L-4MB - CA(IBFS-4 L-4 Merchant Banking 1 This Lesson deals...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
CA (IBFS-4) L-4: Merchant Banking – 1 This Lesson deals with:- 1. Introduction to Merchant Banking (MB) 3. Regulatory Framework of MB Activity 4. Structure of MB Industry 5. Primary Markets in India and Abroad 6. Current Developments in MB 1. Introduction to Merchant Banking (MB): MB is an activity of financial intermediation which matches the entities that need capital with those that have capital. As per the Securities Exchange Board of India (SEBI), which regulates the Indian MB activity, a Merchant Banker (MBR) is defined as a person who is engaged in the business of the issue management either by making arrangements regarding selling, buying of, or subscribing to securities as Manager, Consultant, Advisor or rendering Corporate Advisory Services in relation to such issue management. Distinction between Merchant Banking (MB) and Investment Banking (IB) : 1. MB is the function of intermediation in the capital market. It assists the issuers to raise capital by placement of securities issued by them with the investors. However, MB is not merely about marketing of securities in an agency capacity. An MB 1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
has an onerous responsibility towards the investors in such securities. SEBI requires the MB firms to promote quality issues, maintain integrity and compliance with the law on own account and on behalf the issuers as well. Therefore, MB is a fee-based service for management of public offers (issue management) and private placement of securities in the capital market. N India, a MB leading the public issue is called the Lead Manager. 2. On the other hand, IB has a much wider connotation and is an inclusive term to refer to all types of capital market activities, both fund based and fee based. This development has been driven more by the way the American investment banks have evolved themselves over the past century. Given this situation, IB encompasses not merely merchant banking, but other related capital market activities such as – stock trading, market making, underwriting, broking, and asset management as well. Besides the above, IB also provides a host of corporate advisory services in the areas of Project Advisory, Business and Financial Advisory and Mergers and Acquisitions. 2. (a) Nature of MB : MB facilitates the process of flow of capital in the Market by intermediating between the issuers of capital and the ultimate investors who purchase the securities. MB channelizes the financial surplus of the society into productive investment avenues. MBR has to ensure that only quality paper emanates from his firm. He is required to exercise due diligence to ensure the adequacy and appropriateness of the disclosures made in the offer document. He is also required to guide and co-ordinate the activities of the Registrar, Bankers, 2
Background image of page 2
Advertising Agency, Printers, Underwriters, Brokers, etc. to the issue. MBR has also to ensure the compliance of all laws
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 01/28/2011 for the course FIN 315 taught by Professor Welker during the Spring '09 term at IUP.

Page1 / 21

L-4MB - CA(IBFS-4 L-4 Merchant Banking 1 This Lesson deals...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online