issue Monitoring Reports specified in Clause 7.2 of ChapterVII of these
Guidelines, within 3 working days from the due dates.d. Issue of No objection Certificate (NOC)
In accordance with the Listing Agreement of the Stock Exchanges,the issuer companies shall deposit 1% of the amount of securities offered tothe public
These securities can be related by the concerned Stock Exchangeonly after obtaining an NOC from the Board
e. Registration of merchant bankers
Application for renewal of Certificate of Registration shall be madeby the merchant bankers according to Regulation 9 of SEBI Rules andRegulations, 1992. While filing the renewal application for the certificate ofregistration as merchant banker, it shall provide a statement highlightingthe changes that have taken place
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f. Reporting requirements
In terms of Regulation 28 of SEBI (Merchant Bankers
Regulation) 1992, the merchant bankers shall send a half yearly
report, in the format specified in Schedule XXVII, relating to their
merchant banking activities.
g. Impositions of penalty points
Penalty points may be imposed on the merchant banker for
violation of any of the provisions for operational guidelines.
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Guidelines on Advertisement
1. Factual and truthful
An issue advertisementshall be truthful, fair and clear, andshall not contain any statement that is untrue or misleading. Any
advertisement reproducing, or purporting to reproduce, any
information contained in an offer document shall reproduce such
information in full and disclose all relevant facts
2. Clear and concise
An advertisement shall be set forth in a clear, concise and
understandable language. Extensive use of technical, legal
terminology or complex language and the inclusion of excessive
details, which may distract the investor, shall be avoided.
3. Promise or profits
An issue advertisement shall not contain statements which
promise or guarantee rapid increase in profits.
4. Mode of advertising
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No models, celebrities, fictional characters, landmarks,
caricatures or the likes shall be displayed on or form part of the offer
documents or issue advertisements. Issue advertisements shall not
appear in the form of crawlers on television.
5. Financial data
If any advertisement carries any financial data, it shall also
contain data for the past three years and shall include particulars
relating to sales, gross profit, not profit, share capital, reserves,
earnings per share, dividends, and book values.
6. Risk factors
All issue advertisements carried in the print media such as
newspapers, magazines, brochures or, pamphlets shall contain
highlights relating to any issue, besides containing detailed
information on the risk factors. The print size of highlights and risk
factors in issue advertisements shall not be less than point 7 size.
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7. Issue date
No corporate advertisement of issuer company shall be issued
after 21 days of filing of the offer document with the Board until the
closure of the issue, unless the risk factors which are required to be
mentioned in the offer document, are mentioned in the
advertisement.
8. Product advertisement
No product advertisement of the company shall contain any
reference, directly or indirectly, to the performance of the company
during the period.
9. Subscription
No advertisement shall be issued stating that the issue has
been fully subscribed or oversubscribed during the period the issue is
open for subscription
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10. Issue closure
No announcement regarding closure of the issue shall bemade except on the closing date.
11. Incentives
No incentives, apart from the permissible underwritingcommission and brokerage, shall be offered through advertisementsto anyone associated with marketing the issue.
12. ReservationIn case there is a reservation for NRIs, the issue advertisement
shall specify the same, and also indicate the place in India from wherethe individual NRI applicant can procure application forms.
13. Undertaking
An undertaking has to be obtained from the issuer as part ofthe MOU between the lead merchant banker and the issue companyto the effect that the issuer company shall not directly or indirectlyrelease
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14.Availability of copies
Ensure the availability of copies of all issue related materials
with the lead merchant banker, at least until the allotment is
completed.
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http://www.docstoc.com/docs/3716531/merc
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