Merchant Banking : SEBI
The Securities and Exchange Board of India (SEBI) recently said merchant bankers (MB) can now engage in unregulated activities such as advisory and consultancies without needing a separate legal entity.
- Merchant Banking refers to financial services designed especially for businesses and corporate clients.
- These services help business owners raise funds, manage investments, and expand operations.
- Banks registered as merchant bankers provide expert advice on mergers, acquisitions, and other business activities requiring capital.
- They act as intermediaries between companies and investors to ensure smooth financial growth.
- The role of a merchant banker is similar to that of a financial advisor.
- They help make critical decisions and also help businesses expand by arranging private equity investments or strategic partnerships.
- One of the primary services merchant bankers provide is issue management.
- It involves helping companies raise capital from the public by managing the process of issuing shares, debentures, or other securities.
- Merchant banks do not provide regular banking services to the general public.
- The regulatory framework governing merchant banks in India is primarily overseen by the Securities and Exchange Board of India (SEBI).
- One of the key regulations involves the maintenance of minimum net worth requirements, which ensures that merchant banks have sufficient financial resources to undertake their activities and absorb potential losses.
- SEBI mandates that merchant banks adhere to a strict code of conduct, which includes provisions related to fair dealing, conflict of interest, and transparency.
- Merchant banks are also subject to periodic inspections and audits by SEBI to ensure ongoing compliance.
- Any violations can result in penalties, including suspension or cancellation of the registration certificate.
