Bankers to an Issue

BANKERS TO AN ISSUE

The bankers to an issue are engaged in activities such as acceptance of applications along with application money from the investors in respect of issues of capital and refund of application money.

Registration

To carry on activity as a banker to issue, a person must obtain a certificate of registration from the SEBI. The SEBI grants registration on the basis of all the activities relating to banker to an issue in particular with reference to the following requirements: a) The applicant has the necessary infrastructure, communication and data processing facilities and manpower to effectively discharge his activities, b) The applicant/any of the directors of the applicant is not involved in any litigation connected with the securities market/has not been convicted of any economic offence; c) The applicant is a scheduled bank and d) Grant of a certificate is in the interest of the investors. A banker to an issue can apply for the renewal of his registration three months before the expiry of the certificate. Every banker to an issue had to pay to the SEBI an annual fee of Rs.2.5 lakhs for the first two years from the date of initial registration, and Rs.1 lakh for the third year to keep his registration in force. The renewal fee to be paid by him annually for the first two years was Rs.1 lakh and Rs.20,000 for the third year. Since 1999, schedule of fee is Rs.5 lakhs as initial registration fee and Rs.2.5 lakhs renewal fee every three years from the fourth year from the date of initial registrations. Non-payment of the prescribed fee may lead to the suspension of the registration certificate.

General Obligations and Responsibilities Furnish INFORMATION When required, a banker to an issue has to furnish to the SEBI the following information; a) The number of issues for which he was engaged as a banker to an issue; b) The number of application/details of the application money received, c) The dates on which applications from investors were forwarded to the issuing company /registrar to an issue; d) The dates/amount of refund to the investors.

DBA 1724 Books of Account/Record/Documents

A banker to an issue is required to maintain books of accounts/records/documents for a minimum period of three years in respect of, inter-alia, the number of applications received, the names of the investors, the time within which the applications received were forwarded to the issuing company/registrar to the issue and dates and amounts of refund money to investors.

Disciplinary Action by the RBI

If the RBI takes any disciplinary action against a banker to an issue in relation to issue payment, the latter should immediately inform the SEBI. If the banker is prohibited from carrying on his activities as a result of the disciplinary action, the SEBI registration is automatically deemed as suspended/cancelled.

1 Code of Conduct for Bankers To Issue

A banker to an issue should:

1. Make all efforts to protect the interest of investors.

2. Observe high standards of integrity and fairness in the conduct of its business.

3. Fulfill its obligations in a prompt, ethical and professional manner.

4. At all times exercise due diligence, ensure proper care and exercise independent professional judgment

5.  Not any time act in collusion with other intermediates over the issuer in a manner that is detrimental to the investor

6. Endeavour to ensure that a) inquiries from investors are adequately dealt with; b) grievances of investors are redressed in a timely and appropriate manner; c) where a complaint is not remedied promptly, the investor is advised of any further steps which may be available to the investor under the regulatory system.

7. Not a) Allow blank applications forms bearing brokers stamp to be kept the bank premises or peddled anywhere near the entrance of the premises; b) Accept applications after office hours or after the date of closure of the issue or on bank holidays; c) After the closure of the public issue accept any instruments such as Cheques/ demand drafts/stock invests from any other source other than the designated registrar to the issue; d) Part with the issue proceeds until listing permission is granted by the stock exchange to the body corporate; e) Delay in issuing the final certificate pertaining to the collection figures to the registrar to the issue, the lead manager and the body corporate and such figures should be submitted within seven working days from the issue closure date.

8. Be prompt in disbursing dividends, interests or any such accrual income received or collected by him on behalf of his clients.

9.  Not make any exaggerated statement whether oral or written to the client, either about its qualification or capability to render certain services or its achievements in regard to services rendered to other client.

10. Always Endeavour to render the best possible advice to the clients having regard to the clients‘ needs and the environments and his own professional skill.

11. Not divulge to anybody either orally or in writing, directly or indirectly, any confidential information about its clients which has come to its knowledge, without taking prior permission of its clients

11. Avoid conflict of interest and make adequate disclosure of his interest.

12. Put in place a mechanism to resolve any conflict of interest situation that may arise in the conduct of its business or where any conflict of interest arise, should take reasonable steps to resolve the same in an equitable manner.

14.Make appropriate disclosure to the client of its possible source or potential areas of conflict of duties and interest while acting as banker to an issue which would impair its ability to render fair, objective and unbiased services.

15.Not indulge in any unfair competition, which is likely to harm the interests of other bankers to an issue or investors or is likely to place such other bankers to an issue in a disadvantageous position while competing for or executing any assignment.

16.   Not discriminate amongst its clients, save and except on ethical and commercial considerations. 17. Ensure that any change in registration status/any penal action taken by the SEBI or any material change in financials which may adversely affect the interests of clients/ investors is promptly informed to the clients and business remaining outstanding is transferred to another registered person in accordance with any instructions of the affected clients/investors.

18.Maintain an appropriate level of knowledge and competency and abide by the provisions of the SEBI Act, regulations, circulars and guidelines of the SEBI. The banker to an issue should also comply with the award of the Ombudsman passed under the SEBI (Ombudsman) Regulations, 2003. 19. Ensure that the SEBI is promptly informed about any action, legal proceedings, etc., initiated against it in respect of any material breach of non-compliance by it, of any law, rules, regulations, and directions of the SEBI or of any other regulatory body.

20. Not make any untrue statement of suppress any material fact in any documents, reports, papers or information furnished to the SEBI.

21.  Not neglect or fail or refuse to submit to the SEBI or other agencies with which it is registered, such books, documents, correspondence, and papers or any part thereof as may be demanded/requested from time to time.

22.   Abide by the provisions of such acts and rules, regulations, guidelines, resolutions, notifications, directions, circulars and instructions as may be issued from time to time by the Central Government, relevant to the activities carried on the banker to an issue.

13. (a) Not render, directly or indirectly, any investment advice about any security in the publicly accessible media, whether real-time or non-real-time, unless a disclosure of its interest including long or short position in the security has been made, while rendering such advice; (b) in case an employee of the banker to an issue is rendering such advice, the banker to an issue should ensure that he discloses his interest, the interest of his dependent family members and that of the

17.Make appropriate disclosure to the client of its possible source or potential areas of conflict of duties and interest while acting as banker to an issue which would impair its ability to render fair, objective and unbiased services.

18.Not indulge in any unfair competition, which is likely to harm the interests of other bankers to an issue or investors or is likely to place such other bankers to an issue in a disadvantageous position while competing for or executing any assignment.

19.   Not discriminate amongst its clients, save and except on ethical and commercial considerations. 17. Ensure that any change in registration status/any penal action taken by the SEBI or any material change in financials which may adversely affect the interests of clients/ investors is promptly informed to the clients and business remaining outstanding is transferred to another registered person in accordance with any instructions of the affected clients/investors.

19.Maintain an appropriate level of knowledge and competency and abide by the provisions of the SEBI Act, regulations, circulars and guidelines of the SEBI. The banker to an issue should also comply with the award of the Ombudsman passed under the SEBI (Ombudsman) Regulations, 2003. 19. Ensure that the SEBI is promptly informed about any action, legal proceedings, etc., initiated against it in respect of any material breach of non-compliance by it, of any law, rules, regulations, and directions of the SEBI or of any other regulatory body.

22. Not make any untrue statement of suppress any material fact in any documents, reports, papers or information furnished to the SEBI.

23.  Not neglect or fail or refuse to submit to the SEBI or other agencies with which it is registered, such books, documents, correspondence, and papers or any part thereof as may be demanded/requested from time to time.

23.   Abide by the provisions of such acts and rules, regulations, guidelines, resolutions, notifications, directions, circulars and instructions as may be issued from time to time by the Central Government, relevant to the activities carried on the banker to an issue.

24.   (a) Not render, directly or indirectly, any investment advice about any security in the publicly accessible media, whether real-time or non-real-time, unless a disclosure of its interest including long or short position in the security has been made, while rendering such advice; (b) in case an employee of the banker to an issue is rendering such advice, the banker to an issue should ensure that he discloses his interest, the interest of his dependent family members and that of the employer including employer’s long or short position in the security, while rendering such advice.

Inspection

Such inspection is done by the RBI upon the request of the SEBI. The purpose of inspection is largely to ensure that the required books of accounts are maintained and to investigate into the complaints received from the investors against the bankers to an issue. The foregoing rules and regulations have brought the bankers to an issue under the regulatory framework of the SEBI with a view to ensuring greater investor protection. On the basis of the inspection report, the SEBI can direct the banker to an issue to take such measures as it may deem fit in the interest of the securities market and for due compliance with the provision of the SEBI Act.

Action In Case of Default

With a view to ensure effective regulation of the activities of the bankers to an issue, the SEBI is empowered to suspend/cancel their registration certificate. The grounds of suspension are: a) The banker violates the provisions of the SEBI Act, rules/regulations; b) Fails to/does not furnish the required information or furnishes wrong/false information; c) Fails to resolve investor complaints/to give satisfactory reply to SEBI; d) Is guilty of misconduct/unprofessional conduct inconsistent with the prescribed code of conduct; and e) Fails to pay fees and carry out his obligations as specified in the regulations. The SEBI can cancel registration in case of i. Repeated defaults leading to suspension of a banker, ii. The deterioration in is financial position which likely to adversely affect the interest of the investors, and iii. The being found guilty of fraud/convicted of a criminal offence.