Introduction to Merchant Banking

Definition: Merchant banking refers to the function of intermediation in the capital market, helping issuers raise capital by placing securities with investors.
Evolution: Merchant banking originated in Italy and evolved in France and the UK, with activities including dealing in bills of exchange, speculating on exchange rates, and accepting commercial bills for domestic and international trade.

Key Concepts

Difference between Merchant Banking and Investment Banking: Merchant banking is a fee-based service for issue management and private placement of securities, while investment banking encompasses a broader range of capital market activities, including stock trading, market making, and underwriting.
Merchant Banking in International Scenario: In the UK, merchant banks focused on discounting bills and providing safety in transactions, while in the US, they evolved into investment banks, risking their own capital and earning profits from proprietary trading activities.
Merchant Banking in India: The industry began with foreign banks, followed by nationalized banks creating subsidiaries, and domestic financial institutions establishing separate divisions, with the Association of Investment Bankers of India (AIBI) acting as a self-regulatory organization.

Regulatory Framework

Core Regulation: Governed by various acts, regulations, and guidelines, including the Securities and Exchange Board of India (SEBI) regulations.
Support Regulation: Includes guidelines for issue management, underwriting, and other merchant banking activities.
Role of AIBI: AIBI promotes the interests of the industry, sets professional standards, and establishes standard practices in merchant banking and financial services.

Introduction to Merchant Banking (Part 2)

CORE REGULATIONS: The Securities and Exchange Board of India (SEBI) was established on April 12, 1992, in accordance with the provisions of the SEBI Act, 1992.
SEBI Functions: SEBI is empowered to perform various functions, including:
- Regulating the business in stock exchanges and other securities markets.
- Registering and regulating stockbrokers, share transfer agents, bankers to an issue, debenture trustees, registrars to an issue, merchant bankers, underwriters, portfolio managers, investment advisers, and others associated with the securities market.
- Promoting and regulating Self-Regulatory Organizations (SROs).
- Prohibiting fraudulent and unfair trade practices relating to the securities market.
- Promoting investors' education and training of intermediaries in the securities market.
- Prohibiting insider trading in securities.
- Regulating substantial acquisition of shares and takeover of companies.

SEBI Act, 1992

Penalties: The SEBI Act, 1992, provides for penalties for various offenses, including:
- Section 15A: Penalty for failure to furnish information, return, etc.
- Section 15B: Penalty for failure to enter into an agreement with clients.
- Section 15C: Penalty for failure to redress investors' grievances.
- Section 15G: Penalty for insider trading.
- Section 15H: Penalty for non-disclosure of acquisition of shares and takeovers.
- Section 15HA: Penalty for fraudulent and unfair trade practices.
- Section 15HB: Penalty for contravention where no separate penalty has been provided.

Securities Appellate Tribunal (SAT)

Role: The SAT has been set up under the SEBI Act to exercise jurisdiction, powers, and authority under the said act or any other law in force.
Composition: The SAT shall consist of a presiding officer and two other members, to be appointed by the Central Government.
Appeal: Any person aggrieved by an order of SEBI may appeal to the SAT within 45 days from the date on which a copy of the order is received.
Powers: The SAT shall have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908, while trying a suit, in respect of certain matters.

Securities Contracts (Regulation) Act, 1956

Definition of Securities: The Act provides for the definition of "securities," which includes:
- Shares, scrips, stocks, bonds, debentures, debenture stock, or other marketable securities of a like nature in or of any incorporated company or other body corporate.
- Derivatives.
- Units or any other instrument issued by any collective investment scheme to the investors in such schemes.
- Security receipt as defined in clause (zg) of section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

Introduction to Merchant Banking (Part 3)

Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002: Not directly discussed in this section, but relevant to the broader context of merchant banking.
Securities: Include
- Units or any other such instrument issued to the investors under any mutual fund scheme
- Units or any other instrument issued by any pooled investment vehicle
- Any certificate or instrument, issued to an investor by any issuer being a special purpose distinct entity
- Government Securities
- Such other instruments as may be declared by the Central Government to be securities
- Rights or interest in securities

Key Concepts

Securities Contracts (Regulation) Act, 1956 (SCRA):
- Definition: Regulates the business of dealing in securities and provides for certain other matters connected therewith.
- Details: Aims to prevent undesirable transactions in securities, regulates contracts and transactions in securities, and gives the central government regulatory jurisdiction over stock exchanges, contracts and options in securities, and listing of securities on stock exchanges.
Securities Contracts (Regulation) Rules, 1957 (SCRR):
- Definition: Provides for the actual procedures to be followed by applicants for recognition as a recognised stock exchange and the requirements with respect to listing of securities on a recognised Stock Exchange.
- Details: Lays down conditions for the percentage of shares which need to be offered to the public in order to get the shares listed and also the percentage of shares which need to remain with public in order to remain listed.
SEBI (Merchant Bankers) Regulations, 1992:
- Definition: Lists out the different criteria for registration of a merchant banker as an intermediary with SEBI.
- Details: Details out the different on-going compliances such as the capital adequacy requirement, general obligation and responsibilities, conditions of registrations, grant and renewal of certificate etc.
SEBI (Issue of Capital and Disclosure Requirements) Regulations 2018:
- Definition: Requires that an issuer making an issue of securities to public or to QIBs or to its existing shareholders by way of rights issue is required to appoint a Merchant Banker registered with SEBI.
- Details: Lays down general conditions for capital market issuances, eligibility requirements, general obligations of the issuer and intermediaries in public and rights issuances, and regulations governing preferential issues, qualified institutional placements and bonus issues by listed companies.
SEBI Listing Obligations and Disclosure Requirements (LODR) Regulations 2015:
- Definition: Governs a company which has listed any of its designated securities on a recognised stock exchange.
- Details: Lists out the most important disclosure and other compliances required of a listed company in areas such as preparation and disclosure of financial information, corporate governance, and shareholder rights.

Penalties and Procedures

Section 23A of SCRA:
- Definition: Provides for penalties for failure to furnish information, document, books, returns or report to a recognized stock exchange or to the Board.
- Details: Specifies that the penalty shall not be less than one lakh rupees but which may extend to one lakh rupees for each day during which such failure continues subject to a maximum of one crore rupees.
Section 23 of SCRA:
- Definition: Specifies the penalties and the procedures for various non-compliances and failures.
- Details: Includes penalties for failure to maintain books of account or records as per the listing agreements, conditions or bye-laws of the stock exchange.

Introduction to Merchant Banking (Part 4)

Corporate Governance: Compliance with corporate governance requirements is essential for the protection of shareholders' rights and ensuring equitable treatment to all shareholders.
Stakeholder Role: Recognising the role of stakeholders in corporate governance is crucial for the overall well-being of the company.
Disclosure: Ensuring timely and accurate disclosure of material matters, including financial situation, performance, ownership, and governance, is vital for transparency.
Board of Directors: The board of directors of a listed company has significant responsibilities, including ensuring disclosure of information and overseeing the company's strategy, performance, and operations.

Key Concepts in Listing Regulations

Listing Agreement: The company must comply with the Listing Agreement, which includes regulations such as prior intimations, disclosure of events or information, shareholding pattern, and minimum public shareholding.
Compliance Officer: The company must have a full-time compliance officer to address investor grievances and ensure regulatory compliance.
Grievance Redressal Mechanism: The company must have a grievance redressal mechanism to address investor complaints.

SEBI (Prohibition of Insider Trading) Regulations, 2015

Insider Definition: An insider is defined as any person who is, or was, connected with a company and is reasonably expected to have access to unpublished price sensitive information (UPSI).
Connected Person: A connected person includes immediate relatives, holding companies, associate companies, subsidiaries, intermediaries, and other specified entities.
Unpublished Price Sensitive Information (UPSI): UPSI refers to any information that is not generally available and, if disclosed, would likely affect the price of the securities.
Prohibited Activities: Insiders are prohibited from communicating, providing, or allowing access to UPSI except for legitimate purposes, performance of duties, or discharge of legal obligations.
Codes of Fair Disclosure and Conduct: The board of directors must make a policy for determining legitimate purposes as part of the Codes of Fair Disclosure and Conduct.
Confidentiality: Persons in receipt of UPSI must maintain confidentiality and are considered insiders.

Introduction to Merchant Banking (Part 5)

Insider Trading Regulations: The SEBI (Prohibition of Insider Trading) Regulations aim to prevent insider trading by regulating the use of unpublished price sensitive information.
Database Maintenance: Companies must maintain a structured digital database containing information about insiders, including their Permanent Account Number or other authorized identifiers.
Database Preservation: The database must be preserved for at least eight years after the completion of relevant transactions and must not be outsourced.
Insider Trading Restrictions: No insider can trade in securities when in possession of unpublished price sensitive information, unless they can prove their innocence by demonstrating certain circumstances.

Key Concepts

Trading Plans: Insiders can formulate trading plans to trade in securities, which must be approved by the compliance officer and publicly disclosed.
Trading Plan Requirements: The plan must not entail trading for a period of less than twelve months and must not overlap with another existing plan.
Trading Plan Parameters: The plan must set out parameters for each trade, including the value of trade, nature of trade, specific date or time period, and price limit.
Code of Fair Disclosure: The board of directors of every listed company must formulate and publish a code of practices and procedures for fair disclosure of unpublished price sensitive information.
Code of Conduct: The board of directors or head of the organization must formulate a code of conduct to regulate, monitor, and report trading by designated persons and their immediate relatives.
Chinese Wall: The code of conduct must contain norms for Chinese Wall procedures to prevent the communication of unpublished price sensitive information except for legitimate purposes.

Important Terms

Unpublished Price Sensitive Information: Information that is not publicly available and could impact the price of securities if disclosed.
Insider: A person who has access to unpublished price sensitive information.
Designated Person: An individual who has access to unpublished price sensitive information due to their role or function in the organization.
Compliance Officer: The person responsible for administering the code of conduct and monitoring adherence to the Chinese Wall policy.

Introduction to Merchant Banking

Definition: Merchant banking refers to the financial services provided by a merchant bank, which includes activities such as investment banking, securities trading, and asset management.
Details: In market-sensitive functions, merchant banks are subject to stricter rules regarding trading activities and must comply with the Chinese Wall guidelines, which aim to prevent the disclosure of confidential information.

Key Concepts in Merchant Banking

Confidentiality: A company's investment banking division working on a new IPO cannot disclose confidential information about the offering to the sales team who might be interacting with potential investors.
Non-Public Information: An analyst who has access to non-public information about a company's financial performance cannot share that information with a colleague managing client portfolios.

SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011

Overview: The SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 deal with issues such as initial and continual disclosures of shareholding and control, substantial acquisition of shares or voting rights, bailout takeovers, and investigation and action by SEBI.
Key Terms: The regulations define important terms such as acquirer, control, person acting in concert, and promoter.

Regulations for Substantial Acquisition of Shares

Regulation 3(1): No acquirer shall acquire shares or voting rights in a target company which, taken together with shares or voting rights held by them and persons acting in concert, entitle them to exercise 25% or more of the voting rights in the target company unless the acquirer makes a public announcement of an open offer.
Regulation 3(2): An acquirer who holds shares or voting rights in a target company entitling them to exercise 25% or more but less than the maximum permissible non-public shareholding shall not acquire additional shares or voting rights within any financial year unless the acquirer makes a public announcement of an open offer.

Exemptions from Open Offer Obligations

Inter se Transfer of Shares: Acquisition pursuant to inter se transfer of shares amongst qualifying persons, such as immediate relatives, promoters, or companies, is exempt from the obligation to make an open offer.
Acquisition in the Ordinary Course of Business: Acquisition in the ordinary course of business by an underwriter, stock broker, merchant banker, or market maker is exempt from the obligation to make an open offer.
Acquisitions at Subsequent Stages: Acquisitions at subsequent stages by an acquirer who has made a public announcement of an open offer for acquiring shares pursuant to an agreement of disinvestment are exempt from the obligation to make an open offer.
Acquisition Pursuant to a Scheme: Acquisition pursuant to a scheme made under section 18 of the Sick Industrial Companies (Special Provisions) Act, 1985, or any statutory modification or re-enactment thereto, is exempt from the obligation to make an open offer.

Introduction to Merchant Banking (Part 7)

Definition: Merchant banking involves various activities such as arrangements, reconstruction, amalgamation, merger, or demerger.
Details: These activities can be performed pursuant to an order of a court or tribunal under any law or regulation, Indian or foreign.

Exemptions from Open Offer

The following are exempt from open offer:
- Arrangement: Not directly involving the target company as a transferor or transferee company, or reconstruction not involving the target company’s undertaking.
- Acquisition: Pursuant to a resolution plan approved under section 31 of the Insolvency and Bankruptcy Code, 2016.
- Acquisition: Pursuant to the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
- Acquisition: Pursuant to the provisions of the SEBI (Delisting of Equity Shares) Regulations, 2021.
- Acquisition: By way of transmission, succession, or inheritance.
- Acquisition: Of voting rights or preference shares carrying voting rights arising out of the operation of sub-section (2) of section 47 of the Companies Act, 2013.
- Acquisition: Of shares by lenders pursuant to conversion of their debt as part of a debt restructuring implemented in accordance with the guidelines specified by the Reserve Bank of India.

SEBI (Delisting of Equity Shares) Regulations, 2021

Definition: These regulations deal with the process of delisting of equity shares of a listed company.
Details: Delisting can be done in two ways: Voluntary Delisting and Compulsory Delisting.
Voluntary Delisting: The company may delist equity shares from one or more stock exchanges where they are listed and continue their listing on one or more other exchanges.
Compulsory Delisting: A recognised stock exchange may delist any equity shares of a company on any ground prescribed in the rules made under the Securities Contracts (Regulation) Act, 1956.

Procedure for Voluntary Delisting

Step 1: Obtain the prior approval of the Board of Directors.
Step 2: Make an application to the relevant recognised stock exchange(s) for delisting its equity shares.
Step 3: Issue a public notice of the proposed delisting from the relevant stock exchange(s) in at least one English national newspaper, one Hindi national newspaper, and one vernacular newspaper of the region.
Step 4: Disclose the fact of delisting in its first annual report post delisting.

Reverse Book Building (RBB) Process

Definition: A book building process used to determine the offer price for delisting.
Details: The offer price is determined through a bidding process, and the final offer price is the price at which the maximum number of equity shares is tendered by the public shareholders.

Compulsory Delisting by a Stock Exchange

Grounds: A recognised stock exchange may delist any equity shares of a company on any ground prescribed in the rules made under the Securities Contracts (Regulation) Act, 1956.
Procedure: The recognised stock exchange shall give a notice of the proposed delisting, and the company concerned shall be given a reasonable opportunity of being heard.
Panel: The decision regarding compulsory delisting shall be taken by a panel consisting of representatives from the recognised stock exchange, investors association, Ministry of Corporate Affairs, and the Executive Director or Secretary of the recognised stock exchange.

Introduction to Merchant Banking (Part 8)

Delisting of Equity Shares: The process of removing a company's equity shares from a recognized stock exchange, which can be voluntary or compulsory.
Compulsory Delisting: The delisting of a company's equity shares without the consent of the company, usually due to non-compliance with listing regulations or other serious violations.

Key Concepts

Rights of Public Shareholders: In case of compulsory delisting, the recognized stock exchange shall appoint an independent valuer to determine the fair value of the delisted equity shares, and the promoter shall acquire the shares from public shareholders at the determined value.
Consequences of Compulsory Delisting: The company, its whole-time directors, persons responsible for ensuring compliance, promoters, and companies promoted by them shall not access the securities market or seek listing for any equity shares for a period of ten years.
Special Provisions for Small Companies: Small companies with a paid-up capital not exceeding ten crore rupees and net worth not exceeding twenty-five crore rupees can delist by operation of law, subject to certain conditions.

Delisting Offer under SEBI (SAST) Regulations

Regulation 5A: Deals with delisting, allowing an acquirer to delist a company in accordance with the SEBI (Delisting of Equity Shares) Regulations, 2021, subject to certain conditions.
Conditions for Delisting: The acquirer must declare their intention to delist upfront, and the public announcement, detailed public statement, and letter of offer must mention the open offer price and indicative price for delisting.
Failure of Delisting Offer: If the delisting offer is not successful, the acquirer shall make an announcement within two working days and comply with applicable provisions of the regulations.

SEBI (Buy-Back of Securities) Regulations, 2018

Buy-Back of Securities: The process by which a company buys back its own securities from shareholders, subject to certain regulations and guidelines.
Role of Merchant Banker: The merchant banker plays a crucial role in the delisting process, including advising the company on the delisting process, determining the fair value of the equity shares, and ensuring compliance with regulatory requirements.

Introduction to Merchant Banking (Part 9)

Definition: Merchant banking involves various activities such as buy-back of securities, foreign exchange management, and compliance with regulatory frameworks.
Details: Companies can buy-back their own securities under specific provisions of the Companies Act 2013 and SEBI (Buy-back of Securities) Regulations, 2018.

Key Concepts

Buy-back of Securities: Companies can buy-back their own securities from the market, subject to certain conditions and procedures.
Foreign Exchange Management Act (FEMA), 1999: Regulates foreign exchange transactions, inbound and outbound investments, and acquisition of property and assets in India by non-residents.
FEMA Regulations: Issued by the RBI, these regulations cover various matters concerning foreign exchange transactions, such as external commercial borrowings, trade financing, and foreign investment in India.

Inbound Foreign Investment Routes under FEMA

FDI Route: For strategic investments, with a minimum investment size of 10% of the post-investment fully diluted paid-up capital of the investee company.
FPI Route: For non-resident investors, with a maximum investment size of 10% of the post-investment fully diluted paid-up capital of the listed Indian investee company.
FVCI Route: For off-shore funds making venture capital investments in eligible unlisted investee companies in India.

Regulatory Frameworks

Competition Act, 2002: Prohibits anti-competitive agreements, abuse of dominant position, and regulates combinations that may cause an appreciable adverse effect on competition in India.
Companies Act, 2013: Administers and regulates various aspects of a company, including issue of securities, prospectus, and allotment of securities.
SEBI Act, 1992: Regulates the securities market, including public offers, private placements, and listing of securities.

Introduction to Merchant Banking (Part 10)

Shelf Prospectus: A prospectus in respect of which the securities or class of securities included therein are issued for subscription in one or more issues over a certain period without the issue of a further prospectus.
Key Features:
- No further prospectus is required for a second or subsequent offer issued during the period of validity of the shelf prospectus.
- The company must file an information memorandum containing all material facts relating to new charges created, changes in the financial position of the company, and other prescribed changes.
- The information memorandum must be filed with the Registrar within the prescribed time, prior to the issue of a second or subsequent offer of securities under the shelf prospectus.

Red Herring Prospectus

Definition: A prospectus that does not include complete particulars of the quantum or price of the securities included therein.
Key Features:
- A company proposing to make an offer of securities may issue a red herring prospectus prior to the issue of a prospectus.
- The red herring prospectus must be filed with the Registrar at least 3 days prior to the opening of the subscription list and the offer.
- The red herring prospectus shall carry the same obligations as are applicable to a prospectus.

Abridged Prospectus

Definition: A memorandum containing such salient features of a prospectus as may be specified by SEBI.
Key Features:
- No form of application can be issued for the purchase of any securities of a company unless it is accompanied by an abridged prospectus.
- There are exceptions to this rule, such as where the offer is made in connection with a bona fide invitation to a person to enter into an underwriting agreement.

Prevention of Money Laundering Act 2002

Key Features:
- The Act aims to prevent the generation of black money and proceeds from criminal activities.
- It brings RBI, SEBI, and IRDA under its purview and is applicable to all financial institutions, banks, insurance companies, mutual funds, and their intermediaries.
- Money Laundering is defined as the process of conversion of money obtained from criminal activity into apparently legitimate money by concealing its criminal origin.

SEBI (Bankers to an Issue) Regulations, 1994

Key Features:
- The regulations govern the Bankers to an Issue (BTI) activity, which includes acceptance of application and application monies, acceptance of allotment or call monies, refund of application monies, and payment of dividend or interest warrants.
- The Banker to an Issue must be registered with SEBI and enter into an agreement with the issuer company.

SEBI (Registrars to an Issue and Share Transfer Agents) Regulations, 1993

Key Features:
- The regulations deal with the registration, code of conduct, and activities of entities that undertake activities like collecting applications from investors and keeping proper records of applications and monies received from investors.
- The Registrars to the Issue assist the issuer company in determining the basis of allotment of securities, finalizing the list of persons entitled to allotment, and processing and dispatching allotment letters, refund orders, or certificates.

Introduction to Merchant Banking (Part 11)

Pre-Issue Work: The following tasks are involved:
- Liaisoning with the company for dematerialization of equity shares held by existing shareholders
- Providing instructions to Self-Certified Syndicate Banks (SCSBs) on format and timeline of receipt of information
- Specifying the format for Designated Intermediaries to provide ASBA information
- Intimation of processing fees payable to SCSBs and brokerage/selling commission payable to Syndicate members, Registered Brokers, RTAs, and CDPs
Issue Work: The following tasks are involved:
- Collecting and reporting daily collections/bids received to the lead manager/book running lead managers
- Collecting data and forms from banks
- Liaisoning with clients and intermediaries to the issue
Post-Issue Work: The following tasks are involved:
- The Registrar's sole responsibility is to procure and collect final certificates from all SCSBs within two working days from the closure of the Offer
- Checking the accuracy of the date of such certificates and confirming receipt within the specified time limit
- Obtaining Demographic Details of Bidders from Depositories and validating this data with the Bid file

Key Responsibilities

Basis of Allotment: Ensuring that the Basis of Allotment is in accordance with SEBI ICDR Regulations, guidelines, and notifications, and as specified in the Offer Documents
Technical Rejection List: Preparing a technical rejection list based on electronic Bid files received from Stock Exchanges without reference to physical Bid cum Application Forms
Validation: Validating data with the Bid file and highlighting any discrepancies
Reconciliation: Reconciling compiled data received from Stock Exchanges and all SCSBs, and matching the same with the depository database for correctness of DP ID, Client ID, and PAN

Regulatory Framework

SEBI (Intermediaries) Regulations, 2008: Prescribes the procedure for registration of intermediaries, general obligations, inspection, and disciplinary proceedings
SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021: Allows listed companies to issue shares to employees under certain schemes and prescribes the implementation and administration of these schemes
SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021: Applies to public issues of debt securities and non-convertible redeemable preference shares, and specifies issue requirements, listing procedures, and obligations of intermediaries and issuers
SEBI (Real Estate Investment Trust) Regulations, 2014: Regulates the registration and operation of Real Estate Investment Trusts (REITs) and prescribes the requirements for offer and listing of REIT units.

Introduction to Merchant Banking (Part 12)

SEBI (Infrastructure Investment Trust) Regulations, 2014: The role of the manager includes ensuring investments are made in accordance with the investment conditions and strategy of the InvIT.
Key Responsibilities: The manager is responsible for appointing valuers, auditors, and other intermediaries, as well as ensuring timely and adequate disclosures to unit holders and SEBI.
InvIT: An Infrastructure Investment Trust is a trust registered under these regulations, with the manager ensuring compliance with investment conditions and regulations.

Key Concepts

Decision-Making: The manager must submit reports to the trustee, including decisions to acquire or sell assets, and details of any action requiring unit holder approval.
Disclosure: The manager must ensure timely and adequate disclosures to unit holders, SEBI, and designated stock exchanges, including quarterly reports and valuation reports.
Compliance: The manager must ensure compliance with regulations, including investment conditions, related party transactions, and borrowing and deferred payments.

Regulatory Framework

The Depositories Act, 1996: Enables the setting up of multiple depositories in India, improving capital market infrastructure and investor protection.
SEBI (Depositories and Participants) Regulations, 2018: Deals with procedural requirements for depositories and participants, including registration, rights, and obligations.
SEBI (Certification of Associated Persons in Securities Markets) Regulations, 2007: Requires associated persons to obtain certification, with NISM responsible for implementing the certification process and standards.

Certification Requirements

Obligation of Obtaining Certification: Associated persons must obtain certification, with exemptions for those holding a valid certificate or meeting specific experience and age criteria.
Manner of Obtaining Certification: Certification can be obtained through passing a relevant examination, completing classroom credits, or delivering formal classroom sessions.
Validity Period of Certificate: Certificates are valid for 3 years, with revalidation possible through continuing professional education or passing a relevant examination.

Introduction to Merchant Banking (Part 13)

Definition: Introduction to the NISM-Series-IX: Merchant Banking Certification Examination, which is mandatory for employees working with SEBI-registered Merchant Bankers and performing various SEBI-regulated functions.
Details: The examination is a requirement under the SEBI (CAPSM) Regulations, and employees must pass the relevant certificate examination or complete a specified number of classroom credits to be eligible.

Key Concepts in Merchant Banking

Associated Person: An individual who deals or interacts with investors, issuers, or clients of intermediaries, or handles assets, funds, or redressal of investor grievances.
NISM-Series-IX: Merchant Banking Certification Examination: A certification examination for employees working with SEBI-registered Merchant Bankers, which covers various aspects of merchant banking, including IPO, FPO, Open Offer, Buy-Back, and Delisting.

SEBI (Foreign Portfolio Investors) Regulations, 2019

Definition: A Foreign Portfolio Investor (FPI) is a person who satisfies the prescribed eligibility criteria and has been registered under the FPI Regulations.
Eligibility Criteria: An applicant must not be a resident in India, meet the prescribed conditions, and be authorized to invest in securities outside the country of its incorporation or establishment.
Investment Restrictions: FPIs are subject to investment restrictions and conditions, including transacting in securities only on the basis of taking and giving delivery, and investing in specified securities.

SEBI (Alternative Investment Funds) (AIF) Regulations, 2012

Definition: An Alternative Investment Fund (AIF) is a privately pooled investment vehicle that collects funds from investors for investing in accordance with a defined investment policy.
Categories of AIF: AIFs are categorized into three types: Category I, Category II, and Category III, each with its own investment strategy and conditions.
Registration: AIFs must seek registration under the SEBI (AIF) Regulations and launch schemes subject to filing of placement memoranda with the Board.

SEBI (Research Analyst) Regulations, 2014

Definition: Research Analysts are individuals who provide research reports or recommendations on securities, and are required to register with SEBI.
Registration: Research Analysts must meet the eligibility criteria, pass the NISM-Series-XV: Research Analyst Certification Examination, and comply with the code of conduct and procedures specified by SEBI.

Introduction to Merchant Banking (Part 14)

SEBI (Research Analyst) Regulations, 2014: Defines a research analyst as a person responsible for preparing, publishing, or providing research reports, making 'buy/sell/hold' recommendations, or giving price targets with respect to listed or to-be-listed securities.
Registration Requirement: Research analysts or entities must hold a SEBI registration certificate and have minimum qualifications, such as a post-graduate degree or diploma in finance, accountancy, or related fields from a recognized university or institute.
Minimum Qualifications: Include a professional qualification or post-graduate degree/diploma from a recognized university or institute, or a Post Graduate Program in Securities Market (Research Analysis) from NISM, or a graduate with at least 5 years of experience in financial products or markets.

Key Concepts

SEBI (Investment Adviser) Regulations, 2013: Regulates investment advisers, defining them as persons who provide investment advice to clients for consideration, and requires registration with SEBI.
Investment Advice: Relates to investing in, purchasing, selling, or dealing in securities or investment products, and includes financial planning, but excludes advice given through public media.
Right of Persons with Disabilities Act, 2016: Emphasizes the need for equal and accessible inclusion of persons with disabilities in availing financial services, and SEBI's commitment to ensuring digital KYC process accessibility.

Review Questions

The merchant banker leading a public offer is known as the 'Lead Manager': True
The Act dealing with laws relating to listed and unlisted companies: SEBI Act (among other options)
Validity period of a certificate under SEBI (Certification of Associated Persons in Securities Markets) Regulations, 2007: 3 years
The Act regulating anti-competitive agreements and combinations: Competition Act, 2002