Responsibilities of Lead Managers

Every lead managers has to enter into an agreement with the issuing
companies setting out their mutual rights, liabilities and obligation relating to such issues and in particular to disclosures, allotment and refund. A statement specifying these is furnished to the SEBI at least one month before the opening of the issue for subscription. In case of more than one lead manager, the statement has to provide details about their respective responsibilities. A lead merchant banker cannot manage an issue if the issuing company is his associate. He can also not associate with a merchant banker who does not hold a certificate of registration with the SEBI.

It is necessary for a lead manager who is Category I merchant banker, to accept a minimum underwriting obligation of 5 percent of the total underwriting commitment or Rs 25 lakh, whichever is less. If he is unable to do so, he has to make arrangements for underwriting of an equal amount by a merchant banker associated with that issue under intimation to the SEBI.

Due Diligence Certificate: The lead manager is responsible for the verification of the contents of a prospectus/letter of offer in respect of an issue and the reasonableness of the views expressed in them. He has to submit to the SEBI, at least two weeks before the opening of the issue for subscription, a due diligence certificate to the effect that (1) they are in conformity with the documents/materials and papers relevant to the issue., (2) all legal requirements connected with the issue have fully complied with, and (3) the disclosures are true, fair and adequate to enable the investors to make a well-formed decision as to the investment in the proposed issue.

Submission of Documents: The lead managers to an issue have to submit to the SEBI, at least two weeks before the date of filing with the registrar of companies/regional stock exchanges or both, particulars of the issue, draft prospectus/letter of offer, other literature to be circulated to the investors/ share holders and so on to the SEBI. They have to ensure that the modifications/suggestions made by it with respect to the information to be given to the investors are duly incorporated. They have to continue to be associated with the issues till the subscribers have received the share/debenture certificates or the refund of excess application money.

Acquisition of Shares: A merchant banker is prohibited from acquiring securities of any company on the basis of unpublished price sensitive information obtained during the course of any professional assignment either from the client or otherwise. He has to submit to the SEBI complete particulars of any acquisition of securities of a company whose issue is being managed by him within 15 days from the date of the transaction.

Disclosure to SEBI: As and when required, a merchant banker has to disclose to the SEBI: (1) his responsibilities with regard to the management of the issue, (2) any change in the information/particulars previously furnished which have a bearing on the certificate of registration granted to it, (3) the names of the companies whose issues he has managed or has been associated with (4) the particulars relating to the breach of capital adequacy requirements, and (5) information relating to his activities as manager, underwriter, consultant or advisor to an issue.

Procedure for Inspection:

The SEBI can undertake inspection of the books of accounts, records, and documents of a merchant banker to ensure that the books are maintained in the manner required, the provision of the SEBI Act, rules, regulations are being complied with, and to investigate complaints from investors/other merchant bankers/any other person or any matter having a bearing on his activities as a merchant banker and to investigate suo moto in the interest of securities business/investors into the affairs of the merchant banker.

The merchant banker has an obligation to furnish all information called for, allow a reasonable access to the premises, extend reasonable facility for examination of books/records/ documents/computer data and provide copies of the same and give all assistance to the inspecting authority in connection with the inspection.

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