Role and Responsibilities of Merchant Bankers in Public & Rights Issue

Merchant bankers play an important role in public issue process. While acting as a banker to an issue, a merchant banker has to disclose full details to the Securities Exchange Board of India (SEBI). The details submitted by merchant banker about the public issue should contain the following.

Merchant bankers role in Public Issue

Role of Merchant Bankers in Public Issue

Role of Merchant Bankers in Public Issue

1. Furnishing Information:

  • Number of issues for which the merchant banker is engaged as banker to issue.
  • Number of applications received and details of application money received
  • Dates on which applications from investors were forwarded to issuing company.
  • Details of amount as refund to investors.

2. Books to be Maintained:

  • Books of accounts for a minimum period of 3 years
  • Records regarding the company
  • Documents such as company applications, names of investors, etc.

3. Agreement with issuing company

Agreement with the issuing company by the merchant banker should contain

  • Number of collection centres
  • Application money received
  • Daily statement by each branch which is a collecting centre.

4. Action by RBI: Any action by RBI on merchant banker should be informed to SEBI by the merchant banker concerned.

5. Code of Conduct

  • Having high integration in dealing with clients.
  • Disclosure of all details to the authorities concerned. Avoiding making exaggerated statements.
  • Disclosing all the facts to its customers.
  • Not disclosing any confidential matter of the clients to third parties.

A rights issue is the offer of shares of a company to the existing shareholders. A merchant banker has the following responsibilities in Rights issue.

Responsibilities of merchant bankers in Rights Issue

Responsibilities of Merchant Bankers in Rights Issue

Responsibilities of Merchant Bankers in Rights Issue

1. The merchant banker will ensure that when Rights issues are taken up by a company, the merchant banker who is responsible for the Rights issue, shall see that an advertisement regarding the same is published in an English national daily, in an Hindi national daily and in a regional daily.

These newspapers should be in circulation in the city / town where the registered office of the company is located.

2. It is the duty of the merchant banker to ensure that the application forms for Rights issue should be made available to the shareholders and if they are not available, a duplicate composite application form is made available to them within a reasonable time.

3. If the shareholders are not able to obtain neither the original nor the duplicate application for Rights shares, they can apply on a plain paper through the merchant banker.

4. The details that should be furnished in the plain paper, while applying for Rights shares should be provided by the merchant hanker.

5. The merchant banker should mention in the advertisement, the company official to whom the shareholders should apply for Rights shares.

6. The merchant banker should also inform that no individual can apply twice, in standard form as well as in plain paper.

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