SEBI (Merchant Bankers) Regulations, 1992 govern merchant banking activities in India. These regulations specify the key policy requirements that must be met by merchant bankers operating in India. Some of the key policy requirements are:
- Registration: Merchant banks must be registered with SEBI before they can operate in India. The registration process involves submitting an application along with various documents, such as a detailed business plan, financial statements, and details of the management team.
- Capital adequacy: Merchant banks must maintain a minimum net worth of Rs. 5 crores to be eligible for registration. They must also maintain a minimum net worth of Rs. 50 lakhs at all times.
- Disclosure requirements: Merchant banks must disclose all material information to clients and investors. They must also disclose their fees and charges, as well as any conflicts of interest.
- Due diligence: Merchant banks must conduct due diligence on all clients and transactions. This involves verifying the client’s identity, financial position, and business operations, as well as assessing the risks associated with the transaction.
- Code of conduct: Merchant banks must adhere to a code of conduct that promotes ethical and professional conduct. The code of conduct includes requirements for confidentiality, avoidance of conflicts of interest, and fair treatment of clients and investors.
- Internal controls: Merchant banks must have robust internal controls to ensure compliance with regulations and to manage risks associated with their activities. This includes maintaining appropriate policies and procedures, as well as effective systems for monitoring and reporting.
- Reporting requirements: Merchant banks must submit various reports to SEBI, including quarterly financial statements, annual reports, and compliance reports. They must also report any material developments that may impact their operations or clients.
These policy requirements are designed to promote transparency, accountability, and ethical conduct in merchant banking activities. By meeting these requirements, merchant banks can build trust with clients and investors, and help to promote the development of India’s capital markets.