RMB CIRCULAR NO. 2(98-99) August 11, 1998

To All the registered merchant bankers

The Securities and Exchange Board of India (Merchant Bankers) Regulations, 1992, was amended on December 09, 1997 by the SEBI (Merchant Bankers) Amendment Regulations, 1997, vide. S.O. 837(E), which prohibited registered merchant bankers from undertaking any activity other than that in the securities market. The said Regulations were further amended by the SEBI(Merchant Bankers) Amendment Regulations,1998 vide . S.O. 74(E) dated January 21, 1998, which granted time upto June 30,1998, to the existing registered merchant bankers to segregate those activities undertaken by them that are not related to the securities market.

In view of these amendments, the registered merchant bankers carrying on any activity other than that in the securities market are required to either discontinue the activities other than those relating to the securities market with effect from June 30, 1998 or are required to transfer the merchant banking activities to a new entity, which entity would be required to be registered with SEBI as a merchant banker and can undertake only those activities that are related to the securities market.

Subsequent to these amendments, every registered merchant banker, (including a merchant banker who is an NBFC or is undertaking activities other than those related to the securities market and who has neither applied for transfer of certificate of registration to a new entity nor submitted an undertaking to SEBI that it will not carry on any activity other than those related to the securities market, ) will be required to submit to SEBI, within 7 days from the date of the issue of this Circular, such information as provided for in the Annexure, accompanied by documentary proof, wherever necessary.

Sd/-

M.Natarajan
Division Chief
 

Primary Market Department

1. Name of the entity
2. Date of the grant of the certificate of registration
3. Date of expiry of the certificate of registration

1. IF THE MERCHANT BANKER HAS DISCONTINUED ALL ACTIVITIES IN THE EXISTING COMPANY, EXCEPT THOSE ACTIVITIES RELATING TO THE SECURITIES MARKET

1. Details of the activities other than those in the securities market (including NBFC activities ) undertaken by the existing company which have been discontinued.
2. Details of the activities that the entity proposes to undertake
3. An undertaking that no activity except those related to the securities market or activities which do not require registration/have been granted exemption from registration as an NBFC from RBI, will be undertaken.

2. IF THE MERCHANT BANKER HAS APPLIED FOR TRANSFER OF REGISTRATRION TO ANOTHER ENTITY

1. Date of the application, seeking a transfer of the certificate of registration
2. Name of the transferee company
3. Details of the activities other than that in the securities market (including

company).

(d) Details of the activities that the transferee company proposes to

undertake
 

3. IF THE MERCHANT BANKER IS CONTINUING ACTIVITIES

NOT COMPLIED TO EITEHR A OR B ABOVE.

then the following particulars may be provided:-

1. Date of the surrender of certificate of registration.
2. The list of all the activities that are being carried out including those activities which do not relate to the securities market.
3. Details of enquiry initiated with respect to the merchant banking activity
4. An undertaking to remain liable for all acts of omission and commission committed with reference to the merchant banking activities.
5. Details of fees outstanding till date
6. Details of pending assignment relating to merchant banking activities

JUNE, 1998 

June 05, 1998 

RMB CIRCULAR NO. 1(98-99) June 05, 1998

To All the registered merchant bankers

Securities and Exchange Board of India (Merchant Banker) Regulation, 1992 were amended vide Notification No. S.O. 837 (E) Dated December 09, 1997 prohibiting registered merchant bankers from undertaking any activities other than those in securities market. The said regulation were further amended by SEBI (Merchant Bankers) Amendment Regulations, 1998 vide Notification No.S.O.74(E) dated January 21, 1998, which gave time upto June 30^th, 1998 to the existing registered merchant bankers for segregating the activities not in the area of the securities market (copies of both the notifications are enclosed).

Subsequent to the notifications, SEBI has been receiving many queries from the registered merchant bankers regarding various aspects of the notifications. SEBI has therefore, for the benefit of the merchant banking community compiled all such queries and prepared a comprehensive clarification on the subject which is being issued as a Circular to all the registered merchant bankers.

S/d

M . Natarajan
Division Chief

Part A

Activities that Merchant Bankers can undertake : With effect from July 01, 1998, a merchant banker shall undertake only those activities which are relating to Securities market and which do not require registration/ granted exemption from registration as an NBFC from RBI.

In particular, a merchant banker may undertake the following activities :

• Managing of Public Issue of Securities.
• Underwriting connected with the aforesaid Public Issue Management Business
• Managing/advising on International Offerings of Debt/Equity i.e. GDR, ADR, bonds and other instruments
• Private Placement Securities
• Primary or Satellite dealership of Government Securities
• Corporate Advisory Services related to Securities Market e.g. take-overs, acquisitions, Disinvestment.
• Stock-broking
• Advisory services for Projects
• Syndication of rupee term loans
• International Financial Advisory Services

Similarly Category II, III & IV merchant bankers may continue to carry on the activities which the certificate of registration authourised them to, till the validity of the existing registration.

Part B

Source of Funds: As regards the raising of funds by merchant bankers you may refer to the recent Circular of RBI, where under it has been clarified that Secured Debentures/ Bonds/ ICDS are exempted from the definition of term ‘Public Deposits’. In view of this, a merchant banker may raise money by issue of Secured Debentures/Secured Bonds/ICDS as a source of fund.

Part C

Procedure for transfer of Registration: In view of the Amendments, a registered merchant banker carrying on any business other that in the securities market will either have to discontinue such activities or transfer the merchant banking activities to a new entity. For exercising the later option the new entity shall be required to be registered with SEBI as a merchant banker.

On receipt of application from the existing registered merchant banker for transfer of certificate (or otherwise for grant of registration) to the entity to which the merchant banking activities have been hived off, SEBI will consider the application for transfer, provided such applications is in Form A and accompanied by

• A confirmation that the key persons of transferor company have been transferred to the new entity (the acceptance of transfer by employee shall be submitted to SEBI)
• Networth certificate (as on date of making application) and /or audited accounts (in case of transfer to existing subsidiary)
• Details of Enquiry, if any, initiated against the transferor company ( registered merchant banker)
• An undertaking that the transferee company is not carrying on any activity other than that in the securities market.
• A personal guarantee/ declaration from 2 principal directors of the transferee company that it will be responsible for all the acts of omission and commission by the transferor company and will be subject to any action initiated by SEBI for such acts.

Part D

Payment of fees: The credit will be given for fees paid by the earlier merchant banking entity (transferor) to the entity to which the registration is being transferred (transferee).

December 17, 1998

All Registered Registrars to an Issue
and /or Share Transfer Agents

Dear Sir/Madam,

The Year 2000 problem poses a significant challenge for the securities market and other related activities. Failure to address this issue in timely manner would cause operational problems to all the institutions operating in the securities market, even to the extent of disruption of financial markets. As a result it is imperative that all the agencies operating in the securities market, either directly or indirectly, should take necessary steps to ensure that the problems and disruptions due to Year 2000 bug are minimized.

In this regard, questionnaire were sent to all Registrars to an Issue/Share Transfer Agents on September 19, 1998 and a reminder was sent on October 15, 1998. It is observed that many Intermediaries have not responded and in some cases their system is not Y2K compatible. It is advised that all Registrars to an Issue/Share Transfer Agents shall ensure that their system is Y2K compatible on or before June 30, 1999 and a compliance report shall be submitted to SEBI on or before July 15, 1999. If the Intermediary is working on the project, they are advised to submit a monthly progress report from April, 1999 onwards and should ensure that their system is Y2K compatible within the period as stated above. The monthly progress report should be submitted within 10 days from the end of the month.

If the system is not Y2K compatible within the cut off date mentioned above, SEBI shall be constrained to take a serious view.

Please acknowledge receipt.

Yours faithfully,

D.RAVIKUMAR
DIVISION CHIEF

AUGUST, 1998

August 20, 1998

Dear Sir,

Sub : RRTI CIRCULAR 1(98-99)
Reg : Arms length relationship between the issuer company and the registrar to the issue. 

SEBI had amended the SEBI (Registrars to issue and share transfer agents) Rules and Regulations, 1993, in September 1997, to introduce an arms length relationship between the issuer and the registrar, in the form of Regulation 13(A). This change was notified in the government gazette dated September 17, 1997.

It has now come to SEBI’s notice that some of the registrars are not aware of the said amendment though it was notified in the Government gazette.

This is to inform the Registrars to the issues about the said notification, with a direction to strictly comply with and adhere to Regulation 13(A). In this regard, enclosed please find a copy of the government gazette.

Please acknowledge the receipt.

Yours faithfully,

sd/-

D RAVIKUMAR
DIVISION CHIEF

SEPTEMBER, 1998

September 01, 1998

All Debenture Trustees.

Sub : Submission of Quarterly Reports

Dear Sir,

In terms of the powers conferred on it under Section 11 of SEBI Act , 1992 as also in implementation of the Securities and Exchange Board of India ( Debenture Trustees ) Rules and Regulations, 1993, all the "Debenture Trustees" holding certificate of registration granted in accordance with aforesaid regulations are required to furnish the Quarterly Report, as per the enclosed format, from the Quarter ending September, 1998 onwards.

The report is to be submitted within 15 days from the end of each quarter.

Please acknowledge receipt of the same.

Yours faithfully,

sd/-

D.RAVIKUMAR
DIVISION CHIEF

Encl: a/a

JUNE, 1998

June 17, 1998

To:

ALL BANKERS TO ISSUES

Dear sir,

In terms of the powers conferred on it under Section 11 of SEBI Act , 1992, as also in implementation of the Securities and Exchange Board of India (Bankers to an Issue) Rules and Regulations, 1994, the following instructions are issued and all "Bankers to Issues" holding certificate of registration granted in accordance with aforesaid regulations are advised to ensure compliance with the following -

• Entities which are registered as ‘Bankers to an Issue’ and are coming out with their own Public /Rights Issues may act only as Collecting Banker for their own issue and their principal account for the issue purpose shall be maintained with some other Bank. Even for the purpose of payment of Refund Warrants, Dividend Warrants, Interest Warrants etc. the principal account shall be maintained with other Bank.

•  In such cases Collecting Branches of the Issuer Bank will transfer the balance in their issue accounts at the end of each working day to the Controlling Branch of the Bank, who in turn will transfer the balance in the collection account to the principal account (which will be maintained with other Bank) on daily basis.

Yours faithfully.

D. RAVIKUMAR
DIVISION CHIEF(PMD)

Dear Sir,

SEBI had a meeting with the Association of Mutual Funds in India (AMFI) on March 3, 1998. Based on the deliberations in the meeting, the following clarifications are being issued:

1.     Sub-regulation (5) of Regulation 16 of the Securities and Exchange Board of India (Mutual Funds) Amendment Regulations, 1998, requires that two thirds of the trustees shall be independent persons and shall not be associated with the sponsors. All mutual funds who have 2/3^rd independent trustees shall report to SEBI immediately. Other mutual funds who have yet to comply with this requirement shall take steps to reconstitute the Board of trustees and report to SEBI latest by April 30, 1998.

2.    It shall be mandatory for the investors of mutual fund schemes to mention their bank account numbers in their applications/ requests for redemptions. For this purpose, mutual funds shall ensure to provide for space in the application forms.

3.   The one time expenditure payable by the mutual funds to the depository may either be capitalised or may be included as part of recurring expenditure within the limits as permitted under the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996.

4.    Mutual funds had been advised earlier vide circular dated January 1, 1996, not to levy accounting fees to the schemes for the year 1995-96. The circular would not be applicable if accounting fees had already been charged to the schemes.
 

Yours faithfully,
 
 

P.K.NAGPAL
Division Chief

To,
The Managing Director/President/Chief Executive Officer
All Mutual Funds registered with SEBI
Unit Trust of India/AMFI

Dear Sir,

Enclosed is a copy of the Standard Offer Document and a copy of the memorandum containing key information for any scheme of a mutual fund.

All offer documents of mutual fund schemes filed with SEBI in terms of sub regulation (1) of regulation 28 of the SEBI (Mutual Funds) Regulations, 1996, on or after April 1, 1998, shall be prepared in the aforesaid format.

Application forms for schemes of mutual funds for which the offer documents are filed with SEBI on or after April 1, 1998, shall be accompanied by the aforementioned memorandum in terms of sub regulation (4) of regulation 29 of the amended 1996 Regulations.

The memorandum shall be printed at least in 7 point font size with proper spacing for easy readability.

With effect from April 1, 1998, any draft offer document of schemes of mutual funds filed with SEBI, shall also be available on SEBI’s Internet site – http:\\www.sebi.gov for 21 working days from the date of filing. This facility is being provided to enable the public to comment on the adequacy of disclosures in these documents. You are therefore advised to submit a soft copy of the above documents to SEBI, for this purpose.

Offer document of any scheme already filed with SEBI and for which SEBI has not yet communicated its observations shall, as far as possible, be recast in the format of the Standard Offer Document after receiving observations from SEBI.

This circular is issued under Regulation 77 of the SEBI (Mutual Funds) Regulations, 1996.

Yours faithfully,
 

P.K. NAGPAL
DIVISION CHIEF

c.c.: AMFI - For information

Encl. : a/a
 

Dear Sir,

Further to the amendments to the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, which were notified on 12^th January, 1998, a Corrigendum to the amended Regulations has been notified on 6^th February, 1998, a copy of which is enclosed.

You are advised to strictly adhere to the amended Regulations.

Yours faithfully,
 

P K NAGPAL
DIVISION CHIEF

Encl. : a/a

FEBRUARY, 1998
 

To,
The Managing Director/President/Chief Executive Officer
All Mutual Funds registered with SEBI
Unit Trust of India/AMFI

Dear Sir,

(1) The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, have been amended and notified on 12^th January, 1998, a copy of which is enclosed.

(2) Further, the following clarifications are being issued under regulation 77 of the SEBI (Mutual Funds) Regulations, 1996 :

(a) The words "fundamental attributes" as mentioned in clause (d) of sub-regulation (15) of regulation 18 are being elaborated as below :

(i) Type of a scheme
 
• Open ended/Close ended/Interval scheme
• Sectoral Fund/Equity Fund/Balance Fund/Income Fund/Index Fund/Any other type of Fund

(ii) Investment Objective

• Main Objective - Growth/Income/Both.
• Investment pattern - The tentative Equity/Debt/Money Market portfolio break-up with minimum and maximum asset allocation, while retaining the option to alter the asset allocation for a short term period on defensive considerations.

(iii) Terms of Issue

• Liquidity provisions such as listing, repurchase, redemption.
• Aggregate fees and expenses charged to the scheme.
• Any safety net or guarantee provided.

(c) Regarding disclosure of risk factors in the advertisements by the mutual funds as mentioned in clauses 10, 13 and 14 of the Advertisement Code of the Regulations, it is clarified that :
 

(i)all advertisements announcing the launch of a scheme and those which solicit subscription to the scheme shall disclose all the risk factors as required by the advertisement code.

(ii) all advertisements containing performance information, advertising yield/return etc. shall also disclose all the risk factors.\\

(iii) any advertisement which discloses only the latest NAV, sale and/or repurchase price without any reference to the corresponding past figures may not disclose all the risk factors. However, it shall include a statement that ‘investors are advised to read the offer document before investing in the scheme’.

 Yours faithfully,
 
 

P.K. NAGPAL
DIVISION CHIEF

c.c.: AMFI - For information

Encl. : a/a

December 11, 1998 

NOVEMBER, 1998

November 19, 1998 

OCTOBER, 1998

October 16, 1998 

SEPTEMBER, 1998
September 24, 1998 

AUGUST, 1998

August 14, 1998 

JULY, 1998

July 29, 1998 

JUNE, 1998

June 16, 1998 

MAY, 1998

May 21, 1998 

APRIL, 1998

April 29, 1998 

MARCH, 1998

March 16, 1998 

FEBRUARY, 1998

February 24, 1998 

JANUARY, 1998

January 16, 1998 

December 03, 1998