REGISTRATION OF MERCHANT

BANKER
REQUIREMENT FOR GRANT OF CERTIFICATE:
The Applicant

Shall be a body corporate other than a NBFC.

Has the necessary infrastructure to discharge his
activities.
Should have minimum two experienced employees
to conduct the business of merchant Banker.
Should fulfill the capital adequacy requirement as
specified.
His partner,director or principal officer should not
be involved in any litigation connected with the
securities market which has an adverse effect on the
business fo the applicant.
Should have a professional from an institution
recognised by the government in finance, law or
business management.
Should be a fit and a proper person.
CATEGORIES OF MERCHANT BANKER
Category I
To carry on an activity of the issue management ,
which will inter- alia consist of preparation of prospectus
and other information relating to the issue,
determining financial structure ,tie up of financiers
and final allotment and refund of the subscription and
to act as advisor , consultant ,manager , underwriter,
portfolio manager.(A+C+M+U+P)
Category II
To act as advisor,consultant,co-manager,underwriter,
portfolio manager.(A+C+U+P)
Category III
To act as underwriter, advisor, consultant to an
issue.(U+A+C)
Category IV
To act only as advisor or consultant to an issue.(A or C)
CAPITAL ADEQUACY REQUIREMENT
The Capital Adequacy Requirement (CAR) shall
not be less than the net worth of the person
making the application for grant of registration.

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
PROCEDURE FOR REGISTRATION:
The SEBI on being satisfied that the applicant is
eligible shall grant a certificate in Form B.
On the grant of a certificate the applicant shall be
liable to pay the fees in accordance with
Schedule II as shown below:
Merchant Initial fees for Continuation
Banker 2 Yrs Fees
Category I Rs. 2.5 lakhs Rs.1 lakh
Category II Rs. 1 lakh Rs.50,000
Category III Rs. 1 lakh Rs.25,000
Category IV Rs.5,000 Rs.1,000
RENEWAL OF CERTIFICATE:
Three months before expiry of the period of
certificate, the merchant banker, may if he so
desires , make an application for renewal in
Form A.
The application for renewal shall be dealt within
the same manner as if it were a fresh
application for grant of a certificate.
The SEBI on being satisfied that the applicant
shall be liable to pay the fees in accordance
with schedule II as shown below:
Merchant Banker Initial fees for 2 Yrs Continuation Fees

Category I Rs. 1 lakh Rs.20,000

Category II Rs.75,000 Rs.10,000

Category III Rs.50,000 Rs.5,000

Category IV Rs.5,000 Rs.2,500

OBLIGATIONS &
RESPONSIBILITIES
CODE OF CONDUCT
Every merchant banker shall be abide by the Code of
Conduct as specified by Schedule II.
No merchant banker, other than a bank or a
financial institution , who has been granted a
certificate of registration under these regulations
shall after june 30th, 1998 carry on any business
other than that in the securities market.
A merchant banker who has been granted certificate
of registration to act as primary dealer by reserve
bank of india, may carry on such business as may be
permitted by Reserve Bank of India.
MAINTENANCE OF BOOKS OF
ACCOUNTS, RECORDS, ETC.
Every merchant banker shall keep and maintain the
following Books of Accounts, records and documents
namely:
A copy of balance sheet and P&L account as at the end
of each accounting period;
A copy of the auditor's report on the accounts for that
period; and
A statement of financial position.
Every merchant banker shall intimate to SEBI that where
the books of accounts, Records and Documents are
maintained.
Every Merchant banker shall, after the end of each
accounting period furnish to the SEBI copies of the
balance Sheet, P&L Account and such other documents for
any other preceding five accounting years when requoired
by the SEBI.
SUBMISSION OF HALF YEARLY RESULTS
Every merchant banker shall furnish to the SEBI
half-yearly unaudited financial results when
required by the SEBI with a view to monitor the
capital adequacy of the merchant bankers.
APPOINTMENT OF THE LEAD MERCHANT
BANKER
All issues should be managed by at least one
merchant banker functioning as the lead
manager.

Every lead merchant banker shall before taking

up an assignment relating to an issue , enter
into an agreement with such body corporate
setting out their mutual rights, liabilities and
obligations relating to such issue and in
particular to disclosure, allotment and refund.
RESTRICTION ON APPOINTMENT OF
LEAD MANAGERS

Less than rupes fifty crore- Two(2)

Rupees fifty crore but less than rupees one
hundred crore- Three(3)
Rupees one hundred crore but less than rupees
two hundred crore - Four(4)
Rupees two hundred crore but less than rupees
four hundred crore Five (5)
Above rupees four hundred crore Five or more as
may be agreed by the SEBI.
RESPONSIBILITIES OF LEAD MANAGER
No lead manager to be associated with any issue
unless his responsibilities relating to the issue
mainly, those of disclosure,allotment and refund
are clearly defined allocated and determined,
A statement specifying such responsibilities is
furnished to the SEBI atleast one month before
the opening of the issue for subscription.
Incase there are more than one lead merchant
bankers, the responsibilities should be clearly
demarcated.
UNDERWRITING OBLIGATIONS
The lead merchant banker holding a certificate
under Category I Shall accept a minimum
underwriting obligation of 5% of the Total
underwriting Commitment or rupees twenty-
five lakh, whichever is less.
Incase the lead merchant banker is unable to
accept the minimum underwriting obligation,
that lead merchant banker shall make
arrangements for having the issue underwritten
to that extent by the merchant banker associated
with the issue and shall keep the SEBI informed
of such arrangements.
APPOINTMENT OF COMPLIANCE
OFFICERS

Every merchant banker shall appoint a

compliance officer who shall be responsible for
monitoring the compliance of the act ,rules and
regulations, notification, guidelines,instructions
etc issued by the SEBI or the central
government and for redressal of investors
grievances.
The complia officer shall immediately and
independently report to the SEBI any non-
Compliance observed by him.
PROCEDURE OF INSPECTION
SEBI'S RIGHT TO INSPECT
The SEBI may appoint one or more persons as
inspecting authority to undertake inspection of

The books of accounts,

Records and
Documents of the merchant banker.
PURPOSE OF INSPECTION
to ensure that the books of accounts are being
maitained in the manner required

to ensure the provisions of the

Act,Rules,Regulations are being complied with

to investigate into the complaints received from

investors , other merchant bankers or any other
person on any matter having a bearing on the
activities of the merchant banker
NOTICE BEFORE INSPECTION
Before undertaking an inspection under
regulation 29 the SEBI shall give a reasonable
notice to the merchant banker for that
purpose.

During the course of inspection, the merchant

banker against whom an inspection is being
carried out shall be bound to discharge his
obligations.
SUBMISSION OF REPORT TO SEBI
The inspecting authority shall,as soon as may be
possible submit an inspection report to SEBI.

The SEBI or the chairman shall after

consideration of inspection or investigation report
take such action as the SEBI or chairman may
deem fit and appropriate including action under
the SEBI.
APPOINTMENT OF AUDITORS
The SEBI may appoint a qualified auditor to
investigate the Books of accounts or the affairs of
the merchant banker provided that the auditor so
appointed shall have the same powers of the
inspecting authority.
PROCEDURE FOR ACTION IN
CASE OF DEFAULT
 SUSPENSION OF REGISTRATION
The merchant banker violates the provision of the Act, rules or
Regulations:
Fails to Furnish any information relating to his activity as
merchant banker as required by the SEBI;
furnishes wrong or false information;
does not submit periodical returns as required by SEBI
does not co-operate in any inquiry conducted by the SEBI
The merchant banker fails to resolve the complaints of the
investors or fails to give a satisfactory reply to the SEBI in his
behalf;
The merchant banker indulges in manipulating or price rigging
or concerning activities;
The merchant banker fails to maintain the capital adequecy
requirement;
The merchant banker fails to pay the fees;
The merchant banker violates the conditions of Registration;
The merchant banker does not carry out his obligations as
specified in the regulation.
CANCELLATION OF REGISTRATION
The merchant banker indulges in deliberate
manipulation or price rigging or cornering
activities affecting the securities market and the
investors interest;
The merchant banker is guilt of fraud, or is
convicted of a criminal offence
SHOW CAUSE NOTICE AND ORDER
On receipt of the report from the enquiry officer, the
SEBI shall consider the same and issue a show-cause.
The merchant banker shall within twenty-one days
of the date of the receipt of the show cause send a
reply to the SEBI.
The SEBI after considering the reply to the Show-
Cause notice, if received, shall as soon as possible but
not later than third days from the receipt of the
reply, if any,pass such order as it deems fit.
Every order passed shall be self-contained and given
reasons for the conclusions stated therein including
justification of the penalty imposed by that order.
The SEBI shall send a copy of the order to the
merchant banker.
EFFECT OF SUSPENSION & CANCELLATION
OF REGISTRATION OF MERCHANT BANKERS

On and from the date of the suspension of the

merchant banker, he shall cease to carry on any
activity as a merchant banker during the period
of suspension.
On and from the date of cancellation the
merchant banker shall with immediate effect
cease to carry on any activity as a merchant
banker.
PUBLICATION OF ORDER OF SUPENSION
The order of suspension or cancellation of
certificate passed shall be published in atleast two
daily newspaper by SEBI.