The term Merchant Banking has its origin in the trading methods of countries in the late eighteenth and early nineteenth century when trade-taking place was financed by bill of exchange drawn by merchanting houses
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| Underwriting
In respect of every issue under his management, the lead manager shall accept a minimum underwriting obligation of 5% of the total underwriting commitment or Rs. 25 lacs whichever is less. The outstanding underwriting commitments of a merchant banker shall not exceed 5 times his net worth at any point of time. The lead manager shall ensure that the issue to the public is fully underwritten and details of underwriters included in the prospectus. He shall also satisfy himself about the worth of the underwriters to fulfill their respective underwriting commitments. The lead manager shall satisfy himself that the issue is fully subscribed before announcing closure of the issue. In case, there is no definite information about subscription figures, the issue should be kept open for the required number of days to take care of the underwriters interests and to avoid any dispute, at a later date, by the underwriters over their liability. In case there is a devolvement on underwriters, the lead manager shall ensure that the underwriters give a letter of acceptance for the amount of devolvement within 60 days from the date of closure of the issue and pay the, amount of devolvement within 90 days from the date of closure of the issue. Any dispute relating to acceptance of underwriting commitment shall immediately be brought to the notice of SEBI. The lead manager shall exercise due caution while finalising the underwriting arrangement keeping in view the track record of underwriters in meeting their commitments in the devolved issues managed by them. While selecting underwriters and finalising underwriting arrangements, lead managers may ensure that the underwriters do not overexpose themselves so that it may become difficult for them to fulfill underwriting commitments. In this context, the overall exposure of underwriter(s) belonging to the, same group or management in an issue may be viewed carefully. There were complaints that the OTC Dealers are not treated on par with brokers of other exchanges while finalising underwriting arrangements. SEBI desires that other things being equal, lead managers may not exclude OTC Dealers registered with SEBI under SEBI (Stock Brokers and Sub-Brokers) Rules and Regulations, 1992 from underwriting. Download 0.57 Mb. Share with your friends:
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