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Informist, Wednesday, Dec. 18, 2024

--SEBI tweaks norms for merchant bankers

NEW DELHI – The Securities and Exchange Board of India has decided to overhaul the regulations for merchant bankers to strengthen the regulatory framework with regard to eligibility, net worth, and activities they can undertake, and to increase the safeguards for public issues by companies. The SEBI board, which met Wednesday, approved the amendments to the merchant banker regulations.

Under the amendments approved, merchant bankers will undertake only permitted activities which come under the purview of the SEBI. Further, there will be two categories of merchant bankers based on net worth and activities. A Category 1 merchant banker will need to have a net worth of more than INR 500 million, and it will be allowed to undertake all permitted activities.

A Category 2 merchant banker will need to have a net worth of over INR 100 million and it can undertake all permitted activities except managing equity issues on the main board of stock exchanges. The amended norms will also require all registered merchant bankers to maintain a liquid net worth of at least 25% of the minimum net worth requirement at all times.

Further, a Category 1 merchant banker will face cancellation of registration if it does not earn a minimum revenue of INR 250 million on a cumulative basis in three immediately preceding financial years from the permitted activities. Similarly, a category 2 merchant banker will need to have a cumulative revenue of at least INR 50 million or face cancellation of licence.

SEBI's amended norms also prescribe an underwriting limit for merchant bankers of 20 times of liquid net worth. SEBI also wants to cut conflict of interest and lack of due diligence problems. The amended norms will not allow a merchant banker to lead manage any public issue if its directors, other key managerial personnel, and their relatives hold more than 0.1% of paid-up share capital in the issuer.  End

Reported by Rajesh Gajra

Edited by Akul Nishant Akhoury

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