DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH
Name : MAJOR K. SIVA KUMAR
Designation : HEAD OF SECTION
Branch : Diploma in Commercial and
Computer Practice
Institute : Government Polytechnic, Srikakulam
Year/Semester : V Semester
Subject : Banking
Subject Code : CCP504(B)
Topic : Lead Banks and Merchant Banking
Duration : 50 Mts
Sub Topic : Regulation of Merchant Bankers
Teaching aids : PPT and Animations
CCP504(B).87 1
Obligations and
Responsibilities of Merchant
Bankers :

Objectives:-

On completion of this period, you would be

able to:

 Understand the obligations and

responsibilities of Merchant Bankers

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Recap :

In the previous class, you have learnt some of the

points on Regulatory framework of SEBI on
Merchant Bankers.

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Recap :

 At present merchant bankers in India are subject

to supervision by two authorities:
 RBI
 SEBI
 The merchant bankers have to compulsorily
register their names with SEBI.
 The SEBI grant a certificate after verifying all the
relevant matters.

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Recap (Contd..) :
 The merchant bankers have to fulfill the capital
adequacy ratio norms.
 They have to pay a registration fee and renewal
fee.
 They have to carry on only such businesses as
permitted by SEBI and RBI.

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Known to Unknown :

 Merchant bankers perform many variety of

services.
 In their functioning, they have certain
responsibilities and obligations.
 Can you say for whom they are responsible.

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Known to Unknown :

 What are their obligations.

 Can they function without any accountability.
 Who will fix the responsibilities and obligations.
 Why these responsibilities are fixed.

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Obligations and Responsibilities of
Merchant Bankers

Every merchant banker has to abide by the code

of conduct as specified below:-
 A merchant banker in the conduct of his business
has to observe high standards of service in all
his dealings with his clients and other merchant
bankers.
 He ought to render at all times high standards of
service.

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Obligations and Responsibilities of
Merchant Bankers (Contd..) :
 He has to exercise due diligence, ensure proper
care and exercise independent professional
judgment.
 Whenever necessary, he has to disclose the
possible sources conflict of duties and interest
while providing service to his customers.
 He can not make any harmful statement on other
merchant bankers.

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Obligations and Responsibilities of
Merchant Bankers (Contd..) :
 He should not make any exaggerated statement
about his qualification or achievements to his
clients.
 A merchant banker has always to endeavour to
render the best possible advice to the clients
regarding clients needs and requirements, and his
own professional skill.
 He must ensure that all professional dealings are
effected in a prompt, efficient and cost effective
manner.
CCP504(B).87 10
Obligations and Responsibilities of
Merchant Bankers (Contd..) :

 He should not divulge to other clients, press or any

other party any confidential information about his
client.
 He should not deal in the securities of any client
company without making disclosure to the SEBI and
also the Board of Directors of the client company.

CCP504(B).87 11
Obligations and Responsibilities of
Merchant Bankers (Contd..) :

 He should endeavour to ensure that the investors

are provided with true and adequate information.
 They are made aware of attendant risks associated
with the investment decisions.

CCP504(B).87 12
Responsibility of Merchant Banker :

 He should ensure that the copies of prospectus,

memorandum and related literature are made
available to the investors.
 He should ensure that adequate steps are taken
for the fair allotment of securities and refund of
application money without delay.
 He should see that complaints from investors are
adequately dealt with.

CCP504(B).87 13
Responsibility of Merchant Banker
(Contd..) :
 A merchant banker should not involve in
 Creation of false market
 Price rigging or manipulations
 Passing of price sensitive information to
players of capital market
 Taking any other action which is unethical or
unfair to the investors

CCP504(B).87 14
Responsibility of Merchant Banker
(Contd..) :

 Finally, he has to abide by the provisions of the

SEBI Act, its rules and regulations which are
applicable to him.

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Summary :

 The merchant bankers has to abide by the rules

framed by SEBI.
 The should not involve in unfair practices.
 The should not exaggerate the facts.
 The should provide true and correct information
to the investors.

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Quiz :

1. The merchant banker has to abide by the

provisions of which of the following Act ?
a) RBI Act
b) Excise Act
c) SEBI Act
d) None

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Quiz :

2. The Merchant Banker should not disclose any

confidential information about
a) His clients
b) His superiors
c) Himself
d) None

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Quiz :

3. The merchant banker should not involve in the

following activity
a) Price rigging
b) Creation of false market
c) Passing of price sensitive information
d) All the above

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Frequently Asked Questions :

1. What are the obligations and responsibilities

of merchant bankers ?

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