ISSUE MANAGEMENT
Intermediaries
-A fee/advisory based financial services
-- By Nishant Dhruv, Atmiya College
ISSUE MANAGEMENT
An offer of sale of securities by any body An offer of sale of securities by any body
corporate through a merchant banker.
Nishant Dhruv, Atmiya Institute of
Technology & Science
Intermediaries
� Merchant Bankers/Lead Managers
� Underwriters
� Bankers to an issue
Brokers to an issue� Brokers to an issue
� Registrar and Share Transfer Agents
� Debenture Trustees
� Portfolio Management
Nishant Dhruv, Atmiya Institute of
Technology & Science
1. Merchant Bankers/Lead Managers
� Any person who is engaged in the business
of issue management)
Rendering
Making
arrangemen
t for sales
Intermediaries
Rendering
corporate
Advisory
services to
company Role
Nishant Dhruv, Atmiya Institute of
Technology & Science
� It’s now mandatory that all public issues
should be managed by Merchant banker
� For right issues which do not exceed Rs. 50 � For right issues which do not exceed Rs. 50
lakh, Merchant banker is not necessary.
Nishant Dhruv, Atmiya Institute of
Technology & Science
Merchant Banker/ Lead Manager
1. Registration
2. Grant of Certificate
3. Fee
Conditions of Registration4. Conditions of Registration
5. Responsibilities
6. Restrictions on business
7. Submission of documents
8. Acquisition of shares
Nishant Dhruv, Atmiya Institute of
Technology & Science
1. Registration :
� Compulsory registration is required with SEBI.
� From 1997, SEBI registers only “Category I”
merchant bankers.
� “Category I” merchant bankers can carry any
activity related to Issue management.
Nishant Dhruv, Atmiya Institute of
Technology & Science
2. Grant of Certificate:
� Any person directly/indirectly connected with applicant,
should not have certificate of registration
� CAR of minimum net-worth of Rs. 5 crore
� Directors/Partners should not involve in litigation connected
with securities market.
� Applicant is a fit and proper person (Regulation)
Nishant Dhruv, Atmiya Institute of
Technology & Science
3. Fee
� Application Fee : Rs. 25,000� Application Fee : Rs. 25,000
� Registration Fee : Rs. 10 lacs
� Renewal Fee : Rs. 5 lacs (every 3 years)
Nishant Dhruv, Atmiya Institute of
Technology & Science
4. Conditions of Registration:
� Prior approval of SEBI is required after change of status
� Enter into a legally binding agreement with the issuer specifying their mutual duties & responsibilities
� Pay the registration/renewal fee in the prescribed manner
Nishant Dhruv, Atmiya Institute of
Technology & Science
5. Responsibilities of Lead Manager:
� Agreement with the issuing company about, setting out
their mutual rights, liabilities
� Furnish the statement to SEBI at least 1 month prior to
opening of the issue.
� Lead manager can’t manage the issue, if the issuing
company is its associate. E.g. Kotak Investment Banking
& Kotak Mahindra Bank
Nishant Dhruv, Atmiya Institute of
Technology & Science
6. Restrictions on Business:
� Other than Banker/PFI, no one is allowed to
carry on the business of Merchant Bankercarry on the business of Merchant Banker
� Merchant banker is prohibited from carrying on
fund/asset based business. E.g. Factoring, Bill
Discounting, Leasing etc.
Nishant Dhruv, Atmiya Institute of
Technology & Science
7. Submission of Documents:
� Submit to SEBI at least 2 weeks before the date of filings
to ROCs/SEs
Draft prospectus along with the prescribed fee is payable � Draft prospectus along with the prescribed fee is payable
to SEBI.
8. Acquisition of Shares:
� Merchant banker is prohibited from acquiring securities of
issuer company.
Nishant Dhruv, Atmiya Institute of
Technology & Science
Underwriters
� Underwriters are one who agree to take up
securities which are not fully subscribed.
1 LAKH
Shares Issued
in Market
80,000 Shares
is being
subscribed
20,000 SHARES
UNSUBSCRIBED
Nishant Dhruv, Atmiya Institute of
Technology & Science
� The following operational framework has
been designed by SEBI –
1. Registration1. Registration
2. Fee
3. Agreement with clients (issuer)
4. General Responsibilities
5. Power to Call for Information
Nishant Dhruv, Atmiya Institute of
Technology & Science
1. Registration
� Certificate of registration must be obtain from SEBI.
In granting the certificate, SEBI considers � In granting the certificate, SEBI considers matters relating –
� The underwriter should have at least 2 employees who have experience in the same field.
� CAR is Rs. 20 lakhs (Net worth)
Nishant Dhruv, Atmiya Institute of
Technology & Science
2. Fee
� Application Fee : Rs. 25,000� Application Fee : Rs. 25,000
� Registration Fee : Rs. 10 lacs
� Renewal Fee : Rs. 5 lacs (every 3 years)
Nishant Dhruv, Atmiya Institute of
Technology & Science
3. Agreement with Clients:
� Underwriter has to enter into an agreement with issuing company
� Agreement contains – period within which underwriter has to subscribe the issue –the amount of commission .
4. General Responsibilities:
� Underwriter can’t derive any direct/indirect benefit from issuer other than commission
� Maximum obligation of an underwriter can’t exceed 20 times of net worth.
� Underwriters have to subscribe shares within 45 days
Nishant Dhruv, Atmiya Institute of
Technology & Science
5. Power to Call for Information:
� SEBI may at any time call for information
Nishant Dhruv, Atmiya Institute of
Technology & Science
Bankers To An Issue
� Bankers to an issue are engaged in activities
such as acceptance of application along with such as acceptance of application along with
application money from investors and also
performs the role of issue of capital and
refund of money.
Nishant Dhruv, Atmiya Institute of
Technology & Science
1. Registration
2. Fees
3. Furnish Information
Books of Account/Record4. Books of Account/Record
5. Agreement with Issuing Companies
6. Disciplinary Action by RBI
Nishant Dhruv, Atmiya Institute of
Technology & Science
1. Registration:
� Should have necessary infrastructure, data
processing facility and effective manpowerprocessing facility and effective manpower
� The applicant should not be involve in any of the
litigation connected to securities market.
Nishant Dhruv, Atmiya Institute of
Technology & Science
2. Fee
� Application Fee : Rs. 25,000� Application Fee : Rs. 25,000
� Registration Fee : Rs. 10 lacs
� Renewal Fee : Rs. 5 lacs (every 3 years)
Nishant Dhruv, Atmiya Institute of
Technology & Science
3. Furnish Information:
� Bankers to an issue has to submit following to
SEBI ---SEBI ---
� No. of issues for which he was engaged as banker
� No. of application money received
� The date on which applications have been forwarded to
issuer company (registrar to an issue)
� Amount of refund to the investors
Nishant Dhruv, Atmiya Institute of
Technology & Science
4. Books of Account:
� A banker to an issue is required to maintain
books of account for a minimum period of 3
years.years.
5. Agreement with issuing company:
� Every banker makes an agreement with issuing
company
� Agreement contains no. of collection centres
Nishant Dhruv, Atmiya Institute of
Technology & Science
6. Disciplinary action by RBI
� If RBI takes any disciplinary action against banks
related to issue of payment, then such matter related to issue of payment, then such matter
should immediately should brings into the notice
of SEBI.
� If banker is prohibited by RBI, the registration is
also deemed to be suspended by SEBI.
Nishant Dhruv, Atmiya Institute of
Technology & Science
Brokers to an Issue
Introduction
� Brokers are the one who is directly connect to
the investors. the investors.
� It’s a large pool of investors who are
associated with the brokers
Nishant Dhruv, Atmiya Institute of
Technology & Science
� Meaning:
Brokers to an issue are mainly concerned Brokers to an issue are mainly concerned
with the procurement of subscription to the
issue from its investors (customers).
Nishant Dhruv, Atmiya Institute of
Technology & Science
� Appointment of broker is not compulsory
� The issuer company can appoint as many broker as
it wants
� By and large, leading merchant banker has the
particulars (details) of the performance of the particulars (details) of the performance of the
brokers
� The issuer company may paid
brokerage/commission within the limits
� Brokerage applicable to all types of public issues is
fixed at 1.5%
Nishant Dhruv, Atmiya Institute of
Technology & Science
� All the out-of-pocket cost should be borne by the brokers to an issue
� Listed company are allowed to pay a brokerage on private placement which should not exceed 0.5%
� The issuing company has to pay brokerage/commission within two months from the date of allotment.
� The rate of brokerage payable must be disclosed in the prospectus.
Nishant Dhruv, Atmiya Institute of
Technology & Science
Registrars to an Issue and Share Transfer
Agent
� An intermediary in primary market
� Registrar to an issue carrying activities such as collecting
� STA maintains records of securities held by the investors
� STA deal with all as collecting applications, Keep a proper track record of application & money received, assist the company in determining the basis of allotment, refund orders etc.
� STA deal with all matters related to transfers.
Nishant Dhruv, Atmiya Institute of
Technology & Science
� Registration :
� Category I : Registration can be made with SEBI
as ‘Registrar to an issue’ AND ‘Share Transfer as ‘Registrar to an issue’ AND ‘Share Transfer
Agent’.
� Category II : Registration can be made either as
‘Registrar to an issue’ OR ‘Share Transfer Agent’.
Nishant Dhruv, Atmiya Institute of
Technology & Science
� Capital Adequacy:
� For category I, net worth of Rs.6 lakhs and for category II net worth of Rs.3 lakhs.
� Fees:
For category I, Registration fee Rs. 3 lakhs and � For category I, Registration fee Rs. 3 lakhs and Rs.1 lakh renewal fee (for every 3 years)
� For category II, Registration fee Rs. 1 lakh and Renewal fee Rs.50,000.
� For the both above category application fee is Rs. 10,000
Nishant Dhruv, Atmiya Institute of
Technology & Science
� Maintenance of Records : for 3 years
Nishant Dhruv, Atmiya Institute of
Technology & Science