Underwriting obligations (Regulation 22)

In respect of every issue to be managed, the lead merchant banker holding a certificate under Category I shall accept a minimum Underwriting obligation of five percent of the total underwriting commitment or rupees twenty-five lacs, whichever is less: [Regulation 2 (1)]

     Provided that, if the lead merchant banker is unable to accept the minimum underwriting obligation, that lead merchant banker shall make arrangement for having the issue underwritten to that extent by a merchant banker associated with the issue and shall keep the Board informed of such arrangement.

The lead merchant banker, who is responsible for verification of the contents of a prospectus or the Letter of Offer in respect of an issue and the reasonableness of the views expressed therein, shall submit to the Board at least two weeks prior to the opening of the issue for subscription, a due diligence certificate in Form C.of the Regulations (Regulation 23)

1. The lead manager responsible for the issue shall furnish to the Board, the following documents, namely: -

   1. particulars of the issue;

   2. draft prospectus or where there is an offer to the existing shareholders, the draft letter of offer;

   3. any other literature intended to be circulated to the investors, including the shareholders; and

   4. such other documents relating to prospectus or letter of offer as the case may be.

2. The documents referred to in sub-regulation (1) shall be furnished atleast two weeks prior to date of filing of the draft prospectus or the letter of offer, as the case may be, with the Registrar of Companies or with the Regional Stock Exchanges, or with both.

3. The lead manager shall ensure that the modifications and suggestions, if any, made by the Board on the draft prospectus or the Letter of Offer as the case may be, with respect to information to be given to the investors are incorporated therein.

The lead manager undertaking the responsibility for refunds or allotment of securities in respect of any issue shall continue to be associated with the issue till the subscribers have received the share or debenture certificates or refund of excess application money; (Regulation 25)

    Provided that where a person other than the lead manager is entrusted with the refund or allotment of securities in respect of any issue, the lead manager shall continue to be responsible for ensuring that such other person discharges the requisite responsibilities in accordance with the provisions of the Companies Act and the listing agreement entered into by the body corporate with the stock- exchange. (Regulation 25)

No merchant banker or any of its directors, partner or manager or principal officer shall either on their respective accounts or through their associates or relatives enter into any transaction in securities of bodies corporate on the basis of unpublished price sensitive information obtained by them during the course of any professional assignment either from the clients or otherwise. (Regulation 26)

Every merchant banker shall submit to the Board complete particulars of any transaction for acquisition of securities of any body corporate whose issue is being managed by that merchant banker within fifteen days from the date of entering into such transaction.(Regulation 27)

A merchant banker shall disclose to the Board as and when required, the following information, namely:-

1. his responsibilities with regard to the management of the issue;

2. any change in the information or particulars previously furnished, which have a bearing on the certificate granted to it;

3. the names of the body corporate whose issues he has managed or has been associated with;

4. the particulars relating to breach of the capital adequacy requirement as specified in regulation 7;

5. relating to his activities as a manager, underwriter, consultant or adviser to an issue as the case may be.

1. Powers & Procedure for Inspection - as per Chapter IV of the Regulation

2. Procedure for Action in Case of Default - As per Chapter V

1. A merchant banker in the conduct of his business shall observe high standards of integrity and fairness in all his dealings with his clients and other merchant bankers.

2. A merchant banker shall render at all times high standards of service, exercise due diligence, ensure proper care and exercise independent professional judgement.

He shall wherever necessary, disclose to the clients, possible sources of conflict of duties and interests, while providing unbiased services.

3. A merchant banker shall not make any statement or become privy to any act, practice or unfair competition, which is likely to be harmful to the interests of other merchant bankers or is likely to place such other merchant bankers in a disadvantageous position in relation to the merchant banker, while competing for or executing any assignment.

4. A merchant banker shall not make any exaggerated statement, whether oral or written, to the client either about the qualification or the capability to render certain services or his achievements in regard to services rendered to other clients.

5. A merchant banker shall always endeavour to -

   1. render the best possible advice to the clients having regard to the clients' needs and the environments and his own professional skill; and

   2. ensure that all professional dealings are effected in a prompt, efficient and cost effective manner.

6. A merchant banker shall not -

   1. divulge to other clients, press or any other party any confidential information about his client, which has come to his knowledge; and

   2. deal in securities of any client company without making disclosure to the Board as required under the regulations and also to the Board of Directors of the client company.

7. A merchant banker shall endeavour to ensure that -

   1. the investors are provided with true and adequate information without making any misguiding or exaggerated claims and are made aware of attendant risks before any investment decision is taken by them;

   2. copies of prospectus, memorandum and related literature are made to the investors;

   3. adequate steps are taken for fair allotment of securities and refund of application money without delay; and

   4. complaints from investors are adequately dealt with.

8. The merchant bankers shall not generally and particularly in respect of issue of any securities be party to -

   1. creation of false market;

   2. price rigging or manipulation;

   3. passing of price sensitive information to brokers, members of the stock exchanges and other players in the capital market or take any other action which is unethical or unfair to the investors.

9. A merchant banker shall abide by the provisions of the Act, rules and regulations and which may be applicable and relevant to the activities carried on by the merchant banker.