Need for Registration
SEBI Started the process of registration of some of the intermediaries associated with the process of issue management. This is done to ensure professionalization of intermediaries and to curb the malpractices indulged in by some of intermediaries.
The merchant banks have to be registered with SEBI and no firm can carry on any activity as a Merchant banker, unless it holds a certificate granted by the board under the regulation of SEBI. The investment banks serves as an intermediaries between issuing company and investing clients.
When investment banks serve as the lead managers for the securities of a client, it is necessary that they themselves are credible in order to gain the investor confidence.
The registration procedure serve this purpose. By setting out certain eligibility criteria for the purpose of registration, the regulatory bodies seek to ensure that the investment banks, which handle the various needs of the clients, have the required infrastructure and resources to do so.
Eligibility Criteria
SEBI has prescribed certain criteria in order to be register as merchant banks. These criteria are included in Securities and Exchange Board of India (Merchant Bankers) Rules, 1992.
To be eligible to carry out activities of merchant banker, the applicant must be a body corporate other than a Non Banking Finance Company. The applicant himself must be a qualified professional in finance, law or business management from an institute recognized by the Government, the applicant also must employ two competent persons to carry out the dealings of a merchant banker.
The applicant, his director, partner or principal officer must not have been involved in any lawsuit associated with the securities market and they also must not have been convicted at any time for any offence involving moral turpitude.
SEBI has also set out the capital adequacy requirement to the persons waiting to be registered as merchant bankers. The applicant must have a minimum Net worth of Rs. 5 Crore. The maximum underwriting exposure for an investment bank should not exceed 20 times its total net worth. If the industry practice is to keep an exposure of around 15 times the net worth, it would be termed as the “Industry Capital Adequacy Requirement” as against regulatory suggestions.
In the term of regulations, the firms must meet the capital adequacy in both the countries from where the capital flows out as well as where it flows in. The procedure for registration must be followed and the relevant forms should be submitted by the merchant bankers.
SEBI Started the process of registration of some of the intermediaries associated with the process of issue management. This is done to ensure professionalization of intermediaries and to curb the malpractices indulged in by some of intermediaries.
The merchant banks have to be registered with SEBI and no firm can carry on any activity as a Merchant banker, unless it holds a certificate granted by the board under the regulation of SEBI. The investment banks serves as an intermediaries between issuing company and investing clients.
When investment banks serve as the lead managers for the securities of a client, it is necessary that they themselves are credible in order to gain the investor confidence.
The registration procedure serve this purpose. By setting out certain eligibility criteria for the purpose of registration, the regulatory bodies seek to ensure that the investment banks, which handle the various needs of the clients, have the required infrastructure and resources to do so.
Eligibility Criteria
SEBI has prescribed certain criteria in order to be register as merchant banks. These criteria are included in Securities and Exchange Board of India (Merchant Bankers) Rules, 1992.
To be eligible to carry out activities of merchant banker, the applicant must be a body corporate other than a Non Banking Finance Company. The applicant himself must be a qualified professional in finance, law or business management from an institute recognized by the Government, the applicant also must employ two competent persons to carry out the dealings of a merchant banker.
The applicant, his director, partner or principal officer must not have been involved in any lawsuit associated with the securities market and they also must not have been convicted at any time for any offence involving moral turpitude.
SEBI has also set out the capital adequacy requirement to the persons waiting to be registered as merchant bankers. The applicant must have a minimum Net worth of Rs. 5 Crore. The maximum underwriting exposure for an investment bank should not exceed 20 times its total net worth. If the industry practice is to keep an exposure of around 15 times the net worth, it would be termed as the “Industry Capital Adequacy Requirement” as against regulatory suggestions.
In the term of regulations, the firms must meet the capital adequacy in both the countries from where the capital flows out as well as where it flows in. The procedure for registration must be followed and the relevant forms should be submitted by the merchant bankers.