unit-i mbfs

7/27/2019 Unit-I MBFS

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INDIAN FINANCIAL SYSTEM

Meaning

A system that aims at establishing and providing a regular,

efficient and cost effective linkage between depositors and investors is

known as Financial System.

Seekers of Funds(mainly business firm

and government)

Suppliers of funds

(mainly households)

Flow of funds(Saving)

Flow of financial Services


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Features of Financial System

It provide linkage between depositors and investors.

It facilitate expansion of financial marketIt promotes efficient allocation of financial resources

It influences both quality and the pace of economic

development


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An overview of Indian Financial System:

Financial Financial Financial Financial

Markets Institution Instruments Services

Financial Markets:It is a place where financial assets are created or

transferred.

(i)Money Market

(ii) Capital Market

(iii) Government Securities Market

(iv) Foreign Exchange Market.


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(i)Money Market:

The money market is a wholesale debt market forlow-risk, highly-liquid, short-term instrument.

I t consists of following sub-markets:

1. Call money market

2. Bill market.

3. Short-term government securities.4. Collateral loan market.

(ii)Capital Market:

=> The capital market is designed to finance the long-term investments.

=> The capital market deals with new issue and transferof existing securities.


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Capital marketCapital Market in

India

Governmentsecurity (Gill-

edged market)

Industrial securitymarket

New issuesmarket

and

Old issue market

Developmentfinancial

Institution

IFCI

ICICI

SFCs

IDBIIIBI

UTI

FinancialIntermediaries

Merchant banks

Mutual fundsLeasing companies

Venture capitalist


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(iii) Government Securities Market

It is a market where government securities are traded.

(iv) Foreign Exchange Market:Purchase and sale of national currencies.

The Forex market deals with the multicurrency

requirements, which are met by the exchange of

currencies. Depending on the exchange rate that isapplicable, the transfer of funds takes place in this

market. This is one of the most developed and integrated

market across the globe.


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Most Traded

currenciesApril 2011


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Most Traded Currencies

April 2011.

84.9%

39.1%

19.0%

12.9%

6.4%

7.6%

5.3%

2.2%

2.4%

1.3%

1.6%

1.3%


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Traded only 0.9%

during April 2011

But


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Financial Institution:

=> Institution that provide credit and credit related

services are called financial institution.

=> Financial institutions are the intermediaries who

facilitates smooth functioning of the financial system by

making investors and borrowers meet. They mobilize

savings of the surplus units and allocate them inproductive activities promising a better rate of return.

Functions:

=> Collecting deposits and lend loan to trade.Examples: NABARD, EXIM bank, IDBI, etc.,


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Structure of Banking in India

Scheduledbank

Commercial

bank

Public sector(27)

Nationalizedbanks (19)

State bank ofIndia & its

associates (8)

Private sector(30)

Foreign banks(40)

Regional Ruralbanks (196)

Co-operative

bank


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Characteristics of Financial Institutions

1. Saving Mobilizer

2. Participants3. Dealers

4. Generators

5. Regulation

6. Types

7. Special institutions


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Financial Services:

=> It is concerned with the design and delivery of

advice and financial products to individual and businesses.

=> This service is regulated by SEBI, RBI, Government

of India. It comprise of various functions and services that

provide by the financial institutions in a financial system.

Services are:Leasing, Hire Purchasing, Factoring, Forfeiting, Mutual

Fund, Bill discounting, Credit cards, underwriting,

Brokerage, Portfolio Management, Housing Finance, etc.,


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Financial Instrument:

Financial instrument in the Indian financial system may

be categorized into(i)Money market instrument:

=> Treasury Bill

=> Bill of Exchange.

=> Commercial paper

=> Certificate of deposits

(ii) Capital market instrument:

=> Equity shares

=> Preference Shares.

=> Different type of debentures.


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Merchant bankers as lead managers

Sl.no Size of the issue Maximum number

of lead managers

1 Less than 50 crores 2

2 50 100 crores 3

3 100 200 crores 4

4 200 400 crores 5

5 Above 400 crores 5 or more as

prescribed by SEBI


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Merchant Banking

Definition :

In banking, a merchant bank is a financial institution

primarily engaged in offering financial services and advice to

corporations and wealthy individuals on how to use their money.

According to Cox, D. merchant banking is defined as,

merchant banks are the financial institutions providing

specialist services which generally include the acceptance of bills

of exchange, corporate finance, portfolio management and other

banking services.


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Merchant Banking in India

Till early 1960s there was no merchant banking inthe Indian banking system. It was the Grindlays Bankwhich started merchant banking services as far backas 1967 in India. Others to follow were Citibank

(1970), SBI (1972)

The boom in the capital market in mid 1970s withthe introduction of FERA 1973 encouraged otherbanks and financial institutions to set up MB

divisions.

=> In 1973, SBI started the merchant banking and itwas followed by ICICI.


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=>Private financial brokers also started private MB

organizations

=> Between 1974 and 1985, the merchant banker has

promoted lot of companies.

=> However they were brought under the control of SEBI

in 1992


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Merchant Banking in India-

Institutional Structure

Merchant Banking Divisions

Foreign

Banks

Indian

Banks

Financial

Institutions

Private

Merchant

Bankers

Subsidiary Division in

Bank


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Recent Developments in Merchant Banking

=> The Merchant Banking was at its best during 1985-1992 beingwhen there were many new issues. It is expected that 2010 that it

is going to be party time for merchant banks, as many new issueare coming up.

=> The foreign investors both in the form of portfolioinvestment and through foreign direct investments are venturingin Indian Economy. It is increasing the scope of merchant bankers

in many ways.

=> Disinvestment in the government sector in the country gives abig scope to the merchant banks to function as consultants.

New financial instruments are introduced in the market time

and again. This basically provides more and more opportunity tothe merchant banks.

The mergers and corporate restructuring along with MOU andMOA are giving immense opportunity to the merchant bankers

for consultancy jobs.


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Challenges faced by Merchant Banker in India

1. SEBI guideline has restricted their operations to Issue Management and Portfolio

Management to some extent. So, the scope of work is limited.

2. In efficiency of the clients are often blamed on to the merchant banks, so they

are into trouble without any fault of their own.

3. The net worth requirement is very high in categories I and II specially, so many

professionally experienced person/ organizations cannot come into the picture.

4. Poor New issues market in India is drying up the business of the merchant

bankers.Thus the merchant bankers are those financial intermediary involved with

the activity of transferring capital funds to those borrowers who are interested in

borrowing.


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Functions of Merchant Banking

(i) Corporate counseling:

Corporate counseling covers counseling in the form of project

counseling, capital restructuring, project management, public issuemanagement, loan syndication, working capital fixed deposit, lease

financing, acceptance credit etc., The scope of corporate counseling is

limited to giving suggestions and opinions to the client and help

taking actions to solve their problems.(ii) Project counseling

Project counseling is a part of corporate counseling and

relates to project finance. It broadly covers the study of the project,

offering advisory assistance on the viability and procedural steps forits implementation.


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(iii)Capital Structure

Here the Capital Structure is worked out i.e., the capital

required, raising of the capital, debt-equity ratio, working capital

requirements, etc.,(iv)Portfolio Management

It refers to the effective management of Securities i.e., the

merchant banker helps the investor in matters pertaining to

investment decisions. Taxation and inflation are taken into accountwhile advising on investment in different securities. Investments are

done in such a way that it ensures maximum returns and minimum

risks.

(v) Issue ManagementManagement of issues refers to effective marketing of

corporate securities viz., equity shares, preference shares and

debentures or bonds by offering them to public.


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(vi) Credit Syndication

Credit Syndication refers to obtaining of loans from single

development finance institution or a syndicate or consortium. Merchant

Banks help corporate clients to raise syndicated loans from commercials

banks.

(vii) Working Capital

The Companies are given Working Capital finance, depending

upon their earning capacities in relation to the interest rate prevailing in

the market.(viii)Venture Capital

Venture Capital is a kind of capital requirement which carries

more risks and hence only few institutions come forward to finance. The

merchant banker looks in to the technical competency of the

entrepreneur for venture capital finance.

(ix)Fixed Deposit

Merchant bankers assist the companies to raise finance by way of

fixed deposits from the public.


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(x)Other Functions

Treasury Management- Management of short term fund requirements by

client companies.

Stock broking- helping the investors through a network of service units

Servicing of issues

Small Scale industry counseling- counseling SSI units on marketing and

finance

Equity research and investment counseling

Assistance to NRI investors - the NRI investors are brought to the notice of

the various investment opportunities in the country.

Foreign Collaboration


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LEGAL AND REGULATORY FRAMEWORK


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SEBI Regulations on merchant bankers

I. Registration of Merchant Bankers

A. Application for Grant of CertificateAn application by a person for grant of a certificate shall be made to

the Board in Form A. The application shall be made for any one of

the following categories :

Category I- To carry on any activity of the issue managementCategory II- To act as adviser, consultant, co-manager, underwriter,

portfolio manager

Category III- To act as underwriter, adviser, consultant to an issue.

Category IV- To act only as adviser or consultant to an issueWith effect from 9th December, 1997, an application can be

made only for carrying on the activities mentioned in category I.


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B. Conformance to Requirements:

Subject to the provisions of the regulations, any application, whichnot complete in all respects and does not conform to the instructions

specified in the form, shall be rejected.C. Furnishing of Information:

The Board may require the applicant to furnish further informationor clarification regarding matter relevant to the activity of amerchant banker for the purpose of disposal of the application.

D. Consideration of Application:

The Board shall take into account for considering the grant of acertificate , applicant complies with the following requirements:

That the applicant shall be a body corporate

act as Primary or Satellite Dealer

That the applicant has the necessary infrastructure

employment minimum of two persons who have the experienceto conduct the business of the merchant banker


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That the applicant fulfils the capital adequacy as specified

principal officer is not involved in any litigation connected with

the securities marketofficer has not at any time been convicted for any offence

That the applicant has the professional qualification

That the applicant is a fit and proper person

That the grant of certificate to the applicant is in the interest of

investors.

E. Capital Adequacy Requirement

Category Minimum Amount

Category I Rs.5,00,00,000

Category II Rs.50,00,000

Category III Rs.20,00,000

Category IV Nil


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F. Procedure for Registration:

The Board on being satisfied that the applicant is eligible shall granta certificate in Form B. On the grant of a certificate the applicantshall be liable to pay the fees in accordance with Schedule II.

G. Renewal of Certificate:

Three months before expiry of the period of certificate, the merchantbanker, may if he so desired, make an application for renewal in Form

A. The application for renewal shall be dealt with in the same manneras if it were a fresh application for grant of a certificate

H. Procedure where Registration is not Granted

The refusal to grant registration shall be communicated by the Boardwithin thirty days of such refusal to the applicant stating therein thegrounds on which the application has been rejected.

Any applicant may, apply within a period of thirty days from the dateof receipt of such intimation to the Board for reconsideration for itsdecision.


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I. Effect of Refusal to Grant Certificate:

Any merchant banker whose application for a certificate has been

refused by the Board can cease to carry on any activity as merchantbanker.

J. Payment of Fees:

Every applicant eligible for grant of a certificate shall pay such fees in

such manner and within the period specified in Schedule II. Where amerchant banker fails to any annual fees as the Board may suspend

the registration certificate .


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General Obligations.

A. Sole Function

1. Merchant Banker not to associate with any business other thatthat of the securities market.

2. No merchant banker, other than a bank or a public financial

institution, who has been granted certificate of registration under

these regulations, shall after June 30th, 1998 carry on anybusiness other than that in the securities market.

B. Maintenance of Books

1. A copy ofbalance sheet as at the end of each accounting period;

2. A copy ofprofit and loss account for that period;3. A copy of the auditors report on the accounts for that period; and

4. A statement of financial position


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C. Submission of Half-yearly Results

Every merchant banker shallfurnish to the Board half-yearly

unaudited financial results when required by the Board with a viewto monitor the capital adequacy of the merchant banker.

D. Preservation of Books of Account, Records, etc.,

The merchant banker shallpreserve the books of accounts

and other records and documents maintained under regulation 14for a minimum period of five years.

E. Report on Steps taken on Auditor's Report

Every merchant banker shall within two months from the

date of the auditors report take steps to rectify the deficiencies,made out in the auditors report.

F.Appointment of Lead Merchant Bankers

All issues should be managed by at least one merchant

banker functioning as the lead merchant banker


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G. Restriction on Appointment of Lead Managers

The number of lead merchant bankers may not, exceed in

case of any issue of the following:Size of Issue Number of Merchant Bankers

Less than Rs. 50 Crores Two

Above Rs. 50 Crores but less than Rs.100 Crores Three

Above Rs. 100 Crores but less that Rs.200 Crores Four

Above Rs.200 Crores but less that Rs.400 Crores Five

Above Rs.400 Crores Five or more as

agreed by SEBI

H. Responsibilities of Lead Managers

Specifying such responsibilities is furnished to the Board at

least one month before the opening of the issue for subscription


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I. Underwriting Obligations

In respect of every issue to be managed, the lead merchant banker

holding a certificate under Category I shall accept a minimum Underwriting

obligation of five percent of the total underwriting commitment or rupees

twenty-five lakhs whichever is less.

J. Submission of Due Diligence Certificate

shall submit to the Board at least two weeks prior to the opening of

the issue for subscription, a due diligence certificate in Form C.K. Documents to be furnished to the Board

1. Particulars of the issue;

2. Draft prospectus or where there is an offer to the existing shareholders,

the draft letter of offer;3. Any other literature intended to be circulated to the investors, including

the shareholders; and

4. Such other documents relating to prospectus or letter of offer as the

case may be.


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L. Payment of fees to the Board

The draft prospectus or draft letter of offer referred to in

regulation 24 shall be submitted along with such fees and in suchmanner as may be specified in Schedule IV.

M. Continuance of Association of Lead Manager

The lead manager undertaking the responsibility for refunds

or allotment of securities in respect of any issue shall continue to beassociated with the issues till the subscriber have received the share

or debenture certificates orrefund of excess application money.

N.Acquisition of shares Prohibited

Relative enter into transaction in securities of bodiescorporate on the basis ofunpublished price sensitive information

obtained by them during the course of any professional assignment

either from the clients or otherwise


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O. Information to the Board

Every merchant banker shallsubmit to the Board complete

particulars of any transaction for acquisition of securities of anybody corporate whose issue is being managed by that merchant

banker within fifteen days from the date of entering into such

transaction.

P. Disclosures to the Board

1. His responsibilities with regard to the management of the issue;

2. The names of the body corporate whose issues he has managed

or has been associated with;

3. The particulars relating to breach of the capital adequacyrequirement as specified in regulation 7;

4. Relating to his activities as a manager, underwriter, consultant

or adviser to an issue as the case may be.


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Q.Appointment of Compliance Officer

Every merchant banker shall appoint a compliance officer

who shall be responsible formonitoring the compliance of the Act,rules and regulations notifications, guidelines, instructions etc.,

issued by the board or the Central Government and for redressed of

investors grievances.


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II. Procedure For Inspection

A. Board's Right to inspect

The Board may appoint one or more persons as inspectingauthority to undertake inspection of the books ofaccounts, recordsand documents of the merchant banker

1. To ensure that the books of account are being maintained in themanner required;

2. To ensure that the provisions of the Act, rules, regulations arebeing complied with;

3. To investigate into the complaints received from investors,

4. Investors interest in the affairs of the merchant banker.

B. Notice before inspectionBefore undertaking an inspection under regulation 29 the

Board shall give a reasonable notice to the merchant bankerforthat purpose.


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C. Obligations of Merchant Banker on Inspection

It shall be the duty of every director, proprietor, partner,

officer and employee of the merchant banker, who is being

inspected, toproduce to the inspecting authority such books,accounts and other documents in his custody or control and furnish

him with the statements and information relating to his activities.

D. Submission of Report to the Board

The inspecting authority shall, as soon as possible submit, aninspection report to the Board.

E.Action on Inspection or Investigation Report

The Board of the Chairman shall after consideration of

inspection or investigation report take such action and the board orchairman may deem fit and appropriate including action under the

Securities and Exchange Board of India Regulations, 2002.


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F.Appointment of Auditor

The Board may appoint a qualified auditor to investigate

into the books of accountor the affairs of the merchant banker.G. Communication of findings

The Board shall after consideration of the inspection report

communicate the findings to the merchant bankerto give him an

opportunity of being heard before any action is taken by the Boardon the findings of the inspecting authority .


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III. Procedure For Action Incase Of Default

A. Liability for Action in case of Default

A merchant banker who fails to comply with any conditionssubject to which certificate has been granted, and contravenes any ofthe provisions of the Act rules or regulations shall be dealt with inthe manner provided under the Securities and Exchange Board ofIndia Regulations, 2002.

B. Suspension of RegistrationA penalty for suspension of registration of a merchant banker

may be imposed under the following circumstances:

violates the provisions

fails to furnish any informationfails to resolve the complaints

indulges in manipulation

guilty of misconduct

fails to maintain


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E. Manner of Holding Enquiry before Suspension or Cancellation.

For the purpose of holding an enquiry under regulation 38,

the board may appoint an enquiry officer . The enquiry officer shallissue to the merchant banker a notice the registered office or the

principal place of business of the merchant banker. The merchant

banker may, within thirty days from the date of receipt of such notice

furnish to the enquiry officer a reply together with copies of

documentary or other evidence relied on by him or sought by the

Board from the merchant banker.

F. Show case Notice and Order

On receipt of the report from the enquiry officer, the Board

shall consider the same and issue a show-cause notice as to why the

penalty as proposed by the enquiry officer should not be imposed.

The merchant banker shall within twenty-one days of the date of the

receipt of the show-cause send a reply to the Board.


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G. Effect of Suspension and Cancellation

On and from the date of the suspension of their merchant

banker he shall cease to carry on any activity as a merchant bankerduring the period of suspension.

H.Appeal to the Securities Appellate Tribunal

Any person aggrieved by an order of the board may, on and

after the commencement of the /securities Laws (secondamendment) Act, 1999, under these regulations may prefer an

appeal to a Securities Appellate Tribunal having jurisdiction in the

matter.

I. Fees

Every merchant banker shall pay a sum of Rupees five lacs as

registration fees at the time of the grant of certificate by the Board .


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Every Merchant banker shall pay registration fees as set out below :

1. Category I; A sum of Rs. 2.5 lakhs to be paid annually for the first

two years , third year a sum of Rs. 1 lakh2. Category II ; A sum of Rs. 1.5 lakhs to be paid annually for the

first two years , third year a sum of Rs. 50,000

3. Category III; A sum of Rs.1 lakh to be paid annually for the first

two years, third year a sum of Rs.25,0004. Category IV; A sum of Rs.5,000/- to be paid annually for the first

two years , third year a sum of Rs.1000/-

Renewal Fees :

1. Category I :A sum of Rs.1 lakh to be paid annually for the firsttwo years, third year a sum of Rs.20,000/-

2. Category II: A sum of Rs.75,000/- to be paid annually for the first

two years, third year a sum of Rs.10,000/-


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3. Category III : A sum of s.50,000/ to be paid annually for the first

two years, third year a sum of Rs.5,000/-

4. Category IV: A sum of Rs.5,000/- to be paid annually for the firsttwo years, third year a sum of Rs.2,500/-


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IV. CODE OF CONDUCT FOR MERCHANT BANKERS

The SEBI regulations have outlined the following code ofconduct for the merchant bankers operation in India ;

protect the interests of investors

High standards of integrity

Prompt, ethical

Due Diligence

Grievances of investors are redressed

Adequate disclosure

True and adequate information

Copies of the prospectus

Shall not discriminate among its clients

Misrepresent the service

Avoid conflict of interest

Resolve any conflict


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Appropriate disclosure

Best possible advice

Shall not divulge

Shall not indulge in any unfair competition

Maintain arms length relationships

Internal control procedures

Shall not make untrue statement

Maintain an appropriate level of knowledge

Board is promptly informed

Any investment advice

Demarcate the responsibility

Provide adequate freedom Own internal code of conduct

Good corporate policies

Business is fit and proper


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Adequate resources

Responsible for the acts and omission

Relevant informationShall not be a party


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Provision relating to Companies Act

The various regulations which govern the merchant bankers on thecapital issue are prescribed by the companies act, and the other

enactments mentioned below:1. Provisions of the Companies Act, 1956

a. Prospectus (Sec. 55 to 68A)

b. Allotment (Sec. 55 to 75)

c. Commissions and discounts (Sec. 76 & 77)d. Issue of shares at premium and at discount (Sec. 78 & 79)

e. Issue and redemption of preference shares (Sec. 80 & 80A)

f. further issues of capital (Sec. 81)

g. Nature, numbering and certificate of shares (Sec. 82 to 84)

h. Kinds of share capital and prohibition on issue of any other kind ofshares (Sec. 85 & 86)

i. Matters to be specified in prospectus and reports to be set out therein(Schedule 11)


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2. The Securities Contracts (Regulations) Act, 1957 regarding

transactions in securities

3. The Securities Contracts (Regulation)Rules, 1957.4. Adequacy and quality of personnel employed by them and also the

available infrastructure.


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SEBI Guidelines

Operational Guidelines

SEBI has pronounced the following guidelines for merchant bankers1. Submission of offer document :

The offer documents ofissue size up to Rs. 20 crores shall be

filed by lead merchant bankerswith the concerned regional office of

the Boardunder the jurisdiction of which the registered office of theissuer company falls.

The lead merchant banker shall make available 10 copies of

the draft offer document to the Board and 25 copies to the stock

exchange(s) where the issue is proposed to be listed.The lead merchant banker and the Stock Ex change(s) may

charge a reasonable charge for providing a copy of the draft offer

document.


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f. Any inquiry/investigation being conducted by the Board

g. Period up to which registration/renewal fees has been paid

h. Whether any promoter/group and/or associate company of theissuer company is associated with securities-related business

and registered with SEBI

i. If any one or more of these persons/entities are registered with

SEBI, their respective registration numbersj. If registration has expired, reasons for non-renewal

k. Details of any enquiry/investigation conducted by SEBI at any

time

l. Penalty imposed by SEBIm. Outstanding fees payable to SEBI by these entities, if any


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2. Dispatch of issue material :

Lead merchant bankers shall ensure that whenever there is a

reservation for NRIs, 10 copies of the prospectus together with 1000application forms are dispatched in advance of the issue opening

date, directly along with a letter addressed in person to Adviser (NRI),

Indian Investment Centre, Jeevan Vihar Building Sansad Marg, New

Delhi. Twenty copies of the prospectus and application forms shall be

dispatched in advance of the issue opening date to the various

Investors Associations.

3. Underwriting

While selecting underwriters and finalizing underwriting

arrangement, lead merchant bankers shallensure that the

underwriters do not overexpose themselves so that it becomes

difficult to fulfill their underwriting commitments.


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4. Compliance obligations

The merchant banker shall ensure compliance with the following

post-issue obligationsa. Association of resource personnel :

In case ofover-subscription in public issues, a Board

nominated public representative shall be associated in the process of

finalization of the basis of allotment. Honorarium at a minimum ofRs.500/- per day, plus normal conveyance charges shall be paid to

them.

b. Redressal of investor grievances

The merchant bankers shallassign high priority to investorgrievances, and take all preventive steps to minimize the number of

complaints. The lead merchant banker shall set up a proper

grievance monitoring and redressal system in co-ordination with

the issuers and the Registrars to Issue.


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c. Submission of post issue monitoring reports

The concerned lead merchant banker shall submit, in duplicate, thePost Issue Monitoring Reports specified in Clause 7.2 of ChapterVII of these

Guidelines, within 3 working days from the due dates.d. Issue of No objection Certificate (NOC)

In accordance with the Listing Agreement of the Stock Exchanges,the issuer companies shall deposit 1% of the amount of securities offered tothe public

These securities can be related by the concerned Stock Exchangeonly after obtaining an NOC from the Board

e. Registration of merchant bankers

Application for renewal of Certificate of Registration shall be madeby the merchant bankers according to Regulation 9 of SEBI Rules andRegulations, 1992. While filing the renewal application for the certificate ofregistration as merchant banker, it shall provide a statement highlightingthe changes that have taken place


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f. Reporting requirements

In terms of Regulation 28 of SEBI (Merchant Bankers

Regulation) 1992, the merchant bankers shall send a half yearly

report, in the format specified in Schedule XXVII, relating to their

merchant banking activities.

g. Impositions of penalty points

Penalty points may be imposed on the merchant banker for

violation of any of the provisions for operational guidelines.


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Guidelines on Advertisement

1. Factual and truthful

An issue advertisementshall be truthful, fair and clear, andshall not contain any statement that is untrue or misleading. Any

advertisement reproducing, or purporting to reproduce, any

information contained in an offer document shall reproduce such

information in full and disclose all relevant facts

2. Clear and concise

An advertisement shall be set forth in a clear, concise and

understandable language. Extensive use of technical, legal

terminology or complex language and the inclusion of excessive

details, which may distract the investor, shall be avoided.

3. Promise or profits

An issue advertisement shall not contain statements which

promise or guarantee rapid increase in profits.

4. Mode of advertising


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No models, celebrities, fictional characters, landmarks,

caricatures or the likes shall be displayed on or form part of the offer

documents or issue advertisements. Issue advertisements shall not

appear in the form of crawlers on television.

5. Financial data

If any advertisement carries any financial data, it shall also

contain data for the past three years and shall include particulars

relating to sales, gross profit, not profit, share capital, reserves,

earnings per share, dividends, and book values.

6. Risk factors

All issue advertisements carried in the print media such as

newspapers, magazines, brochures or, pamphlets shall contain

highlights relating to any issue, besides containing detailed

information on the risk factors. The print size of highlights and risk

factors in issue advertisements shall not be less than point 7 size.


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7. Issue date

No corporate advertisement of issuer company shall be issued

after 21 days of filing of the offer document with the Board until the

closure of the issue, unless the risk factors which are required to be

mentioned in the offer document, are mentioned in the

advertisement.

8. Product advertisement

No product advertisement of the company shall contain any

reference, directly or indirectly, to the performance of the company

during the period.

9. Subscription

No advertisement shall be issued stating that the issue has

been fully subscribed or oversubscribed during the period the issue is

open for subscription


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10. Issue closure

No announcement regarding closure of the issue shall bemade except on the closing date.

11. Incentives

No incentives, apart from the permissible underwritingcommission and brokerage, shall be offered through advertisementsto anyone associated with marketing the issue.

12. ReservationIn case there is a reservation for NRIs, the issue advertisement

shall specify the same, and also indicate the place in India from wherethe individual NRI applicant can procure application forms.

13. Undertaking

An undertaking has to be obtained from the issuer as part ofthe MOU between the lead merchant banker and the issue companyto the effect that the issuer company shall not directly or indirectlyrelease


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14.Availability of copies

Ensure the availability of copies of all issue related materials

with the lead merchant banker, at least until the allotment is

completed.


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http://www.docstoc.com/docs/3716531/merc

hant-banking# - c this to for 2nd unit
http://www.docstoc.com/docs/3716531/merchant-bankinghttp://www.docstoc.com/docs/3716531/merchant-bankinghttp://www.docstoc.com/docs/3716531/merchant-bankinghttp://www.docstoc.com/docs/3716531/merchant-bankinghttp://www.docstoc.com/docs/3716531/merchant-bankinghttp://www.docstoc.com/docs/3716531/merchant-banking