SEBI has recently stated that a merchant banker cannot carry on any business other than in the securities market. In June 2010 Barclays Securities (India) Pvt. Ltd. ("BSIPL"), a merchant banker registered under the SEBI (Merchant Bankers) Regulations, 1992, had filed with SEBI a request for 'No Action Letter' under the SEBI (Informal Guidance) Scheme 2003 in relation to its proposed referral business. Under the proposed referral business BSIPL would refer its clients to other service providers for non-security related products/ services. The other service providers are in the nature of investment banking firms and/or intermediaries who may assist clients to invest in corporate deposits or property consultants who can advise clients on purchasing or selling real estate assets etc.
SEBI in its reply stated that a merchant banker cannot carry on any business other than in the securities market, under regulation 13A of the SEBI (Merchant Bankers) Regulations, 1992. SEBI also stated that regulation 13A was further clarified by the circular dated June 05, 1998, whereby certain other activities such as 'advisory services for projects', 'syndication of rupee term loans', 'international financial advisory services' have been specifically permitted. Since referral activities for non-security related products and/or services does not fall within the purview of the activities permitted by regulation 13A nor is specifically enumerated in the aforesaid circular, SEBI disallowed BSIPL from undertaking such business.
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