Misdeeds in the past can make the future tough for investment bankers seeking to advise clients on public offers, as market watchdog SEBI has upped the ante against those with a dark history.
The SEBI scan will not only cover the investment banking entity concerned, but also group entities, promoters, directors and key management persons. I-banks must seek approval from the Securities and Exchange Board of India for new registrations as well as renewal of licence as bankers to public issues.
Investment bankers are at the centre of any public offer, wherein these entities have a role to play from the time of conceiving the deal to issues like finalising the price, facilitating the information for investors, finding out investors to the final sale of shares.
While there are two-three bankers attached to almost every public offer, their numbers can be more than 10-12 in large deals. The bankers get paid anywhere between 0.05-1.0 per cent of the total issue proceeds in fees.
The factors that would be considered by SEBI before taking a call on granting the approval include any disciplinary proceedings, including enquiry, adjudication, consent, prosecution or any other action such as suspension or debarment from the market.
Besides, even adverse comments like warning and caution initiated by or pending with SEBI against the banker or its associates would be taken into account. Towards meeting this objective, SEBI in a circular has asked bankers to file an "Additional Information Sheet (AIS)", detailing their disclosures and related documentary proofs, along with their application for registration or renewal as bankers to an issue.
The AIS needs to contain all the details of the bankers' promoters and other associates active in the market. The bankers would also need to provide details of all pending or completed actions against them, their associates, group entities, promoters, directors and key management personnel.
SEBI has also asked for "details of the corrective measures taken pursuant to actions taken by SEBI." Besides the actions taken by SEBI, the bankers would also have to disclose any disciplinary proceedings initiated by or pending with any other regulatory authority, in India or abroad. Other than disciplinary actions, issues like any pending complaints or litigations, compliance with various stock market regulations and regular filing of quarterly reports, would also be looked into by SEBI.