PRIMARY MARKET

INTERMEDIARIES
Firm or person (such as a broker or consultant) who acts as a
mediator on a link between parties to a business deal, investment
decision, negotiation, etc. In money markets, for example, banks act
as intermediaries between depositors seeking interest income and
borrowers seeking debt capital. Intermediaries usually specialize in
specific areas, and serve as a conduit for market and other types of
information. Also called a middleman.

MAJOR INTERMEDIARIES
ARE:
Merchant
Bankers/Lead
Managers

Underwriters

Bankers to
an issue

Registrars to
an issue

Share
Transfer
Agents

Debenture
Trustees

Brokers to an
issue

Portfolio
Managers

INDIAN LAWS
GOVERNING SECURITIES
MARKET INTERMEDIARIES
Today, intermediaries continue to be governed by the specific
regulations governing each category of intermediaries, which inter
alia include:
The SEBI (Stock Brokers and Sub- brokers) Regulations, 1992;
The SEBI (Depositories and Participants) Regulations, 1996;
The SEBI (Bankers to an Issue) Regulations, 1994; the SEBI
(Merchant Bankers) Regulations, 1992;
The SEBI (Portfolio Managers) Regulations, 1993;
The SEBI (Registrar to an Issue and Share Transfer Agents)
Regulations, 1993;
The SEBI (Underwriters) Regulations, 1993.

MERCHANT BANKERS
Merchant bankers play an important role in issue management process.
Lead managers (category I merchant bankers) have to ensure
correctness of the information furnished in the offer document. They
have to ensure compliance with SEBI rules and regulations as also
Guidelines for Disclosures and Investor Protection. To this effect, they
are required to submit to SEBI a due diligence certificate confirming that
the disclosures made in the draft prospectus or letter of offer are true,
fair and adequate to enable the prospective investors to make a well
informed investment decision. The role of merchant bankers in
performing their due diligence functions has become even more
important with the strengthening of disclosure requirements and with
SEBI giving up the vetting of prospectuses. SEBI's various operational
guidelines issued during the year to merchant bankers primarily
addressed the need to enhance the standard of disclosures.

UNDERWRITERS
Underwriters

are required to register with SEBI in terms of the SEBI

(Underwriters) Rules and Regulations, 1993. In addition to underwriters
registered with SEBI in terms of these regulations, all registered merchant
bankers in categories I, II and III and stockbrokers and mutual funds registered
with SEBI can function as underwriters. Part III gives further details of
registration of underwriters. In 1996-97, the SEBI (Underwriters) Regulations,
1993 were amended mainly pertaining to some procedural matters.
Forms of Underwriting:
Full

Underwriting
Partial Underwriting
Joint Underwriting
Syndicate Underwriting
Firm Underwriting
Sub Underwriting
Ouright Purchases of Issues

BANKERS TO AN
Scheduled banks acting asISSUE
bankers to an issue are required to be
registered with SEBI in terms of the SEBI (Bankers to the Issue)
Rules and Regulations, 1994. These regulations lay down eligibility
criteria for bankers to an issue and require registrants to meet
periodic reporting requirements. Part III gives further details of
registration of bankers to an issue.

REGISTRARS TO AN ISSUE
AND SHARE TRANSFER
Registrars to an issue (RTI)AGENTS
and share transfer agents (STA) are registered
with SEBI in terms of the SEBI (Registrar to the Issue and Share Transfer
Agent) Rules and Regulations, 1993. Under these regulations, registration
commenced in 1993-94 and is granted under two categories: category I - to
act as both registrar to the issue and share transfer agent and category II to act as either registrar to an issue or share transfer agent. With the setting
up of the depository and the expansion of the network of depositories, the
traditional work of registrars is likely to undergo a change.
The Capital Adequacy norms Prescribed by the regulation are:
Category I - Rs. 600,000
Category II - Rs. 300,000

DEBENTURE
TRUSTEES

A debenture trustee means a trustee of a trust deed for securing any issue of
debentures of a body corporate. To act as debenture trustee, the entity should
either be a scheduled bank carrying on commercial activity, a public financial
institution, an insurance company, or a body corporate. The entity should be
registered with SEBI to act as a debenture trustee.
Only the following Categories of persons are eligible to act as debenture
trustees:
i) A schedules bank carrying a commercial activity.
ii) A public financial institution within the meaning of section 4A of the
companies act
iii) An insurance company.
iv) A body corporate.
Fees for the initial as well as permanent registration is to be paid by the
applicant. The break-up of fee is given:
Type

Fees prescribed in
Debenture Trustee
Regulations

Tenure (years

Initial Registration

20,00,000/-

Permanent Registration

9,00,000/-

After completion of initial

period of 5 years

BROKERS TO AN
Brokers are persons who procure
subscriptions to issue from
ISSUE
prospective investors spread over large area. A company can provide
as many number of brokers as it wants. Members are prohibited to act
as mangers or brokers to issue by SEBI regulations unless the stock
exchange of which they are members give its approval and company
complies with the listing requirements and undertakes to have its
securities listed on a recognised stock exchange.

PORTFOLIO
Portfolio managers are
required to register with SEBI in terms of the
MANAGERS
SEBI (Portfolio Managers) Rules and Regulations, 1993. The
registered portfolio managers exclusively carry on portfolio
management activities. In addition all merchant bankers in categories
I and II can act as portfolio managers with prior permission from SEBI.
Part III gives further details of the registration of portfolio managers.

INSIDER TRADING
Insider trading is the buying or selling of a security by someone who
has access to material nonpublic information about the security.
Insider trading can be illegal or legal depending on when
the insider makes the trade. It is illegal when the material information
is still nonpublic; trading while having special knowledge is unfair to
other investors who don't have access to such knowledge.

1)
2)
3)
4)
5)
6)
7)
8)
9)
10)

PROHIBITION OF
FRAUDULENT AND
UNFAIR TRADE
PRACTICES
Prohibition of certain
dealings in securities.
Prohibition against market manipulation.
Prohibition of misleading statements to induce sale or purchase of
securities.
Prohibition of unfair trade practices relating to securities.
Power of the Board to order investigation.
Procedure for investigation.
Duty to produce records.
Submission of report to the Board.
Power of the Board to issue directions.
Suspension or cancellation of Registration.