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Merchant Banking and Financial Services, III Semester (MBA), UNIT-2

Definition of Issue Management Intermediaries

   Posted On :  07.10.2021 07:18 am

The origin of Merchant Banking is Italy. The Italian grain merchants provided funds for commodity traders and cargo owners. Their other activities were buying, selling and shipping of goods. The merchant Bankers were either individuals or Banking houses. Later on, the center of merchant banking operations was shifted from Italy to Amsterdam and thereafter to London.

Merchant Banking is one of the major Fee Based/Advisory Services. In 1969, the Greenlays Bank commenced merchant Banking division in India. Formal Merchant Banking service was originated. The bank started the activities relating to public issue of securities. They also undertook financial consultancy services. In the year 1973 the State Bank of India started Merchant Banking services. In 1974, the ICICI started research service. After 1975 many Merchant Banking organizations came into existence. The sponsors for these organizations were by Banks, Financial Institutions, Non-Banking Financial Institutions (NBFCs), Brokers and so on. Consequently, the scope of merchant banking activities was widened.

Initially, the new issue market was regulated under the provisions of the Capital issues (Control) Act 1947 and rules made under it. In 1992, the act was repealed. The protection of the interest of the investors was transferred to the Securities and Exchange Board of India (SEBI). Various regulatory measures covering both the intermediaries as well as the activities were introduced by SEBI for strengthening the operations of the new issues in the country. Many intermediaries who play an important role in the process of selling new issues emerged.

The major new issue Market intermediaries are:-

Merchant Bankers

Lead Managers

Underwriters

Bankers to issue

Brokers to an issue

Registrars to issue and Share transfer agent

Debenture trustees

Portfolio Managers

The legal framework prescribed by SEBI controlled the operations of these intermediaries. Rules and regulations were framed by SEBI for prohibition of fraudulent and unfair trading practices relating to the Securities Market and Prohibition on dealing/communicating/counseling on matters relating to insider trading.

The role of these intermediaries and SEBI regulations on their activities as well as issue procedure relating to issues of capital/securities are elaborately dealt in this unit.
Tags : Merchant Banking and Financial Services, III Semester (MBA), UNIT-2
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