CAPITAL MARKET INTERMEDIARIES

STOCK BROKERS
MERCHANT BANKERS UNDERWRITERS

DEPOSITORY REGISTERER &

PARTICIPTANT TRANSFER
AGENT.
INTERMEDIARIES

PUBLIC CAPITAL MARKETS

PORTFOLIO INTERMEDIARIES FINANCIERS

MANAGERS

MUTUAL FUNDS CREDIT RESEARCH VENTURE

AGENCY CAPTAL
⦿ Intermediaries are service providers in the
market, including stock brokers, sub- brokers,
financiers, merchant bankers, underwriters,
depository participants, registrar and transfer
agents, FIIs/ sub accounts, mutual Funds, venture
capital funds, portfolio managers, custodians, etc

Section 11 and section 12 of SEBI Act, 1992 defines an

Intermediary.

The regulation of intermediaries is ensured through the various rules and

regulations enunciated by SEBI with conditions of strict compliance. SEBI
has the Power to Issue Directions under Section 11(B) to the mentioned
intermediaries with regards to matters connection with Section 12.
Ex. Services required for trading
⦿ A stockbroker is a regulated professional individual,
usually associated with a brokerage form firm or
broker-dealer, who buys and sells stocks and other
securities for both retail and institutional clients,
through a stock exchange or over the counter, in
return for a fee or commission.
Stockbrokers are known by numerous professional
designations, depending on the license they hold, the
type of securities they sell, or the services they
provide.
Brokerage: 2.5 % or less
SEBI (Stock brokers & Sub-brokers)
Regulations, 1992
Registration
Application through Stock Exchange to SEBI and
Fees by stock brokers

5. The Board shall take into account for considering the grant of a certificate all matters relating
to buying, selling, or dealing in securities and in particular the following, namely, whether the
stock broker
(a) is eligible to be admitted as a member of a stock exchange;
(b) has the necessary infrastructure like adequate office space, equipments and man power to
effectively discharge his activities; (c) has any past experience in the business of buying, selling
or dealing in securities;
(d) is subjected to disciplinary proceedings under the rules, regulations and bye-laws of a stock
exchange with respect to his business as a stock-broker involving either himself or any of his
partners, directors or employees;
(e) is a fit and proper person”
⦿A merchant bank is a financial institution that
provides capital to companies in the form
of share ownership instead of loans. A merchant bank also
provides advisory on corporate matters to the firms they lend
to.
⦿ Both commercial banks and investment banks may
engage in merchant banking
activities.
Historically, merchant banks' original purpose was to
facilitate and/or finance production and trade of
commodities, hence the name "merchant".
Few banks today restrict their activities to such a narrow
scope.
SEBI (Merchant Bankers’) Regulation Act, 1992
Regulation 2 (cb) of Securities and Exchange Board of India (Merchant
Bankers) Regulations, 1992 defines the term merchant banker as “any
person who is involved in the business of issue management either by
making arrangements pertaining to selling, buying or subscribing to
securities or acting as manager, consultant, adviser or rendering
corporate advisory service in relation to such issue management”.

No, merchant banker as per Regulation 13A of the Merchant Banker

Regulation who have obtained the certificate of registration after 30th
June 1988 can carry on any business apart from business in the
securities market. But, the Bank or Public Financial Institution can do
so.

● Regulation 22 of the Merchant Banking Regulation which provides that the lead merchant
banker shall accept a minimum underwriting obligation of 5% of total commitment or INR
25 Lacs, whichever is less.
● Due Diligence:
○ It is provided by the Regulation 24(3) of SEBI (ICDR) Regulations, 2018 that every
merchant banker acting as a lead manager in the issue of securities shall ensure the
authentication and the credibility of all the information disclosed by the issuer in the
draft of the offer document and make satisfy himself as to the compliance of all the
SEBI regulations.
Classification of Merchant Bankers & Capital Adequacy:
⦿ A company or other entity that administers the
public issuance and distribution of securities
from a corporation or other issuing body. An
underwriter works closely with the issuing body
to determine the offering price of the
securities, buys them from the issuer and sells
them to investors via the underwriter's
distribution network
⦿ EX- MB and syndicate members.
Exchange Board of India (Underwriters) Rules,
1993
Securities And Exchange Board Of India (Underwriters) (Repeal)
Regulations, 2021 . Mar 30, 2021
⦿ Depository system introduced in India in the year
1996.
⦿ InIndia, a Depository Participant (DP) is
described as an agent of the depository. They are
the intermediaries between the depository and
the investors.
The relationship between the DPs and the
depository is governed by an agreement made
between the two under the Depositories Act.
⦿ Service provided-
Dematerialization, Rematerialization,
Transfers of securities, settlement of trades.
 What is Dematerialisation?

Conversion of physical securities into electronic

form.

Some examples of securities that can be

Dematerialised :

Equity Preference Debenture

Bonds
Shares Shares s

Governme Sovereign
Mutual
nt Gold
Fund Units
Securities Bonds
 Dematerialisation : Prerequisites

Investor should have a Demat account with any

Depository Participant (DP)

Securities should be available for Dematerialisation

(active ISIN):

• Company Details whose securities are available for Demat is

available on websites of Depositories
- CDSL : https://www.cdslindia.com/Investors/InvestorCorner.aspx

- NSDL : https://nsdl.co.in/master_search.php

• Details of Registrar and Transfer Agent (RTA) of company

available on “Investor Relations” section of the Company website
 Dematerialisation : Meaning of ISIN
International Securities Identification
Number (ISIN)

Unique Allotted by NSDL in

Same ISIN
Identification Contains 12 India for all securities
used by both
Number for Each Characters except Government
depositories
Security securities

Example of ISIN - IN E 005A 08 02 0 Check Digit

‘IN’
stands for ‘E’ stands for Serial No./
‘08’ for
India Company. ‘005A’ for Type of
Security
Company Instrument.
Code
‘F’ stands for Identity
Mutual Funds
 Dematerialisation : Prerequisites

Investor should have a Demat account with any

Depository Participant (DP)

Securities should be available for Dematerialisation

(active ISIN):

• Company Details whose securities are available for Demat is

available on websites of Depositories
- CDSL :
https://www.cdslindia.com/Investors/InvestorCorner.aspx

- NSDL : https://nsdl.co.in/master_search.php

• Details of Registrar and Transfer Agent (RTA) of company

available on “Investor Relations” section of the Company website
6
⦿ Registrar are the trusts or institutions that
register and maintain detailed records of the
transactions of investors for the convenience
of mutual fund houses.
⦿ Registrar or transfer agents are the trusts or
institutions that register and maintain
detailed records of the transactions of
investors for the convenience of mutual fund
houses.
SEBI (Registrars to an Issue and Share Transfer Agents)
Regulations, 1993
Registrar to an issue under Regulation 2(f) of SEBI (Registrars to an Issue and Share
Transfer Agents) Regulations, 1993

● To collect applications from investors in respect of an issue.

● keeping a proper record of application and monies received from investors or paid
to the seller of securities.
● Assisting body corporate or group of persons in determining the basis of allotment
in consultation with stock exchange.
● Finalising list of persons entitled to allotment.
● Processing and dispatching allotment letters, refund orders or certificates, and
other related documents in respect of an issue.

Share transfer agent under Regulation 2(g) of SEBI (Registrars to an Issue and Share
Transfer Agents) Regulations, 1993

● Transfer agents on behalf of any body-corporate deal in matters connected with

the transfer and redemption of securities issued by such body corporate.
● Cancel the name and certificate of the shareholder who had sold the shares of
securities, and replace it with the new shareholder.
● Inform investors of new fund offers.
● Transmission, consolidation, sub-division of securities.
● Transfer of securities and record-keeping for investors.
regulation 7 of SEBI (LISTING OBLIGATIONS AND DISCLOSURE
REQUIREMENTS) Regulations, 2015 (Updated 10 January, 2020)

1. Appoint a share transfer agent or manage the share transfer facility in-house.

If listed entity has no. of shareholder less than or equal to one Lacs : Listed
entity shall appoint a share transfer agent or manage the share transfer facility
in-house.

If listed entity have no. of shareholder exceeding one Lacs : Listed entity shall
either register with the Board as a Category II share transfer agent or appoint a
share transfer agent.

2. Compliance certificate to Board The listed entity shall submit a compliance

certificate to the exchange, duly signed by both the compliance officer of the listed
entity and the authorised representative of the share transfer agent, wherever
applicable, within one month of end of each half of the financial year.

3. Change or appointment of a new share transfer agent In case of any change or

appointment of a new share transfer agent, the listed entity shall enter into a tripartite
agreement between the existing share transfer agent, the new share transfer agent
and the listed entity
⦿A mutual fund is a type of professionally managed
collective investment scheme that pools money from many
investors to purchase securities. While there is no legal
definition of the term "mutual fund", it is most commonly
applied only to those collective investment vehicles that
are regulated and sold to the general public.
They are sometimes referred to as "investment companies"
or "registered investment companies. Most mutual funds
are "open-ended," meaning investors can buy or sell shares
of the fund at any time.

Securities and Exchange Board of India (Mutual Funds)

Regulations, 1996
⦿ Venture capital (VC) is financial capital provided to
early-stage, high-potential, high risk, growth start-up
companies. The venture capital fund makes money by owning
equity in the companies it invests in.
● The typical venture capital investment occurs after the
seed funding round as the first round of institutional
capital to fund growth (also referred to as Series A
round) in the interest of generating a return through an
eventual realization event, such as an IPO or trade sale
of the company.
● Venture capital is a subset of private equity.
● Therefore, all venture capital is private equity, but
not all private equity is venture
● Technology Development and Information Company of India Ltd. (TDICI), an
equal joint venture of ICICI and UTI, was the first organization to begin its
venture capital operations in India. TDICI was the investment manager and the
funds were registered as UTI’s Venture Capital Unit Scheme (VECAUS).
● Thereafter in 1996 the regulatory environment of the industry was defined by
the SEBI (Venture Capital Fund) Regulations, 1996 followed by the SEBI
(Foreign Venture Capital Investor) Regulations, 2000 on the recommendation
of Chandrasekhar committee fostering growth in the industry.
● Venture Capital can be formed in:
○ o Trust
○ o Company
○ o Body Corporate
● Investors in venture capital funds are:
○ o Financial institutions
○ o Banks
○ o Pension Funds
○ o Corporations
○ o High Networth individuals; etc
● Venture capitalists raises money from these investors and invests in start-up
companies
❖ According to a survey by Bain & Company, the number
of start-ups in India expanded by 17% annually between
2012 and 2020 and approximately 9% of the 110,000
start-ups in India at this time have funding, indicating
that there is a considerable need for additional
investments.
❖ India as of 2021 has 73 unicorns, 2021 witnessed the
creation of 44 new unicorns, which puts it in third place
among nations with the most unicorns, behind China
and the United States.
❖ SEBI (Alternative Investment Funds) Regulations 2012
(the AIF Regulations), which recognised VCFs as
separate asset classes.
certificate of registration under are categorised under
Regulation 3(4) of the AIF Regulations.
Investments in start-ups, early-stage businesses, social ventures,
small and medium-sized enterprises (SMEs), and other infrastructure
are all eligible for Category I AIFs. It stipulates that-
● A single firm may receive a maximum investment of 25% of the
investable funds.
● Borrowing is only permitted for a maximum of 30 days to address
short-term funding needs. There are a total of four borrowing
opportunities per year. No more than 10% of the investable funds
may be borrowed.
⦿A portfolio manager is either a person who
makes investment decisions using money other people have placed
under his or her control or a person who manages a financial
institution's asset and liability (loan and deposit) portfolios. On the
investments side, they work with a team of analysts and researchers,
and are ultimately responsible for establishing an
investment strategy,
⦿ Portfoliomanagers are presented with investment ideas from internal
buy-side analysts and sell-side analysts from investment banks. It is
their job to sift through the relevant information and use their
judgment to buy and sell securities. Throughout each day, they read
reports, talk to company managers and
monitor industry and economic trends looking for the right company and
time to invest the portfolio's capital.
Before 1993, Portfolio Management Services was an unregulated activity.
1993, SEBI laid out the guidelines for PMS,
To become a portfolio manager, one needs to fulfill a few criteria.
Some of these mandatory requirements are as follows:
● Portfolio managers must be registered with SEBI.
● The registration certificate for a portfolio manager is valid for three years. The
net worth requirement for an investment advisor is ₹50 lakhs.
● The net worth requirement for a fund manager is ₹5 crores.
● Now as per the PMS SEBI rule, the minimum investment has changed from
₹25 lakhs to ₹50 lakhs in PMS Registration.
● 2021 amendment-qualification : a professional qualification in the area of
finance, accountancy, law, or business management from any university or a
college acknowledged by the Central Government or by any of the State
Government or by any foreign university, or a professional education by
completing a Post Graduate Program in the field of Securities Markets
(Portfolio Management) from the NISM of a tenure not less than one year, or
a professional qualification by obtaining a CFA (Chartered Financial Analyst)
charter from the CFA Institute.
⦿A financial professional who has expertise in
evaluating the creditworthiness of
individuals and businesses. Credit analysts
determine the likelihood that a borrower
will be able to meet financial obligations
and pay back a loan, often by reviewing the
borrower's financial history and determining
whether market conditions will be
conducive to repayment.
SEBI (Credit Rating Agencies) Regulations 1999
CRISIL Ratings Limited CRISIL House Central Avenue Hiranandani Business
Park Powai https://www. crisil.com

India Ratings and Research Pvt. Ltd. (Formerly Fitch Ratings India Pvt. Ltd.)
Wockhardt Towers, 4th Floor, West Wing, Bandra Kurla Complex, Mumbai
https://www.i ndiaratings.c o.in

CARE Ratings Limited Godrej Coliseum 4th Floor Somaiya Hospital Road, OFF
Eastern Express Highway Sion E https://www. careratings.c om

BRICKWORK RATINGS INDIA PRIVATE LIMITED 3rd floor, Raj Alkaa Park, 29/3
& 32/2, Kalena Agrahara , Bannerghatta Road, Bengaluru https://www.
brickworkrati ngs.com

Acuite Ratings & Research Limited (Formerly SMERA) A-812, The Capital, G
Block, BKC, Bandra (E), Mumbai https://www. acuite.in

Infomerics Valuation and Rating Pvt. Ltd. 104 & 108 (1st Floor), Golf Apt., Sujan
Singh Park, Maharishi Ramanna Marg, New Delhi https://www.i nfomerics.co m

ICRA LIMITED 1105,Kailash Building, 11th floor, 26 Kasturba Gandhi Marg, New
Delhi https://www.
SRO
Self-Regulatory Organisations (SRO)
are not for profit organisations that
attempt to bridge the gap between
regulation and industry specific
requirements.
In the Indian context, the most popular
example remains the Association of
Mutual Funds India, or the AMFI, an
entity incorporated under Section 8 of
the Companies Act 2013 as a
not-for-profit organisation with the
stated intent to act as a facilitator
between the Regulatory Body of
SEBI/RBI/the Government of India and
the Mutual Fund ecosystem.
Securities and Exchange Board of
India (Self Regulatory Organizations)
Regulations, 2004/2021
 Securities and Exchange Board of India (Intermediaries)
regulations, 2008
For determining the ‘fit and proper person’ criteria applicant/ intermediary should not be subjected to the following
disqualifications:

a) criminal complaint filed/ pending under section 154 of the Code of Criminal Procedure, 1973;

b) charge sheet filed for economic offences by any enforcement agency and pending proceedings thereto;

c) an order of restraint, prohibition or debarment on matters of securities laws or financial market passed the Board/
regulatory authority/ enforcement agency;

d) any recovery proceedings pending or initiated by the Board;

e) conviction of any offence involving moral turpitude;

f) winding proceedings passed or initiated;

g) declared insolvent and not discharged;

h) unsoundness of mind;

i) a wilful defaulter;

j) declared a fugitive economic offender; and

k) any other disqualification as may be specified by the Board.