Registration and Regulation of Working of Intermediaries

SEBI regulates various intermediaries in the primary and secondary markets through its Regulations for these intermediaries. These Regulations allow SEBI to inspect the functioning of these intermediaries and to collect to fees from them. Details of the registration and regulation of the working of intermediaries are given in the following sub-sections.

Primary Market Intermediaries

• Merchant bankers
  During 1996-97, 179 merchant bankers were granted registration. The certificates of registration granted to 14 merchant bankers were cancelled due to non payment of fees.
  
  Merchant bankers are registered in 4 categories. For each category, there are different eligibility criteria, which have been set keeping in view the different activities which Merchant Bankers are authorised to do. The category wise details of the registration of merchant bankers are given in Table 26.
  
  
• Registrars to an issue and share transfer agents
  Registrars to an Issue (RTI) and Share Transfer Agents (STA) are registered and regulated under SEBI (Registrar to an Issue and Share Transfer Agent) Rules and Regulations, 1993. Under these regulations, registration commenced in 1993-94 and is granted under two categories: Category I to act as both registrar to an issue and share transfer agent and Category II to act as either registrar to an issue or share transfer agent. Table 27 gives details of registration of registrars to an issue and share transfer agents. SEBI issued instructions to all registered RTIs and/or STAs to appoint compliance officers who would ensure that all rules, regulations, guidelines and directions issues by SEBI, the government and other regulatory authorities are complied with, and any deviations therefrom were to be reported to SEBI.
  
  
• Bankers to an issue
  Scheduled banks acting as bankers to an issue are required to be registered with SEBI in terms of SEBI (Bankers to an Issue) Rules and Regulations, 1994. Under these regulations, registration commenced in 1994-95 and bankers to an issue are required to comply with the guidelines issued and submit quarterly reports of their activities. At the end of March 1997, 80 bankers to an issue were registered with SEBI.
  
  
• Debenture trustees
  Debenture trustees are registered under and regulated by the SEBI (Debenture Trustees) Rules and Regulations, 1993. Under these regulations, registration commenced in 1993-94 and at the end of March 1997, 27 debenture trustees were registered with SEBI.
  
  
• Underwriters
  The number of underwriters registered with SEBI in terms of the SEBI (Underwriters) Rules and Regulations, 1993, which was 40 at the end of 1995-96, fell to 34 at the end of 1996-97.
  
  
• Portfolio managers
  During the year 1996-97, 3 portfolio managers were granted registration. Thus the number of portfolio managers rose from 13 at the end of 1995-96 to 16 at the end of 1996-97. It may be mentioned here that Category I and II merchant bankers are also authorised to undertake the activities of portfolio managers.
  
  

Secondary Market Intermediaries

• Stock brokers
  All stock brokers are registered with SEBI in terms of the SEBI (Stock Brokers and Sub Brokers) Regulations, 1992. During 1996-97, 391 brokers were registered with SEBI making the total number of stock brokers registered with SEBI to 8,867 as on March 31, 1997. Exchange wise details of stock brokers registered with SEBI are given in the Table 28 below. Figure 12 below illustrates the number of stock brokers and the level of corporatisation of membership of stock exchanges.
  
  From the table, the trend towards corporatisation can be seen. Corporate membership has gone up from 1,917 (23% of the total membership) as on March 31, 1996 to 2,360 (27% of total membership) as on March 31, 1997. The trend towards corporatisation of membership is expected to continue further in 1997-98 considering the one time exemption from capital gains tax proposed in the Budget for 1997-98. As of March 31, 1997, the majority of members of the NSEI and the OTCEI were corporate bodies. Other exchanges which are large in terms of number of members, such as Mumbai, Calcutta, Jaipur and Uttar Pradesh, had comparatively lower rates of corporatisation of members.
  
  
• Sub-brokers
  Individual investors invariably transact securities through sub-brokers. It is therefore absolutely imperative to regulate this class of intermediaries. SEBI’s efforts in registering and regulating them have not been very successful so far. As on March 31, 1997 only 1,798 sub brokers are registered with SEBI.