Sebi Proposes To Review Merchant Banking Rules
The Securities and Exchange Board of India is taking a fresh look at the merchant banking regulations in the light of changes in responsibilities vested on the merchant bankers.
A Sebi source said the move is necessary in the light of the introductions of the new takeover code and the concept of book-building in the capital market.
We have shown great faith in the merchant bankers in the new takeover code. Besides this, we have also given up vetting of offer documents.
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We need to take a fresh look at the regulations governing merchant bankers as the concepts of takeover code and book-building did not exist when they were framed. It is important for us to check if we need to make any modifications in any of the regulations, said a source from the Securities and Exchange Board of India.
Sebi is envisaging a two-tier regulatory structure wherein the discipline in the merchant banking community will be ensured by the self regulatory organisation like the Association of Merchant Bankers of India (Ambi).
We do not intend to get into any kind of micro management. Merchant bankers have to ensure discipline amongst themselves.
However, for the purpose we need to give statutory authority status to the Association of Merchant Bankers of India within the framework of the Sebi Regulations. We are already discussing the issue with the association and they are supposed to get back to us with their comments.
The new structure envisaged above is also expected to screen the entry of new players into the merchant banking community.
The self-regulatory structure that exists abroad also has a system where investment bankers are not allowed to do business unless they become members of the SRO and qualify certain norms. We expect SROs in India to perform a similar function, the source added.
Meanwhile, the Securities and Exchange Board of India is not interested in regulating private placement of debt.
The market regulator is of the opinion that the matter is between the issuer and the investor who is expected to be a qualified investor. The regulator is not sure if it needs to play any role in the matter that is settled outside the capital market.
Ambi had put forward a proposal to regulate private placement of debt. Merchant bankers have been after us to regulate it because they want to ensure commissions in these deals. It is not fair to ask for regulating it putting forward the interest of small investors, the source added.