Role of merchant bankers in fixing the price
Role of merchant bankers in fixing the price: Merchant bankers play an important role in the public issue process. While acting as a banker to an issue, a merchant banker has to disclose full details to the Securities Exchange Board of India (SEBI). The details submitted by the merchant bankers about the public issue should contain the following.
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Furnishing Information:
- A number of issues for which the merchant banker is engaged as a banker to issue.
- Number of applications received and details of application money received
- Dates on which applications from investors were forwarded to issuing company.
- Details of amount as a refund to investors.
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Books to be Maintained:
- Books of accounts for a minimum period of 3 years
- Records regarding the company
- Documents such as company applications, names of investors, etc.
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Agreement with the issuing company
An agreement with the issuing company by the merchant banker should contain
- Number of collection centers
- Application money received
- Daily statement by each branch which is a collecting center.
- Action by RBI: Any action by RBI on merchant bankers should be informed to SEBI by the merchant banker concerned.
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Code of Conduct
- Having high integration in dealing with clients.
- Disclosure of all details to the authorities concerned. Avoiding making exaggerated statements.
- Disclosing all the facts to its customers.
- Not disclosing any confidential matter of the clients to third parties.
A rights issue is the offer of shares of a company to the existing shareholders. A merchant banker has the following responsibilities regarding Rights issues.
Role of merchant bankers in fixing the price
Responsibilities of Merchant Bankers in Rights Issue
- The merchant banker will ensure that when Rights issues are taken up by a company, the merchant banker who is responsible for the Rights issue, shall see that an advertisement regarding the same is published in an English national daily, a Hindi national daily, and in a regional daily.
These newspapers should be in circulation in the city/town where the registered office of the company is located.
- It is the duty of the merchant banker to ensure that the application forms for the Rights issues should be made available to the shareholders and if they are not available, a duplicate composite application form is made available to them within a reasonable time.
- If the shareholders are not able to obtain neither the original nor the duplicate application for Rights shares, they can apply on plain paper through the merchant banker.
- The details that should be furnished in the plain paper, while applying for Rights shares should be provided by the merchant hanker.
- The merchant banker should mention in the advertisement, the company official to whom the shareholders should apply for Rights shares.
- The merchant banker should also inform that no individual can apply twice, in standard form as well as in plain paper.