(UNDERWRITERS) REGULATIONS 1993
CONTENTSCHAPTER II: REGISTRATION OF UNDERWRITERS
3. Application for grant of certificateCHAPTER III: GENERAL OBLIGATIONS AND RESPONSIBILITIES
13. To abide by the Code of ConductCHAPTER IV: INSPECTION AND DISCIPLINARY PROCEEDINGS
19. Board's right to inspectCHAPTER V: PROCEDURE FOR ACTION IN CASE OF DEFAULT
25. Liability for action in case of defaultSCHEDULE I: FORMS SCHEDULE II: FEES
SCHEDULE III: CODE OF CONDUCT
THE GAZETTE OF INDIA EXTRAORDINARY
SECURITIES AND EXCHANGE BOARD OF INDIA
No.LE/10/93. In exercise of the powers conferred by section 30 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Board with the previous approval of the Central Government, hereby makes the following regulations, namely :-
1. (1) These regulations may be called the Securities and Exchange Board of India (Underwriters) Regulations, 1993.
(2) They shall come into force on the date of their publication in the Official Gazette.
2. (1) In these regulations, unless the context otherwise requires :-
(a) "enquiry officer" means any officer of the Board, or any other person, having experience in dealing with the problems relating to the securities market, who is appointed by the Board under Chapter V;
(i) in relation to a proprietary concern, the proprietor himself;
(e) regulations" means Securities and Exchange Board of India (Underwriters) Regulations, 1993;(2) All other words and expressions used in these regulations but not defined, and defined in the Act and the rules shall have the same meanings respectively assigned to them in the Act or the rules, as the case may be.
3. (1) An application by an underwriter for grant of a certificate shall be made to the Board in Form A.
(2) Notwithstanding anything contained in sub-regulation (1), any application made by an underwriter 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.
4. (1) The Board may require the applicant to furnish further information or clarification regarding matters relevant to underwriting to consider the application for grant of a certificate.
1*[(2) If the Board, on receipt of further information, is of the opinion that the information so furnished is not sufficient to decide on the application and seeking further information through correspondence is likely to delay the matter, it may require the applicant or its principal officer to appear before the Board in order to give an opportunity to the applicant to give further clarifications on the application made under Regulation 3.]
5. Subject to the provisions of sub-regulation (2) 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:
Providedthat, before rejecting any such application, the applicant shall be given an opportunity to remove within 2*[one month] such objections as may be indicated by the Board.
3*[Provided further that the Board may, on sufficient reasons being shown extend the time by another one month in order to enable the applicant to comply with the requirements of the Board].
6. The Board shall take into account for considering the grant of a certificate, all matters which are relevant to or relating to underwriting and in particular the following, namely, whether the applicant -
(a) has the necessary infrastructure like adequate office space, equipments, and manpower to effectively discharge his activities;Capital Adequacy Requirement
7. (1) The capital adequacy requirement referred to in sub- regulation (d) of regulation 6 shall not be less than the networth of rupees twenty lakhs;
(2) Notwithstanding anything contained in sub-regulation (1),-
(a) every stock broker, who acts as an underwriter shall fulfil the capital adequacy requirements specified by the stock exchange of which he is a member;Explanation: For the purposes of this regulation, "networth" means -
(a) in the case of an applicant being a proprietary concern or a firm or an association of persons or any body of individuals, the value of capital contributed to such business by the applicant and the free reserves of any kind belonging to the business of the applicant; andProcedure for registration
8. The Board on being satisfied that the applicant is eligible, shall send an intimation 6*[within one month of such satisfaction] of the applicant mentioning that he has been found eligible for the grant of certificate and grant a certificate in form B subject to payment of fees as specified in regulation 12.
9. (1) An underwriter may, if he so desires, make an application in Form A for renewal of certificate before three months of the expiry of the period of certificate.
10. (1) Where an application for grant of a certificate under regulation 3 or of renewal under regulation 9 does not fulfil the requirements set out in regulation 6, the Board may reject the application, after giving an opportunity of being heard.
(2) 7*[The decision shall be communicated by the Board within thirty days of such decision 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 (2), apply within a period of thirty days from the date of receipt of such intimation, to the Board for reconsideration of its decision.
(4) On receipt of the application made under sub-regulation (3), the Board shall reconsider its decision and communicate its findings thereon as soon as possible in writing to the applicant.
11. Any underwriter whose application for grant or renewal of 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 act as an underwriter.
8*[Provided that if the Board is satisfied that it is in the interest of the investors, it may permit the underwriter to undertake the underwriting commitments already entered into by him during the validity period of the certificate.]
12. (1) Every applicant eligible for grant or renewal of a certificate shall pay fees in such manner and within the period specified in Schedule II:
Provided10*[***] that a stock broker or a merchant banker who, has been granted a certificate under Section 12 of the Act and pays fees under the Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992 or Securities and Exchange Board of India (Merchant Bankers) Regulations 1992, shall not be required to pay fees under sub- regulation (1).
(2) Where an underwriter fails to pay the fees as provided in sub- regulation (1), the Board may suspend the certificate, whereupon the underwriter shall forthwith cease to act as an underwriter.
1. Substituted for the following by the Securities and Exchange Board of India (Underwriters) (Amendment) Regulations 1997, published in the Official Gazette of India dated 17.01.1997
"The applicant or, its principal officer shall, if so required, appear before the Board for personal representation. Application to conform to the requirements"2. Substituted for "the time specified" by the Securities and Exchange Board of India (Amendment) Regulations 1997 published in the Official Gazette of India dated 17.01.1997.
3. Proviso inserted by the Securities and Exchange Board of India (Underwriters) (Amendment) Regulations, 1997 published in the Official Gazette of India dated 17.01.1997.
4. Substituted for "The applicant or, its principal officer shall, if so required, appear before the Board for personal representation. Application to conform to the requirements" by the Securities and Exchange Board of India (Underwriters) (Amendment) Regulations 1997 published in the Official Gazette of India dated 17.01.1997 .
5. Clause (f) inserted by the SEBI (underwriters) Amendment Regulations, 1998 published in the Official Gazette of India dated 05.01.1998.
6. "within one month of such satisfaction" inserted by Securities and Exchange Board of India (Underwriters) (Amendment) Regulations, 1997 published in the Official Gazette of India dated 17.01.1997.
7. Substituted for, by the Securities and Exchange Board of India (Underwriters) (Amendment) Regulations 1997 published in the Official Gazette of India dated 17.01.1997
"The refusal to grant or renew the certificate 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"8. Proviso inserted by the Securities and Exchange Board of India (Underwriters) (Amendment) Regulations, 1997 published in the Official Gazette of India dated 17.01.1997.
9. The proviso omitted by the SEBI (Underwriters) (Amendment) Regulations, 1997 published in the Official Gazette of India dated 17.01.1997
"Provided that the Board may on sufficient cause being shown permit the underwriter to pay such fees at any time before the expiry of six months from the date on which such fees become due;"10. The word "further" omitted by the SEBI (Underwriters) (Amendment) Regulations, 1997 published in the Official Gazette of India dated 17.01.1997.
13. Every underwriter shall at all times abide by the Code of Conduct as specified in Schedule III.
14. Every underwriter shall enter into an agreement referred to in clause (b) of rule 4 with each body corporate on whose behalf he is acting as underwriter and the said agreement shall, amongst other things, provide for the following, namely :-
(i) the period for which the agreement shall be in force;General responsibilities of an underwriter
15. (1) The underwriter shall not derive any direct or indirect benefit from underwriting the issue other than the commission or brokerage payable under an agreement for underwriting.
(2) The total underwriting obligations under all the agreements referred to in clause (b) of rule 4 shall not exceed twenty times the networth referred to in regulation 7.
(3) Every underwriter, in the event of being called upon to subscribe for securities of a body corporate pursuant to an agreement referred to in clause (b) of rule 4 shall subscribe to such securities within 45 days of the receipt of such intimation from such body corporate.
16. (1) Subject to the provisions of any other law, every underwriter shall keep and maintain the following books of accounts and documents, namely :-
(a) in relation to underwriter being a body corporate -
(i) a copy of the balance sheet and profit and loss account as specified in sections 211 and 212 of the Companies Act, 1956 (1 of 1956);(b) in relation to an underwriter not being a body corporate -
(ii) their assets and liabilities.
(3) Every underwriter shall also maintain the following records with respect to -
(i) details of all agreements referred to in clause (b) of rule 4;(4) Every underwriter shall intimate to the Board the place where the books of accounts, records and documents are maintained.
17. Every underwriter shall preserve the books of account and other records and documents mentioned under this chapter for a minimum period of five years.
11*[Appointment of Compliance Officer
17 A (1) Every underwriter shall appoint a compliance officer who shall be responsible for monitoring the compliance of the Act, rules and regulations, notifications, guidelines, instructions, etc. issued by the Board or the Central Government and for redressal of investors’ grievances.
(2) The compliance officer shall immediately and independently report to the Board any non-compliance observed by him]
18. (1) The Board may at any time call for any information from an underwriter with respect to any matter relating to underwriting business.
(2) Where any information is called for under sub-regulation (1) it shall be the duty of the underwriter to furnish such information.
11. Regulation 17A inserted by the SEBI (Investment Advice by Intermediaries) (Amendment) Regulations, 2001, published in the Official Gazette of India dated 29.05.2001.
19. (1) Where it appears to the Board so to do, it may appoint one or more persons as inspecting authority to undertake the inspection of the books of accounts, other records and documents of the underwriter for any of the purposes specified in sub-regulation (2).
(2) The purposes referred to in sub-regulation (1) shall be as follows, namely:-
(a) to ensure that the books of accounts and other records and documents are being maintained in the manner required;Procedure for inspection
20. (1) Before undertaking an inspection under regulation 19 the Board shall give a reasonable notice to the underwriter, for that purpose.
(2) Notwithstanding anything contained in sub-regulation (1), where the Board is satisfied that in the interest of the investors or in the public interest no such notice should be given, it may by an order in writing direct that the inspection of the affairs of the underwriter be taken up without such notice.
(3) On being empowered by the Board, the inspecting authority shall undertake the inspection and the underwriter against whom an inspection is being carried out shall be bound to discharge his obligations as provided under regulation 21.
21. (1) It shall be the duty of every director, proprietor, partner, officer and employee of the underwriter who is being inspected to produce to the inspecting authority such books, accounts and other documents in his custody or control and furnish him with the statements and information relating to an underwriter within such time as the inspecting authority may require.
(2) The underwriter shall allow the inspecting authority to have a reasonable access to the premises occupied by such underwriter or by any other person, on his behalf and also extend reasonable facility for examining any books, records, documents and computer data in the possession of the underwriter or any such other person on their behalf and also provide copies of documents or other material which in the opinion of the inspecting authority are relevant for the purposes of the inspection.
(3) The inspecting authority shall in the course of inspection, be entitled to examine or record statements of any principal officer, director, partner, proprietor and employee.
(4) It shall be the duty of every director, proprietor, partner, officer or employee of the underwriter to give to the inspecting authority all assistance in connection with the inspection which the underwriter may reasonably be expected to give.
22. The inspecting authority shall, as soon as may be possible, submit an inspection report to the Board.
23. (1) The Board shall after consideration of the inspection report communicate the findings to the underwriter to give him an opportunity of being heard before any action is taken by the Board on the findings of the inspecting authority.
(2) On receipt of the explanation, if any, from the underwriter the Board may call upon the underwriter to take such measures as the Board may deem fit in the interest of the securities market and for due compliance with the provisions of the Act, rules and regulations.
24. Notwithstanding anything contained above the Board may appoint a qualified auditor to investigate into the books of account of the affairs of the underwriter:
Providedthat the auditor so appointed shall have the same powers of the inspecting authority as stated in regulation 19 and the obligation of the underwriter and his employees in regulation 21 shall be applicable to the investigation under this regulation.
25. (1) An underwriter or a stock broker or a merchant banker entitled to carry on business of underwriting without obtaining a separate certificate under rule 3 who, -
(a) fails to comply with any conditions subject to which certificate has been granted;(2) The penalties referred to in sub-regulation (1) may be either:
(a) suspension of registration 12*[under the grounds specified] in sub-regulation (1) of regulation 26 after enquiry for a specified period; orSuspension, cancellation of certificate
26. (1) A penalty of suspension of certificate granted to an underwriter or a certificate of registration granted under section 12 of the Act to a stock broker or a merchant banker entitled to carry on business of underwriting without obtaining a certificate under rule 3, may be imposed where an underwriter or such stock broker or merchant banker -
(i) violates the provisions of the Act, rules or regulations;(2) A penalty of cancellation of certificate granted to an underwriter or a certificate of registration granted under section 12 of the Act to a stock broker or a merchant banker entitled to carry on the business of underwriting under rule 3, may be imposed where they.
(i) indulge in deliberate manipulation or price rigging or cornering activities affecting the securities market and the investors interest;Manner of making order of suspension and cancellation of certificate
27. No order of penalty of suspension or cancellation shall be imposed except after holding an inquiry in accordance with the procedure specified in regulation 28.
28. (1) For the purpose of holding an enquiry under regulation 27, the Board may appoint an enquiry officer.
(2) The enquiry officer shall issue to the underwriter a notice at the registered office or the principal place of business of the underwriter.
(3) The underwriter may, within thirty days from the date of receipt of such notice, furnish to the enquiry officer a reply together with copies of documentary or other evidence relied on by him or sought by the Board from the underwriter.
(4) The enquiry officer shall, give a reasonable opportunity of hearing to the underwriter to enable him to make submissions in support of his reply made under sub-regulation (3).
(5) Before the enquiry officer, the underwriter may either appear in person or through any person duly authorised by the underwriter:
Providedthat no lawyer or advocate shall be permitted to represent the underwriter at the enquiry:
Providedfurther that where a lawyer or an advocate has been appointed by the Board as a presenting officer under sub-regulation (6), it shall be lawful for the underwriter to present its case through a lawyer or advocate.
(7) The enquiry officer shall, after taking into account all relevant facts and submissions made by the underwriter, submit a report to the Board and recommend the penalty to be awarded as also the justification of the penalty proposed.
29. (1) On receipt of the report from the enquiry officer, the Board shall consider the same and issue a show-cause notice as to why the penalty as it considers appropriate should not be imposed.
(2) The underwriter shall within 13*[thirty days] of the date of the receipt of the show-cause notice send a reply to the Board.
(3) The Board after considering the reply to the show-cause notice, if received, shall as soon as possible but not later than thirty days from the receipt of the reply, if any, pass such order as it deems fit.
(4) Every order passed under sub-regulation (3) shall be self- contained and give reasons for the conclusions stated therein including justification of the penalty imposed by that order.
(5) The Board shall send a copy of the order under sub-regulation (3) to the underwriter.
30. (1) On and from the date of the suspension of the certificate or certificate of registration granted to a stock broker or a merchant banker under section 12 of the Act, the underwriter shall cease to act as an underwriter during the period of suspension:
Providedthat the Board may in the interest of the investors and securities market, permit the underwriter to complete his underwriting obligations specified in the agreement referred to in clause (b) of rule 4.
(2) On and from the date of cancellation of certificate or certificate of registration granted to a stock broker or a merchant banker under section 12 of the Act, the underwriter shall with immediate effect cease to act as an underwriter.
31. The order of the Board passed under sub-regulation (3) of regulation 29, shall be published in atleast two daily newspapers by the Board.
14*[Appeal to the Securities Appellate Tribunal
32. Any person aggrieved by an order of the Board made, on and after the commencement of the Securities Laws (Second Amendment) Act, 1999, (i.e., after 16th December 1999), under these regulations may prefer an appeal to a Securities Appellate Tribunal having jurisdiction in the matter.
12. "under the grounds specified" inserted by the Securities and Exchange Board of India (Underwriters) (Amendment) Regulations, 1997 published in the Official Gazette of India dated 17.01.1997.
13. Substituted for "twenty one days" by the Securities and Exchange Board of India (underwriters) Amendment Regulations 1997 published in the Official Gazette of India dated 17.01.1997.
14. Substituted for the following by the SEBI (Appeal to the Securities Appellate Tribunal) (Amendment) Regulations, 2000 published in the Official Gazette of India dated 28.03.2000
"Any person aggrieved by an order of the Board under the regulations may prefer an appeal to the Central Government under the Securities and Exchange Board of India (Appeal to the Central Government) Rules, 1993."
APPLICATION FOR REGISTRATION AS UNDERWRITER
NAME OF APPLICANT AND ITS STATUS
NAME AND DESIGNATION OF PRINCIPAL
1. Applicants must submit a completed application form together with supporting documents to the Securities and Exchange Board of India.
2. All columns of the application should be filled in. In case a column is not relevant then `NOT APPLICABLE' should be specified.
3. Information which needs to be supplied in more details may be written on separate sheets which should be attached to the application form.
4. Original copy of form duly signed should be submitted for registration.
PART - I
1. APPLICANTS DETAILS
1.1 Name of the Applicant:
1.2 Address of Applicant:
Pin code: _____________________ Telephone No:_____________
Telex No: _____________________ Fax No: _________________
1.3 Address of the applicant for Correspondence:
Pin code: _____________________ Telephone No:_____________
Telex No: _____________________ Fax No: _________________
1.4 Address of Branch Offices (in India) of the applicant, if any:
1.5 Whether any other application under Securities and Exchange Board of India Act, 1992 has been made for grant of Certificate, if so, details thereof
2. ORGANISATION STRUCTURE :
2.1 Objects of the organisation of the applicant. (Attach extracts from relevant documents like, Partnership deed/Charter/Memorandum of Association/Articles of Association etc) in support of objects of the organisation.
2.2 Date and Place of Incorporation/Establishment of the organisation of the applicant.
Day Month Year Place
2.3 Status of the applicant (specify whether proprietary, partnership, association of persons, body of individuals, limited company - public/private, others. If listed, name the stock exchange and latest share price:-high and low.)
2.4 Organisation Chart stating the functional responsibility at various levels
2.5 Particulars of all Proprietors/ Partners/ Managers/ Officers/ Directors.
2.6 Number of employees
2.7 Name and activities of associate companies/ concerns.
2.8 In case the applicant is a body corporate, please give list of major share holders (holding 5% or more voting rights)
3.0 DETAILS OF INFRASTRUCTURAL FACILITIES
3.1 Office Space (mention the extent of area and ownership details available).
3.2 Office Equipment (mention the details of electronic office equipment, typewriters, telecommunication equipment, Furniture & Fixtures, other communication facilities etc.)
4.0 BUSINESS PLAN ( FOR THREE YEARS)
4.1 History, Major achievements and present activity
5.0 FINANCIAL INFORMATION
5.1 Capital Structure (Rs. in lakhs)
Note:- In case of partnership or proprietary concerns, please indicate capital minus drawings.
5.2 Deployment of Resources
a) Fixed Assets
b) Plant & Machinery and office equipment
c) Investments (Details should be given separately)
5.3 Major Source of Estimated Profit from various sources (Rs. in lakhs)
5.4 Please enclose three years of audited annual accounts and where unaudited reports are submitted, give reasons.
5.5 Name and Address of the Principal Bankers
5.6 Name and Address of the Auditors (Internal, External & Tax auditor, if any, as applicable)
6.0 OTHER INFORMATION
6.1 Indicate involvement in any offence relating to moral turpitude/economic offenses in the last three years.
6.2 Any other information considered relevant to the nature of services rendered by the company.
7.0 BUSINESS INFORMATION
7.2 Indicate How decision on Underwriting is usually taken.
7.3 Indicate various research & database facilities available.
7.4 Enclose a copy of typical contract entered with the issuer for Underwriting activity.
8.0 EXPERIENCE :
8.1 Experience in Underwriting activities. (Indicate Name of the company, Particulars of the issue, Amount of underwriting done in last three years)
8.2 Experience in other financial services rendered:- (Period, Area and Date of Commencement of Activity).
8.3 Details of all Un-settled and pending devolvement/disputes regarding Underwriting:
8.4 Indicate underwriting defaulted with any company and reasons for the same.
THIS DECLARATION MUST BE SIGNED BYPRINCIPAL OFFICER/S
I/We hereby apply for GRANT OF CERTIFICATE OF ______________________________ REGISTRATION by the Board. I/We warrant that I/We will carry out my/our duties in accordance with the Act, Rules and Regulations. I/We warrant that I/We have truthfully and fully answered the questions above and provided all the information which might reasonably be considered relevant for the purposes of my/our grant of certificate for registration and I/We will promptly notify the Board of any changes in the information during the period that my/our registration is being considered and if my/our registration is accepted, thereafter.
I/We understand that misleading or attempting to mislead the Board shall render the applicant liable to disciplinary proceedings.
I/We certify that the above information and information supplied in the application form is true, complete and correct.
For and on behalf of
(Name of Applicant)
(Name of Applicant)
CERTIFICATE OF REGISTRATION
I. In exercise of the powers conferred by sub-section (1) of section 12 of the Securities and Exchange Board of India Act, 1992, read with the rules and regulations made thereunder for the underwriters, the Board hereby grants a certificate of registration to ________________________ as an underwriter subject to the conditions in the rules and in accordance with the regulations.
II. Registration Code for the underwriter is __________
III. Unless renewed, the certificate of registration is valid from ________ to _________.
For and on behalf of
Security Exchange Board of India
3. (a) The fee referred to in paragraph 1 shall be paid by the underwriter within fifteen days from the date of receipt of intimation from the Board under regulation 8.
(b) The fee referred to in paragraph 2 shall be paid by the underwriter within fifteen days of receipt of intimation from the Board disposing of the application for renewal made under sub-regulation (1) of regulation 9.4. The fees specified in paragraphs 1 and 2 shall be payable by the underwriter by a demand draft in favour of "Securities and Exchange Board Of India" payable at Mumbai or at the respective regional office.]
15. Substituted for the following paragraphs 1, 2, 3 and 4 by the SEBI(Underwriters) (Amendment) Regulations, 1999 published in the Official Gazette of India dated 30.09.1999.
1. Every underwriter shall subject to paragraphs 3 and 4 of this Schedule , pay registration fees as set out below:(i) Rs 2 lakhs as 1st installment for the first year from the date of initial grant of certificate.2. Every underwriter shall subject to paragraphs (3) and (4) of this schedule pay a fee of Rs 20,000/- every year to keep the certificate in force or renewal thereof.
1. Every underwriter shall maintain high standards of integrity, dignity and fairness in all his dealings with his clients and other Underwriters in the conduct of his business.
2. An underwriter shall ensure that he and his personnel will act in an ethical manner in all his dealings with a body corporate making an issue of securities (hereinafter referred to in the schedule as "the issuer").
3. Every underwriter shall, at all times, render high standards of service, exercise due diligence, ensure proper care and exercise independent professional judgement.
4. Every underwriter shall disclose to the Issuer Company his possible source or potential areas of conflict of duties and interest while providing underwriting services.
5. Underwriter shall not indulge in any unfair competition, which is likely to be harmful to the interest of other underwriters carrying on the business of underwriting or likely to place such other underwriters in a disadvantageous position in relation to the underwriter while competing for, or carrying out any assignment.
6. No underwriter shall make any statement, either oral or written, which would misrepresent -
(a) the services that the underwriter is capable of performing for the, or has rendered to other Issuer Company;7. No underwriter shall divulge to other Issuer, Press or any party any confidential information about his Issuer Company, which has come to his knowledge and deal in securities of any Issuer Company without making disclosure to the Board as required under the regulations and also to the Board of Directors of the Issuer Company.
8. No underwriter shall willfully make untrue statement or suppress any material fact in any documents, reports, papers or information furnished to the Board.
16*[9 (a) [An underwriter or any of his employees shall not render, directly or indirectly any investment advice about any security in the publicly accessible media, whether real-time or non-real-time, unless a disclosure of his interest including his long or short position in the said security has been made, while rendering such advice.
(b) In case, an employee of the underwriter is rendering such advice, he shall also disclose the interest of his dependent family members and the employer including their long or short position in the said security, while rendering such advice].
16. Clause 9 inserted by the SEBI (Investment Advice by Intermediaries) (Amendment) Regulations, 2001 published in the Official Gazette of India published in the Official Gazette of India dated 29.5.2001.