NISM Series IX (Merchant Banking) flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Primary market

The segment where an issuer sells newly created securities to investors to raise fresh capital, through public issues, rights issues, preferential allotments or private placements.

Secondary market

The segment where already-issued securities are bought and sold among investors on recognised stock exchanges or over the counter, providing liquidity and price discovery.

SEBI Act, 1992

The statute that established the Securities and Exchange Board of India as the statutory regulator of the securities market, granting powers to regulate intermediaries and investigate violations.

Depository

A SEBI-registered entity such as NSDL or CDSL that holds securities in dematerialised electronic form on behalf of investors, who access it through depository participants.

T+1 settlement

A settlement cycle in which securities and funds are exchanged on the first business day after the trade date, with clearing corporations guaranteeing completion of settlement.

Clearing corporation

A market infrastructure entity that novates trades, acts as central counterparty and guarantees settlement of obligations between buyers and sellers on the exchange.

Regulator of money market

The Reserve Bank of India regulates the money market, government securities market and foreign exchange, separate from SEBI's role over the securities market.

Merchant banker definition

Under SEBI (Merchant Bankers) Regulations, 1992, a person engaged in issue management or acting as manager, consultant or adviser to an issue of securities.

Category I merchant banker

The highest registration category under the 1992 Regulations, permitted to act as lead manager to an issue and subject to the highest net worth requirement.

Lead manager

A merchant banker appointed to manage an issue, responsible for due diligence, drafting the offer document, filing with SEBI and exchanges, marketing and post-issue compliance.

Underwriting

An arrangement in which the underwriter agrees to subscribe to the unsubscribed portion of an issue up to a stated amount, receiving an underwriting commission for the risk assumed.

Devolvement

The situation where an issue is under-subscribed and the underwriter must honour the commitment by subscribing to the shortfall, thereby taking up the unsubscribed shares.

Loan syndication

A merchant banking service in which the banker arranges a loan from a group of lenders for a corporate borrower, structuring terms and coordinating documentation.

Merchant banking vs commercial banking

Merchant banking is fee-based advisory and capital-raising work, whereas commercial banking involves taking deposits and lending, which merchant bankers do not do.

Merchant banker registration

No person may carry on merchant banking business without a certificate of registration from SEBI under the 1992 Regulations, granted for an initial five-year period.

Category I net worth

The minimum net worth required for Category I merchant banker registration is Rs 5 crore, supporting the widest permitted activity including lead management.

Code of conduct

Conduct rules under the 1992 Regulations requiring merchant bankers to act in the interest of issuers and investors, maintain confidentiality and avoid misleading statements.

Record retention

Merchant bankers must maintain books of accounts, records and documents for at least five years and submit periodic reports to SEBI on their activities.

Suspension of registration

A SEBI action against a merchant banker for failure to comply with the Regulations, which may include suspension or cancellation of the certificate of registration.

ICDR 2018

SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, governing public issues, rights issues, preferential allotments and related disclosure and eligibility norms.

Book building

A price discovery process in which investors bid within a price band set by the issuer and lead manager, and the final price is determined from the bids received.

Red herring prospectus

An offer document that omits the price and price band, filed before the final prospectus, which is filed with the Registrar of Companies after price discovery.

Promoter contribution lock-in

A requirement that the minimum promoter contribution, at least 20% of post-issue capital under ICDR, be locked in for a prescribed period after the issue.

Anchor investor

A qualified institutional buyer allotted shares in a book-built public issue before the issue opens, subject to lock-in and limits on the portion allotted.

Green shoe option

An over-allotment facility allowing the stabilising agent to allot more than the issue size and stabilise the post-listing price within prescribed caps and periods.

Rights issue

An issue of securities to existing shareholders in proportion to their holding, typically at a discount, giving them the right to subscribe within a stated period.

Qualified institutions placement

A private placement of securities by a listed company to qualified institutional buyers, governed by ICDR, with pricing and lock-in conditions.

Mandatory open offer

Under SEBI (SAST) Regulations, 2011, crossing 25% voting rights or acquiring control triggers an open offer for at least 26% of the target's shares.

Buyback of securities

A company's repurchase of its own shares, governed by SEBI (Buy-back of Securities) Regulations, 2018, through tender offer, open market or book building.

Delisting regulations

SEBI (Delisting of Equity Shares) Regulations, 2021, prescribe the reverse book building process and conditions for removing shares from exchange listing.

Debenture trustee

A SEBI-registered entity appointed for a debt issue that holds security on behalf of debenture holders and monitors compliance with the trust deed.

Insider trading prohibition

SEBI (Prohibition of Insider Trading) Regulations, 2015 bar trading in securities while in possession of unpublished price-sensitive information.