AIBI
Also written Association of Investment Bankers of India · Association of Merchant Bankers of India · AIBI Due Diligence Manual
The Association of Investment Bankers of India — the industry body for merchant bankers, recognised by SEBI as a self-regulatory organisation, founded in 1993 as the Association of Merchant Bankers of India.
In plain language
Every regulated industry tends to grow a body of its own. For merchant bankers in India that body is the Association of Investment Bankers of India, or AIBI.
It is not a regulator. SEBI is. But AIBI is recognised by SEBI as a self-regulatory organisation. That means it sets professional standards for its own members.
It began in 1993 under a different name: the Association of Merchant Bankers of India. The change of name tracks the change in the business, from pure issue management towards the wider investment banking role.
AIBI does three things a candidate should be able to name. It sets standards and standard practices. It speaks for the industry to SEBI and other authorities. And it gathers and spreads information about the business.
Its most visible output is a manual. The AIBI Due Diligence Manual tells a merchant banker how to do the diligence behind an offer document, and the workbook leans on it directly.
How it works
What SEBI recognised it for (Chapter 2, section 2.2.1). AIBI is the industry body for merchant bankers in India that acts as a self-regulatory organisation. It was founded in 1993 as the Association of Merchant Bankers of India, and was granted recognition by SEBI to set professional standards, to provide efficient services and to establish standard practices in merchant banking and financial services. Its primary objective is to ensure that its members render services to all constituents within an agreed framework of ethical principles and practices. It also works towards promoting the interests of the industry and of its members.
Its representational role. The workbook calls AIBI the thought leader and a nodal point for the assimilation and dissemination of information relating to the investment banking industry in India, and the industry's sole representative to all statutory authorities — and in particular to SEBI.
The Due Diligence Manual. Released in 2012 and updated from time to time, it is the reference Chapter 5 uses for what a lead manager's diligence must cover. Following it, the exercise includes discussions with the issuer's promoters, directors, key managerial personnel and other key employees; an independent review of every document and piece of information the issuer provides; and a briefing to the issuer's representatives, with legal advisers' help, on their statutory responsibilities under the Companies Act 2013, the ICDR Regulations, the LODR Regulations, the uniform listing agreement, and the insider trading and takeover regulations. The manual's named diligence areas number eight: promoter and promoter group, capital structure, capital built-up, risk factors, management, business, financial statements and litigations. It also guides the preparation of offer documents and the treatment of the expertise and non-expertise portions.
Where AIBI does not sit. It does not collect SEBI's money. Registration and renewal fees are payable to SEBI — by direct credit through NEFT, RTGS or IMPS, or by demand draft in favour of the Securities and Exchange Board of India, payable at Mumbai or at the respective regional office.
One more place it appears. The NISM Series IX Examination Committee itself consists of nominated representatives from AIBI, which is part of why the paper's framing tracks industry practice so closely.
A worked example
Chandrabhaga Capital Advisors Pvt Ltd is granted a certificate of registration as a merchant banker. Two payments follow, and neither goes to AIBI.
| Payment | Amount | Payable to | Timing |
|---|---|---|---|
| Registration fee | Rs 20,00,000 | SEBI | Within 15 days of intimation of the grant |
| Renewal fee | Rs 9,00,000 | SEBI | Every three years from the sixth year |
The accounts team draws a demand draft in favour of the Association of Investment Bankers of India, because somebody remembered the name. It is returned. The draft has to be in favour of the Securities and Exchange Board of India, payable at Mumbai or at the respective regional office.
The delay costs money. Unpaid fees carry interest at 15% per annum for each month of delay or part thereof, and until they are paid the merchant banker shall not undertake any new activity.
On a delay of 2 months on the Rs 20,00,000 registration fee: interest = Rs 20,00,000 × 15% × 2/12 = Rs 50,000.
What the firm does owe AIBI is different in kind. Before signing its first due diligence certificate, the team builds its checklist from the AIBI Due Diligence Manual of 2012 and its eight named areas — promoter and promoter group, capital structure, capital built-up, risk factors, management, business, financial statements and litigations. That is what a self-regulatory organisation actually supplies: not a fee, a standard.
Why NISM asks about it
Chapter 2 (Introduction to the Merchant Banking) is 15% of the paper and gives AIBI its own section, 2.2.1. Chapter 5 (Issue Management – Process and Underwriting), at 18% the heaviest chapter, cites the AIBI Due Diligence Manual for what diligence must cover.
Chapter 3's review question 2 is the one to memorise: whether the registration fee should be paid by demand draft in favour of the Association of Investment Bankers of India, payable at Mumbai — False, because it goes to SEBI. Expect also the founding year (1993), the founding name (Association of Merchant Bankers of India), and the status: a self-regulatory organisation recognised by SEBI, and the industry's sole representative to statutory authorities.
Common exam traps
- AIBI is a self-regulatory organisation, not a regulator. It sets standards; SEBI registers, inspects and penalises.
- Fees go to SEBI, never to AIBI. This is a printed review question, and the answer is False.
- Founded in 1993 as the Association of Merchant Bankers of India, and later renamed. Both the year and the original name are examinable.
- Sole representative to all statutory authorities is the workbook's phrase. AIBI is not one of several industry bodies for merchant bankers.
- The Due Diligence Manual is AIBI's, not SEBI's. It guides the diligence; the legal obligation comes from the ICDR and Merchant Bankers Regulations, and the due diligence certificate is still the merchant banker's own.
- AIBI does not run the Document Repository platform. The stock exchanges set that up.
- The name says "investment bankers" but the members are merchant bankers. The workbook uses both words loosely in this section; read the context rather than the label.
Check yourself
1.Which statement about the Association of Investment Bankers of India (AIBI) is correct?
- a)It is a statutory body set up under the SEBI Act, 1992
- b)It was founded in 2003 as the Indian Merchant Bankers' Forum
- c)It registers merchant bankers on behalf of SEBI
- d)It was founded in 1993 as the Association of Merchant Bankers of India and was granted recognition by SEBI to set up professional standards
Show the answer
Answer: (d) It was founded in 1993 as the Association of Merchant Bankers of India and was granted recognition by SEBI to set up professional standards
The workbook: "The industry body for merchant bankers in India that acts as a self-regulatory organisation is known as the Association of Investment Bankers of India (AIBI). It was founded in 1993 as the Association of Merchant Bankers of India. It was granted recognition by SEBI to set up professional standards, for providing efficient services and to establish standard practices in merchant banking and financial services."
Its primary objective: "to ensure that its members render services to all constituents within an agreed framework of ethical principles and practices." It is also "the industry's sole representative to all statutory authorities, and in particular, to SEBI."
Why the other options are wrong:
- Statutory body under the SEBI Act — AIBI is an industry body recognised by SEBI, not a statutory body created by the Act.
- Founded in 2003 under another name — wrong year and wrong name; it was 1993, as the Association of Merchant Bankers of India.
- Registers merchant bankers — registration is granted by SEBI under the SEBI (Merchant Bankers) Regulations, 1992; AIBI sets standards and represents the industry.
2.Registration fees payable by a merchant banker on grant of the certificate should be made by demand draft in favour of:
- a)Securities and Exchange Board of India, payable at Mumbai or the respective regional office
- b)The Association of Investment Bankers of India, payable at Mumbai
- c)The Reserve Bank of India
- d)The stock exchange on which the merchant banker is registered
Show the answer
Answer: (a) Securities and Exchange Board of India, payable at Mumbai or the respective regional office
The fees specified shall be payable by the merchant banker by way of 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.
AIBI is the industry body, not the fee collector. As Chapter 2 explained, the industry body for merchant bankers in India that acts as a self-regulatory organisation is known as the Association of Investment Bankers of India (AIBI) — recognised by SEBI, but not a regulator and not a recipient of statutory fees.
The amounts: every Merchant Banker is required to pay a fee of Rs. 20 lakh as registration fees, preceded by a non-refundable application fee of Rs. 50,000/- with the Form A application.
And to keep it alive: a merchant banker who has been granted a certificate of registration, to keep its registration in force, shall pay a fee of nine lakh rupees every three years from the sixth year, from the date of grant of certificate of registration.
The timing: 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.
And non-payment has two consequences, not one: the merchant banker shall not undertake any new activity till such time the fees is paid by the merchant banker, and shall also be liable to pay interest at 15% per annum for each month of delay or part thereof.
Paying fees is itself a condition of registration: the merchant banker shall pay the fees for registration in the manner as provided in these regulations.
3.Who appoints the accountants and auditors who help prepare the financial statements for inclusion in the offer document?
- a)The issuer company
- b)The merchant banker
- c)The Association of Investment Bankers of India
- d)The Ministry of Corporate Affairs
Show the answer
Answer: (a) The issuer company
The issuer appoints, though in consultation with the lead manager.
The issuer shall, in consultation with the lead manager(s), appoint other intermediaries which are registered with SEBI after the lead manager(s) have independently assessed the capability of other intermediaries to carry out their obligations.
The lead manager assesses capability; the issuer appoints.
The statutory auditors are the issuer's own auditors in any case. The statutory auditors of the issuer company also provide their reports on the financial information included in the Offer Documents and other relevant certifications pertaining to the issue including "comfort letters" for financial information included in the Offer Documents including for periods subsequent to the date of the last audited financial statements.
Option C confuses AIBI's role. As Chapter 2 explained, AIBI is the self-regulatory industry body; its contribution here is guidance — the Association of Investment Bankers of India's Due Diligence Manual — not appointments.
The other appointments the issuer must make:
An issuer shall appoint one or more SEBI registered merchant bankers, as lead manager(s) to the issue.
The issuer shall, in case of an issue made through the book building process, appoint syndicate member(s) and in the case of any other issue, appoint bankers to issue.
The issuer shall appoint a registrar to the issue, registered with SEBI, which has connectivity with all the depositories — but if the issuer itself is a registrar, it shall not appoint itself as registrar to the issue, and the lead manager shall not act as a registrar to the issue in which it is also handling the post-issue responsibilities.
The issuer shall appoint a compliance officer who shall be responsible for monitoring the compliance of the securities laws and for redressal of investors' grievances.
And one restriction on the lead managers themselves: at least one lead manager to the issue shall not be an associate... of the issuer, an associate's role shall be limited to marketing of the issue.
Where this is taught
Free preparation for NISM Series IXRelated terms
- SCORESSEBI's centralised web-based system for processing investor complaints, on which the company or intermediary must upload an Action Taken Report and the investor can watch the status online.
- Merchant bankerA SEBI-registered body corporate engaged in the business of issue management — arranging the selling, buying or subscribing of securities, or acting as manager, consultant or adviser in relation to an issue.
- Document Repository platformAn online platform set up by the stock exchanges on which merchant bankers upload and maintain electronically the documents they relied upon while conducting due diligence in a public issue.
- Due diligence certificateThe formal certificate a lead manager signs and files with SEBI at prescribed stages of an issue, confirming that it has verified the issuer's disclosures and that the offer document is compliant.
- Investment bankingThe wider term for all capital market activity, fund-based and non-fund-based — merchant banking plus stock trading, market making, underwriting, broking, asset management and corporate advisory.
- Strategic Business UnitThe ring-fenced unit through which a merchant banker may carry on fee-based, non-fund-based activities SEBI does not regulate, with the segregation due on or before December 31, 2026.