Registration, Code of Conduct and General Obligations of Merchant Bankers

Where this chapter sits

Chapter 3 carries 15% of the paper. It is the rulebook you will personally work under.

Three things dominate: the two categories with their net worth requirements, the code of conduct, and the conflict-of-interest restrictions on lead managing.

3.1 What a merchant banker may do

As per the SEBI (Merchant Bankers) Regulations, 1992, a body corporate other than a non-banking financial company (NBFC) can undertake activities that are relating to merchant banker.

The SEBI-regulated permitted activities

I. Managing of public issues, qualified institutions placements, rights issues of securities and advisory or consulting services incidental to such issues

II. Managing of: a. Acquisitions and takeovers under the... (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 b. buy-back under the... (BuyBack of Securities) Regulations, 2018 c. delisting under the... (Delisting of Equity Shares) Regulations, 2021 d. compliances as may be required under the... (Listing Obligations and Disclosure Requirements) Regulations, 2015 in respect of any scheme of arrangement e. implementation of a scheme under the... (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 f. advisory or consulting services incidental to the activities specified in clauses (a) to (e)

III. Underwriting activities as specified by the Board from time to time

IV. Private placement of listed or proposed to be listed securities — where 'securities' shall be treated as 'proposed to be listed' from the date of approval of the board resolution of the issuer

V. Managing of international offering of securities and advisory or consulting services incidental to such offering

VI. Filing of placement memorandum of an alternative investment fund

VII. Issuance of fairness opinion

VIII. Managing of secondary market transactions of securities listed on a stock exchange recognized by the Board and activities incidental thereto

IX. Market making in accordance with the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018

X. Any other activity as may be specified by the Board from time to time

Non-SEBI-regulated activities

Merchant Bankers can now undertake fee-based, non-fund-based activities in the financial service sector, provided they are incidental or complementary to merchant banking and conducted through Strategic Business Units (SBUs) with proper segregation and ring-fencing. The segregation shall be done on or before December 31, 2026.

Fee-based and non-fund-based only — and only through an SBU.

The conditions:

(a) The MB shall ensure that the grievance redressal mechanism including escalation mechanism, if any, with respect to activities not regulated by SEBI, is separate and distinct from the grievance redressal mechanism provided for activities regulated by SEBI and is part of the SBU.

(b) The MB shall prepare and maintain separate records in the SBU for the non-SEBI regulated activities.

(c) The staff engaged in non-SEBI regulated activities, should be distinct from the staff handling activities regulated by SEBI. However, the staff can cross the Chinese wall, subject to due procedures approved by the board of directors of the entity. Such Chinese wall shall not be applicable for the Key Managerial Personnel.

(d) The other resources, including the information technology infrastructure, may be shared... subject to due procedures approved by the board of directors.

(e) The MB shall duly disclose on its website, the list of the activities that are not regulated by SEBI or any other Financial Sector Regulator (FSR), along with a disclosure that none of the SEBI investor protection mechanism will be available — existing MBs to do so within thirty days from the effective date, i.e., on or before February 02, 2026.

(f) If an MB undertakes activity regulated by other FSR, the name of the relevant FSR should also be specified in disclosures.

(g) The MB shall ensure that its advertising, marketing material and its webpage displaying information pertaining to SEBI regulated activities shall be separate and distinct from that of non-SEBI regulated activities.

(h) Before undertaking any activities which are not regulated by SEBI, there shall be an upfront written disclosure by the MB to the relevant stakeholders including clients, beneficiaries and counterparties, on all engagement letters, contracts, agreements, and business communication, with confirmation/acknowledgement... obtained from the stakeholders.

(i) For existing mandates, disclosures, acknowledgements and a compliance report to the Board.

And a half-yearly undertaking: the MB must submit an undertaking as part of the half-yearly report confirming compliance with requirements of regulation 13A and the conditions prescribed, duly reviewed and approved by its board of directors.

Plus one more: a person holding a Certificate of Registration under MB regulations, which is also regulated by the Reserve Bank of India, shall undertake the merchant banking activities specified through a separate business unit.

Note the Chinese wall carve-out — it shall not be applicable for the Key Managerial Personnel, since KMPs must see both sides of the business.

3.2 Registration

The definition

A Merchant Banker is defined as "any person who is engaged in the business of issue management either by making arrangements regarding selling, buying or subscribing to securities or acting as manager, consultant, adviser or rendering corporate advisory service in relation to such issue management".

Principal officer — an employee of the merchant banker, who has at least five years of experience in working in the financial markets, and who has been designated as such by the merchant banker, and is responsible for the decisions made by the merchant banker for the management or administration of merchant banking activities and all other operations.

**Existing merchant bankers must comply within one year from the effective date i.e., on or before January 02, 2027, while a new applicant is required to comply with the said requirement at the time of filing application with SEBI.

The two categories

An application... needs to be submitted to SEBI in Form A, accompanied by a non-refundable application fee of Rs. 50,000/-, and can be made only for Category I Merchant Banker.

(i) Category I, which can carry out all the permitted activities;

(ii) Category II, which can carry out all the permitted activities except public issues of equity shares proposed to be listed on the main board of a recognised stock exchange.

And existing firms must choose: a merchant banker that already holds a certificate of registration under these regulations shall re-categorise itself as Category I or Category II within such time period and in the manner, as may be specified by the Board.

Note that fresh applications can only be for Category I. Category II exists as a destination for existing firms and for those who fail to meet Category I requirements.

Eligibility

(a) The applicant shall be a body corporate including a company incorporated under the Companies Act, 2013 or any previous company law or a limited liability partnership firm, except—

I. a body corporate incorporated outside India other than a foreign bank licensed by the Reserve Bank of India, II. a One Person Company as defined under the Companies Act, 2013, and III. a non-banking financial company — though the merchant banker who has been granted registration by the Reserve Bank of India to act as a primary or satellite dealer may carry on such activity subject to the condition that it shall not accept or hold public deposit.

(b) The applicant should have the necessary infrastructure like adequate office space, equipment's and manpower to effectively discharge his activities;

(c) The applicant has in its employment, a minimum of two persons who are professionally qualified in finance or law or accountancy or business management from a Government recognised university or institution or who have a recognised degree in finance or law or accountancy or business management from a foreign university or institution.

Two qualified persons — the single most examined number in this chapter.

And they must be certified: the employees of an applicant, shall possess the certificate for NISM Series-IX: Merchant Banking Certification Examination at the time of application.

For an existing MB: an existing employee shall obtain requisite certification within one year from effective date, i.e., on or before January 02, 2027. And the employees, who are appointed on or after January 3, 2026, shall be required to obtain requisite certification within ninety days from the date of his/her appointment.

The remaining conditions:

(d) A person directly or indirectly connected with the applicant has not been granted registration by the SEBI — where directly or indirectly connected means any person being an associate, subsidiary or inter-connected or group company of the applicant.

(e) The applicant fulfils the capital adequacy and liquid net worth requirements specified in regulations 7 and 7A

(f) The applicant, his partner, director or principal officer are not involved in any litigation connected with the securities market which has an adverse bearing on the business of the applicant

(g) The applicant, his director, partner or principal officer have not been at any time been convicted for any offence involving moral turpitude or has been found guilty of any economic offence

(h) The applicant has the professional qualification from an institution recognized by the Government in finance, law or business management

(i) Grant of certificate to the applicant is in the interest of investors

(j) The applicant satisfies the capital adequacy requirements and is Fit and proper person

And a grandfathering rule: the certificate of registration granted to a merchant banker connected directly or indirectly with another merchant banker prior to the commencement of the... (Merchant Bankers) (Amendment) Regulations, 2025 shall continue to be valid.

Capital adequacy and liquid net worth

Merchant Bankers are required to comply with the revised net worth (capital adequacy) and liquid net worth requirements.

Who must comply when:

Applications made on or after January 3, 2026: Applicants must satisfy the revised net worth and liquid net worth requirements as on the date of application. Applications filed before January 3, 2026 but granted registration subsequently: Such applicants are treated as existing Merchant Bankers. Existing Merchant Bankers are required to comply with the revised requirements in a phased manner.

The phased requirements under Regulation 7A:

Liquid net worth is one quarter of net worth in every cell.

Re-categorisation: existing merchant bankers may continue to operate under their existing category up to March 31, 2027, and on or before March 31, 2027, they must intimate SEBI by email (mb@sebi.gov.in) regarding the category under which they intend to continue from April 1, 2027, accompanied by a Chartered Accountant-certified Net Worth Certificate, including the component of liquid net worth.

The consequences of failure:

An existing Merchant Banker that fails to comply with the Category I requirements by the end of Phase I or Phase II, as applicable, shall be automatically designated as a Category II Merchant Banker.

An existing Merchant Banker that fails to comply with the Category II requirements by the end of Phase I or Phase II shall not undertake any fresh permitted activity specified under Regulation 13A(1) until it complies.

Demotion for failing Category I; a freeze on new business for failing Category II.

Ongoing: a Chartered Accountant's certificate confirming that the prescribed net worth and liquid net worth requirements have been maintained at all times during the relevant half-year period, submitted with the Half-Yearly Report.

And generally: a merchant banker that fails to meet the minimum net worth requirement... shall not undertake any fresh permitted activity, till such time it complies with the requirement.

What liquid net worth means

"Liquid net worth" shall mean net worth deployed in unencumbered liquid assets, with applicable haircut.

The workbook's illustration: with Listed Shares A — Rs. 200 and G-Sec B — Rs. 100, the value counted is 70% of Listed Shares i.e., 70% of Rs. 200 = Rs. 140 plus 90% of G-Sec i.e., 90% of Rs. 100 = Rs. 90, giving Total Value = Rs. 230.

And "liquid assets" means low risk assets that can be converted into cash in a short period of time such as cash, fixed deposits, government securities, money markets instruments, treasury bills, repo on government securities and acceptable marketable securities with applicable haircut.

Valuation basis: the value as recorded in the books of accounts, on the date of computation of the net worth.

Fit and proper

SEBI takes into account the "Criteria for fit and proper person" as given under the SEBI (Intermediaries) Regulations 2008, requiring (a) the competence and capability in terms of infrastructure and manpower requirements; and (b) the financial soundness, which includes meeting the net worth requirements.

And Regulation 5 allows SEBI to require further information or clarification, and the applicant or its principal officer shall, if so required, appear before SEBI for personal representation.

3.2.4 Fees

On being intimated of the grant of this certificate the merchant banker is required to pay the requisite fees... within 15 days of receipt of such intimation from SEBI.

**Payment may be by direct credit in the bank account through NEFT/RTGS/IMPS or any other mode allowed by RBI or by a demand draft in favour of Securities and Exchange Board of India payable at Mumbai or at the respective regional office.

In favour of SEBI — not AIBI.

And non-payment has two consequences: the merchant banker shall not undertake any new activity till such time the fees is paid, and shall also be liable to pay interest at 15% per annum for each month of delay or part thereof.

3.2.5 Conditions of registration

(a) Where the merchant banker proposes change in control, it shall obtain prior approval of the SEBI for continuing to act as such after the change

(b) The merchant banker shall pay the fees for registration in the manner as provided

(c) The merchant banker shall take adequate steps for redressal of grievances of the investors within 21 days of the date of the receipt of the complaint and keep SEBI informed about the number, nature and other particulars of the complaints received

(d) It shall always maintain capital adequacy requirements during the period, and maintain liquid net worth requirements specified in regulation 7A at all times

(e) It shall abide by the regulations made under the SEBI Act, 1992

(f) it shall intimate the Board of the details of any change in information submitted while seeking registration within seven working days of such change

(g) where the merchant banker is acting as an underwriter, it shall enter into a valid agreement with the body corporate

(h) it shall undertake only such activities as specified by the Board

(i) it shall not outsource — (i) due diligence activities; (ii) preparation of offer related document; and (iii) any other activity as may be specified by the Board

(k) The compliance officer shall possess NISM-Series-IX: Merchant Banking Certification Examination and NISM-Series-III-A: Securities Intermediaries Compliance (Non-Fund) Certification Examination

Two certifications for the compliance officer, not one. An existing compliance officer must obtain them within one year i.e., on or before January 02, 2027, and one appointed on or after January 3, 2026... within ninety days from the date of his/her appointment.

The minimum revenue requirement

The merchant banker shall generate minimum revenue, on a cumulative basis over the three immediately preceding financial years from permitted activities:

Category I: at least Rs. 25 crore Category II: at least Rs. 5 crore

The sanction: if an MB fails to generate minimum revenue... its certificate of registration is liable to be cancelled under summary proceedings under SEBI (Intermediaries) Regulations, 2008.

The first assessment w.r.t. minimum revenue from permitted activities by MBs, will be carried out with effect from April 01, 2029.

Four extenuating circumstances SEBI will weigh: 1. Natural Calamities: Events such as floods, earthquakes, or other natural disasters. 2. Pandemics: Outbreak of pandemic situations, such as COVID-19. 3. Global Economic Recession... 4. Geopolitical Factors: Geopolitical tensions and war.

Reporting: MBs are required to submit details of revenue from permitted activities to SEBI within three months from the end of each financial year, starting from FY 2026-27.

And an exclusion for a merchant banker managing only (i) listed or proposed to be listed non-convertible securities, securitized debt instruments, security receipts, municipal debt securities, commercial papers; or (ii) listed or proposed to be listed units of a REITs or an InvITs.

Which matches a separate note: Merchant bankers handling only debt/hybrid issues are exempt from revenue requirements.

3.3 The code of conduct

Regulation 13 provides that each merchant banker registered with SEBI should follow the prescribed code of conduct as given under the Schedule III.

The code of conduct emphasises the importance of integrity, honesty and ethical behaviour expected from merchant bankers. It also lays out the need for proper supervision of the employees and agents of a merchant bank, since they are in contact with investors and clients very frequently.

The thirty-five clauses, grouped by theme.

Towards investors:

1. A merchant banker shall make all efforts to protect the interests of investors. 2. A merchant banker shall maintain high standards of integrity, dignity and fairness in the conduct of its business. 3. A merchant banker shall fulfill its obligations in a prompt, ethical, and professional manner. 4. A merchant banker shall at all times exercise due diligence, ensure proper care and exercise independent professional judgment. 5. A merchant banker shall 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. 6. adequate and timely disclosures so as to enable them to make a balanced and informed decision. 7. investors given true and adequate information without making any misleading or exaggerated claims or any misrepresentation and are made aware of the attendant risks. 8. copies of the prospectus, offer document, letter of offer or any other related literature is made available to the investors at the time of issue or the offer.

Towards clients:

9. A merchant banker shall not discriminate amongst its clients, save and except on ethical and commercial considerations. 10. no statement which would misrepresent the services that the merchant banker is capable of performing. 14. A merchant banker shall always endeavour to render the best possible advice to the clients, having regard to their needs. 15. no divulging of any confidential information about its clients... without taking prior permission of its clients, except where such disclosures are required to be made in compliance with any law. 16. prompt information of any change in registration status/any penal action taken by the SEBI or any material change in the merchant banker's financial status, with outstanding business transferred to another registered intermediary.

On conflicts:

11. A merchant banker shall avoid a conflict of interest and make adequate disclosure of its interest. The MB is prohibited from managing the public issue if key personnel hold >0.1 issuer's shares. 12. a mechanism to resolve any conflict of interest situation... in an equitable manner. 13. appropriate disclosure of its possible source or potential areas of conflict of duties and interest. 18. A merchant banker shall maintain arm's length relationship between its merchant banking activity and any other activity.

On competition and market conduct:

17. no unfair competition, such as weaning away the clients on assurance of higher premium or advantageous offer price. 32. A merchant banker shall not be a party to or instrument for— (a) creation of false market; (b) price rigging or manipulation; or (c) passing of unpublished price sensitive information. 33. no insider trading either through its account or their respective accounts or through their associates or family members, relatives or friends.

On the firm itself:

19. internal control procedures which can be reasonably expected to protect its operations, its clients, investors and other registered entities from financial loss arising from theft, fraud, and other dishonest acts, professional misconduct or omissions. 20. no untrue statement or suppress any material fact in any documents, reports or information furnished to the SEBI. 21. an appropriate level of knowledge and competence, and compliance with the award of the Ombudsman passed under the SEBI (Ombudsman) Regulations, 2003. 22. prompt information to SEBI of any action, legal proceedings, etc., initiated against it. 23. no investment advice in any publicly accessible media... unless a disclosure of his interest including a long or short position, in the said security has been made — extending to an employee's dependent family members and the employer merchant banker. 24. demarcated responsibilities of intermediaries appointed so as to avoid any conflict or confusion. 25. adequate freedom and powers to its compliance officer. 26. its own internal code of conduct. 27. good corporate policies and corporate governance. 28-31. fit and proper employees, adequate supervisory resources, responsibility for the Acts or omissions of its employees and agents, and senior management access to all relevant information about the business on a timely basis.

As underwriter:

34. no misrepresentation of the services that the underwriter is capable of performing... [or] his underwriting commitment. 35. no unfair competition harmful to other underwriters.

3.4 General obligations

Books of accounts — Regulation 14

Every merchant banker shall keep and maintain: (a) a copy of balance sheet as at the end of each accounting period; (b) a copy of profit and loss account for that period; (c) a copy of the auditor's report on the accounts for that period; (d) a statement of financial position; (e) Records and documents pertaining to due diligence exercised in pre-issue and post-issue activities of issue management and in case of takeover, buy-back and delisting of securities.

And it must tell SEBI where they are: every merchant banker shall intimate to SEBI the place where the books of account, records and documents are maintained.

**Plus, on request, copies for any other preceding five accounting years.

As underwriter, additional records of (i) details of all agreements entered with a body corporate...; (ii) total amount of securities of each body corporate subscribed to...; (iii) statement of capital adequacy requirements.

The retention period: the above documents need to be maintained for a minimum period of 8 years.

Two modern requirements: stock exchanges have set up an online Document Repository platform which would enable Merchant bankers to upload and maintain the aforesaid documents electronically, and a merchant banker shall maintain all the data and information within the territorial limits of India as per the data storage and localization norms.

Half-yearly results — Regulations 15 and 17

Merchant bankers [must] submit the unaudited half-yearly financial results when required by SEBI.

And on auditor findings: every merchant banker shall, within two months from the date of the auditor's report, take steps to rectify the deficiencies made out in the auditor's report.

Responsibilities of lead managers — Regulation 20

Lead managers of an issue are primarily responsible for the pricing, financing and distribution of the securities. They have a greater responsibility towards investors, SEBI and the issuer company.

No lead manager shall agree to manage or be associated with any issue unless its responsibilities relating to the issue particularly, those of disclosures, allotment and refund are clearly defined, allocated and determined and a statement specifying such responsibilities is disclosed in the draft offer document and offer document.

And where there are several: where there is more than one lead merchant banker to the issue, the responsibilities of each of the lead merchant banker shall clearly be demarcated and a statement specifying such responsibilities shall be disclosed in the draft offer document and offer document.

Association restrictions — Regulations 21, 21A and 21C

Regulation 21 — merchant bankers shall not be lead managers in any issue if a merchant banker who is not holding a certificate of registration from SEBI is associated to the issue.

Regulation 21A — a merchant banker, being a promoter or an associate of either the issuer of the securities or of a person making an offer to sell or purchase securities... shall not lead manage any issue or be associated with any activity.

With one exception: a merchant banker who is an associate of such issuer or person may be appointed, if he is involved only in the marketing of the issue or offer.

"Associate" means: (i) either of them controls, directly or indirectly through its subsidiary or holding company, not less than ten percent of the voting rights in the other; or (ii) Either of them, directly or indirectly, by itself or in combination with other persons, exercises control over the other; or (iii) There is a common director (a) in the issuer and the merchant banker; or (b) in the issuer's subsidiary or holding company and the merchant banker.

Two carve-outs on the common-director limb: it shall not be applicable where the director concerned is a nominee director, nor where the director concerned is an independent director subject to recusal by the said independent director in respect of the issue from the boards of both issuer and merchant banker.

Its own issue: a merchant banker shall not lead manage its own issue or be associated with any other activity undertaken under any of the regulations made by the Board in respect of its own issue.

And the shareholding restriction: a merchant banker shall not lead manage any public issue, if its directors, other key managerial personnel, compliance officer, employees referred to in clause (b) of Regulation 6, or relative(s) of the said persons, individually or in aggregate hold more than 0.1% of the paid up share capital or shares whose nominal value is more than 10,00,000 rupees, whichever is lower in the issuer.

Two qualifications. Any such holdings in the issuer through mutual funds and employee stock option schemes may be excluded. And such a merchant banker may be appointed, if it is involved only in the marketing of the issue, subject to disclosure of nature of instrument(s) · amount of investment(s) · quantum of holding(s)... in the issuer company · relationship of such entities with the MB in the offer document and marketing materials.

This applies to all public issues filed with SEBI or stock exchange(s) on or after the effective date, i.e., January 03, 2026.

"Relative" is defined widely: (i) spouse of the person; or (ii) parent of the person and parent of the spouse of such person; or (iii) sibling(s) of the person and sibling(s) of the spouse of such person; or (iv) child of the person and child of its spouse; or (v) spouse of the person referred to at clause (iii); or (vi) spouse of the person referred to at clause (iv); or (vii) Hindu Undivided Family of the concerned person.

Underwriting — Regulations 22 onwards

The agreement must provide for: (i) the period for which the agreement shall be in force; (ii) the allocation of duties and responsibilities between the underwriter and the client; (iii) the amount of underwriting obligations; (iv) the period, within which the underwriter has to subscribe to the issue after being intimated...; (v) the amount of commission or brokerage payable to the underwriter; (vi) details of arrangements, if any, made by the underwriter for fulfilling the underwriting obligations.

The general responsibilities:

a. A merchant banker acting as an underwriter shall not derive any direct or indirect benefit from underwriting the issue other than the commission or brokerage payable under the agreement.

b. At any point of time, the total underwriting obligations under all the agreements shall not exceed twenty times of the liquid net worth of the merchant banker. Existing MBs must comply within two years from the effective date, i.e., by January 02, 2028.

d. a certificate issued by Chartered Accountant providing the value of total underwriting obligations of the MB, as a part of Half Yearly Report.

e. A merchant banker, if called upon... to subscribe to the securities of a body corporate, shall subscribe to the said securities prior to the finalisation of the basis of allotment.

Twenty times liquid net worth — not net worth.

Acquisition of securities — Regulation 26

No merchant banker or any of its directors, partner or manager or principal officer or compliance officer or employees referred to in clause (b) of regulation 6 shall either on their respective accounts or through their associates or relatives, enter into any transaction in securities of bodies corporate on the basis of unpublished price sensitive information obtained by them during the course of any professional assignment either from the clients or otherwise.

Information and disclosures — Regulation 28

As part of the periodic report a merchant banker must submit (i) complete particulars of any transaction for acquisition of securities of any body corporate whose issue is being managed by it; (ii) complete particulars of any transaction for acquisition of securities made in pursuance of underwriting or market making obligations...; (iii) any other information as may be specified by the Board.

And as and when required: (i) its responsibilities with regard to the management of the issue; (ii) Any change in the information or particulars previously furnished, which have a bearing on the certificate granted to it; (iii) The names of the body corporate whose issues he has managed or has been associated with; (iv) The particulars relating to the breach of the capital adequacy requirement as specified in regulation 7; (v) Relating to its activities as a manager, underwriter, consultant or adviser to an issue.

The compliance officer — Regulation 28A

A merchant banker shall always have a compliance officer who-

(i) at the time of appointment should be a qualified Company Secretary or have a graduate degree in law from a university/institution recognised by the Government; and (ii) at the time of appointment shall have a minimum of two years post qualification experience in activities related to corporate or secretarial compliance; and (iii) shall possess such certification(s) as may be specified by the Board.

An alternative route for existing officers: one may continue if he/she complies with clauses (i), (ii) and (iii) or has professional qualification with at least five years post qualification experience in activities related to corporate or secretarial compliance and obtains such certification(s).

Independence: the compliance officer shall be separate and independent from the principal officer and the employees referred to in clause (b) of regulation 6.

Responsibilities: a. monitoring the compliance of the Act, rules and regulations, notifications, guidelines, instructions, etc., issued by the Board or the Central Government; and b. for redressal of investors' grievances.

And a reporting duty: the compliance officer shall immediately and independently report to the Board any non-compliance observed by him/her and ensure that the observations made or deficiencies pointed out by the Board in the draft prospectus or the letter of offer as the case may be, do not recur.

On vacancy: the merchant banker shall appoint another compliance officer not later than three months from the date of the office becoming vacant — and shall not fill such vacancy by appointing a person in an interim capacity, unless such appointment is made in accordance with conditions applicable in case of a regular appointment.

3.4.13 Dispute resolution and grievances

All claims, differences or disputes between a merchant banker and its client arising out of or in relation to the activities of the merchant banker in the securities market shall be submitted to a dispute resolution mechanism that includes mediation and/or conciliation and/or arbitration.

The redressal deadline: the Merchant Banker shall redress investor grievances promptly but not later than twenty-one calendar days from the date of receipt of the grievance.

SCORES

SEBI has vide its Circular No. CIR/OIAE/2/2011 dated June 3, 2011 provided for a system for processing of investor complaints against listed companies called SEBI Complaints Redress System (SCORES). This is a centralised web based complaints redress system.

Its salient features: centralised database of all complaints · online movement of complaints to the concerned listed companies · online upload of Action Taken Reports (ATRs) by the concerned intermediaries/companies and · online viewing by investors of actions taken on the complaint and its current status.

What SEBI deals with: complaints arising out of issues that are covered under SEBI Act, Securities Contract Regulation Act, Depositories Act and Rules and Regulation made there under and provisions that are covered under section 26 of Companies Act.

The merchant banker's obligation: each Merchant Banker is given a user id and password... The merchant banker is expected to log in to the website on a daily basis to check for any new complaints uploaded by SEBI and to initiate steps to get these resolved at the earliest. And it must submit an Action Taken Report (ATR) in respect of each such complaint.

Daily, not weekly.

What is not a complaint in SCORES: complaints that are incomplete or not specific · allegations without supporting documents · offering suggestions or seeking guidance/explanation · seeking explanation for non-trading of shares or illiquidity of shares · not satisfied with trading price of the shares of the companies · non-listing of shares of private offer · disputes arising out of private agreement with companies/intermediaries.

And what SEBI does not deal with at all: complaints against unlisted/delisted/wound up/liquidated/sick companies · complaints that are sub-judice · complaints falling under the purview of other regulatory bodies viz. RBI, IRDA, PFRDA, CCI, etc., or under the purview of other ministries viz., MCA, etc.