SEBI proposes changes in merchant banker norm to bring it up to date
Informist, Wednesday, Aug 28, 2024
--SEBI floats paper on review of norms for merchant bankers
--SEBI for aligning norms for merchant bankers with current ecosystem
--SEBI paper: Need clarity on merchant bankers' permitted activities
--SEBI paper for barring merchant bankers from valuation activities
--SEBI paper proposes 2 merchant banker categories
--SEBI: Merchant banker categories to be based on net worth, activities
MUMBAI – The Securities and Exchange Board of India has made several proposals in a consultation paper to review the regulations for merchant bankers that include alignment with regulations for other regulated intermediaries, bringing clarity on permitted activities, raising capital adequacy requirements and eligibility criteria, and deleting redundant provisions. The market regulator has invited comments from the public on the various proposals made in the paper and set a deadline of Sep 18 for receiving it.
There are 224 merchant bankers registered with SEBI currently. They are the intermediary class which interacts with primary market issuers, including initial public offers, guides them on the regulatory requirements, vets their offer documents, and monitors all pre-listing and listing, and some post-listing activities of the issuers.
The consultation paper has proposed that merchant bankers be registered under two categories - category 1 where the merchant banker's networth is at least 500 mln rupees and who can undertake all permitted activities, and category 2 where the networth is at least 100 mln rupees, but which cannot undertake activities related to main board issues.
Currently, a merchant banker needs to have a minimum networth of only 50 mln rupees. The SEBI paper stated that merchant bankers under the proposed two categories be given two years to progressively increase their networth.
SEBI also said in the paper that there was a need for clarity on permitted activities for the merchant bankers, and detailed a few proposals. In one such proposal, the paper stated that merchant bankers be barred from undertaking any activities, whether related to the securities market or not, which do not come under SEBI's jurisdiction. The SEBI paper also suggested that merchant bankers should not be allowed to undertaking valuation activities. End
