Sebi proposes overhaul of investment banking norms amid boom in ECM | News on Markets

The present internet value requirement for service provider bankers is Rs 5 crore, which was final hiked in 1992 from Rs 1 crore.

The regulator has now proposed to have two classes of funding banks primarily based on their internet value.

These with at the least Rs 50 crore internet value will fall beneath Class 1 and shall be allowed to undertake all actions that fall beneath Sebi’s ambit.

In the meantime, these with internet value of at the least Rs 10 crore will fall beneath the Class 2 not be allowed to deal with foremost board points.

Additional, the regulator has proposed that service provider banks preserve a fourth of their internet value in “liquid” property — these that may be simply transformed into money.

The quantity of points that an funding banker can underwrite shall be linked to internet value.

“The underwriting threshold to be prescribed at seven instances of internet value or 20 instances of liquid internet value, whichever is decrease,” Sebi stated.

The regulator proposed a glide path of two years to satisfy these necessities after they’re accredited by its board.

“Service provider banker’s play an crucial position within the major market and have been entrusted with the duty to make sure applicable due diligence, preserve integrity of the first market and guarantee compliance with the related legal guidelines on their very own account and on behalf of the issuers. Because of evolution of the securities markets and total elevated compliance necessities, the roles and tasks and enterprise undertaken by them within the major market have elevated considerably,” the regulator stated within the session paper.

To supply extra readability on their roles, Sebi has stated service provider bankers shall be allowed to undertake solely these actions, that are associated to the securities market and are available beneath its jurisdiction. Presently, there isn’t any particular provision round this.

To make sure solely critical gamers get registered as service provider bankers, Sebi has prescribed a income threshold of at the least Rs 25 crore within the three instantly previous monetary years, on a mixed foundation, from permitted actions.

Sebi has additionally prescribed {that a} single company group, apart from banks and public monetary establishments, can have just one service provider banking license.

The regulator has noticed that the observe of getting a number of service provider banking registrations is susceptible to misuse.

“If a service provider banker is debarred from enterprise sure service provider banking actions by way of a regulatory order, might shift such actions to its different associated/linked service provider banker,” the Sebi has stated.

The regulator has proposed to bar service provider banks to deal with their very own problem to keep away from battle of curiosity and guarantee unbiased due diligence. Additionally, the service provider banker is not going to be allowed to “lead handle” any problem if its key personnel, individually or in combination holds, greater than 0.1 per cent of the issuer’s paid up share capital.

The regulator has additionally prescribed that Class 1 bankers have at the least 5 years of related expertise for minimal two workers. In the meantime, for these beneath Class 2, the present requirement of two years will proceed.

Sebi has proposed to exclude international corporates from being eligible for grant of registration as service provider bankers, besides international banks licensed with the Reserve Financial institution of India. 

First Revealed: Aug 28 2024 | 7:58 PM IST