Merchant_Bankers_Apr17

Merchant_Bankers_Apr17_2020
1 (1) These regulations may be called the Securities and Exchange Board of India (Merchant Bankers) Regulations, 1992.
1 (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, 1 and Imposing Penalty) Regulations, 2002 w.e.f., 27.09.2002. Prior to omission the clause read as under :(a) "enquiry officer" means any Officer of the Board , or any other person, having experience in dealing with theproblems relating to the securities market , who is authorised by the Board under Chapter V;2[(a) Act means the Securities and Exchange Board of India Act, 1992 (15 of1992);(aa) body corporate shall have the meaning assigned to it in or under clause (7) ofsection 2 of the Companies Act, 1956 (1 of 1956);(ab) certificate means a certificate of 3 registration issue d by the Board ;(ac) 4(ad) change in control, in relation to a merchant banker being a body corporate,means:(i) if its shares are listed on any recognised stock exchange, change in controlwithin the meaning of regulation 12 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations,1997;(ii) in any other case, change in the controlling interest in the body corporate .interest means an interest, whether direct or indirect, to the extent of at leastfifty one per cent of voting rights in the body corporate ;](b) form means a form specified in Schedule I;(c) inspecting authority means one or more persons appointed by the Board toexercise powers conferred under Chapter IV;5[(ca) issue means an offer of sale or purchase of securities by any bodycorporate, or by any other person or group of persons on its or his or theirbehalf, as the case may be, to or from the public, or the holders of securities ofsuch body corporate or person or group of persons through a merchant banker;(cb) merchant banker means any person who is engaged in the business of issue management either by making arrangements regarding selling, buying orsubscribing to securities or acting as manager, consultant, adviser or renderingcorporate advisory service in relation to such issue management;]2006, w.e.f., 7-9-2006.Conditions Of Registration Of Certain Intermediaries) (Amendment) Regulations, 2016
3 (1) An application by a person for grant of a certificate 11[of 12 registration] shall be made to the Board in Form A. 13[(1A) An application for registration made under sub-regulation (1) shall be accompanied by a non-refundable application fee as specified in Schedule II.]
3 (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 theissue, determining financial structure, tie up of financiers and final allotmentand refund of the subscriptions; 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;
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.
5 (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 :16[(a) the applicant shall be a body corporate other than a non-banking financialcompany as defined under clause (f) of section 45-I of the Reserve Bank ofIndia Act, 1934 (2 of 1934), as amended from time to time :w.e.f, 09.12.1997.Regulations, 2006 (Amendment) Regulations, 1997 w.e.f., 09.12.1997.17[Provided that the merchant banker who has been granted registration by theReserve Bank of India to act as a primary or satellite dealer may carry on suchactivity subject to the condition that it shall not accept or hold public deposit;]18[(aa)]the applicant has the necessary infrastructure like adequate officespace, equipments, and manpower to effectively discharge his activities;(b) the applicant has in his employment minimum of two persons who have theexperience to conduct the business of merchant banker;(c) a person directly or indirectly connected with the applicant has not been grantedregistration by the Board.indirectly connected means any person being an associate, subsidiary or inter -connected or group company of the applicant in case of the applicant being abody 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 anylitigation connected with the securities market which has an adverse bearing onthe business of the applicant ;(f) The applicant , his director, partner or principal officer has not at any time beenconvicted for any offence involving moral turpitude or has been found guilty ofany economic offence;(g) The applicant has the professional qualification from an institution recognised bythe Government in finance, law or business management;19[(gg) the applicant is a fit and proper person;]
6A For the purpose of determining whether an applicant or the merchant banker is a fit and proper person the Board may take into account the criteria specified in Schedule II of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008.] 21[Capital adequacy requirement.
7 The capital adequacy requirement referred to in clause (d) of regulation 6 shall be a net worth of not less than five crore rupees. up capital and free reserves of the applicant 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 of 24 registration in Form B and shall send an intimation to theapplicant.
8 (2) 25[ The certificate of registration granted under sub-regulation (1) shall be valid unless it is suspended or cancelled by the Board.]
8 (3) 26[The merchant banker who has already been granted certificate of registration by the Board , prior to the commencement of the Securities and Exchange Board of 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 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. The figure "1, 00, 00, 000" in sub-regulation (2) of regulation 7 was 22 Substituted by the Securities and Exchange Board of India (Merchant Bankers) (Amendment) Regulations, 2011 w.e.f. 05-07-2011. Prior to the substitution the regulation 8 as amended by the Securities and Exchange Board of India (Merchant Bankers) Regulations, 1997 w.e.f. 09-12-1997, read as under: 8. Procedure for registration.(1) The Board , on being satisfied that the applicant is eligible, shall grant a certificate in Form B.
8 (2) and (3) ***Omitted.
8 (4) On the grant of a certificate the applicant shall be liable to pay the fees in accordance with Schedule II Registration Of Certain Intermediaries) (Amendment) Regulations, 2016 . Registration Of Certain Intermediaries) (Amendment) Regulations, 2016 . Intermediaries) (Amendment) Regulations, 2016 . Prior to substitution, sub-regulation (2) read as under: (2) The certificate of initial registration granted under sub-regulation (1) shall be valid for a period of five years from the date of its issue to the applicant . Intermediaries) (Amendment) Regulations, 2016 . Prior to substitution, sub-regulation (3) read as under: The merchant banker who has already been granted certificate of registration by the Board, prior to the commencement of the Securities and Exchange Board of India (Merchant Bankers) (Amendment) Regulations, 2011, and has not completed a period of three years, shall be deemed to have been granted a certificate of initial registration for a period of five years from the date of its certificate of registration, subject to payment of fee for the remaining period of two years, as prescribed in Schedule II of these regulations . The certificate of initial registration granted under sub-regulation (1) shall be valid for a period of five years from the date of its issue to the applicant . India (Change in Conditions of Registration of Certain Intermediaries) (Amendment) Regulations, 2016 shall be deemed to have been granted a certificate of registration, in terms of sub-regulation (1).
8 (4) On the grant of a certificate of 27 registration the merchant banker shall beliable to pay the fee in accordance with Schedule II of these regulations.]8A 289 29Registration Of Certain Intermediaries) (Amendment) Regulations, 2016 .Intermediaries) (Amendment) Regulations, 2016 . Prior to omission regulation 8A which was, read as under:8A. Grant of certificate of permanent registration.(1) The merchant banker who has been granted or deemed to have been granted a certificate of initialregistration under regulation 8, may, three months before the expiry of the period of certificate of initialregistration, make an application for grant of a certificate of permanent registration in Form A.
8 (2) The merchant banker who has already been granted a certificate of registration by the Board and hascompleted a period of five years, on the date of commencement of the Securities and Exchange Board of India(Merchant Bankers) ( Am endment) Regulations, 2011, may, three months before the expiry of validity ofcertificate of registration or before, make an application for grant of a certificate of permanent registration inForm A.
8 (3) An application under sub-regulation (1) or sub-regulation (2) shall be accompanied by a non-refundableapplication fee as specified in Schedule II of these regulations .
8 (4) The application for grant of a certificate of permanent registration shall be accompanied by details of thechanges that have taken place in the information that was submitted to the Board while seeking initialregistration or renewal, as the case may be, and a declaration stating that no changes other than those asmentioned in such details have taken place.
8 (5) The application for permanent registration made under sub-regulation (1) or (2) shall be dealt with in thesame manner as if it were a fresh application for grant of a certificate of initial registration.
8 (6) The Board , on being satisfied that the applicant is eligible, shall grant a certificate of permanent registrationin Form B and shall send an intimation to the applicant .
8 (7) On the grant of a certificate of permanent registration the merchant banker shall be liable to pay the fee inaccordance with Schedule II of these regulations.]Regulations, 2011 . Prior to omission, regulations 9 as amended by Securities and ExchangeBoard of India (Merchant Bankers) (Amendment) Regulations, 1997 w.e.f, 09.12.1997, Securities andExchange Board of India (Merchant Bankers) (Amendment) Regulations, 1998 w.e.f, 21-01-1998, Securitiesand Exchange Board of India (Merchant Bankers) (Third Amendment) Regulations, 2006 andSecurities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, , read as under:9. (1) Three months before the expiry of the period of certificate, the merchant banker may, if he so desires,make an application for renewal in Form A.(1A) An application for renewal made under sub-regulation (1) shall be accompanied by a non-refundableapplication fee as specified in Schedule II .(1B) The application for renewal under sub-regulation (1) shall be accompanied by details of the changes thathave taken place in the information that was submitted to the Board while seeking registration or earlier
9A (1) 31[Registration granted under regulation 8] shall be subject to the following conditions, namely:(a) where the merchant banker proposes 32[change in control], it shall obtain priorapproval of the Board for continuing to act as such after the change;(b) 33[it shall pay the fees for registration, in the manner provided in theseregulations;](c) it shall take adequate steps for redressal of grievances of the investors withinone month of the date of the receipt of the complaint and keep the Boardinformed about the number, nature and other particulars of the complaintsreceived;(d) it shall maintain capital adequacy requirements specified in regulation 7 at alltimes during the period of the 34;(e) it shall abide by the regulations made under the Act in respect of the activitiescarried on by it as merchant banker.renewal, as the case may be, and a declaration stating that no changes other than those as mentioned in suchdetails have taken place.
9A (2) The application of 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 : Provided that in the case of an application for renewal of certificate of registration, the provisions of clause (a) of regulation 6 shall not be applicable up to June 30, 1998.
9A (3) The Board on being satisfied that the applicant is eligible for renewal of certificate shall grant a certificate in Form B and sent an intimation to the applicant .
9B The certificate of registration granted under regulation 8 and its renewal granted under regulation 9, shall be valid for a period of three years from the date of its issue to the applicant . Intermediaries) (Amendment) Regulations, 2016 . Prior to substitution, sub-regulation (1) read as under: (1) Where an application for grant of a certificate 37[of initial registration under regulation 3 or of permanent registration under regulation 8A] does not satisfy the criteria set out in regulation 6, the Board may reject the application after giving an opportunity of being heard. Prior to this the words of initial registration under regulation 3 or of permanent registration under regulation Exchange Board of India (Merchant Bankers) (Amendment) Regulations, 2011 . Intermediaries) (Amendment) Regulations, 2016 . Prior to substitution, sub-regulation (s) read as under: (2) The refusal to grant 38[initial registration or permanent registration, as the case may be,] 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 . the word registration by the Securities and Exchange Board of India (Merchant Bankers) (Amendment) Regulations, 2011 . Intermediaries) (Amendment) Regulations, 2016 w.e.f. 08-12-2016. Prior to omission, the regulation was Any applicant , whose application for grant of a certificate of permanent registration has been refused by the Board , on and from the date of receipt of the communication, shall not carry on any activity as a merchant banker : Provided that the Board may, in the interest of investors in the securities market, permit the merchant banker to carry on activities undertaken prior to the receipt of the intimation of refusal subject to such condition as the Board may specify.]
10 37[(1) Where an application for grant of a certificate of registration under regulation 3 does not satisfy the criteria set out in regulation 6, the Board shall reject the application after giving an opportunity of being heard.]
10 (2) The refusal to grant registration, shall be communicated by the Board withinthirty days of such refusal to the applicant stating therein the grounds on which theapplication has been rejected .
10 (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 suchintimation to the Board for reconsideration of its decision.
10 (4) The Board shall reconsider an application made under sub-regulation (3) and
11 11. Effect of refusal to grant certificate of permanent registration. Intermediaries) (Amendment) Regulations, 2016 . Regulations, 2011 . Prior to the substitution the regulation read as under:
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. .Bankers) (Amendment) Regulations, 1997 .Notwithstanding anything contained above , a merchant banker who prior to the dateof notification of the Securities and Exchange Board of India (Merchant Bankers)Amendment Regulations, 1997, has entered into a contract in respect of a businessother than that of the securities market may, if he so desires, discharge hisobligations under such contract:43[Provided that a merchant banker who has been granted certificate of registrationto act as primary or satellite dealer by Reserve Bank of India, may carry on suchbusiness as may be permitted by the Reserve Bank of India.]44[Provided further that a merchant banker, who has been granted certificate ofregistration under these regulations, may ensure market making in accordance withChapter XA of the Securities and Exchange Board of India (Issue of Capital andDisclosure Requirements) Regulations, 2009](i) A bank shall mean a banking company as defined under section 5 of theBanking Regulation Act, 1949 (10 of 1949), and the corresponding new bankset up under the Banking Companies (Acquisition and Transfer of Undertaking)Act, 1970 (5 of 1970), and the Banking Companies (Acquisition and Transfer ofUndertaking) Act, 1980 (40 of 1980), State Bank of India Act, 1955 (23 of 1955)and State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959).(ii) A public financial institution shall have the same meaning as assigned to theterm under section 4A of the Companies Act, 1956 (1 of 1956) and shall includeIndustrial Development Corporations and Financial Corporations established bythe Central Government or State Governments , as the case may be.]
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.
12 (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
13 Every merchant banker shall abide by the Code of Conduct as specified in Schedule III. 40[Merchant banker not to associate with any business other than that of the
13A No merchant banker , other than a Bank or a 41Public Financial Institution, who has been granted a certificate of registration under these regulations shall 42[after June 30, 1998] carry on any business other than that in the securities market . substituted by the Securities and Exchange Board of India (Merchant Bankers) (Amendment) Regulations, 2011 and read as under: 11. Effect of refusal to grant certificate of permanent registration. Any applicant, whose application for grant of a certificate of permanent registration has been refused by the Board , on and from the date of receipt of the communication, shall not carry on any activity as a merchant banker: Provided that the Board may, in the interest of investors in the securities market , permit the merchant banker to carry on activities undertaken prior to the receipt of the intimation of refusal subject to such condition as the Board may specify. - Prior to substitution by the Securities and Exchange Board of India (Merchant Bankers) (Amendment) Regulations, 2011 , the regulation read as under:
14 (1) Every merchant banker shall keep and maintain the following books of account, records and documents namely :(a) a copy of balance sheet as at the end of the each accounting period;(b) a copy of profit and loss account for that period;(c) a copy of the auditors report on the accounts for that period45[;](d) a statement of financial position.46[(e) Records and documents pertaining to due diligence exercised in pre-issue andpost issue activities of issue management and in case of takeover, buybackand delisting of securities.](Amendment) Regulations, 1998
14 (2) Every merchant banker shall intimate to the Board the place where the books of account, records and documents are maintained .
14 (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
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 account 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 auditors report.
i. regulations sebi (stock brokers and sub-brokers) (amendment) regulations, 2011 w.e.f april 06, 2011 the amendment to sebi (stock brokers and sub-brokers) regulations, 2011 facilitates introduction of self-clearing members in the currency derivatives segment of an exchange.annual report 2011-12(change (change ii. sebi in conditions in conditions of registration of certain intermediaries) (amendment) regulations, 2011 w.e.f. april 19, 2011 sebi of registration of certain intermediaries) (amendment) regulations, 2011 were notified on april 19, 2011 whereby the existing requirements for obtaining prior approval was done away with, in case of change in status and constitution, for certain intermediaries such as stock broker and sub-broker, merchant banker, registrar to an issue and share transfer agent, underwriters, debenture trustee and credit rating agency. instead, it is provided that the prior approval will be required only in case where there is a change in control of those intermediaries. the term ‘change in control’ shall have the meaning as assigned to it under sebi takeover regulations. in case of depository participant, where there was no such provision, requirement for obtaining prior approval in case of change in control has been introduced. vide said notification, the following regulations were amended, to give the above effect: • sebi (stock brokers and sub-brokers) regulations, 1992 sebi (merchant bankers) regulations, 1992 sebi (registrars to an issue and share transfer agents) regulations, 1993 sebi (underwriters) regulations, 1993 sebi (debenture trustees) regulations, 1993 sebi (bankers to an issue) regulations, 1994 sebi (depositories and participants) regulations, 1996 sebi (credit regulations, 1999rating agencies) • • • • • • • iii. sebi (issue of capital and disclo- (amendment) sure requirements) regulations, 2011 w.e.f. april 29, 2011 the amendment deals with payment options in public issues and rights issues. it makes usage of the asba facility mandatory in the case of qualified institutional buyers and non-institutional investors. iv. sebi (foreign institutional investors) (amendment) regulations, 2011 w.e.f. may 02, 2011 a new sub-section was introduced by the said amendment to provide that in cases where the goi entered into agreements or treaties with other sovereign governments, and where such agreements or treaties specifically recognised certain entities to be distinct and separate, the board may recognise them as such, during the validity of such agreements or treaties.v. sebi (credit rating agencies) (amendment) regulations, 2011 w.e.f. july 05, 2011 as per existing regulations, the certificate of registration granted to credit rating agencies was required to be renewed after every three years from the date of original registration. in order to facilitate grant of certificate of permanent registration, the provisions of the regulations pertaining to credit rating agencies was amended. the amendment regulations provided that an initial certificate of registration will be granted for a period of five years thereafter grant of certificate of permanent registration will be considered by the board. fee schedule has also been modified accordingly. vi. sebi (registrar to an issue and share (amendment) transfer regulations, 2011 w.e.f. july 05, 2011 as per existing regulations, the certificate agents) 146of registration granted to registrar to an issue and share transfer agents (rti & stas) was required to be renewed after every three years from the date of original registration. in order to facilitate grant of certificate of permanent registration, the provisions of the regulations pertaining to rtis & stas were amended. the amendment regulations provided that an initial certificate of registration will be granted for a period of five years thereafter grant of certificate of permanent registration will be considered by the board. fee schedule has also been modified accordingly. vii. sebi (underwriters) (amendment) regulations, 2011 w.e.f. july 05, 2011 as per existing regulations, the certificate of registration granted to underwriters was required to be renewed after every three years from the date of original registration. in order to facilitate grant of certificate of permanent registration, the provisions of the regulations pertaining to underwriters were amended. the amendment regulations provided that an initial certificate of registration will be granted for a period of five years thereafter grant of certificate of permanent registration will be considered by the board. fee schedule has also been modified accordingly. viii. sebi trustees) (amendment) regulations, 2011 w.e.f. july 05, 2011 as per existing regulations, the certificate of registration granted to debenture trustees was required to be renewed after every three years from the date of original registration. in order to facilitate grant of certificate of permanent registration, the provisions of the regulations pertaining to debenture trustees were amended. the amendment regulations provided that an initial certificate of registration will be granted for a period of five years thereafter grant of certificate of (debenture part four: regulatory changespermanent registration will be considered by the board. fee schedule has also been modified accordingly. ix. sebi (merchant bankers) (amendment) regulations, 2011 w.e.f. july 05, 2011 as per existing regulations, the certificate of registration granted to merchant bankers was required to be renewed after every three years from the date of original registration. in order to facilitate grant of certificate of permanent registration, the provisions of the regulations pertaining to merchant bankers were amended. the amendment regulations provided that an initial certificate of registration will be granted for a period of five years thereafter grant of certificate of permanent registration will be considered by the board. fee schedule has also been modified accordingly. x. sebi issue) (amendment) regulations, 2011 w.e.f. july 05, 2011 as per existing regulations, the certificate of registration granted to bankers to an issue was required to be renewed after every three years from the date of original registration. in order to facilitate grant of certificate of permanent registration, the provisions of the regulations pertaining to bankers to an issue were amended. the amendment regulations provided that an initial certificate of registration will be granted for a period of five years thereafter grant of certificate of permanent registration will be considered by the board. fee schedule has also been modified accordingly.(bankers to an xi. sebi (depositories and participants) (amendment) regulations, 2011 w.e.f. july 05, 2011 as per existing regulations, the certificate to depository registration granted of 147annual report 2011-12participants was required to be renewed after every five years from the date of original registration. in order to facilitate grant of certificate of permanent registration, the provisions of sebi (depository participants) regulations, 1996 were amended. the amendment regulations provided that an initial certificate of registration will be granted for a period of five years thereafter grant of certificate of permanent registration will be considered by the board. fee schedule has also been modified accordingly.
18 Clause (a) to regulation 6 was renumbered as (aa) by the Securities and Exchange Board of India (Merchant Bankers) (Amendment) Regulations, 1997 w.e.f., 09.12.1997. (Amendment) Regulations, 1997 w.e.f., 09.12.1997w.e.f. 10-3-2004.21 Substituted by the Securities and Exchange Board of India (Merchant Bankers) (Third Amendment)Regulations, 2006. . Prior to the substitution the regulation (7) read as
19 The number of lead merchant bankers may not, exceed in case of any issue of Size of issue No. of Merchant Bankers(a)Rupees(b)two(c) Rupees(d) Rupeesfour(e) Above Rupees four hundred crores five or more as may be agreed by the boardbutcrorescroresTwoThreeFourFivehundredhundredhundredhundredlessbutbutrupeesrupeesthanrupeesonehundredcroreslesslessthanthanLessthancrorescroresrupeesfiftycroresfiftycroresonetwosuch responsibilities is furnished to the Board at least one month before the openingof 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 bankers shall clearly bedemarcated and a statement specifying such responsibilities shall be furnished tothe Board at least one month before the opening of the issue for subscription.
19 (2) Lead merchant banker not to associate with a merchant banker without
iv. sebi (merchant bankers) (amendment)regulations, 2006the sebi (merchant bankers) regulations, 1992 were further amended by the captioned amendment regulations on april 19, 2006 vide s.o. no. 560(e). by this amendment, existing regulation 19, which laid down limits on the maximum number of lead merchant banker to be appointed in case of any issue, was omitted.
20 (1) No lead manager shall agree to manage or be associated with any issue unless his responsibilities relating to issue mainly, those of disclosures, allotment and refund are clearly defined, allocated and determined and a statement specifying Regulations, 2009, w. e. f., 26-08-2009. 48 Omitted vide Securities and Exchange Board of India (Merchant Bankers) (Amendment) Regulations, 2006.w.e.f. 18-4-2006. Before the omission, regulation 19 read as under :
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 .
21A (1) A merchant banker shall not lead manage any issue or be associated with any activity undertaken under any regulations made by the Board, 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 in terms of any regulations made by the Board: Provided that a merchant banker who is an associate of such issuer or person may be appointed, if he is involved only in the marketing of the issue or offer. deemed to be an associate of the issuer or person if:(i) either of them controls, directly or indirectly through its subsidiary or holdingcompany, not less than fifteen per cent. of the voting rights in the other; or(ii) either of them, directly or indirectly, by itself or in combination with otherpersons, exercises control over the other; or(iii) there is a common director , excluding nominee director , amongst the issuer , itssubsidiary or holding company and the merchant banker.]
22 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 per cent 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 . Regulations, 2009, w. e. f., 26-08-2009. Regulations, 2009, w. e. f., 26-08-2009. 51[Provided further that in any issue made in accordance with Chapter XA of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 the merchant banker shall, itself or jointly with other merchant bankers associated with the issue, underwrite at least fifteen per cent of the issue size.]
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 (1)] 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 abearing on the certificate granted to it;(iii) the names of the body corporate whose issues he has managed or has beenassociated with;(iv) the particulars relating to the breach of the capital adequacy requirement asspecified in regulation 7;(v) relating to his activities as a manager, underwriter, consultant or adviser to anissue, as the case may be.58[{(2) The merchant banker shall submit a periodic report in such manner as may bespecified by the Board from time to time}]
28A (1) Every merchant banker shall appoint a compliance officer who shall be responsible for monitoring the compliance of the Act, rules and regulations, notifications, guidelines, instructions, etc., issued by the Board or the Central Government and for redressal of investors grievances.
28A (2) The compliance officer shall immediately and independently report to the Board any non-compliance observed by him and ensure that the observations made or deficiencies pointed out by the Board on/in the draft prospectus or the letter of offer
29 (1) The Board may appoint one or more persons as inspecting authority to undertake inspection of the books of account, records and documents of the merchant banker for any of the purposes specified in sub-regulation (2). Regulations, 2009, w. e. f., 26-08-2009. 58 Substituted by the Securities and Exchange Board of India (Merchant Bankers) (Amendment) Regulations, of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, w. e. f., 26-08-2009, read as under : The merchant banker shall submit a half yearly report for the period ending with 31st March and 30th September of every year, in the format specified in schedule IV, within three months from the close of the period to which it corresponds. Regulations, 2001, w.e.f., 29-5-2001.
29 (2) The purposes referred to in sub-regulation (1) may be as follows namely :(a) to ensure that the books of account are being maintained in the mannerrequired;(b) that the provisions of the Act, rules , regulations are being complied with;(c) to investigate into the complaints received from investors, other merchantbankers or any other person on any matter having a bearing on the activities ofthe merchant banker; and(d) to investigate suo motu in the interest of securities business or investors interestinto the affairs of the merchant banker.
30 (1) Before undertaking an inspection under regulation 28 the Board shall give a reasonable notice to the merchant banker for that purpose.
30 (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.
30 (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.
31 (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 theinspection.
31 (3) The inspecting authority , in the course of inspection, shall be entitled to examine or record statement of any principal officer, director , partner, proprietor and employee of the merchant banker.
31 (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
32 The inspecting authority shall, as soon as may be possible submit, an inspection report to the Board.
33 The Board or the Chairman shall after consideration of inspection or investi- gation report take such action as the Board or Chairman may deem fit and appropriate including action under 61[ Chapter V of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008]].
34 The Board may appoint a qualified auditor to investigate into the books of account or the affairs of the merchant bankers: 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. shall have the same meaning as given in section 226 of the Companies Act, 1956 (1
35 A merchant banker who contravenes any of the provisions of the Act, Rules or Regulations framed thereunder shall be liable for one or more actions specified 60 Substituted by the Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 w.e.f.,27.09.2002. Prior to the substitution the regulation read as under: Communication of findings etc. to the merchant banker 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 .
35 (2) On receipt of the explanation if any, from the merchant banker, the Board may call upon the merchantbanker to take such measures as the Board may deem fit in the interest of the securities market and for duecompliance with the provisions of the Act, rules and regulations.Officer and Imposing Penalty) Regulations, 2002 by the Securities and Exchange Board of India(Intermediaries) Regulations, 2008, w.e.f, 26-5-2008.
33 Action on inspection or investigation report The Board or the Chairman shall after consideration of inspection or investigation report take action as the Board or Chairman may deem fit and appropriate including action under the Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002. Prior to the above substitution the regulation read as under: 33. Communication of findings etc. to the merchant banker etc.-(1) The Board shall after consideration of the inspection report communicate the findings to the merchantbanker to give him an opportunity of being heard before any action is taken by the Board on the findings ofthe inspecting authority .
33 (2) On receipt of the explanation if any, from the merchant banker, the Board may call upon the merchantbanker to take such measures as the Board amy deem fit in the interest of the securities market and for duecompliance with the provisions of the Act, rules and regulations.therein including the action under Chapter V of the Securities and Exchange Board
44 (1) The Board may, exempt any person or class of persons from the operation of all or any of the provisions of these regulations for a period as may be specified but not exceeding twelve months, for furthering innovation in technological aspects relating to testing new products, processes, services, business models, etc. in live environment of regulatory sandbox in the securities markets .
44 (2) Any exemption granted by the Board under sub-regulation (1) shall be subject to the applicant satisfying such conditions as may be specified by the Board including conditions to be complied with on a continuous basis. a live testing environment where new products, processes, services, business models, etc. may be deployed on a limited set of eligible customers for a specified period of time, for furthering innovation in the securities market, subject to such conditions as may be specified by the Board .]

Merchant_Bankers_Apr17_2020

1 (1) These regulations may be called the Securities and Exchange Board of India (Merchant Bankers) Regulations, 1992.

1 (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, 1 and Imposing Penalty) Regulations, 2002 w.e.f., 27.09.2002. Prior to omission the clause read as under :(a) "enquiry officer" means any Officer of the Board , or any other person, having experience in dealing with theproblems relating to the securities market , who is authorised by the Board under Chapter V;2[(a) Act means the Securities and Exchange Board of India Act, 1992 (15 of1992);(aa) body corporate shall have the meaning assigned to it in or under clause (7) ofsection 2 of the Companies Act, 1956 (1 of 1956);(ab) certificate means a certificate of 3 registration issue d by the Board ;(ac) 4(ad) change in control, in relation to a merchant banker being a body corporate,means:(i) if its shares are listed on any recognised stock exchange, change in controlwithin the meaning of regulation 12 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations,1997;(ii) in any other case, change in the controlling interest in the body corporate .interest means an interest, whether direct or indirect, to the extent of at leastfifty one per cent of voting rights in the body corporate ;](b) form means a form specified in Schedule I;(c) inspecting authority means one or more persons appointed by the Board toexercise powers conferred under Chapter IV;5[(ca) issue means an offer of sale or purchase of securities by any bodycorporate, or by any other person or group of persons on its or his or theirbehalf, as the case may be, to or from the public, or the holders of securities ofsuch body corporate or person or group of persons through a merchant banker;(cb) merchant banker means any person who is engaged in the business of issue management either by making arrangements regarding selling, buying orsubscribing to securities or acting as manager, consultant, adviser or renderingcorporate advisory service in relation to such issue management;]2006, w.e.f., 7-9-2006.Conditions Of Registration Of Certain Intermediaries) (Amendment) Regulations, 2016

3 (1) An application by a person for grant of a certificate 11[of 12 registration] shall be made to the Board in Form A. 13[(1A) An application for registration made under sub-regulation (1) shall be accompanied by a non-refundable application fee as specified in Schedule II.]

3 (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 theissue, determining financial structure, tie up of financiers and final allotmentand refund of the subscriptions; 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;

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.

5 (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 :16[(a) the applicant shall be a body corporate other than a non-banking financialcompany as defined under clause (f) of section 45-I of the Reserve Bank ofIndia Act, 1934 (2 of 1934), as amended from time to time :w.e.f, 09.12.1997.Regulations, 2006 (Amendment) Regulations, 1997 w.e.f., 09.12.1997.17[Provided that the merchant banker who has been granted registration by theReserve Bank of India to act as a primary or satellite dealer may carry on suchactivity subject to the condition that it shall not accept or hold public deposit;]18[(aa)]the applicant has the necessary infrastructure like adequate officespace, equipments, and manpower to effectively discharge his activities;(b) the applicant has in his employment minimum of two persons who have theexperience to conduct the business of merchant banker;(c) a person directly or indirectly connected with the applicant has not been grantedregistration by the Board.indirectly connected means any person being an associate, subsidiary or inter -connected or group company of the applicant in case of the applicant being abody 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 anylitigation connected with the securities market which has an adverse bearing onthe business of the applicant ;(f) The applicant , his director, partner or principal officer has not at any time beenconvicted for any offence involving moral turpitude or has been found guilty ofany economic offence;(g) The applicant has the professional qualification from an institution recognised bythe Government in finance, law or business management;19[(gg) the applicant is a fit and proper person;]

6A For the purpose of determining whether an applicant or the merchant banker is a fit and proper person the Board may take into account the criteria specified in Schedule II of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008.] 21[Capital adequacy requirement.

7 The capital adequacy requirement referred to in clause (d) of regulation 6 shall be a net worth of not less than five crore rupees. up capital and free reserves of the applicant 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 of 24 registration in Form B and shall send an intimation to theapplicant.

8 (2) 25[ The certificate of registration granted under sub-regulation (1) shall be valid unless it is suspended or cancelled by the Board.]

8 (3) 26[The merchant banker who has already been granted certificate of registration by the Board , prior to the commencement of the Securities and Exchange Board of 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 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. *The figure "1, 00, 00, 000" in sub-regulation (2) of regulation 7 was 22 Substituted by the Securities and Exchange Board of India (Merchant Bankers) (Amendment) Regulations, 2011 w.e.f. 05-07-2011. Prior to the substitution the regulation 8 as amended by the Securities and Exchange Board of India (Merchant Bankers) Regulations, 1997 w.e.f. 09-12-1997, read as under: 8. Procedure for registration.(1) The Board , on being satisfied that the applicant is eligible, shall grant a certificate in Form B.

8 (2) and (3) ***Omitted.

8 (4) On the grant of a certificate the applicant shall be liable to pay the fees in accordance with Schedule II Registration Of Certain Intermediaries) (Amendment) Regulations, 2016 . Registration Of Certain Intermediaries) (Amendment) Regulations, 2016 . Intermediaries) (Amendment) Regulations, 2016 . Prior to substitution, sub-regulation (2) read as under: (2) The certificate of initial registration granted under sub-regulation (1) shall be valid for a period of five years from the date of its issue to the applicant . Intermediaries) (Amendment) Regulations, 2016 . Prior to substitution, sub-regulation (3) read as under: The merchant banker who has already been granted certificate of registration by the Board, prior to the commencement of the Securities and Exchange Board of India (Merchant Bankers) (Amendment) Regulations, 2011, and has not completed a period of three years, shall be deemed to have been granted a certificate of initial registration for a period of five years from the date of its certificate of registration, subject to payment of fee for the remaining period of two years, as prescribed in Schedule II of these regulations . The certificate of initial registration granted under sub-regulation (1) shall be valid for a period of five years from the date of its issue to the applicant . India (Change in Conditions of Registration of Certain Intermediaries) (Amendment) Regulations, 2016 shall be deemed to have been granted a certificate of registration, in terms of sub-regulation (1).

8 (4) On the grant of a certificate of 27 registration the merchant banker shall beliable to pay the fee in accordance with Schedule II of these regulations.]8A 289 29Registration Of Certain Intermediaries) (Amendment) Regulations, 2016 .Intermediaries) (Amendment) Regulations, 2016 . Prior to omission regulation 8A which was, read as under:8A. Grant of certificate of permanent registration.(1) The merchant banker who has been granted or deemed to have been granted a certificate of initialregistration under regulation 8, may, three months before the expiry of the period of certificate of initialregistration, make an application for grant of a certificate of permanent registration in Form A.

8 (2) The merchant banker who has already been granted a certificate of registration by the Board and hascompleted a period of five years, on the date of commencement of the Securities and Exchange Board of India(Merchant Bankers) ( Am endment) Regulations, 2011, may, three months before the expiry of validity ofcertificate of registration or before, make an application for grant of a certificate of permanent registration inForm A.

8 (3) An application under sub-regulation (1) or sub-regulation (2) shall be accompanied by a non-refundableapplication fee as specified in Schedule II of these regulations .

8 (4) The application for grant of a certificate of permanent registration shall be accompanied by details of thechanges that have taken place in the information that was submitted to the Board while seeking initialregistration or renewal, as the case may be, and a declaration stating that no changes other than those asmentioned in such details have taken place.

8 (5) The application for permanent registration made under sub-regulation (1) or (2) shall be dealt with in thesame manner as if it were a fresh application for grant of a certificate of initial registration.

8 (6) The Board , on being satisfied that the applicant is eligible, shall grant a certificate of permanent registrationin Form B and shall send an intimation to the applicant .

8 (7) On the grant of a certificate of permanent registration the merchant banker shall be liable to pay the fee inaccordance with Schedule II of these regulations.]Regulations, 2011 . Prior to omission, regulations 9 as amended by Securities and ExchangeBoard of India (Merchant Bankers) (Amendment) Regulations, 1997 w.e.f, 09.12.1997, Securities andExchange Board of India (Merchant Bankers) (Amendment) Regulations, 1998 w.e.f, 21-01-1998, Securitiesand Exchange Board of India (Merchant Bankers) (Third Amendment) Regulations, 2006 andSecurities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, , read as under:9. (1) Three months before the expiry of the period of certificate, the merchant banker may, if he so desires,make an application for renewal in Form A.(1A) An application for renewal made under sub-regulation (1) shall be accompanied by a non-refundableapplication fee as specified in Schedule II .(1B) The application for renewal under sub-regulation (1) shall be accompanied by details of the changes thathave taken place in the information that was submitted to the Board while seeking registration or earlier

9A (1) 31[Registration granted under regulation 8] shall be subject to the following conditions, namely:(a) where the merchant banker proposes 32[change in control], it shall obtain priorapproval of the Board for continuing to act as such after the change;(b) 33[it shall pay the fees for registration, in the manner provided in theseregulations;](c) it shall take adequate steps for redressal of grievances of the investors withinone month of the date of the receipt of the complaint and keep the Boardinformed about the number, nature and other particulars of the complaintsreceived;(d) it shall maintain capital adequacy requirements specified in regulation 7 at alltimes during the period of the 34;(e) it shall abide by the regulations made under the Act in respect of the activitiescarried on by it as merchant banker.renewal, as the case may be, and a declaration stating that no changes other than those as mentioned in suchdetails have taken place.

9A (2) The application of 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 : Provided that in the case of an application for renewal of certificate of registration, the provisions of clause (a) of regulation 6 shall not be applicable up to June 30, 1998.

9A (3) The Board on being satisfied that the applicant is eligible for renewal of certificate shall grant a certificate in Form B and sent an intimation to the applicant .

9B The certificate of registration granted under regulation 8 and its renewal granted under regulation 9, shall be valid for a period of three years from the date of its issue to the applicant . Intermediaries) (Amendment) Regulations, 2016 . Prior to substitution, sub-regulation (1) read as under: (1) Where an application for grant of a certificate 37[of initial registration under regulation 3 or of permanent registration under regulation 8A] does not satisfy the criteria set out in regulation 6, the Board may reject the application after giving an opportunity of being heard. Prior to this the words of initial registration under regulation 3 or of permanent registration under regulation Exchange Board of India (Merchant Bankers) (Amendment) Regulations, 2011 . Intermediaries) (Amendment) Regulations, 2016 . Prior to substitution, sub-regulation (s) read as under: (2) The refusal to grant 38[initial registration or permanent registration, as the case may be,] 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 . the word registration by the Securities and Exchange Board of India (Merchant Bankers) (Amendment) Regulations, 2011 . Intermediaries) (Amendment) Regulations, 2016 w.e.f. 08-12-2016. Prior to omission, the regulation was Any applicant , whose application for grant of a certificate of permanent registration has been refused by the Board , on and from the date of receipt of the communication, shall not carry on any activity as a merchant banker : Provided that the Board may, in the interest of investors in the securities market, permit the merchant banker to carry on activities undertaken prior to the receipt of the intimation of refusal subject to such condition as the Board may specify.]

10 37[(1) Where an application for grant of a certificate of registration under regulation 3 does not satisfy the criteria set out in regulation 6, the Board shall reject the application after giving an opportunity of being heard.]

10 (2) The refusal to grant registration, shall be communicated by the Board withinthirty days of such refusal to the applicant stating therein the grounds on which theapplication has been rejected .

10 (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 suchintimation to the Board for reconsideration of its decision.

10 (4) The Board shall reconsider an application made under sub-regulation (3) and

11 11. Effect of refusal to grant certificate of permanent registration. Intermediaries) (Amendment) Regulations, 2016 . Regulations, 2011 . Prior to the substitution the regulation read as under:

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. .Bankers) (Amendment) Regulations, 1997 .Notwithstanding anything contained above , a merchant banker who prior to the dateof notification of the Securities and Exchange Board of India (Merchant Bankers)Amendment Regulations, 1997, has entered into a contract in respect of a businessother than that of the securities market may, if he so desires, discharge hisobligations under such contract:43[Provided that a merchant banker who has been granted certificate of registrationto act as primary or satellite dealer by Reserve Bank of India, may carry on suchbusiness as may be permitted by the Reserve Bank of India.]44[Provided further that a merchant banker, who has been granted certificate ofregistration under these regulations, may ensure market making in accordance withChapter XA of the Securities and Exchange Board of India (Issue of Capital andDisclosure Requirements) Regulations, 2009](i) A bank shall mean a banking company as defined under section 5 of theBanking Regulation Act, 1949 (10 of 1949), and the corresponding new bankset up under the Banking Companies (Acquisition and Transfer of Undertaking)Act, 1970 (5 of 1970), and the Banking Companies (Acquisition and Transfer ofUndertaking) Act, 1980 (40 of 1980), State Bank of India Act, 1955 (23 of 1955)and State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959).(ii) A public financial institution shall have the same meaning as assigned to theterm under section 4A of the Companies Act, 1956 (1 of 1956) and shall includeIndustrial Development Corporations and Financial Corporations established bythe Central Government or State Governments , as the case may be.]

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.

12 (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

13 Every merchant banker shall abide by the Code of Conduct as specified in Schedule III. 40[Merchant banker not to associate with any business other than that of the

13A No merchant banker , other than a Bank or a 41Public Financial Institution, who has been granted a certificate of registration under these regulations shall 42[after June 30, 1998] carry on any business other than that in the securities market . substituted by the Securities and Exchange Board of India (Merchant Bankers) (Amendment) Regulations, 2011 and read as under: 11. Effect of refusal to grant certificate of permanent registration. Any applicant, whose application for grant of a certificate of permanent registration has been refused by the Board , on and from the date of receipt of the communication, shall not carry on any activity as a merchant banker: Provided that the Board may, in the interest of investors in the securities market , permit the merchant banker to carry on activities undertaken prior to the receipt of the intimation of refusal subject to such condition as the Board may specify. - Prior to substitution by the Securities and Exchange Board of India (Merchant Bankers) (Amendment) Regulations, 2011 , the regulation read as under:

14 (1) Every merchant banker shall keep and maintain the following books of account, records and documents namely :(a) a copy of balance sheet as at the end of the each accounting period;(b) a copy of profit and loss account for that period;(c) a copy of the auditors report on the accounts for that period45[;](d) a statement of financial position.46[(e) Records and documents pertaining to due diligence exercised in pre-issue andpost issue activities of issue management and in case of takeover, buybackand delisting of securities.](Amendment) Regulations, 1998

14 (2) Every merchant banker shall intimate to the Board the place where the books of account, records and documents are maintained .

14 (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

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 account 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 auditors report.

i. regulations sebi (stock brokers and sub-brokers) (amendment) regulations, 2011 w.e.f april 06, 2011 the amendment to sebi (stock brokers and sub-brokers) regulations, 2011 facilitates introduction of self-clearing members in the currency derivatives segment of an exchange.annual report 2011-12(change (change ii. sebi in conditions in conditions of registration of certain intermediaries) (amendment) regulations, 2011 w.e.f. april 19, 2011 sebi of registration of certain intermediaries) (amendment) regulations, 2011 were notified on april 19, 2011 whereby the existing requirements for obtaining prior approval was done away with, in case of change in status and constitution, for certain intermediaries such as stock broker and sub-broker, merchant banker, registrar to an issue and share transfer agent, underwriters, debenture trustee and credit rating agency. instead, it is provided that the prior approval will be required only in case where there is a change in control of those intermediaries. the term ‘change in control’ shall have the meaning as assigned to it under sebi takeover regulations. in case of depository participant, where there was no such provision, requirement for obtaining prior approval in case of change in control has been introduced. vide said notification, the following regulations were amended, to give the above effect: • sebi (stock brokers and sub-brokers) regulations, 1992 sebi (merchant bankers) regulations, 1992 sebi (registrars to an issue and share transfer agents) regulations, 1993 sebi (underwriters) regulations, 1993 sebi (debenture trustees) regulations, 1993 sebi (bankers to an issue) regulations, 1994 sebi (depositories and participants) regulations, 1996 sebi (credit regulations, 1999rating agencies) • • • • • • • iii. sebi (issue of capital and disclo- (amendment) sure requirements) regulations, 2011 w.e.f. april 29, 2011 the amendment deals with payment options in public issues and rights issues. it makes usage of the asba facility mandatory in the case of qualified institutional buyers and non-institutional investors. iv. sebi (foreign institutional investors) (amendment) regulations, 2011 w.e.f. may 02, 2011 a new sub-section was introduced by the said amendment to provide that in cases where the goi entered into agreements or treaties with other sovereign governments, and where such agreements or treaties specifically recognised certain entities to be distinct and separate, the board may recognise them as such, during the validity of such agreements or treaties.v. sebi (credit rating agencies) (amendment) regulations, 2011 w.e.f. july 05, 2011 as per existing regulations, the certificate of registration granted to credit rating agencies was required to be renewed after every three years from the date of original registration. in order to facilitate grant of certificate of permanent registration, the provisions of the regulations pertaining to credit rating agencies was amended. the amendment regulations provided that an initial certificate of registration will be granted for a period of five years thereafter grant of certificate of permanent registration will be considered by the board. fee schedule has also been modified accordingly. vi. sebi (registrar to an issue and share (amendment) transfer regulations, 2011 w.e.f. july 05, 2011 as per existing regulations, the certificate agents) 146of registration granted to registrar to an issue and share transfer agents (rti & stas) was required to be renewed after every three years from the date of original registration. in order to facilitate grant of certificate of permanent registration, the provisions of the regulations pertaining to rtis & stas were amended. the amendment regulations provided that an initial certificate of registration will be granted for a period of five years thereafter grant of certificate of permanent registration will be considered by the board. fee schedule has also been modified accordingly. vii. sebi (underwriters) (amendment) regulations, 2011 w.e.f. july 05, 2011 as per existing regulations, the certificate of registration granted to underwriters was required to be renewed after every three years from the date of original registration. in order to facilitate grant of certificate of permanent registration, the provisions of the regulations pertaining to underwriters were amended. the amendment regulations provided that an initial certificate of registration will be granted for a period of five years thereafter grant of certificate of permanent registration will be considered by the board. fee schedule has also been modified accordingly. viii. sebi trustees) (amendment) regulations, 2011 w.e.f. july 05, 2011 as per existing regulations, the certificate of registration granted to debenture trustees was required to be renewed after every three years from the date of original registration. in order to facilitate grant of certificate of permanent registration, the provisions of the regulations pertaining to debenture trustees were amended. the amendment regulations provided that an initial certificate of registration will be granted for a period of five years thereafter grant of certificate of (debenture part four: regulatory changespermanent registration will be considered by the board. fee schedule has also been modified accordingly. ix. sebi (merchant bankers) (amendment) regulations, 2011 w.e.f. july 05, 2011 as per existing regulations, the certificate of registration granted to merchant bankers was required to be renewed after every three years from the date of original registration. in order to facilitate grant of certificate of permanent registration, the provisions of the regulations pertaining to merchant bankers were amended. the amendment regulations provided that an initial certificate of registration will be granted for a period of five years thereafter grant of certificate of permanent registration will be considered by the board. fee schedule has also been modified accordingly. x. sebi issue) (amendment) regulations, 2011 w.e.f. july 05, 2011 as per existing regulations, the certificate of registration granted to bankers to an issue was required to be renewed after every three years from the date of original registration. in order to facilitate grant of certificate of permanent registration, the provisions of the regulations pertaining to bankers to an issue were amended. the amendment regulations provided that an initial certificate of registration will be granted for a period of five years thereafter grant of certificate of permanent registration will be considered by the board. fee schedule has also been modified accordingly.(bankers to an xi. sebi (depositories and participants) (amendment) regulations, 2011 w.e.f. july 05, 2011 as per existing regulations, the certificate to depository registration granted of 147annual report 2011-12participants was required to be renewed after every five years from the date of original registration. in order to facilitate grant of certificate of permanent registration, the provisions of sebi (depository participants) regulations, 1996 were amended. the amendment regulations provided that an initial certificate of registration will be granted for a period of five years thereafter grant of certificate of permanent registration will be considered by the board. fee schedule has also been modified accordingly.

18 Clause (a) to regulation 6 was renumbered as (aa) by the Securities and Exchange Board of India (Merchant Bankers) (Amendment) Regulations, 1997 w.e.f., 09.12.1997. (Amendment) Regulations, 1997 w.e.f., 09.12.1997w.e.f. 10-3-2004.21 Substituted by the Securities and Exchange Board of India (Merchant Bankers) (Third Amendment)Regulations, 2006. . Prior to the substitution the regulation (7) read as

19 The number of lead merchant bankers may not, exceed in case of any issue of Size of issue No. of Merchant Bankers(a)Rupees(b)two(c) Rupees(d) Rupeesfour(e) Above Rupees four hundred crores five or more as may be agreed by the boardbutcrorescroresTwoThreeFourFivehundredhundredhundredhundredlessbutbutrupeesrupeesthanrupeesonehundredcroreslesslessthanthanLessthancrorescroresrupeesfiftycroresfiftycroresonetwosuch responsibilities is furnished to the Board at least one month before the openingof 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 bankers shall clearly bedemarcated and a statement specifying such responsibilities shall be furnished tothe Board at least one month before the opening of the issue for subscription.

19 (2) Lead merchant banker not to associate with a merchant banker without

iv. sebi (merchant bankers) (amendment)regulations, 2006the sebi (merchant bankers) regulations, 1992 were further amended by the captioned amendment regulations on april 19, 2006 vide s.o. no. 560(e). by this amendment, existing regulation 19, which laid down limits on the maximum number of lead merchant banker to be appointed in case of any issue, was omitted.

20 (1) No lead manager shall agree to manage or be associated with any issue unless his responsibilities relating to issue mainly, those of disclosures, allotment and refund are clearly defined, allocated and determined and a statement specifying Regulations, 2009, w. e. f., 26-08-2009. 48 Omitted vide Securities and Exchange Board of India (Merchant Bankers) (Amendment) Regulations, 2006.w.e.f. 18-4-2006. Before the omission, regulation 19 read as under :

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 .

21A (1) A merchant banker shall not lead manage any issue or be associated with any activity undertaken under any regulations made by the Board, 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 in terms of any regulations made by the Board: Provided that a merchant banker who is an associate of such issuer or person may be appointed, if he is involved only in the marketing of the issue or offer. deemed to be an associate of the issuer or person if:(i) either of them controls, directly or indirectly through its subsidiary or holdingcompany, not less than fifteen per cent. of the voting rights in the other; or(ii) either of them, directly or indirectly, by itself or in combination with otherpersons, exercises control over the other; or(iii) there is a common director , excluding nominee director , amongst the issuer , itssubsidiary or holding company and the merchant banker.]

22 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 per cent 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 . Regulations, 2009, w. e. f., 26-08-2009. Regulations, 2009, w. e. f., 26-08-2009. 51[Provided further that in any issue made in accordance with Chapter XA of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 the merchant banker shall, itself or jointly with other merchant bankers associated with the issue, underwrite at least fifteen per cent of the issue size.]

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 (1)] 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 abearing on the certificate granted to it;(iii) the names of the body corporate whose issues he has managed or has beenassociated with;(iv) the particulars relating to the breach of the capital adequacy requirement asspecified in regulation 7;(v) relating to his activities as a manager, underwriter, consultant or adviser to anissue, as the case may be.58[{(2) The merchant banker shall submit a periodic report in such manner as may bespecified by the Board from time to time}]

28A (1) Every merchant banker shall appoint a compliance officer who shall be responsible for monitoring the compliance of the Act, rules and regulations, notifications, guidelines, instructions, etc., issued by the Board or the Central Government and for redressal of investors grievances.

28A (2) The compliance officer shall immediately and independently report to the Board any non-compliance observed by him and ensure that the observations made or deficiencies pointed out by the Board on/in the draft prospectus or the letter of offer

29 (1) The Board may appoint one or more persons as inspecting authority to undertake inspection of the books of account, records and documents of the merchant banker for any of the purposes specified in sub-regulation (2). Regulations, 2009, w. e. f., 26-08-2009. 58 Substituted by the Securities and Exchange Board of India (Merchant Bankers) (Amendment) Regulations, of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, w. e. f., 26-08-2009, read as under : The merchant banker shall submit a half yearly report for the period ending with 31st March and 30th September of every year, in the format specified in schedule IV, within three months from the close of the period to which it corresponds. Regulations, 2001, w.e.f., 29-5-2001.

29 (2) The purposes referred to in sub-regulation (1) may be as follows namely :(a) to ensure that the books of account are being maintained in the mannerrequired;(b) that the provisions of the Act, rules , regulations are being complied with;(c) to investigate into the complaints received from investors, other merchantbankers or any other person on any matter having a bearing on the activities ofthe merchant banker; and(d) to investigate suo motu in the interest of securities business or investors interestinto the affairs of the merchant banker.

30 (1) Before undertaking an inspection under regulation 28 the Board shall give a reasonable notice to the merchant banker for that purpose.

30 (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.

30 (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.

31 (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 theinspection.

31 (3) The inspecting authority , in the course of inspection, shall be entitled to examine or record statement of any principal officer, director , partner, proprietor and employee of the merchant banker.

31 (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

32 The inspecting authority shall, as soon as may be possible submit, an inspection report to the Board.

33 The Board or the Chairman shall after consideration of inspection or investi- gation report take such action as the Board or Chairman may deem fit and appropriate including action under 61[ Chapter V of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008]].

34 The Board may appoint a qualified auditor to investigate into the books of account or the affairs of the merchant bankers: 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. shall have the same meaning as given in section 226 of the Companies Act, 1956 (1

35 A merchant banker who contravenes any of the provisions of the Act, Rules or Regulations framed thereunder shall be liable for one or more actions specified 60 Substituted by the Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 w.e.f.,27.09.2002. Prior to the substitution the regulation read as under: Communication of findings etc. to the merchant banker 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 .

35 (2) On receipt of the explanation if any, from the merchant banker, the Board may call upon the merchantbanker to take such measures as the Board may deem fit in the interest of the securities market and for duecompliance with the provisions of the Act, rules and regulations.Officer and Imposing Penalty) Regulations, 2002 by the Securities and Exchange Board of India(Intermediaries) Regulations, 2008, w.e.f, 26-5-2008.

33 Action on inspection or investigation report The Board or the Chairman shall after consideration of inspection or investigation report take action as the Board or Chairman may deem fit and appropriate including action under the Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002. Prior to the above substitution the regulation read as under: 33. Communication of findings etc. to the merchant banker etc.-(1) The Board shall after consideration of the inspection report communicate the findings to the merchantbanker to give him an opportunity of being heard before any action is taken by the Board on the findings ofthe inspecting authority .

33 (2) On receipt of the explanation if any, from the merchant banker, the Board may call upon the merchantbanker to take such measures as the Board amy deem fit in the interest of the securities market and for duecompliance with the provisions of the Act, rules and regulations.therein including the action under Chapter V of the Securities and Exchange Board

44 (1) The Board may, exempt any person or class of persons from the operation of all or any of the provisions of these regulations for a period as may be specified but not exceeding twelve months, for furthering innovation in technological aspects relating to testing new products, processes, services, business models, etc. in live environment of regulatory sandbox in the securities markets .

44 (2) Any exemption granted by the Board under sub-regulation (1) shall be subject to the applicant satisfying such conditions as may be specified by the Board including conditions to be complied with on a continuous basis. a live testing environment where new products, processes, services, business models, etc. may be deployed on a limited set of eligible customers for a specified period of time, for furthering innovation in the securities market, subject to such conditions as may be specified by the Board .]