| Underwriters_Apr17_2020 |
| 25 Liability for action in case of default. |
| 1 (1) These regulations may be called the Securities and Exchange Board of India (Underwriters) Regulations, 1993. |
| 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[(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)of section 2 of the Companies Act, 1956 (1 of 1956);(ab) “certificate” means a certificate of 2[***] registration issued by the Board;(ac) 3[***]Conditions Of Registration Of Certain Intermediaries) (Amendment) Regulations, 2016 w.e.f. 08-12-2016.Regulations, 2011, w.e.f. 5-7-2011.Regulations, 2011, w.e.f. 19-4-2011. Prior to omission, it read as under:4[(ad) “(ad) “change in control” –(i) in case of a body corporate –(A) if its shares are listed on any recognised stock exchange, shall beconstrued with reference to the definition of control in terms ofregulations framed under clause (h) of sub-section (2) of section 11of the Act;(B) in any other case, shall be construed as change in the controllinginterest in the body corporate;“controlling interest” means an interest, whether direct or indirect, to the extent ofat least fifty-one percent of voting rights in the body corporate;(ii) in a case other than that of a body corporate, shall be construed as anychange in its legal formation or ownership.]5[(ca) ‘issue’ means an offer of sale of securities by any body corporate or byany other person or group of persons on its or his or their behalf, as the casemay be, to the public, or, the holders of securities of such body corporate orperson or group of persons;](i)(A)(iii)in case of a partnership firm any change in partners not amounting to dissolution of the(B)(C)(ii)“change of status or constitution” in relation to an underwriter means any change in its status orconstitution of whatsoever nature and includes—in case of a body corporate—amalgamation, demerger, consolidation or any other kind of corporate restructuringfalling within the scope of section 391 of the Companies Act, 1956 (1 of 1956) or the correspondingprovision of any other law for the time being in force;change in its managing director or whole-time director; andany change in control over the body corporate;any change between the following legal forms - individual, partnership firm, Hinduundivided family, private company, public company, unlimited company or statutory corporation and othersimilar changes;firm;4 Substituted by the SEBI(Change in Conditions of Registration of Certain Intermediaries) (Amendment)Regulations, 2011, w.e.f. 19-4-2011. Prior to substitution, it read as under:“change in control”, in relation to an underwriter being a body corporate, means :—if its shares are listed on any recognised stock exchange, change in control within themeaning of regulation 12 of the Securities and Exchange Board of India (Substantial Acquisition of Sharesand Takeovers) Regulations, 1997;in any other case, change in the controlling interest in the body corporate.means an interest, whether direct or indirect, to the extent of at least fifty-one per cent of voting rights inthe body corporate;]powers conferred under Chapter IV;“form” means a form specified in Schedule I;“inspecting authority” means one or more person appointed by the Board to exercise(i)(ii)(b)(c)(d) “principal officer” means,—(i) in relation to a proprietary concern, the proprietor himself;(ii) in relation to a firm or an association of persons or any body ofindividuals or a body corporate, a secretary, treasurer, partner, manageror director of the firm, association or body corporate;(iii) any person connected with the management or administration of thefirm, association or the body corporate upon whom the Board hasserved a notice of its intention of treating him as the principal officerthereof;(e) “regulations” meansthe Securities and Exchange Board ofIndia(Underwriters) Regulations, 1993;6[(f) “underwriter” means a person who engages in the business of underwritingof an issue of securities of a body corporate;(fa) “underwriting” means an agreement with or without conditions to subscribeto the securities of a body corporate when the existing shareholders of suchbody corporate or the public do not subscribe to the securities offered tothem;](g) all other words and expressions used in these regulations but not defined, |
| 3 (1) No person shall act as underwriter unless he holds a certificate granted by the Board under these regulations. |
| 3 (2) Notwithstanding anything contained in sub-regulation (1), every stock broker or merchant banker holding a valid certificate of registration under section 12 of the Act, shall be entitled to act as an underwriter without obtaining a separate certificate under these regulations. |
| 3 (3) A stock broker or merchant banker acting as an underwriter under sub- regulation (2) shall be governed by these regulations in other respects.] Application for grant of certificate 10[of 11[***] registration]. 6 Substituted, ibid. Prior to substitution, it read as under: “(f) “rules” means Securities and Exchange Board of India(Underwriters) Rules. 1993” 7-9-2006. |
| 3A 3A. ] (1) An application by an underwriter for grant of a certificate 13[of 14[***] registration] shall be made to the Board in Form A. 15[(1A) An application for registration made under sub-regulation (1) shall be accompanied by a non-refundable application fee as specified in Schedule II.](2) Notwithstanding anything contained in sub-regulation (1), any applicationmade by an underwriter prior to the coming into force of these regulationscontaining such particulars or as near thereto as mentioned in Form A shall betreated as an application made in pursuance of sub-regulation (1) and dealt withaccordingly. |
| 4 (1) The Board may require the applicant to furnish further information or clarification regarding matters relevant to underwriting to consider the application for grant of a certificate. 16[(2) If the Board, on receipt of further information, is of the opinion that the information so furnished is not sufficient to decide on the application and seeking further information through correspondence is likely to delay the matter, it may require the applicant or its principal officer to appear before the Board in order to give an opportunity to the applicant to give further clarifications on the application made under 17[regulation 3A].] |
| 5 Subject to the provisions of 18[sub-regulation (2) of regulation 3A], 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 19[one month] such objections as may be indicated by the Board : Registration Of Certain Intermediaries) (Amendment) Regulations, 2016 w.e.f. 08-12-2016. 12 Regulation ‘3’ renumbered as ‘3A’, ibid. Registration Of Certain Intermediaries) (Amendment) Regulations, 2016 w.e.f. 08-12-2016. 16 Substituted by SEBI (Underwriters) (Amendment) Regulations, 1997, w.e.f. 17-01-1997. Prior to substitution, it read as under: “The applicant or, its principal officer shall, if so required, appear before the Board for personalrepresentation.”7-9-2006.Regulations, 2006, w.e.f. 7-9-2006.1997, w.e.f. 17-01-1997.20[Provided further that the Board may, on sufficient reasons being shown ,extend the time by another one month in order to enable the applicant to complywith the requirements of the Board.] |
| 6 The Board shall take into account for considering the grant of a certificate, all matters which are relevant to or relating to underwriting and in particular the following, namely, whether the applicant—(a) has the necessary infrastructure, like adequate office space, equipmentsand manpower to effectively discharge his activities;(b) has any past experience in the underwriting or has in his employmentminimum two persons who had the experience in underwriting;(c) or any person, directly or indirectly connected with the applicant has notbeen granted registration by the Board under the Act.account whether a previous application for a certificate of any person directlyor indirectly connected with the applicant has been rejected by the Board orany disciplinary action has been taken against such person under the Act orany of the rules or any of the regulations made under the Act;](d) fulfils the capital adequacy requirements specified in regulation 7;(e) or any of its director, partner or principal officer is or has at any time beenconvicted for any offence involving moral turpitude or has been found guiltyof any economic offence;22[(f) is a fit and proper person.] |
| 6A For the purpose of determining whether an applicant or the underwriter 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.] Capital adequacy requirement. 20 Inserted, ibid. 21 Inserted, ibid. 23 Substituted by the SEBI (Intermediaries) Regulations, 2008, w.e.f. 26-05-2008. Prior to substitution, 2004, read as under: “6A. Applicability of Securities and Exchange Board of India (Criteria for Fit and Proper Person) Regulations, 2004.- The Provisions of the Securities and Exchange Board of India (Criteria for Fit and Proper Person) Regulations, 2004 shall, as far as may be, apply to all applicant s or underwriters under these |
| 7 (1) The capital adequacy requirement referred to in sub-regulation (d) of regulation 6 shall not be less than the net worth of rupees twenty lakhs. 24[(2) Notwithstanding anything contained in sub-regulation (1), every stock- broker, who acts as an underwriter shall fulfil the capital adequacy requirements specified by the stock exchange of which he is a member.](a) in the case of an applicant being a proprietary concern or a firm or anassociation of persons or any body of individuals, the value of capitalcontributed to such business by the applicant and the free reserves of anykind belonging to the business of the applicant ; and(b) in the case of a body corporate , the value of the paid-up capital and the freereserves as disclosed in the books of account of the applicant at the time ofmaking the application under sub-regulation (1) of regulation 3.25[ 8 . Grant of certificate of 26[***] registration.(1) The Board, on being satisfied that the applicant is eligible, shall send anintimation to the applicant , within one month of such satisfaction, mentioning thatit has been found eligible for grant of certificate of 27[***] registration and grant acertificate in Form B.(2) 28[The certificate of registration granted under sub-regulation (1) shall be validunless it is suspended or cancelled by the Board.](3) 29[The underwriter who has already been granted certificate of registration bythe Board, prior to the commencement of the Securities and Exchange Board ofIndiaIntermediaries)in Conditions of Registration of Certain(Change25 Substituted by the SEBI (Underwriters) (Amendment) Regulations, 2011, w.e.f. 5-7-2011. Prior tosubstitution, it read as under: |
| 8 The Board on being satisfied that the applicant is eligible, shall send an intimation within one month of the such satisfaction to the applicant mentioning that he has been found eligible for the grant of certificate and grant a certificate in Form B subject to payment of fees as specified in regulation 12.” Registration Of Certain Intermediaries) (Amendment) Regulations, 2016 w.e.f. 08-12-2016. Registration Of Certain Intermediaries) (Amendment) Regulations, 2016 w.e.f. 08-12-2016. 28 Substituted by the Securities and Exchange Board of India (Change In Conditions Of Registration Of Certain Intermediaries) (Amendment) Regulations, 2016 w.e.f. 08-12-2016. 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 .” 29 Substituted by the Securities and Exchange Board of India (Change In Conditions Of Registration Of Certain Intermediaries) (Amendment) Regulations, 2016 w.e.f. 08-12-2016. Prior to substitution sub- regulation (3) read as under: “(3) The underwriter who has already been granted a certificate of registration by the Board, prior to the commencement of the Securities and Exchange Board of India (Underwriters) (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 under Schedule II of these regulations .” (Amendment) Regulations, 2016 shall be deemed to have been granted a certificate of registration, in terms of sub-regulation (1).](4) The grant of certificate of 30[***] registration shall be subject to payment of |
| 9 (1) An underwriter may, if he so desires, make an application in Form A for renewal of certificate before three months of the expiry of the period of certificate. (1A) An application for renewal made under sub-regulation (1) shall be accompanied by a non-refundable application fee as specified in Schedule II. |
| 9 (2) The application for renewal of certificate under sub-regulation (1) shall be dealt with in the same |
| 9A (1) 34[Registration granted under regulation 8] shall be subject to the following conditions, namely:—(a) where the underwriter proposes 35[change in control], it shall obtain priorapproval of the Board for continuing to act as such after the change;(b) it shall enter into a valid agreement with the body corporate on whose behalfit is acting as underwriter;(c) 36[it shall pay the fees for registration, in the manner provided in theseregulations;](d) it shall maintain capital adequacy requirements specified in regulation 7 at alltimes during the period of the 37[***];(e) it shall abide by the regulations made under the Act in respect of theactivities carried on by it as underwriter;38[(f) (f) it shall immediately intimate the Board, details of changes that havethat was submitted, while seekinginformationtaken placeregistration.]inthe |
| 9A (2) Nothing contained in clause (a) of sub-regulation (1) shall affect the obligation to obtain a fresh registration under section 12 of the Act in cases where it isapplicable.9B 39[***]registration granted under regulation 8A” by the Securities and Exchange Board of India (Change InConditions Of Registration Of Certain Intermediaries) (Amendment) Regulations, 2016 w.e.f. 08-12-2016.(Underwriters) (Amendment) Regulations, 2011, w.e.f. 5-7-2011.Registration of Certain Intermediaries) (Amendment) Regulations, 2011, w.e.f. 19-4-2011.36 Substituted by the Securities and Exchange Board of India (Change In Conditions Of Registration OfCertain Intermediaries) (Amendment) Regulations, 2016 w.e.f. 08-12-2016. Prior to this clause (c) read asunder:“(c) it shall pay the fees for 36[initial registration or permanent registration], as the case may be, in themanner provided in these regulations;”““registration or renewal” by the SEBI (Underwriters) (Amendment) Regulations, 2011, w.e.f. 5-7-2011.”In Conditions Of Registration Of Certain Intermediaries) (Amendment) Regulations, 2016 w.e.f. 08-12-thereof” by the SEBI (Underwriters) (Amendment) Regulations, 2011, w.e.f. 5-7-2011.Certain Intermediaries) (Amendment) Regulations, 2016 w.e.f. 08-12-2016. |
| 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 .” |
| 10 40[ (1) Where an application for grant of a certificate of registration under regulation 3A does not fulfil the requirements set out in regulation 6, the Board shall reject the application after giving an opportunity of being heard.]41[(2) The decision shall be communicated by the Board within thirty days of suchdecision stating therein the grounds on which the application has been rejected.](3) Any applicant may, being aggrieved by the decision of the Board under sub-regulation (2), apply within a period of thirty days from the date of receipt of suchintimation, to the Board for reconsideration of its decision.(4) On receipt of the application made under sub-regulation (3), the Board shallreconsider its decision and communicate its findings thereon as soon as possible |
| 11 Any underwriter whose application for grant or renewal of 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 act as an underwriter: Provided that if the Board is satisfied that it is in the interest of the investors , it may permit the underwriter to undertake the underwriting commitments already entered into by him during the validity period of the |
| 12 43[“(1) Every applicant eligible for grant of registration, shall pay the fees in such manner and within the period specified in Schedule II:] 44[***] Provided 45[***] that a stock broker 46[***], who has been granted a certificate under section 12 of the Act and pays fees under the Securities and Exchange Board of India (Stock Brokers and Sub-brokers) Regulations, 1992 47[***], shall not be required to pay fees under sub-regulation (1).(2) Where an underwriter fails to pay the fees as provided in sub-regulation (1),the Board may suspend the certificate, whereupon the underwriter shall forthwith |
| 13 Every underwriter shall at all times abide by the Code of Conduct as specified in Schedule III. |
| 14 Every underwriter shall enter into an agreement referred to in 48[clause (b) of sub-regulation (1) of regulation 9A] with each body corporate on whose behalf he is acting as underwriter and the said agreement shall, amongst other things, provide for the following, namely :—(i) the period for which the agreement shall be in force;43 Substituted by the Securities and Exchange Board of India (Change In Conditions Of Registration OfCertain Intermediaries) (Amendment) Regulations, 2016 w.e.f. 08-12-2016. Prior to substitution, sub-regulation (1) read as under:“(1) Every applicant eligible for grant 43[of initial or permanent registration, as the case may be,] shall payfees in such manner and within the period specified in Schedule II:”words “or renewal of a certificate”, by the SEBI (Underwriters) (Amendment) Regulations, 2011, w.e.f. 5-7-2011omission, it read as under:“ Provided that the Board may on sufficient cause being shown permit the underwriter to pay such fees atany time before the expiry of six months from the date on which such fees become due.”45 Word ‘further’ omitted, ibid.46 Words “or a merchant banker” omitted by the SEBI (Underwriters) (Amendment) Regulations, 2002,w.e.f. 10-12-2002.47 Words “or the Securities and Exchange Board of India (Merchant Bankers) Regulations, 1992” omitted,ibid.(Amendment) Regulations, 2006, w.e.f. 7-09-2006.49[(ia) the allocation of duties and responsibilities between the underwriter andthe client;](ii) the amount of underwriting obligations;(iii) the period, within which the underwriter has to subscribe to the issue afterbeing intimated by or on behalf of such body corporate ; |
| 15 (1) The underwriter shall not derive any direct or indirect benefit from underwriting the issue other than the commission or brokerage payable under an agreement for underwriting. |
| 15 (2) The total underwriting obligations under all the agreements referred to in clause (b) of rule 4 shall not exceed twenty times the net worth referred to in regulation 7. |
| 15 (3) Every underwriter, in the event of being called upon to subscribe for securities of a body corporate pursuant to an agreement referred to in 50[clause (b) of sub- regulation (1) of regulation 9A] shall subscribe to such securities within 45 days of the receipt of such intimation from such body corporate . |
| 16 (1) Subject to the provisions of any other law, every underwriter shall keep and maintain the following books of account and documents, namely:—(a) in relation to underwriter being a body corporate—(i) a copy of the balance sheet and profit and loss account as specified insections 211 and 212 of the Companies Act, 1956 (1 of 1956);(ii) a copy of the auditor’s report referred to in section 227 of theCompanies Act, 1956 (1 of 1956);(b) in relation to an underwriter not being a body corporate—(i) records in respect of all sums of money received and expended by themand the matters in respect of which the receipt and expenditure takeplace; and(ii) their assets and liabilities. |
| 16 (2) Without prejudice to sub-regulation (1), every underwriter shall, after the close of each financial year as soon as possible but not later than six months from the close of the said period furnish to the Board, if so required, copies of the balance sheet, profit and loss account, statement of capital adequacy requirement and such other documents as may be required by the Board under regulation 16. |
| 16 (3) Every underwriter shall also maintain the following records with respect to— 49 Inserted, ibid. (Amendment) Regulations, 2006, w.e.f., 7-09-2006.(i) details of all agreements referred to in 51[clause (b) of sub-regulation (1) ofregulation 9A] ;(ii) total amount of securities of each body corporate subscribed to in pursuanceof an agreement referred to in 52[clause (b) of sub-regulation (1) of regulation9A];(iii) statement of capital adequacy requirements as specified in regulation 7;(iv) such other records as may be specified by the Board for underwriting. |
| 17 Every underwriter shall preserve the books of account and other records and documents mentioned under this chapter for a minimum period of five years. |
| 17A (1) Every underwriter 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. |
| 17A (2) The compliance officer shall immediately and independently report to the Board any non-compliance observed by him.] |
| 18 (1) The Board may at any time call for any information from an underwriter with respect to any matter relating to underwriting business. |
| 18 (2) Where any information is called for under sub-regulation (1) it shall be the |
| 19 (1) Where it appears to the Board so to do, it may appoint one or more persons as inspecting authority to undertake the inspection of the books of account, other records and documents of the underwriter for any of the purposes specified in sub-regulation (2). |
| 19 (2) The purposes referred to in sub-regulation (1) shall be as follows, namely :— 52 ibid. 05-2001.(a) to ensure that the books of account and other records and documents arebeing maintained in the manner required;(b) that the provisions of the Act, rules and regulations are being complied with;(c) to investigate into the complaints received from investors, other underwritersor any other person or any matter having a bearing on the activities of theunderwriter; and(d) to investigate suo motu in the interest of securities business or investors’interest into the affairs of the underwriter. |
| 20 (1) Before undertaking an inspection under regulation 19, the Board shall give a reasonable notice to the underwriter, for that purpose. |
| 20 (2) Notwithstanding anything contained in sub-regulation (1), where the Board is satisfied that in the interest of the investors or in the public interest no such notice should be given, it may by an order in writing direct that the inspection of the affairs of the underwriter be taken up without such notice. |
| 20 (3) On being empowered by the Board, the inspecting authority shall undertake the inspection and the underwriter against whom an inspection is being carried out shall be bound to discharge his obligations as provided under regulation 21. |
| 21 (1) It shall be the duty of every director, proprietor, partner, officer and employee of the underwriter 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 an underwriter within such time as the inspecting authority may require. |
| 21 (2) The underwriter shall allow the inspecting authority to have a reasonable access to the premises occupied by such underwriter 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 underwriter or any such other person on their behalf and also provide copies of documents or other materials which in the opinion of the inspecting authority are relevant for the purposes of the inspection. |
| 21 (3) The inspecting authority shall in the course of inspection, be entitled to examine or record statements of any principal officer, director, partner, proprietor and employee. |
| 21 (4) It shall be the duty of every director, proprietor, partner, officer or employee of the underwriter to give to the inspecting authority all assistance in connection with the inspection which the underwriter may reasonably be expected to give. |
| 22 The inspecting authority shall, as soon as may be possible, submit an inspection report to the Board. |
| 23 The Board or the Chairman shall after consideration of inspection or investigation report take such action as the Board or Chairman may deem fit and appropriate including action under 55[Chapter V of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008. ]] |
| 24 Notwithstanding anything contained above the Board may appoint a qualified auditor to investigate into the books of account or the affairs of the underwriter: Provided that the auditor so appointed shall have the same powers of the inspecting authority as stated in regulation 19 and the obligation of the underwriter and his employees in regulation 21 shall be applicable to the investigation under this regulation. auditor” shall have the same meaning as given to it in section 226 of the |
| 25 An underwriter who contravenes any of the provisions of the Act, Rules or Regulations framed thereunder shall be liable for one or more actions specified therein including the action under Chapter V of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008.] 54 Substituted by the SEBI (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002, w.e.f. 27-9-2002. Prior to substitution, it read as under: “Communication of findings etc. to underwriter.-(1) The Board shall after consideration of the inspection report communicate the findings to the underwriter to give him an opportunity of being heard before any action is taken by the Board on the findings of the inspecting authority . (2) On receipt of the explanation, if any, from the underwriter, the Board may call upon the underwriter to take such measures as the Board may deem fit in the interest of the securities market and for the due compliance with the provisions of the Act, rules and regulations.” by Enquiry Officer and Imposing Penalty) Regulations, 2002” by the SEBI (Intermediaries) Regulations, 2008, w.e.f. 26-05-2008. 56 Substituted by the SEBI (Intermediaries) Regulations, 2008, w.e.f. 26-05-2008. Prior to substitution, Penalty) Regulations, 2002, w.e.f. 27-9-2002 and amended by SEBI(Underwrites) Amendment) Regulations, 1997, w.e.f.17-1-1997 read as under: “Liability for action in case of default-An underwriter or a stock broker or a merchant banker entitled to carry on business of underwriting who-(a) fails to comply with any conditions subject to which certificate has been granted;(b) contravenes any of the provisions of the Act, rules or regulations, shall be dealt with in the manner provided under the Securities and Exchange Board of India(Procedure for |
| 33 (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 securitiesmarkets. |
| 33 (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. means a live testing environment where new products, processes, services, business models, etc. may be deployed on a limited set of eligible customers for |