Dec 12, 2024Amendment to SEBI (Merchant Bankers) Regulations, 1992
The Securities and Exchange Board of India (‘SEBI’) has, pursuant to a Notification dated November 29, 2024, amended the SEBI (Merchant Bankers) Regulations, 1992 by way of the SEBI (Merchant Bankers) (Amendment) Regulations, 2024. Certain significant amendments have been summarised below:
| Regulation | Pre-amendment Position | Post-amendment Position | Implications |
| Regulation 20:
Responsibilities of Lead Managers | No lead manager shall agree to manage or be associated with any issue, unless his responsibilities relating to issue mainly, those of disclosures, allotment and refund are clearly defined, allocated and determined and a statement specifying such responsibilities is furnished to the Board at least one month before the opening of the issue for subscription: Provided that, where there are more than one lead merchant bankers to the issue, the responsibilities of each of such lead merchant bankers shall clearly be demarcated and a statement specifying such responsibilities shall be furnished to the Board at least one month before the opening of the issue for subscription. | No lead manager shall agree to manage or be associated with any issue, unless its responsibilities relating to the issue particularly, those of disclosures, allotment and refund are clearly defined, allocated and determined and a statement specifying such responsibilities is disclosed in the draft offer document and offer document: Provided that, where there is more than one lead merchant banker to the issue, the responsibilities of each of the lead merchant banker shall clearly be demarcated and a statement specifying such responsibilities shall be disclosed in the draft offer document and offer document. | The requirement for submitting the statement of inter-se allocation of responsibilities amongst merchant bankers to an issue to SEBI has been aligned with the requirement under the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, such that this statement need not be furnished to SEBI one month prior to the opening of an issue, and should, instead, be disclosed in the draft offer document and offer document for such issue. |
| Regulation 21A:
Merchant Banker Not to Act as Such for an Associate | A merchant banker shall not lead manage any issue or be associated with any activity undertaken under any regulations made by the Board, if he is a promoter or a director or an associate of the issuer of securities or of any person making an offer to sell or purchase securities in terms of any regulations made by the Board: Provided that a merchant banker who is an associate of such issuer or person may be appointed, if he is involved only in the marketing of the issue or offer. Explanation: For the purposes of this regulation, a merchant banker shall be deemed to be an “associate of the issuer or person” if: (i) either of them controls, directly or indirectly through its subsidiary or holding company, not less than fifteen per cent. of the voting rights in the other; or (ii) either of them, directly or indirectly, by itself or in combination with other persons, exercises control over the other; or (iii) there is a common director, excluding nominee director, amongst the issuer, its subsidiary or holding company and the merchant banker.” | A merchant banker, being a promoter or an associate of either the issuer of the securities or of a person making an offer to sell or purchase securities in terms of any of the regulations made by the Board, shall not lead manage any issue or be associated with any activity undertaken under any of the regulations made by the Board by such issuer or person: Provided that a merchant banker who is an associate of such issuer or person may be appointed, if he is involved only in the marketing of the issue or offer. Explanation: For the purposes of this regulation, a merchant banker shall be deemed to be an “associate of the issuer or person” if: (i) either of them controls, directly or indirectly through its subsidiary or holding company, not less than fifteen per cent. of the voting rights in the other; or (ii) either of them, directly or indirectly, by itself or in combination with other persons, exercises control over the other; or (iii) there is a common director – (a) in the issuer and the merchant banker; or (b) in the issuer’s subsidiary or holding company and the merchant banker: Provided that this clause shall not be applicable where the director concerned is a nominee director: Provided further that this clause shall not be applicable where the director concerned is an independent director subject to recusal by the said independent director in respect of the issue from the boards of both issuer and merchant banker. | (i) The exclusion of the restriction in relation to the merchant banker being a director of the issuer or of any entity proposing to sell/purchase the securities of the issuer has been done away with; and (ii) The exclusion of the ‘common director’ has been extended to an independent director, subject to recusal by such director in respect of the issue from the relevant boards.
|
| Regulation 22B:
General Responsibilities of a Merchant Banker as an Underwriter | Every merchant banker acting as an underwriter, in the event of being called upon to subscribe for securities of a body corporate pursuant to an agreement for underwriting, shall subscribe to such securities within 45 days of the receipt of such intimation from such body corporate. | A merchant banker, if called upon, pursuant to an agreement for underwriting to subscribe to the securities of a body corporate, shall subscribe to the said securities prior to the finalisation of the basis of allotment. | A merchant banker, if called upon to subscribe to the securities of a body corporate (pursuant to an underwriting agreement), must subscribe to such securities prior to the finalisation of the basis of allotment, instead of the earlier time limit of 45 days from the intimation of subscription by such body corporate. |