A market consists of sellers of products and buyers thereof. Obviously the securities market refers to investors i.e. wealth savers, who mobilise their savings and search for a remunerative source of investment thereof on the one hand, and on the other the capital seekers, that is, business, industry or government. The two constitute the core elements of the securities/capital market

This is the market consisting of large number of individual investors, household savers, professionals, and agriculturists, who are able to a preserve, a part of their current earnings to build sizeable amounts and invest in securities. They form the class of capital providers or capital builders for the nation. On the other side the corporate entities engaged in Industry, trade or other business ventures are the productive users and consequent seekers of very large amount of capital. It is the function of the capital market to transform and redirect the use of the savings of large number of individuals to productive channels to meet long term needs of capital for Industry, trade and business. The capital/security market intermediaries serve as the bridge or necessary link between capital providers and capital seekers. They enable a smooth flow of investible funds from the supply to the demand points.

The individual savers are not organised. They can invest if they could secure the trust and confidence that the funds invested would be prudently employed and they could confidently expect to get a fair return/reward on their hard-earned savings. In short in addition to a remunerative return on their savings, they look for other pre-requisites in making an investment decision. these are security of the funds entrusted and liquidity i.e. to get back their savings in times of their need. This is the function of organised capital market to regulate market forces to ensure fair dealings, to motivate savings on the part of the investors and to secure smooth flow of savings/capital from investors to capital seekers for productive needs. This supervisory and regulatory function is performed by SEBI, the market regulator cum market developer.

The role of intermediaries makes the market vibrant, and to function smoothly and continuously . Intermediaries possess professional expertise and play an promotional role in organising a perfect match between the supply and demand for capital in the market. All those, institutions or individuals, who help to bring the savers and seekers of capital and enable a regular flow of funds from supply to demand points are intermediaries. Thus a commercial bank, an insurance company, a mutual fund, stock exchange or depository are as much intermediaries, as are brokers, merchant bankers, Registrars etc. All intermediaries are service providers and are an integral part of the Capital Market or Money Market.

The market Regulator, SEBI regulates various intermediaries in the primary and secondary markets through its Regulations for these intermediaries. SEBI has defined the role of each of the intermediary, the eligibility criteria for granting registration, their functions and responsibilities and the code of conduct to which they are bound. These Regulations also empower SEBI to inspect the functioning of these intermediaries and to collect fees from them and to impose penalties on erring entities. Detailed information about the role and responsibilities of intermediaries are discussed in different articles subsequently under this module. Presently we will briefly cover in a nutshell the core functions of each one of the intermediaries operating in the Primary and the secondary markets.

Merchant Bankers

Merchant banker" means any person who is engaged in the business of issue management either by making arrangements regarding selling , buying or subscribing to securities as manager, consultant, adviser or rendering corporate advisory service in relation to such issue management 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 SEBI's various operational guidelines issued from time to time to merchant bankers primarily addressed the need to enhance the standard of disclosures.

Merchant bankers are registered in 4 categories. For each category, there are different eligibility criteria, which have been set keeping in view the different activities which Merchant Bankers are authorised to do

Registrars to an issue and share transfer agents

Registrars to an Issue (RTI) and Share Transfer Agents (STA) are registered and regulated under SEBI (Registrar to an 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 an issue and share transfer agent and Category II to act as either registrar to an issue or share transfer agent. SEBI issued instructions to all registered RTIs and/or STAs to appoint compliance officers who would ensure that all rules, regulations, guidelines and directions issues by SEBI, the government and other regulatory authorities are complied with, and any deviations therefrom were to be reported to SEBI.

Bankers to an issue

Scheduled banks acting as bankers to an issue are required to be registered with SEBI in terms of SEBI (Bankers to an Issue) Rules and Regulations, 1994. Under these regulations, registration commenced in 1994-95 and bankers to an issue are required to comply with the guidelines issued and submit quarterly reports of their activities. At the end of March 1997, 80 bankers to an issue were registered with SEBI.

Debenture Trustees

Debenture trustees are registered with SEBI in terms of the SEBI (Debenture Trustees) Rules and Regulations, 1993. Since 1995-96, SEBI has been monitoring the working of debenture trustees by calling for details regarding compliance by issuers of the terms of the debenture trust deed, creation of security, payment of interest, redemption of debentures and redressal of complaints of debenture holders regarding non-receipt of interest/redemption proceeds on due dates. At the end of March 1997, 27 debenture trustees were registered with SEBI.

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.

Portfolio managers

During the year 1996-97, 3 portfolio managers were granted registration. Thus the number of portfolio managers rose from 13 at the end of 1995-96 to 16 at the end of 1996-97. It may be mentioned here that Category I and II merchant bankers are also authorised to undertake the activities of portfolio managers, while the registered portfolio managers exclusively carry on portfolio management activities.

Stock brokers

All stock brokers dealing in securities are registered with SEBI in terms of SEBI (Stock Brokers and Sub Brokers) Regulation 1992. During 1996-97, 391 additional brokers were registered with SEBI making the total registered membership to 8,867 as on March 31, 1997.

Sub brokers

In many cases, individual investors transact in securities through sub brokers. It is therefore absolutely imperative to regulate this class of intermediary. As on March 31, 1997 only 1,798 sub brokers were registered with SEBI. The main reason for the limited success in registering large number of sub brokers is that brokers are reluctant to take responsibility of the acts of the sub-brokers. Measures initiated by SEBI for bringing sub-brokers more fully under the ambit of regulatory oversight have been described earlier in this Report.