THE GAZETTE OF INDIA

EXTRAORDINARY

PART –II – SECTION 3 – SUB SECTION (ii)

PUBLISHED BY AUTHORITY

SECURITIES AND EXCHANGE BOARD OF INDIA

NOTIFICATION

Mumbai, the 7^th September, 2006

SECURITIES AND EXCHANGE BOARD OF INDIA

(MERCHANT BANKERS) (THIRD AMENDMENT)

REGULATIONS, 2006

S.O No. 1448 (E). In exercise of the powers conferred by section 30 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) (Third Amendment) Regulations, 2006.

2. They shall come into force on the date of their publication in the Official Gazette.

3. In the Securities and Exchange Board of India (Merchant Bankers) Regulations, 1992:-

(i) in regulation 2 –

a. after the opening part and before clause (b), the following clauses shall be inserted, namely:-

“(a) “Act” means the Securities and Exchange Board of India Act, 1992 (15 of 1992);

(aa) “body corporate” shall have the meaning assigned to it in or under clause (7) of section 2 of the Companies Act, 1956 (1 of 1956);

(ab) “certificate” means a certificate of registration issued by the Board;

(ac) “change of status or constitution” in relation to a merchant banker -

(i) means any change in its status or constitution of whatsoever nature; and

(ii) without prejudice to generality of sub-clause (i), includes –

(A) amalgamation, demerger, consolidation or any other kind of corporate restructuring falling within the scope of section 391 of the Companies Act, 1956 (1 of 1956) or the corresponding provision of any other law for the time being in force;

(B) change in its managing director or whole-time director; and

(ad) “change in control”, in relation to a merchant banker being a body corporate, means:-

(i) if its shares are listed on any recognised stock exchange, change in control within the meaning of regulation 12 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997;

(ii) in any other case, change in the controlling interest in the body corporate;

Explanation: For the purpose of sub-clause (ii), the expression “controlling interest” means an interest, whether direct or indirect, to the extent of at least fifty one percent. of voting rights in the body corporate;”

b. after clause (c), the following clauses shall be inserted, namely:-

“(ca) “issue” means an offer of sale or purchase of securities by any body corporate, or by any other person or group of persons on its or his or their behalf, as the case may be, to or from the public, or the holders of securities of such body corporate or person or group of persons through a merchant banker;

(cb) “merchant banker” means any person who is engaged in the business of issue management either by making arrangements regarding selling, buying or subscribing to securities or acting as manager, consultant, adviser or rendering corporate advisory service in relation to such issue management.”

c. clause (e) shall be omitted;

d. in clause (f), the words “and the rules” occurring after the words “defined in the Act” and the words “or the rules, as the case may be” occurring at the end shall be omitted;

(ii) in regulation 3 –

a. after sub-regulation (1), the following sub-regulation shall be inserted, namely:-

“(1A) An application for registration made under sub-regulation (1) shall be accompanied by a non-refundable application fee as specified in Schedule II.”

b. in sub-regulation (2A), clause (ii) shall be omitted;

(iii) regulation 7 shall be substituted with the following, namely:-

“Capital adequacy requirement

7. The capital adequacy requirement referred to in clause (d) of regulation 6 shall be a net worth of not less than five crores rupees.

Explanation: For the purposes of this regulation, “net worth” means the sum of paid up capital and free reserves of the applicant at the time of making application under sub-regulation (1) of regulation 3.”

(iv) in regulation 9, after sub-regulation (1), the following sub-regulation shall be inserted, namely:-

“(1A) An application for renewal made under sub-regulation (1) shall be accompanied by a non-refundable application fee as specified in Schedule II.”

(v) after regulation 9, the following regulations shall be inserted, namely:-

“Conditions of registration

9A. (1) Any registration granted under regulation 8 or any renewal granted under regulation 9 shall be subject to the following conditions, namely:-

(a) where the merchant banker proposes to change its status or constitution, it shall obtain prior approval of the Board for continuing to act as such after the change;

(b) it shall pay the fees for registration or renewal, as the case may be, in the manner provided in these regulations;

(c) it shall take adequate steps for redressal of grievances of the investors within one month of the date of the receipt of the complaint and keep the Board informed about the number, nature and other particulars of the complaints received;

(d) it shall maintain capital adequacy requirements specified in regulation 7 at all times during the period of the certificate or renewal thereof;

(e) it shall abide by the regulations made under the Act in respect of the activities carried on by it as merchant banker.

(2) Nothing contained in clause (a) of sub-regulation (1) shall affect the obligation to obtain a fresh registration under section 12 of the Act in cases where it is applicable.

Period of validity of certificate

9B. The certificate of registration granted under regulation 8 and its renewal granted under regulation 9, shall be valid for a period of three years from the date of its issue to the applicant.”

(vi) in Schedule II –

a. in paragraph 1, for the words “Rupees five lacs”, the words “ten lakh rupees” shall be substituted;

b. in paragraph 2, for the words and figures “Rs. 2.5 lacs”, the words “five lakh rupees” shall be substituted;

c. after paragraph 3, the following paragraph shall be inserted, namely:-

“3A. The non-refundable fee payable along with an application for registration under sub-regulation (1A) of regulation 3 or an application for renewal of registration under sub-regulation (1A) of regulation 9 shall be a sum of twenty five thousand rupees.”

d. in paragraph 4, for the words and figures “paragraphs 1 and 2” the words and figures “paragraphs 1, 2 and 3A” shall be substituted.

F.No. SEBI/LAD/DOP/ 0709 /2006

M. DAMODARAN

CHAIRMAN

SECURITIES AND EXCHANGE BOARD OF INDIA

Footnotes :

1. The principal regulations Securities and Exchange Board of India (Merchant Bankers) Regulations, 1992 were published in Official Gazette of India on 22^nd December, 1992 vide F.No.20/15/SE/92.

2. The Securities and Exchange Board of India (Merchant Bankers) Regulations, 1992 was subsequently amended :

(a) on 7^th September, 1995 by Securities and Exchange Board of India (Merchant Bankers) (Amendment) Regulations, 1995 vide No. S.O. 396 (E);

(b) on November 28, 1995 by Securities and Exchange Board of India (Payment of Fees) (Amendment) Regulations, 1995 vide No. S.O. 939 (E);

(c) on June 6, 1996 by Securities and Exchange Board of India (Merchant Bankers) (Amendment) Regulations, 1996 vide F.No. SEBI/LE-I/9/95;

(d) on December 9, 1997 by Securities and Exchange Board of India (Merchant Bankers) (Amendment) Regulations, 1997 vide No. S.O. 837 (E);

(e) on January 21, 1999 by Securities and Exchange Board of India (Merchant Bankers) (Amendment) Regulations, 1999 vide No. S.O. 74 (E).

(f) on September 30, 1999 by Securities and Exchange Board of India (Merchant Bankers) (Amendment) Regulations, 1999 vide No. S.O. 799 (E).

(g) on November 17, 1999 by Securities and Exchange Board of India (Merchant Bankers) (Second Amendment) Regulations, 1999 vide No. S.O. 1119 (E).

(h) on March 28, 2000 by Securities and Exchange Board of India (Appeal to Securities Appellate Tribunal) (Amendment) Regulations, 2000 vide No. S.O. 278 (E).

(i) on May 29, 2001 by Securities and Exchange Board of India (Investment Advice by Intermediaries) (Amendment) Regulations, 2001 vide No. S.O. 476 (E).

(j) on September 27, 2002 by Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 vide No. S.O. 1045 (E).

(k) on October 1, 2003 by Securities and Exchange Board of India (Merchant Bankers) (Amendment) Regulations, 2003 vide No. S.O. 1154 (E).

(l) on March 10, 2004 by the Securities and Exchange Board of India (Criteria for Fit and Proper Person) Regulations, 2004 vide S.O. No. 398(E).

(m) on April 19, 2006 by the Securities and Exchange Board of India (Merchant Bankers) (Amendment) Regulations, 2006 vide No. S.O. 560(E).

(n) on May 3, 2006 by the Securities and Exchange Board of India (Merchant Bankers) (Second Amendment) Regulations, 2006 vide No. S.O. 640(E).

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THE GAZETTE OF INDIA EXTRAORDINARY PART –II – SECTION 3 – SUB SECTION (ii) PUBLISHED BY AUTHORITY SECURITIES AND EXCHANGE BOARD OF INDIA NOTIFICATION Mumbai, the 7^th September, 2006 SECURITIES AND EXCHANGE BOARD OF INDIA (MERCHANT BANKERS) (THIRD AMENDMENT) REGULATIONS, 2006 S.O No. 1448 (E). In exercise of the powers conferred by section 30 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) (Third Amendment) Regulations, 2006. 2. They shall come into force on the date of their publication in the Official Gazette. 3. In the Securities and Exchange Board of India (Merchant Bankers) Regulations, 1992:- (i) in regulation 2 – a. after the opening part and before clause (b), the following clauses shall be inserted, namely:- “(a) “Act” means the Securities and Exchange Board of India Act, 1992 (15 of 1992); (aa) “body corporate” shall have the meaning assigned to it in or under clause (7) of section 2 of the Companies Act, 1956 (1 of 1956); (ab) “certificate” means a certificate of registration issued by the Board; (ac) “change of status or constitution” in relation to a merchant banker - (i) means any change in its status or constitution of whatsoever nature; and (ii) without prejudice to generality of sub-clause (i), includes – (A) amalgamation, demerger, consolidation or any other kind of corporate restructuring falling within the scope of section 391 of the Companies Act, 1956 (1 of 1956) or the corresponding provision of any other law for the time being in force; (B) change in its managing director or whole-time director; and (C) any change in control over the body corporate; (ad) “change in control”, in relation to a merchant banker being a body corporate, means:- (i) if its shares are listed on any recognised stock exchange, change in control within the meaning of regulation 12 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997; (ii) in any other case, change in the controlling interest in the body corporate; Explanation: For the purpose of sub-clause (ii), the expression “controlling interest” means an interest, whether direct or indirect, to the extent of at least fifty one percent. of voting rights in the body corporate;” b. after clause (c), the following clauses shall be inserted, namely:- “(ca) “issue” means an offer of sale or purchase of securities by any body corporate, or by any other person or group of persons on its or his or their behalf, as the case may be, to or from the public, or the holders of securities of such body corporate or person or group of persons through a merchant banker; (cb) “merchant banker” means any person who is engaged in the business of issue management either by making arrangements regarding selling, buying or subscribing to securities or acting as manager, consultant, adviser or rendering corporate advisory service in relation to such issue management.” c. clause (e) shall be omitted; d. in clause (f), the words “and the rules” occurring after the words “defined in the Act” and the words “or the rules, as the case may be” occurring at the end shall be omitted; (ii) in regulation 3 – a. after sub-regulation (1), the following sub-regulation shall be inserted, namely:- “(1A) An application for registration made under sub-regulation (1) shall be accompanied by a non-refundable application fee as specified in Schedule II.” b. in sub-regulation (2A), clause (ii) shall be omitted; (iii) regulation 7 shall be substituted with the following, namely:- “Capital adequacy requirement 7. The capital adequacy requirement referred to in clause (d) of regulation 6 shall be a net worth of not less than five crores rupees. Explanation: For the purposes of this regulation, “net worth” means the sum of paid up capital and free reserves of the applicant at the time of making application under sub-regulation (1) of regulation 3.” (iv) in regulation 9, after sub-regulation (1), the following sub-regulation shall be inserted, namely:- “(1A) An application for renewal made under sub-regulation (1) shall be accompanied by a non-refundable application fee as specified in Schedule II.” (v) after regulation 9, the following regulations shall be inserted, namely:- “Conditions of registration 9A. (1) Any registration granted under regulation 8 or any renewal granted under regulation 9 shall be subject to the following conditions, namely:- (a) where the merchant banker proposes to change its status or constitution, it shall obtain prior approval of the Board for continuing to act as such after the change; (b) it shall pay the fees for registration or renewal, as the case may be, in the manner provided in these regulations; (c) it shall take adequate steps for redressal of grievances of the investors within one month of the date of the receipt of the complaint and keep the Board informed about the number, nature and other particulars of the complaints received; (d) it shall maintain capital adequacy requirements specified in regulation 7 at all times during the period of the certificate or renewal thereof; (e) it shall abide by the regulations made under the Act in respect of the activities carried on by it as merchant banker. (2) Nothing contained in clause (a) of sub-regulation (1) shall affect the obligation to obtain a fresh registration under section 12 of the Act in cases where it is applicable. Period of validity of certificate 9B. The certificate of registration granted under regulation 8 and its renewal granted under regulation 9, shall be valid for a period of three years from the date of its issue to the applicant.” (vi) in Schedule II – a. in paragraph 1, for the words “Rupees five lacs”, the words “ten lakh rupees” shall be substituted; b. in paragraph 2, for the words and figures “Rs. 2.5 lacs”, the words “five lakh rupees” shall be substituted; c. after paragraph 3, the following paragraph shall be inserted, namely:- “3A. The non-refundable fee payable along with an application for registration under sub-regulation (1A) of regulation 3 or an application for renewal of registration under sub-regulation (1A) of regulation 9 shall be a sum of twenty five thousand rupees.” d. in paragraph 4, for the words and figures “paragraphs 1 and 2” the words and figures “paragraphs 1, 2 and 3A” shall be substituted. F.No. SEBI/LAD/DOP/ 0709 /2006 M. DAMODARAN CHAIRMAN SECURITIES AND EXCHANGE BOARD OF INDIA Footnotes : 1. The principal regulations Securities and Exchange Board of India (Merchant Bankers) Regulations, 1992 were published in Official Gazette of India on 22^nd December, 1992 vide F.No.20/15/SE/92. 2. The Securities and Exchange Board of India (Merchant Bankers) Regulations, 1992 was subsequently amended : (a) on 7^th September, 1995 by Securities and Exchange Board of India (Merchant Bankers) (Amendment) Regulations, 1995 vide No. S.O. 396 (E); (b) on November 28, 1995 by Securities and Exchange Board of India (Payment of Fees) (Amendment) Regulations, 1995 vide No. S.O. 939 (E); (c) on June 6, 1996 by Securities and Exchange Board of India (Merchant Bankers) (Amendment) Regulations, 1996 vide F.No. SEBI/LE-I/9/95; (d) on December 9, 1997 by Securities and Exchange Board of India (Merchant Bankers) (Amendment) Regulations, 1997 vide No. S.O. 837 (E); (e) on January 21, 1999 by Securities and Exchange Board of India (Merchant Bankers) (Amendment) Regulations, 1999 vide No. S.O. 74 (E). (f) on September 30, 1999 by Securities and Exchange Board of India (Merchant Bankers) (Amendment) Regulations, 1999 vide No. S.O. 799 (E). (g) on November 17, 1999 by Securities and Exchange Board of India (Merchant Bankers) (Second Amendment) Regulations, 1999 vide No. S.O. 1119 (E). (h) on March 28, 2000 by Securities and Exchange Board of India (Appeal to Securities Appellate Tribunal) (Amendment) Regulations, 2000 vide No. S.O. 278 (E). (i) on May 29, 2001 by Securities and Exchange Board of India (Investment Advice by Intermediaries) (Amendment) Regulations, 2001 vide No. S.O. 476 (E). (j) on September 27, 2002 by Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 vide No. S.O. 1045 (E). (k) on October 1, 2003 by Securities and Exchange Board of India (Merchant Bankers) (Amendment) Regulations, 2003 vide No. S.O. 1154 (E). (l) on March 10, 2004 by the Securities and Exchange Board of India (Criteria for Fit and Proper Person) Regulations, 2004 vide S.O. No. 398(E). (m) on April 19, 2006 by the Securities and Exchange Board of India (Merchant Bankers) (Amendment) Regulations, 2006 vide No. S.O. 560(E). (n) on May 3, 2006 by the Securities and Exchange Board of India (Merchant Bankers) (Second Amendment) Regulations, 2006 vide No. S.O. 640(E). ************************