The Securities and Exchange Board (SEBI), which was established as a regulatory body to protect the interests of investors in the securities market in 1992 framed some guidelines for the Merchant Banks operating in India. These are known as the Securities and Exchange Board of India (Merchant Bankers) Regulations, 1992, and have been regularly amended to keep up with the changing market conditions.
These Regulations have been divided into Five Chapters and Four Schedules.
1. The First Chapter deals with the definitions of various terms used in Merchant Banking Industry.
2. The Second Chapter deals with the Registration and Certification of Merchant Bankers in India. It lays out certain Operational Capabilities and Capital Requirements that need to be fulfilled to register as a Merchant Banker in India. For e.g., Section 7 of the regulations state that a capital adequacy requirement of net worth of Rupees Five Crores needs to be fulfilled.
3. The Third Chapter talks about the General Obligations and Responsibilities that a registered Merchant Banker has to undertake. These include the General Code of Conduct, auditing of accounts, disclosure of information and other necessary operating guidelines.
4. The Fourth Chapter lays down the right of the Board to inspect the Merchant Bankers registered under it and the actions that can be taken on the basis of the report.
5. The Fifth Chapter deals with the cases of defaults and the actions to be taken in that condition.
The Schedules contain the format of forms and reports that are necessary and also describe the fees that need to be paid for various purposes.
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