SEBI Merchant Bankers Regulations: FOCL Barred for Two Years
Why in the news
SEBI penalised First Overseas Capital Ltd (FOCL) for several violations, signalling tougher focus on accountability, financial soundness and disclosure by merchant bankers.
Key facts
- Action: no new issue-management mandates (IPOs included), advisory work, or acting as manager or lead underwriter for two years.
- Penalty: ₹20 lakh.
About the regulations
- SEBI (Merchant Bankers) Regulations, 1992 regulate capital-market intermediation for transparency and investor protection.
- Merchant banker: anyone in issue management, arranging purchase, sale or subscription of securities, or acting as manager, consultant or adviser to an issue.
- Covers public issues (IPO/FPO), underwriting, restructuring advice, portfolio and project finance advice.
| Provision | Reference | Core requirement |
|---|---|---|
| Registration | Reg. 3-6 | Prior SEBI registration; infrastructure, staff, financial soundness |
| Capital adequacy | – | Net worth at least ₹5 crore (paid-up capital plus free reserves, excluding revaluation reserves) |
| Code of conduct | Schedule III | Integrity, fairness, no conflicts, full disclosure, confidentiality |
| Underwriting and issue management | Reg. 13-16 | Agreement with issuer, due diligence, due diligence certificate before issue opens |
| Records | Reg. 29 | Keep for a minimum of 5 years |
| Reports | Reg. 32 | Half-yearly reports to SEBI |
| Non-securities business | Reg. 24(b) | Barred from unrelated business such as real estate or trade |
Exam angle
- Year of regulations: 1992; regulator: SEBI.
- Net worth floor: ₹5 crore; record retention: 5 years.