SEBI (Merchant Bankers) (Amendment) Regulations, 2024: Enhancements to Regulatory Framework
The Securities and Exchange Board of India (SEBI) has introduced the Merchant Bankers (Amendment) Regulations, 2024, aimed at enhancing the regulatory framework governing merchant banking activities in India. This amendment is part of SEBI’s ongoing efforts to improve transparency, accountability, and operational efficiency within the financial services sector.
Key highlights of the amendment include revised eligibility criteria for merchant bankers, adjustments to net worth requirements, and updated guidelines for licensing and registration processes. Category I Merchant Bankers will now need to maintain a minimum net worth of ₹50 crore, while Category II Merchant Bankers face tailored requirements that reflect their specific operational scopes.
Additionally, the regulations emphasize the importance of compliance with corporate governance standards and risk management practices, ensuring that merchant bankers operate with integrity and professionalism. These changes are expected to foster a more robust environment for investment banking activities, ultimately benefiting both market participants and investors.
Stakeholders are encouraged to familiarize themselves with the new regulations to ensure compliance and leverage the opportunities presented by these updates in the dynamic financial landscape.
SECURITIES AND EXCHANGE BOARD OF INDIA
NOTIFICATION
Mumbai, the 29th November, 2024
SECURITIES AND EXCHANGE BOARD OF INDIA (MERCHANT BANKERS) (AMENDMENT) REGULATIONS, 2024
F. No. SEBI/LAD-NRO/GN/2024/214.—In exercise of the powers conferred by section 30 read with clause (b) of sub-section (2) of section 11 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Board hereby makes the following regulations to further amend the Securities and Exchange Board of India (Merchant Bankers) Regulations, 1992, namely, –
1. These regulations may be called the Securities and Exchange Board of India (Merchant Bankers)
2. (Amendment) Regulations, 2024.
They shall come into force on the date of their publication in the Official Gazette.
3. I. In the Securities and Exchange Board of India (Merchant Bankers) Regulations, 1992, – In regulation 6, –
(i) the words “for considering the grant of a certificate” appearing after the words “into account” shall be omitted;
(ii) the word “relating” appearing after the words “relevant to the activities” shall be substituted with the words “of a”;
(iii) after the word “particular”, the symbol and word “, whether” shall be inserted;
(iv) the existing clause (b) shall be substituted with the following, namely,-
“(b) the applicant has in its employment, a minimum of two persons who are professionally qualified in finance or law or accountancy or business management from a Government recognised university or institution or who have a recognised degree in finance or law or accountancy or business management from a foreign university or institution;”
(v) clause (g) shall stand omitted;
(vi) the word “his” appearing in clauses (aa), (b), (e) and (f) shall be substituted with the word “its”.
II. In regulation 9A, in sub-regulation (1), –
(i) in clause (c), –
a. the word “adequate” appearing after the words “shall take” shall be substituted with the word “all”;
b. the word “the” shall be inserted after the words “redressal of” and before the word “grievances”;
c. the words and symbol “and keep the Board informed about the number, nature and other particulars of the complaints received” shall stand omitted;
(ii) clause (f) shall be substituted with the following clause, namely,-
“(f) it shall intimate the Board of the details of any change in information submitted while seeking registration within seven working days of such change.”
III. In regulation 13A, –
(i) the words “he” and “his” appearing in non-obstante clause shall be substituted with the words “it” and “its” respectively;
(ii) the second proviso shall be substituted with the following proviso, namely,-
“Provided further that a merchant banker, that has been granted a certificate of registration under these regulations, shall ensure market making in accordance with the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018.”;
(iii) in clause (ii) of the Explanation, the words, symbols and figures “section 4A of the Companies Act, 1956 (1 of 1956)” shall be substituted with the words, symbols and figures “sub-section (72) of section 2 of the Companies Act, 2013”.
IV. The existing regulation 20 shall be substituted with the following regulation, namely,-
“Responsibility of the lead manager.
20. No lead manager shall agree to manage or be associated with any issue unless its responsibilities relating to the issue particularly, those of disclosures, allotment and refund are clearly defined, allocated and determined and a statement specifying such responsibilities is disclosed in the draft offer document and offer document:
Provided that, where there is more than one lead merchant banker to the issue, the responsibilities of each of the lead merchant banker shall clearly be demarcated and a statement specifying such responsibilities shall be disclosed in the draft offer document and offer document.”
V. In regulation 21A, –
(i) in the marginal heading, the words “as such for an” shall be substituted with the words “for its”;
(ii) the existing sub-regulation (1), without the proviso and Explanation therein, shall be substituted by the following, namely, –
“A merchant banker, being a promoter or an associate of either the issuer of the securities or of a person making an offer to sell or purchase securities in terms of any of the regulations made by the Board, shall not lead manage any issue or be associated with any activity undertaken under any of the regulations made by the Board by such issuer or person:”;
(iii) in the proviso to sub-regulation (1), the word “he” shall be substituted with the word “it”;
(iv) in the Explanation under sub-regulation (1), –
a. the word “purposes” appearing after the words “For the” and before the words “of this regulation” shall be substituted with the word “purpose”;
b. clause (iii) shall be substituted by the following clause, namely,
“(iii) there is a common director –
(a) in the issuer and the merchant banker; or
(b) in the issuer’s subsidiary or holding company and the merchant banker:
Provided that this clause shall not be applicable where the director concerned is a nominee director:
Provided further that this clause shall not be applicable where the director concerned is an independent director subject to recusal by the said independent director in respect of the issue from the boards of both issuer and merchant banker.”
VI. In regulation 22B, the existing sub-regulation (3) shall be substituted with the following sub-regulation, namely,-
“(3) A merchant banker, if called upon, pursuant to an agreement for underwriting to subscribe to the securities of a body corporate, shall subscribe to the said securities prior to the finalisation of the basis of allotment.”
VII. The existing regulation 27 shall be substituted with the following regulation, namely, –
“27. A merchant banker shall submit to the Board complete particulars of the transaction for acquisition of securities of a body corporate whose issue is managed by that merchant banker, within fifteen days from the date of entering into such a transaction:
Provided that complete particulars of a transaction for acquisition of securities pursuant to underwriting or market making obligations in accordance with the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 shall be submitted to the Board on a quarterly basis.”
VIII. In regulation 28, in sub-regulation (1),
(i) in clauses (i) and (v), the word “his” shall be substituted with the word “its”.
(ii) in clause (iii), the word “he” shall be substituted with the word “it”.
IX. In regulation 30, in sub-regulation (3), the word “his” shall be substituted with the word “its”.
X. In regulation 31,
(i) in sub-regulations (1), the word “his” appearing after the words “information relating to” and before the words “activities as a merchant banker”, shall be substituted with the word “its”.
(ii) in sub-regulation (2), the word “his” shall be substituted with the word “its”.
XI. In regulation 34, –
a. in the marginal heading, the word “the” shall be inserted after the word “of” and before the word “auditor”;
b. in the Explanation thereto, the words, symbols and figures “given in section 226 of the Companies Act, 1956 (1 of 1956)” shall be substituted with the words, symbols and figures “provided in section 141 of the Companies Act, 2013”.
XII. In Schedule III,
(i) in clause (23), in sub-clause (a), the word “his” shall be substituted with the word “their”.
(ii) in clause (34), in sub-clause (b), the word “his” shall be substituted with the word “its”.
BABITHA RAYUDU, Executive Director
[ADVT.-III/4/Exty./727/2024-25]
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