The Securities and Exchange Board of India (SEBI) has released a discussion paper proposing significant amendments to the SEBI (Merchant Bankers Regulations) Regulations, 1992. These proposed changes are aimed at modernizing the regulatory framework to better align with the evolving market landscape and global standards.
Key Proposed Changes
- Inclusion of Foreign Professional Qualifications: Employees holding professional qualifications from foreign universities or institutions may be permitted to work in merchant banking roles. This move aims to attract and retain top global talent in the Indian merchant banking sector.
- Net Worth Calculation: The committee has suggested that “securities premium” should be included when ascertaining the minimum net worth of a merchant banking entity. Currently, the net worth requirement for a merchant banking firm is set at Rs 5 crore.
- Regulatory Clarifications:
- Body Corporates Eligibility: Only body corporates are eligible for merchant banking licenses, excluding individuals, proprietary, and partnership firms. Consequently, references to proprietors and partners will be removed from the regulations.
- Principal Officer Definition: The definition of principal officer will be updated to include “designated partner” to accommodate limited liability partnerships (LLPs), which are eligible for merchant banking registration.
This discussion paper is the result of extensive consultations initiated by SEBI in late 2022, seeking inputs from merchant bankers and the Association of Investment Bankers of India (AIBI). In August 2023, SEBI established an Expert Committee under the chairmanship of S K Mohanty, former whole-time member of SEBI, to review and recommend updates to the regulatory framework for merchant bankers.
SEBI has also invited public comments on the proposed amendments until June 11, 2024. Stakeholders and interested parties are encouraged to submit their views to ensure a comprehensive and inclusive regulatory update.
