Chapter 16 - OPERATIONAL GUIDELINES - SEBI (Disclosure and Investor Protection Guidelines) 2000

CHAPTER XVI OPERATIONAL GUIDELINES 16.0 The eligible merchant bankers shall ensure compliance with the following: 16.1 Submission of draft and final offer document 16.1.1 (a) The offer documents of size upto 1 (Rs.50 crores) shall be filed by lead merchant bankers with the concerned regional office of Board under the jurisdiction of which the registered office of the issuer company falls. (b) The jurisdiction of regional offices/ head office shall be as per Schedule XXII. 16.1.2 (a) As per Clause 5.6 of Chapter V of the Guidelines, the draft offer document filed with the Board shall be made public. (b) 2 (The lead merchant banker shall make ten (10) copies of the draft offer document available to the dealing office of the Board, three (3) copies to the Primary Market Department, SEBI, Head Office and 25 copies to the stock exchange(s) where the issue is proposed to be listed.) (c) Copies of the draft offer document shall be made available to the public by the lead merchant bankers / Stock Exchange. (d) The lead merchant banker and the Stock Exchanges(s) may charge such reasonable charge for providing a copy of the draft offer document. 3 (Provided that nothing contained in this clause shall apply to a fast track issue.) 16.1.3 4 ((a) The lead merchant banker shall submit the draft offer document on a computer floppy to the dealing office of the Board and to the Primary Market Department, SEBI, Head Office, as specified in Schedule XXIII. (b) In case of book built issues the lead merchant banker shall submit a printed and soft copy on a computer floppy, of the draft offer document incorporating the Board s observations and a printed copy of bid cum application form to the Primary Market Department, SEBI, Head Office at least five days before opening of bidding.) 5 (Provided that nothing contained in this clause shall apply to a fast track issue.) 16.1.4 (a) The Lead Merchant Bankers shall submit two copies of final printed copy of the final offer document to dealing offices of Board 6 (within three (3) days of filing offer document with Registrar of Companies / concerned Stock Exchange(s) as the case may be) (b) 7 (The lead merchant banker shall submit one final printed copy of the final offer document to Primary Market Department, SEBI, Head Office, within three (3) days of filing the offer document with Registrar of Companies / concerned Stock Exchange(s) as the case may be.) 8 ((c) The lead merchant banker shall submit a computer floppy containing the final prospectus/ letter of offer to Primary Market Department, SEBI, Head Office, as specified in Schedule XXIII within three (3) days of filing the final prospectus/ letter of offer with the Registrar of Companies/ concerned Stock Exchange(s). Along with the floppy, the lead manager shall submit an undertaking to SEBI certifying that the contents of the floppy are is in HTML format and are identical to the printed version of prospectus/ letter of offer filed with Registrar of Companies/ concerned Stock Exchange as the case may be.) 16.1.5 9 ((a)) Whenever offer documents (for public/ rights issues, takeovers or for any other purpose) are filed with any Department/ office of Board, the following details 10 (about themselves) 11 (certified as correct) shall be given by the lead merchant banker in the forwarding letters: i. Registration No. ii. Date of Registration / Renewal of registration. iii. Date of expiry of registration. iv. If applied for renewal, date of application. v. Any communication from the Board prohibiting from acting as a merchant banker. vi. Any inquiry / investigation being conducted by the Board. vii. 12 (Deleted) viii. 13 (Deleted) ix. 14 (Deleted) x. 15 (Deleted) xi. 16 (Deleted) xii. 17 (Deleted) xiii. 18 (Deleted) 19 ((b) The following details about the issuer company certified as correct shall be furnished by the lead merchant banker along with their forwarding letter while filing offer documents for public/ rights issue/ buyback/ takeovers: (i) whether any promoter/ director/ group /associate company/entity of the issuer company and/or any company/entity with which any of the above is associated as promoter/ director/ partner/ proprietor, is/was engaged in securities related business and registered with SEBI. (ii) If any one or more of these persons/entities are/ were registered with SEBI, their respective registration numbers. (iii) If registration has expired, reasons for non renewal. (iv) Details of any enquiry / investigation conducted by SEBI at any time. (v) Penalty imposed by SEBI (Penalty includes deficiency/warning letter, adjudication proceedings, suspension / cancellation / prohibitory orders). (vi) Outstanding fees payable to SEBI by these entities, if any. (c) The draft and final offer documents submitted to the Board on computer floppies as per the clause 16.1.3 and 16.1.4(c) shall be accompanied by the information as per format in Schedule XXIIIA.) 20 (Provided that nothing contained in sub-clause (a) and (b) shall apply to a fast track issue.) 16.1.6 Offer documents not accompanied by the information referred to in clause 16.1.5 may be rejected. 16.1.7 (a) 21 (Lead Merchant Bankers shall obtain similar information from other intermediaries including Self Certified Syndicate Banks to ensure that they comply with these guidelines and a confirmation from all intermediaries including Self Certified Syndicate Banks that they are eligible to be associated with the concerned issue.The intermediaries shall also indicate in their letters that they have obtained such information from other intermediaries.) 16.1.8 Despatch of issue material 16.1.8.1 (a) Lead merchant bankers shall ensure that whenever there is a reservation for NRIs, 10 copies of the prospectus together with 1000 application forms are despatched in advance of the issue opening date directly along with a letter addressed in person to Adviser (NRI), Indian Investment Centre, Jeevan Vihar Bldg., Sansad Marg, New Delhi - 110001. (b) Twenty copies of the prospectus and application forms shall be despatched in advance of the issue opening date to the various Investors Associations. 16.1.9 Underwriting 16.1.9.1 (a) While selecting underwriters and finalising underwriting arrangements, lead merchant bankers shall ensure that the underwriters do not overexpose themselves so that it may become difficult to fulfil underwriting commitments. (b) The overall exposure of underwriter(s) belonging to the same group or management in an issue shall be assessed carefully by the lead Merchant Banker. (c) OTC Dealers registered with Board under Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Rules and Regulations, 1992 shall be treated at par with the brokers of other stock exchanges in respect of underwriting arrangement. 16.2 22 (Instructions on post-issue obligations) 16.2.0 The merchant banker shall ensure compliance with the following postissue obligations: 16.2.1 23 (Deleted) 16.2.2 Redressal of investor grievances 16.2.2.1 (a) The merchant bankers shall assign high priority to investor grievances and take all preventive steps to minimise the number of complaints. (b) The lead merchant banker shall set up proper grievance monitoring and redressal system in co-ordination with the issuers and the Registrars to Issue, and take all necessary measures 24 (including guidance to the ASBA investors to approach the Self Certified Syndicate Banks for redressal of their grievances) to resolve the grievances quickly. 16.2.2.2 The merchant bankers shall actively associate with the post-issue refund and allotment activities and regularly monitor investor grievances arising therefrom. 16.2.3 Submission of post issue monitoring reports 16.2.3.1 (a) The concerned lead merchant banker shall submit, in duplicate, the Post Issue Monitoring Reports specified in Clause 7.2 of Chapter VII of these Guidelines, within 3 working days from the due dates either by registered post or deliver at respective regional offices/ head office at the addresses given in Schedule XXII. (b) Where the offer document has been dealt with by any of the regional offices of the Board, a copy of the report shall be sent to the Board s Head office, Mumbai. 16.2.3.2 The Lead Merchant Banker(s) shall inform the Board on important developments about the particular issues being lead managed by them during the intervening period of the reports. 16.2.4 Issue of No objection certificate(NOC) 25 (16.2.4.1 (a) As per the Listing Agreement of the Stock Exchanges, the issuer companies shall deposit 1% of the amount of securities offered to the public and/or to the holders of the existing securities of the company, as the case may be, with the designated Stock Exchange, which can be released by the concerned stock exchange only after obtaining an NOC from the Board. (b) An application for NOC shall be submitted by issuer company to the Board in the format specified in Schedule XXIV. 16.2.4.2 The following conditions shall be complied before submitting the application for issue of NOC: a) Completion of 4 months from the date of obtaining the listing permission from the concerned Designated Stock Exchange or the last date when the listing permission was obtained from any of the other stock exchanges, where the securities are proposed to be listed, whichever is later. b) 26 (Satisfactory redressal of all complaints regarding all applications in the issue including Applications Supported by Blocked Amount received at the Board against the Company as confirmed by the Registrar.) c) 27 (Certificate from the Designated Stock Exchange to the issuer company to the effect that underwriting/brokerage commission as well as fees of Registrars/Lead merchant bankers/Self Certified Syndicate Banks have been duly paid by the company. ) 16.2.4.3 Applications for issue of NOC shall be filed by merchant bankers with the concerned designated office of Board under the jurisdiction to which the registered office of the issuer company falls, as specified in Schedule XXII. 16.2.4.4 In cases where issues (i.e. public/rights/offer of sale or any other) fail and the investors monies are fully refunded, an NOC from the Board may not be required and the concerned designated Stock Exchange can refund the 1% security deposit after duly verifying that the refund orders have actually been despatched. 16.2.4.5 (a) The complaints with respect to non-receipt of underwriting /brokerage commission and non-receipt of Registrars/Lead merchant bankers 28 (/Self Certified Syndicate Banks) fees may be filed with the concerned Designated Stock Exchanges. (b) Responses against complaints forwarded by the Board to the concerned companies shall be submitted to the Board as per the proforma specified in Schedule XXV for updation of records.) 29 (16.3.0 Merchant Bankers) 30 (16.3.1) Registration and renewal of registration of Merchant Bankers 16.3.1.1 (a) Application for renewal of Certificate of Registration shall be made by the Merchant Bankers as per regulation 9 of Securities and Exchange Board of India (Merchant Bankers) Rules and Regulations, 1992. (b) While filing the renewal application for the certificate of registration as merchant banker, it shall provide a statement highlighting the changes that have taken place in the information that was submitted to the Board for the earlier registration and a declaration stating that no other changes other than as mentioned in the above statement has taken place. (c) Merchant Bankers while forwarding the renewal application in form A as per Securities and Exchange Board of India (Merchant Bankers) Rules and Regulations, 1992, shall also forward the additional information as specified in Schedule XXVI. 16.3.2 Reporting requirements in respect of merchant banking activities 16.3.2.1 (a) In terms of regulation 28 of Securities and Exchange Board of India (Merchant Bankers Regulation) 1992, the merchant bankers shall send half yearly report in the format specified at Schedule XXVII relating to their merchant banking activities. (b) The report referred to in sub-clause (a) shall be submitted twice a year, as on March 31 and September 30 and it should reach the Board within three months from the close of the period to which it relates. 16.4 Registration with Association of Merchant Bankers of India (AMBI) 16.4.4 Registered Merchant Bankers shall inform the Board of their having become a member of AMBI with relevant details. 16.5 Issue of Penalty Points 16.5.1 (a) Penalty points may be imposed on the merchant banker for violation of any of the provisions of operational guidelines under these Chapters. (b) The Merchant Banker, on whom penalty point of four or more has been imposed may be restrained from filing any offer document or associating or managing any issues for a particular period. (c) The Board may initiate action under the SEBI (Merchant Bankers) Regulations against the Merchant Bankers, irrespective of whether any penalty point is imposed or not. (d) Imposition of penalty point is not a condition precedent for initiation of proceeding against the Merchant Banker under the Securities and Exchange Board of India (Merchant Bankers) Regulations. ******* 1 Substituted vide SEBI Circular No. SEBI/CFD/DIL/DIP/2008/28/8 dated August 28, 2008 for the words and figures Rs. 20 crores . 2 Substituted for the following clause vide SEBI Circular No. DIP (Compendium) Circular No. 3 dated August 04, 2000: The lead merchant banker shall make10 copies of the draft offer document available to Board and 25 copies to the Stock Exchange(s) where the issue is proposed to be listed . 3 Inserted proviso, vide SEBI Circular No. SEBI/CFD/DIL/DIP/28/2007/29/11 dated November 29, 2007. 4 Substituted for the following clause vide SEBI Circular No. DIP (Compendium) Circular No. 3 dated August 04, 2000: The Lead Merchant Banker shall also submit to Board the draft offer document on a computer floppy as per the format specified in Schedule XXIII . 5 Inserted proviso, vide SEBI Circular No. SEBI/CFD/DIL/DIP/28/2007/29/11 dated November 29, 2007. 6 Substituted vide SEBI Circular No. RMB (Compendium) Series Circular No. 2 (1999-2000) dated February 16, 2000 for 10 days prior to issue opening date . 7 Substituted vide SEBI Circular No. RMB (Compendium) Series Circular No. 2 (1999-2000) dated February 16, 2000 for the following: the lead merchant banker shall make 10 copies of the draft offer document available to Board and 25 copies to the Stock Exchange (s) where the issue is proposed to be listed 8 Inserted vide SEBI Circular No. RMB (Compendium) Series Circular No. 2 (1999-2000) dated February 16, 2000. 9 Renumbered Clause no. 16.1.5 to Clause no. 16.1.5 (a) vide SEBI Circular No. DIP (Compendium) Circular No. 3 dated August 04, 2000. 10 Inserted vide SEBI Circular No. DIP (Compendium) Circular No. 3 dated August 04, 2000. 11 Inserted vide SEBI Circular No. RMB (Compendium) Series Circular No. 2 (1999-2000) dated February 16, 2000. 12 Omitted the following clause vide SEBI Circular No. DIP (Compendium) Circular No. 3 dated August 04, 2000: Period upto which registration / renewal fees has been paid. Initially Inserted vide SEBI Circular No. RMB (Compendium) Series Circular No. 2 (1999-2000) dated February 16, 2000. 13 Omitted the following clause vide SEBI Circular No. DIP (Compendium) Circular No. 3 dated August 04, 2000: Whether any promoter/ director/ group and/ or associate company of the Lead Manager is associated with securities related business and registered with SEBI. Initially Inserted vide SEBI Circular No. RMB (Compendium) Series Circular No. 2 (1999-2000) dated February 16, 2000. 14 Omitted the following clause vide SEBI Circular No. DIP (Compendium) Circular No. 3 dated August 04, 2000: If any one or more of these persons/entities are registered with SEBI, their respective registration numbers. Initially Inserted vide SEBI Circular No. RMB (Compendium) Series Circular No. 2 (1999-2000) dated February 16, 2000. 15 Omitted the following clause vide SEBI Circular No. DIP (Compendium) Circular No. 3 dated August 04, 2000: If registration has expired, reasons for non renewal. Initially Inserted vide SEBI Circular No. RMB (Compendium) Series Circular No. 2 (1999-2000) dated February 16, 2000. 16 Omitted the following clause vide SEBI Circular No. DIP (Compendium) Circular No. 3 dated August 04, 2000: Details of any enquiry / investigation conducted by SEBI at any time. Initially Inserted vide SEBI Circular No. RMB (Compendium) Series Circular No. 2 (1999-2000) dated February 16, 2000. 17 Omitted the following clause vide SEBI Circular No. DIP (Compendium) Circular No. 3 dated August 04, 2000: Penalty imposed by SEBI (Penalty includes deficiency/warning letter, adjudication proceedings, suspension/ cancellation / prohibitory orders) Initially Inserted vide SEBI Circular No. RMB (Compendium) Series Circular No. 2 (1999-2000) dated February 16, 2000. 18 Omitted the following clause vide SEBI Circular No. DIP (Compendium) Circular No. 3 dated August 04, 2000: Outstanding fees payable to SEBI by these entities, if any. Initially Inserted vide SEBI Circular No. RMB (Compendium) Series Circular No. 2 (1999-2000) dated February 16, 2000. 19 Inserted vide SEBI Circular No. DIP (Compendium) Circular No. 3 dated August 04, 2000. 20 Inserted proviso, vide SEBI Circular No. SEBI/CFD/DIL/DIP/28/2007/29/11 dated November 29, 2007. 21 Substituted vide SEBI Circular No. SEBI/CFD/DIL/DIP/31/2008/30/7 dated July 30, 2008 for the following: Lead Merchant Bankers shall obtain similar information from other intermediaries to ensure that they comply with these guidelines and are eligible to be associated with the concerned issue. 22 Numbered the clause as 16.2 , vide SEBI Circular No. SEBI/CFD/DIL/DIP/14/2005/25/1 dated January 25, 2005. 23 Omitted the following clause vide SEBI Circular No. DIP (Compendium) Circular No. 3 dated August 04, 2000: 16.2.1 Association of Resource Personnel 16.2.1.1 (a) In terms of Clause 7.1 of Chapter VII of these Guidelines in case of over-subscription in public issues, a Board nominated public representative shall be associated in the process of finalisation of basis of allotment. (b) The lead merchant banker shall intimate the person so nominated the date, time, venue etc. in respect of process of finalisation of basis of allotment. (c) The expenses of the public representatives associated in the allotment process of oversubscribed issues shall be borne by the lead merchant bankers and recovered from the issuers. (d) Honorarium at minimum of 500/- per day plus normal conveyance charges shall be paid to the public representatives. (e) The Board s Regional Managers at New Delhi, Chennai and Calcutta shall be associated with the public representatives . 24 Inserted vide SEBI Circular No. SEBI/CFD/DIL/DIP/31/2008/30/7 dated July 30, 2008. 25 Substituted vide SEBI/CFD/DIL/DIP/Circular No. 11 dated August 14, 2003 for the following: 16.2.4.1 (a) As per the Listing Agreement of the Stock Exchanges, the issuer companies shall deposit 1% of the amount of securities offered to the public and/or to the holders of the existing securities of the company, as the case may be, with the regional Stock Exchange, which can be released by the concerned stock exchange only after obtaining an NOC from the Board. (b) An application for NOC shall be submitted by issuer company to the Board in the format specified in Schedule XXIV. 16.2.4.2 The following conditions shall be complied before submitting the application for issue of NOC: a) Completion of 4 months from the date of obtaining the listing permission from the concerned Regional Stock Exchange or the last date when the listing permission was obtained from any of the other stock exchanges, where the securities are proposed to be listed, whichever is later. b) Satisfactory redressal of all complaints received at the Board against the Company. c) Certificate from the Regional Stock Exchange to the issuer company to the effect that underwriting/brokerage commission as well as Registrars/Lead merchant bankers fees have been duly paid by the company. 16.2.4.3. Applications for issue of NOC shall be filed by merchant bankers with the concerned regional office of Board under the jurisdiction to which the registered office of the issuer company falls, as specified in Schedule XXII. 16.2.4.4. In cases where issues (i.e. public/rights/offer of sale or any other) fail and the investors monies are fully refunded, an NOC from the Board may not be required and the concerned regional Stock Exchange can refund the 1% security deposit after duly verifying that the refund orders have actually been despatched. 16.2.4.5 (a) The complaints with respect to non-receipt of underwriting /brokerage commission and non-receipt of Registrars/Lead merchant bankers fees may be filed with the concerned Regional Stock Exchanges. (b) Responses against complaints forwarded by the Board to the concerned companies shall be submitted to the Board as per the proforma specified in Schedule XXV for updation of records. 26 Substituted vide SEBI Circular No. SEBI/CFD/DIL/DIP/31/2008/30/7 dated July 30, 2008 for the following: Satisfactory redressal of all complaints received at the Board against the Company. 27 Substituted vide SEBI Circular No. SEBI/CFD/DIL/DIP/31/2008/30/7 dated July 30, 2008 for the following: Certificate from the Designated Stock Exchange to the issuer company to the effect that underwriting/brokerage commission as well as Registrars/Lead merchant bankers fees have been duly paid by the company. 28 Inserted vide SEBI Circular No. SEBI/CFD/DIL/DIP/31/2008/30/7 dated July 30, 2008. 29 Inserted the heading vide SEBI Circular No. SEBI/CFD/DIL/DIP/14/2005/25/1 dated January 25, 2005. 30 Renumbered the clause as 16.3.1 , vide SEBI Circular No. SEBI/CFD/DIL/DIP/14/2005/25/1 dated January 25, 2005.