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CHAPTER II

REGISTRATION OF MERCHANT BANKERS

Application for grant of certificate

3. (1) An application by a person for grant of a certificate shall be made to the Board in Form A .

(2) The application under sub- regulation (1) shall be made for any one of the following categories of the merchant banker namely:-

(a)Category I, that is �

(i) to carry on any activity of the issue management, which will inter-alia consist of preparation of prospectus and other information relating to the issue, determining financial structure, tie-up of financiers and final allotment and refund of the subscription; and (ii) to act as adviser, consultant, manager, underwriter, portfolio manager.
(b) Category II, that is, to act as adviser, consultant, co- manager, underwriter, portfolio manager;
(c) Category III, that is to act as underwriter, adviser, consultant to an issue;
(d) Category IV, that is to act only as adviser or consultant to an issue.
¹[(2A) Notwithstanding anything contained in this regulation, with effect from 9^th December, 1997,

(i) an application under sub-regulation (2) can be made only for carrying on the activities mentioned in clause(a) therein, and
(ii) an applicant can carry on the activity as underwriter only if he obtains separate certificate of registration under the provisions of Securities and Exchange Board of India (Underwriters) Regulations, 1993, and
(iii) an applicant can carry on the activity as portfolio manager only if he obtains separate certificate of registration under the provisions of Securities and Exchange Board of India (Portfolio Manager)Regulations, 1993.]
(3) Notwithstanding anything contained in sub-regulation (1), any application made by a merchant banker prior to coming into force of these regulations containing such particulars or as near thereto as mentioned in Form A shall be treated as an application made in pursuance of sub-regulation (1) and dealt with accordingly.

Application to conform to the requirements

(4) Subject to the provisions of sub-regulation (3) of regulation 3, any application, which is not complete in all respects and does not conform to the instructions specified in the form, shall be rejected:

Provided that, before rejecting any such application, the applicant shall be given an opportunity to remove within the time specified such objections as may be indicated by the Board.

Furnishing of information, clarification and personal representation

5. (1) The Board may require the applicant to furnish further information or clarification regarding matters relevant to the activity of a merchant banker for the purpose of disposal of the application. (2) The applicant or its principal officer shall, if so required, appear before the Board for personal representation.

Consideration of application

6. The Board shall take into account for considering the grant of a certificate, all matters which are relevant to the activities relating to merchant banker and in particular the applicant complies with the following requirements, namely:- ²[(a) the applicant shall be a body corporate other than a non- banking financial company as defined under clause (f) of section 45-I of the Reserve Bank of India Act, 1934, (2 of 1934) as amended from time to time,] ³[ Provided that the merchant banker who has been granted registration by the Reserve Bank of India to act as a Primary or Satellite dealer may carry on such activity subject to the condition that it shall not accept or hold public deposit] ⁴[(aa)] the applicant has the necessary infrastructure like adequate office space, equipments, and manpower to effectively discharge his activities; (b) the applicant has in his employment minimum of two persons who have the experience to conduct the business of the merchant banker; (c) a person directly or indirectly connected with the applicant has not been granted registration by the Board; Explanation: For the purposes of this clause the expression "directly or indirectly connected" means any person being an associate, subsidiary, inter-connected or group Company of the applicant in case of the applicant being a body corporate. (d) the applicant fulfils the capital adequacy requirement specified in regulation 7;

(e) the applicant, his partner, director or principal officer is not involved in any litigation connected with the securities market which has an adverse bearing on the business of the applicant;

(f) the applicant, his director, partner or principal officer has not at any time been convicted for any offence involving moral turpitude or has been found guilty of any economic offence;

(g) the applicant has the professional qualification from an institution recognised by the Government in finance, law or business management;

⁵[(gg) the applicant is a fit and proper person,]

(h) grant of certificate to the applicant is in the interest of investors.

Capital Adequacy Requirement

7. (1) The capital adequacy requirement referred to in sub- regulation (d) of regulation 6 shall not be less than the net worth of the person making the application for grant of registration.

(2) For the purposes of sub- regulation (1), the networth shall be as follows, namely :-

*Category*	*Minimum Amount*
Category I	[Rs.5,00,00,000;]⁶
Category II	Rs.50,00,000;
Category III	Rs.20,00,000
Category IV	Nil

Explanation:

For the purposes of this regulation "networth" means in the case of an applicant which is a partnership firm or a body corporate, the value of the capital contributed to the business of such firm or the paid up capital of such body corporate plus free reserves as the case may be at the time of making application under sub-regulation(1)of regulation 3.

Procedure For Registration

8.(1)The Board on being satisfied that the applicant is eligible shall grant a certificate in Form B. ⁷[***].

(2) [omitted by the Securities and Exchange Board of India( Merchant Bankers) Amendment Regulations, 1997 with effect from December 9, 1997 vide S.O.No. 837(E) ]

(3)[omitted by the Securities and Exchange Board of India( Merchant Bankers) Amendment Regulations, 1997 with effect from December 9, 1997 vide S.O.No. 837(E) ]

(4) On the grant of a certificate the applicant shall be liable to pay the fees ⁸[***] in accordance with Schedule II;
⁹[***]

Renewal of certificate

9. (1) Three months before expiry of the period of certificate, the merchant banker, may if he so desires, make an application for renewal in Form A .

(2) The application for renewal, under sub-regulation (1) shall be dealt with in the same manner as if it were a fresh application for grant of a certificate.

¹⁰[Provided that in case of an application for renewal of certificate of registration, the provisions of clause (a) of regulation 6 shall not be applicable upto June 30^th , 1998]

(3)The Board on being satisfied that the applicant is eligible for renewal of certificate shall grant a certificate in Form B and send an intimation to the applicant ¹¹[***]

(4) [omitted by the Securities and Exchange Board of India( Merchant Bankers) Amendment Regulations, 1997 with effect from December 9, 1997 vide S.O.No. 837(E) ]

(5) [omitted by the Securities and Exchange Board of India( Merchant Bankers) Amendment Regulations, 1997 with effect from December 9, 1997 vide S.O.No. 837(E) ]

(6) On the grant of a certificate the applicant shall be liable to pay the fees ¹²[***] in accordance with Schedule II ;

¹³[***]

Procedure where registration is not granted

10. (1) Where an application for grant of a certificate under regulation 3 or of renewal under regulation 9, does not satisfy the criteria set out in regulation 6, the Board may reject the application after giving an opportunity of being heard.

(2) The refusal to grant registration shall be communicated by the Board within thirty days of such refusal to the applicant stating therein the grounds on which the application has been rejected.

(3) Any applicant may, being aggrieved by the decision of the Board,under sub-regulation (1), apply within a period of thirty days from the date of receipt of such intimation to the Board for reconsideration of its decision.

(4) The Board shall reconsider an application made under sub- regulation (3) and communicate its decision as soon as possible in writing to the applicant.

Effect of refusal to grant certificate

11. Any merchant banker whose application for a certificate has been refused by the Board shall on and from the date of the receipt of the communication under sub-regulation (2) of regulation 10 cease to carry on any activity as merchant banker.

Payment of fees and the consequences of failure to pay fees

12. (1) Every applicant eligible for grant of a certificate shall pay such fees in such manner and within the period specified in Schedule II .

(2) Where a merchant banker fails to pay the Annual fees as provided in sub-regulation (1), read with Schedule II, the Board may suspend the registration certificate, whereupon the merchant banker shall cease to carry on any activity as a merchant banker for the period during which the suspension subsists.

¹ Inserted by the Securities and Exchange Board of India (Merchant Bankers)Amendment Regulations, 1997 w.e.f 9^th December, 1997 vide S.O 837(E).
² Inserted by the Securities and Exchange Board of India (Merchant Bankers) Regulations, 1997 , w.e.f 9^th December, 1997, vide S.O.837 (E).
³Inserted by the Securities and Exchange Board of India (Merchant Bankers)(Second Amendment) Regulations, 1999 w.e.f. November, 17, 1999 vide S.O.1119(E).
⁴Renumbered at the place of earlier clause (a), ibid.
⁵Inserted ibid.
⁶Substituted for "Rs. 1, 00,00,000" by Securities and Exchange Board of India (Merchant Bankers) Amendment Regulation 1995, w.e.f September 7, 1995 vide F..NO. SEBI./LE-1/9/95.
⁷ The words "and send an intimation to the applicant mentioning the category for which the Board has granted certificate" omitted by Securities and Exchange Board of India (Merchant Bankers) Amendment Regulations, 1997 w.e.f. 9^th December, 1997 vide S.O.837(E).
⁸The words "for the category for which the certificate is granted" omitted, ibid
⁹Proviso omitted, ibid.
¹⁰Inserted by the Securities and Exchange Board of India (Merchant Bankers)Amendment Regulations, 1998 w.e.f January 21, 1998, vide S.O.74 (E).
¹¹The words "mentioning the category for which the Board has granted certificate" omitted by the Securities and Exchange Board of India (Merchant Bankers) Amendment Regulations, 1997, w.e.f 9^th December 1997, vide S.O.837(E).
¹²The words "for the category for which the registration is granted" omitted, ibid.
¹³proviso omitted, ibid.

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