Merchant

Banking
 Origin of Merchant
Banking
13th Century merchant bankers were
traders of commodities and acted as
bankers to the kings of European states.
They Financed the continental wars
and coastal trades.
They lent their names to lesser known
traders by accepting bills through
which they guaranteed that the holder
of the bill would receive full payment.
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 Managers to the issue or
Merchant Bankers
Advise on the capital structure,
instrument of issue.
Pricing
Assessing and appraisal of project
report.
Appointment of bankers,
underwriters, brokers, registrars,
printers and advertisement agents.
Holding brokers-Underwriters,
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Press and investor conferences.
Deciding the pattern of
advertisement.
Deciding the collection branches
where application can be received
or collected.
Deciding on the dates of opening
and closing of the subscription list.
Obtain daily report of the
applications and amounts collected
at branches.
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Obtaining subscription to the
issue.
Obtain consent of the Stock
Exchange and get basis of
allotment approved.
Looking at the above roles of
the MB a company should
choose one after a lot of
research into his integrity,
expertise, competence.
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 Factors to select a MB
Ethics and integrity.
Reputation.
Trained & committed manpower.
Concern & interest of clients.
Liaison and networking.
Relationship & Contacts.
Infrastructure.
Past performance.
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Factors to select a client.
Track record of the company.
Track record of the promoters.
Professional management.
Financial strength of the
promoters and the company.
Economic viability of the project.

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 Prime Objectives of MB
Providing long term funds to the
projects or companies.
Project counseling- loan
syndication, project appraisal and
arrangement of Working capital.
Deciding the capital structure.
Portfolio Management
Underwriting
Corporate advisory & issue mgmt.
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 Emerging Areas.
Private placements with NRIs and
FIIs.
Brought out deals.
Market Making
OTC
NSE
Forex
Financial engineering- M&As,
capital restructuring.
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 SEBI (MB) Regulations,
1992
Code of Conduct for MB
Observe high standards of
integrity and fairness in all his
dealings.
Render high standard of service,
exercise due diligence, proper
care, exercise independent
judgment & disclose conflict of
interest while providing unbiased
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Code of conduct continued..
Not make any statement or
become privy to any act, practice
or unfair competition, likely to
harm the interest of other MB or
is likely to place such other MB in
a disadvantageous position in
relation to the MB, while
competing for or executing any
assignment. (Harmful statement
while solicitation & execution)
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Not make exaggerated statements,
written or oral, to the client either
about the qualification or the
capability to render certain services
or his achievements in regard to
services rendered to other clients.
Render best possible advice to the
client having regard to the clients
needs and the environment and his
own professional skill;
Ensure that all professional
dealings are effected in a prompt,
efficient and cost
Financial effective
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A MB shall not divulge to other
clients, press or any other party any
confidential information about his
client, which has come to his
knowledge.
Deal in securities of the client
company without making disclosure
to the board as required under the
regulation and also to the Board of
Directors of the client company.
Provide investors with true and
adequate information without
making any Financial
misguiding
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 exaggerated claims and are aware
of attendant risks before any
investment decisions are made.
Ensure copies of prospectus,
memorandum and related literature
are made available to investors.
Fair allotment of securities and
refund of application money
without delay.
Investor complaints are adequately
dealt with.
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 The MB shall not generally and
particularly in respect of issue of any
securities be party to
Creation of false market
Price rigging or manipulation
Passing of price sensitive information
or take any other action which is
unethical or unfair to the investors.
A MB shall abide by the provisions of
the Act, rules and regulations
which may be applicable and
relevant to the activities carried on
by the merchant banker.
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 Non-Compliance and
Defaults.
Type 1 General Defaults.
Type 2 Minor Defaults.
Type 3 Major Defaults.
Type 4 Serious Defaults.

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 SEBI (MB) Regulations
1992
Chapter I Preliminary
Chapter II Registration of MB
Chapter III General Obligations
and Responsibilities.
Chapter IV Procedure for
Inspection.
Chapter V Procedure for Action in
case of Default.
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 Schedule 1 Forms
Form A Application for Grant
of Certificate/Renewal of
Certificate.
Form B Certificate of
Registration.
Form C Due diligence
certificate.
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 Schedule 2 Fees
Schedule 3 Code for Merchant
Bankers.

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 Qualities of a good MB
Leadership
Aggressive action
Co-operative and friendliness
Contacts
Attitude towards problem solving
Inquisitiveness for new skills, information
and knowledge

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