Sunday, January 16, 2011

Merchant bankers cannot undertake referral activities for non-security related products and/or services

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.

Monday, January 10, 2011

SEBI Master Circulars and new SEBI website

SEBI has recently issued the following master circulars:

1. Master Circular on Matters Related to Exchange Traded Derivatives (available here) issued with a sunset clause of one year
2. Master Circular on Administration of Stock Exchanges, Arbitration in recognised Stock Exchanges and Stock Exchanges / trading platform for Small & Medium Enterprises including guidelines for Market Makers (available here)
3. Master Circular for Depositaries (available here)
4. Master Circular for Stock Exchanges and Depositaries (available here)
5. Master Circular for Stock Exchanges- Cash Market (available here)
6. Master Circular on Anti-Money Laundering (available here)
7. Master Circular for Mutual Funds.(available here)

It was in December 2008 that SEBI started issuing master circulars, following the footsteps of the RBI (which has various master circulars on FEMA, NBFCs, etc.). The first master circular issued by SEBI was the consolidated Master Circular on Anti Money Laundering (AML) and Combating Financing of Terrorism (CFT) on December 18, 2010 (covered in this blog here). This was followed by a Master Circular on Mutual Funds (covered in this blog here) which was issued on January 1, 2010.

On a separate note, SEBI has come up with a new website (currently in Beta), which depicts trend graphs and live feeds of SEBI/SAT orders. This new SEBI website can be accessed here.