With the increasing number of merchant bankers in the market, the Securities and Exchange Board of India (Sebi) has proposed significant changes to its regulations to ensure better oversight and compliance. The proposal, outlined in a consultation paper open for public comments until 18 September, aims to address the regulatory and systemic risks associated with merchant bankers engaging in activities outside the securities market.
Sebi’s proposal includes stricter guidelines for merchant bankers, requiring them to focus solely on activities related to the securities market under Sebi’s jurisdiction. Any activities outside of this domain must be segregated within two years. The regulator also plans to categorize merchant bankers based on their net worth, with minimum requirements set at ₹50 crore and ₹10 crore for different categories.
While the move has been welcomed by industry experts, some merchant bankers are concerned that the proposed net worth requirements may restrict smaller players. However, the overall consensus is that these changes are necessary to maintain the integrity of the market and ensure that merchant bankers are well-equipped to handle market volatility.
In addition to the financial requirements, Sebi also aims to prevent merchant bankers from using multiple registrations within a group to evade regulatory scrutiny. The proposal suggests that merchant bankers within the same group should have only a single registration to streamline regulatory oversight.
Overall, the proposed changes by Sebi are seen as a positive step towards ensuring accountability and transparency in the merchant banking sector. While there are concerns about potential barriers for smaller firms, the overarching goal is to create a more robust and competitive market environment for all players involved.
