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NISM Series IX (Merchant Banking) study materials
NISM Series IX (Merchant Banking) study resources

NISM Series IX (Merchant Banking): Regulatory Framework for Merchant Bankers

NISM Series IX (Merchant Banking) · Work through your exam, one topic at a time.

All guide sections

Regulatory Framework for Merchant Bankers

The most rule-dense domain: entry requirements, continuing obligations, the code of conduct, record-keeping and the consequences of breach.

Entry

  • Section 12(1) of the SEBI Act, 1992 bars any intermediary from dealing in securities without registration.
  • Application in the prescribed form with fee; SEBI grants or rejects with reasons; an aggrieved applicant may appeal to the Securities Appellate Tribunal.
  • Net worth: ₹5 crore (Category I), ₹50 lakh (Category II), maintained at all times, not merely at entry.
  • Certificate valid five years; renewal is sought before expiry.

Continuing obligations

  • Notify SEBI of changes in control, material litigation, or failure to meet eligibility.
  • Keep books and records for at least five years, separately for each issue handled.
  • File due diligence certificates, post-issue reports and periodic financial information.
  • Follow the code of conduct: integrity, diligence, confidentiality, no misrepresentation, avoidance and disclosure of conflicts, fair and not misleading publicity.

Code of conduct in practice

Schedule III obligations are enforceable conditions of registration, not ethics advice. A merchant banker must not associate with an issue where the offer document is misleading or the issuer's disclosures are inadequate.

Worked example

After the RHP is filed, an associate discovers that a promoter director's material litigation was omitted. The lead manager cannot stay silent or quietly proceed: it must put the omission to the issuer and to SEBI, ensure corrective disclosure, and decline to continue if the deficiency stays material. Its due diligence certificate is a representation on which investors and SEBI rely, and liability attaches to the signed certificate.

Traps

  • Confusing net worth with paid-up capital.
  • Quoting the Companies Act eight-year retention instead of the intermediary five years.
  • Treating the code of conduct as voluntary.
  • Forgetting that suspension, cancellation and debarment are available alongside monetary penalties.