PROVISIONS UNDER COMPANIES ACT

The various regulations which govern the merchant bankers on the capital issue are
prescribed by the companies act, and the other enactments mentioned below.

1. PROVISIONS OF THE COMPANIES ACT, 1956

a. Prospectus (Sec. 55 to 68A)

b. Allotment (Sec. 55 to 75)

c. Commissions and discounts (Sec. 76 & 77)

d. Issue of shares at premium and at discount (Sec. 78 & 79)

e. Issue and redemption of preference shares (Sec. 80 & 80A)

f. further issues of capital (Sec. 81)

g. Nature, numbering and certificate of shares (Sec. 82 to 84)

h. Kinds of share capital and prohibition on issue of any other kind of shares

(Sec. 85 & 86)

1. Matters to be specified in prospectus and reports to be set out therein (Schedule 11)

2. The Securities Contracts (Regulations) Act, 1957 regarding transactions in securities

3. The Securities Contracts (Regulation)Rules, 1957.

2. their capital adequacy

3. their track record, experience and general reputation

4. Adequacy and quality of personnel employed by them and also the available

infrastructure.

SCRA ( SECURITY CONTRACT REGULATION ACT)

The Securities Contracts (Regulations) Act was passed in 1956 by Parliament and it

came into force in February 1957.

An act to prevent undesirable transactions in securities by regulating the business of
dealing therein, by providing for certain other matters connected therewith.

1. This Act may be called the Securities Contracts (Regulation) Act, 1956.

2. It extends to the whole of India.

3. It shall come into force on such date as the Central Government may, by notification

in the Official Gazette, appoint.

Definitions

a. -Contract? means a contract for or relating to the purchase or sale of securities;

b. -Corporatisation? means the succession of a recognized stock exchange, being a

Body of individuals or a society registered under the Societies Registration Act,

1860 (21 of 1860), by another stock exchange, being a company incorporated

for The purpose of assisting, regulating or controlling the business of buying, selling

or dealing in securities carried on by such individuals or society;

c. -demutualization? means the segregation of ownership and management from the

trading rights of the members of a recognized stock exchange in accordance with

a scheme approved by the Securities and Exchange Board of India;

(c) -derivative? includes

a. a security derived from a debt instrument, share, loan, whether secured or unsecured,

risk instrument or contract for differences or any other form of security;

b. a contract which derives its value from the prices, or index of prices, of underlying

securities;

c. -Government security? means a security created and issued, whether before or

after the commencement of this Act, by the Central Government or a State

Government for the purpose of raising a public loan and having one of the forms

specified in clause (2) of section 2 of the Public Debt Act, 1944 (18 of 1944);

d. -member? means a member of a recognized stock exchange;

e. -option in securities? means a contract for the purchase or sale of a right to buy or

sell, or a right to buy and sell, securities in future, and includes a teji, a mandi, a teji

mandi, a galli, a put, a call or a put and call in securities;

f. -recognized stock exchange? means a stock exchange which is for the time being

recognized by the Central Government under section 4;

g. stock exchange which may provide for

(i) the issue of shares for a lawful consideration and provision of trading rights in lieu

of membership cards of members of a recognized stock exchange;

(ii) the restrictions on voting rights;

(iii) the transfer of property, business, assets, rights, liabilities, recognitions, contracts
of the recognized stock exchange, legal proceedings by, or against, the recognized
stock exchange, whether in the name of the recognized stock exchange or any
trustee or otherwise and any permission given to, or by, the recognized stock
exchange;

(iv) the transfer of employees of a recognized stock exchange to another recognized

stock exchange;

(v) any other matter required for the purpose of, or in connection with, the
corporatisation or demutualization, as the case may be, of the recognized stock
exchange

h. -securities? include

i. shares, scrips, stocks, bonds, debentures, debenture stock or other marketable

securities of a like nature in or of any incorporated company or other body

corporate;

(h) Government securities;

i. such other instruments as may be declared by the Central Government to be

securities; and

ii. rights or interest in securities;

(j) -stock exchange? means

a. any body of individuals, whether incorporated or not, constituted before

corporatisation and demutualization under sections 4A and 4B, or

b. a body corporate incorporated under the Companies Act 1956 whether under a

scheme of corporatisation and demutualization or otherwise, for the purpose of

assisting, regulating or controlling the business of buying,

Recognised Stock Exchanges

APPLICATION FOR RECOGNITION OF STOCK EXCHANGES

Any stock exchange, which is desirous of being recognized for the purposes of this
Act, may make an application in the prescribed manner to the Central Government.

(2) Every application under sub-section

1. shall contain such particulars as may be prescribed, and shall be accompanied by a copy of the
bye-laws of the stock exchange for the regulation and control of contracts
and also a copy of the rules relating in general to the constitution of the stock exchange
and in particular, to

a. the governing body of such stock exchange, its constitution and powers of

management and the manner in which its business is to be transacted;

b. the powers and duties of the office bearers of the stock exchange;

c. the admission into the stock exchange of various classes of members, the

qualifications for membership, and the exclusion, suspension, expulsion and readmission
of members there from or thereinto;

d. the procedure for the registration of partnerships as members of the stock exchange

in cases where the rules provide for such membership; and the nomination and

appointment of authorized representatives and clerks.

Grant of Recognition of Stock Exchanges

1. If the Central Government is satisfied, after making such inquiry as may be necessary

in this behalf and after obtaining such further information, if any, as it may require,

a. that the rules and bye-laws of a stock exchange applying for registration are
inconformity with such conditions as may be prescribed with a view to ensure
fairdealing and to protect investors;

b. that the stock exchange is willing to comply with any other conditions (including
conditions as to the number of members) which the Central Government, after
consultation with the governing body of the stock exchange and having regard to
the area served by the stock exchange and its standing and the nature of the securities
dealt with by it, may impose for the purpose of carrying out the objects of this Act;
and

c. that it would be in the interest of the trade and also in the public interest to grant
recognition to the stock exchange; it may grant recognition to the stock exchange
subject to the conditions imposed upon it as aforesaid and in such form as may be
prescribed.

2. The conditions which the Central Government may prescribe under clause (a) of subsection

(1) for the grant of recognition to the stock exchanges may include, among
other matters, conditions relating to,
i. the qualifications for membership of stock exchanges;

ii. the manner in which contracts shall be entered into and enforced as between members;

iii.the representation of the Central Government on each of the stock exchange by

such number of persons not exceeding three as the Central Government may nominate in this

behalf; and

iv.the maintenance of accounts of members and their audit by chartered accountants

whenever such audit is required by the Central Government.

3. Every grant of recognition to a stock exchange under this section shall be published
in the Gazette of India and also in the Official Gazette of the State in which the
principal office as of the stock exchange is situate, and such recognition shall have
effect as from the date of its publication in the Gazette of India.

4. No application for the grant of recognition shall be refused except after giving an
opportunity to the stock exchange concerned to be heard in the matter; and the
reasons for such refusal shall be communicated to the stock exchange in writing.

5. No rules of a recognized stock exchange relating to any of the matters specified in

sub-section (2) of section 3 shall be amended except with the approval of the
Central Government.
Even though we have 23 stock exchanges in India, a major part of the transactions is
controlled by Bombay Stock Exchange. This has led to enormous speculation, rigging and
cornering of shares by a few speculators. To prevent these malpractices by companies,
brokers and merchant bankers, the government constituted Securities Exchange Board of
India in April 1988 for regulating and promoting the stock market in the country and
effective from 1992.
 SEBI

SEBI is a body corporate with head office at Bombay. The Chairman and the board

members are appointed by the Central government. SEBI has two major functions. The

are :

1. Regulatory and

2. Development

1. Regulatory

a. Registering the brokers and sub-brokers

b. Registration of mutual funds

c. Regulation of stock exchanges

d. Prohibition of fraudulent and unfair trade practice

e. Controlling insider-trading, take-over bids and imposing penalties

2. Development

a. Educating investors

b. Training intermediaries in stock market transactions

c. Promoting fair transactions

d. Undertaking research and publishing useful information to all

Objectives:

? To deal with development and regulation of stock market in India.

? To promote fair dealings by the issue of securities and ensure a market place

? where they can raise funds.

? To provide protection to the investors.

? Regulate and develop a code of conduct for brokers, merchant bankers, etc.

? To have check on preferential allotment to promoters at a very low price.

? To prevent deviations and violations of rules prescribed by stock exchange.

? To verify listing requirements, listing procedures, and ensure compliance of the

same by the companies, so that only financially sound companies are listed.

? To prescribe required standards for merchant bankers.

? The promote healthy growth of security market for the development of capital

market in the country.

Powers of Sebi

As per the Act, SEBI has powers

? To file complaints in a court

? To regulate companies in the issue and transfer of shares including bonus and
? rights shares.

? It can levy penalties on companies and on brokers for violating transactions.

? Power to summon any broker or intermediaries and call for documents.

? It can issue directions to all brokers for protecting the interests of investors.

In addition to the above powers:

? it can call for periodical returns from stock exchange.

? seek any information from stock exchange.

? It can enquire into the functioning of stock exchange.

? It can grant permission for the change of bye-laws of any stock exchange.

? It can compel listing of securities of public company.

? It can control and regulate stock exchanges.

? Granting registration to market intermediaries, prohibit inside-trading and prohibit

Fraudulent and unfair trade practices.

? Promoting investor-education, and trading of intermediaries in capital market.

? Regulating purchase of shares and take-over of companies.

CODE OF CONDUCT FOR MERCHANT BANKERS

The SEBI regulations have outlined the following code of conduct for the merchant
bankers operation in India ;

A merchant banker shall make all efforts to protect the interests of investors.

A Merchant Banker shall maintain high standards of integrity, dignity and fairness

in the conduct of its business.

A Merchant Banker shall fulfill its obligations in a prompt, ethical, and professional

manner.

A Merchant Banker shall at all times exercise due diligence, ensure proper care
and exercise independent professional judgment.

A Merchant Banker shall Endeavour to ensure that enquiries from the investors

are adequately dealt with, grievances of investors are redressed in a timely and

appropriate manner, where a complaint is not remedied promptly, the investor is

advised of any further steps which may be available to the investor under the

regulatory system.

A Merchant Banker shall ensure that adequate disclosures are made to the

investors in a timely manner in accordance with the applicable regulations and

guidelines so as to enable them to make a balanced and informed decision.

A Merchant Banker shall endeavour to ensure that the investors are provided with

true and adequate information without making any misleading or exaggerated

claims or any misrepresentation and are made aware of the attendant risks before
taking any investment decision.

A Merchant Banker shall endeavour to ensure that copies of the prospectus,

offer document, letter of offer or any other related literature is made available to

the investors at the time of issue of the offer.

A Merchant Banker shall not discriminate amongst its clients, save and except

on ethical and commercial considerations.

A Merchant Banker shall not make any statement, either oral or written, which

would misrepresent the services that the Merchant Banker is capable of

performing for any client or has rendered to any client.

A Merchant Banker shall avoid conflict of interest and make adequate disclosure

of its interest.

A Merchant Banker shall put in place a mechanism to resolve any conflict of

interest situation that may arise in the conduct of its business or where any conflict

of interest arises, shall take reasonable steps to resolve the same in an equitable

manner.

Merchant Banker shall make appropriate disclosure to the client of its possible

source or potential areas of conflict of duties and interest while acting as Merchant

Banker which would impair its ability to render fair, objective and unbiased services.
 A Merchant Banker shall always endeavour to render the best possible advice to

the clients having regard to their needs.

A Merchant Banker shall not divulge to anybody either oral or in writing, directly

or indirectly, any confidential information about its clients which has come to its

knowledge, without taking prior permission of its client, except where such

disclosures are required to be made in compliance with any law for the time being

in force.

A Merchant Banker shall ensure that any change in registration status/any penal

action taken by the Board or any material change in the Merchant Bankers financial

status, which may adversely affect the interests of clients/investors is promptly

informed to the clients and any business remaining outstanding is transferred to

another registered intermediary in accordance with any instructions of the affected

clients.

A Merchant Banker shall not indulge in any unfair competition, such as

weaning away the clients on assurance of higher premium or advantageous offer

price or which is likely to harm the interests of other Merchant Bankers or investors

or is likely to place such other Merchant Bankers in a disadvantageous position

while competing for or executing any assignment.

 A Merchant Banker shall maintain arms length relationship between its

merchant banking activity and any other activity.

A Merchant Banker shall have internal control procedures and financial and

operational capabilities which can be reasonably expected to protect its operations,

its clients, investors and other registered entities from financial loss arising from

theft, fraud, and other dishonest acts, professional misconduct or omissions.

A Merchant Banker shall not make untrue statement or suppress any material

fact in any documents, reports or information furnished to the Board.

A Merchant Bankers shall maintain an appropriate level of knowledge and

competence and abide by the provisions of the Act, regulations made there under,

circulars and guidance, which may be applicable and relevant to the activities carried

on by it. The merchant banker shall also comply with the award of the Ombudsman

passed under Securities and Exchange Board of India (Ombudsman) Regulations,

2003.

A Merchant Banker shall ensure that the Board is promptly informed about any

action, legal proceedings etc., initiated against it in respect of material breach or

non-compliance by it, of any law, rules, regulations, directions of the Board or of

any other regulatory body.

 A Merchant Banker or any of its employers shall not render, directly or indirectly,

any investment advice about any security in any publicly accessible media, whether

real-time , unless a disclosure of his interest including a long or short position, in

the said security has been made, while rendering such advice. In the event of an

employee of the Merchant Banker rendering such advice, the merchant banker

shall ensure that such employee shall also disclose the interests, if any, of himself,

his dependent family members including their long or short position in the said

security, while rendering such advice.

A Merchant Banker shall demarcate the responsibilities of the various

intermediaries appointed by it clearly so as to avoid any conflict or confusion in

their job description.

A Merchant Banker shall provide adequate freedom and powers to its compliance

officer for the effective discharge of the compliance officers duties.

A Merchant Banker shall develop its own internal code of conduct for governing

its internal operations and laying down its standards of appropriate conduct for its

employees and officers in carrying out their duties. Such a code may extend to the

maintenance of professional excellence and standards, integrity, confidentiality,

objectivity, avoidance or resolution of conflict of interests, disclosure of

shareholdings and interests etc.

A Merchant Banker shall ensure that good corporate policies and corporate

governance are in place.

A Merchant Banker shall ensure that any person it employs or appoints to conduct

business is fit and proper and otherwise qualified to act in the capacity so

employed or appointed

A Merchant Banker shall ensure that it has adequate resources to supervise

diligently and does supervise diligently persons employed if appointed by it in the

conduct of its business, in respect of dealings in securities market.

A Merchant Banker shall be responsible for the acts or omissions of its

employees and agents in respect of the conduct of its business.

A Merchant Banker shall ensure that the senior management, particularly decision

makers have access to all relevant information about the business on a timely

basis.

A Merchant Banker shall not be a party to or instrumental for creation of false

market; price rigging or manipulation; or passing of unpublished price sensitive

information in respect of securities which are listed and proposed to be listed in

any stock exchange to any person or intermediary in the securities market.

Sebi Guidelines

Operational Guidelines

SEBI has pronounced the following guidelines for merchant bankers :

1. Submission of offer document : The offer documents of issue size up to Rs. 20 crores
shall be filed by lead merchant bankers with the concerned regional office of the Board
under the jurisdiction of which the registered office of the issuer company falls. The
jurisdiction of regional offices/head office shall be as per Schedule XXII. According to
Clause 5.6 of Chapter V of the Guidelines, the draft offer document filed with the Board
shall be made public.
The lead merchant banker shall make available 10 copies of the draft offer document
to the Board and 25 copies to the stock exchange(s) where the issue is proposed to be
listed. Copies of the draft offer document shall be made available to the public by the lead
merchant bankers/Stock Exchange. The lead merchant banker and the Stock Ex change(s)
may charge a reasonable charge for providing a copy of the draft offer document.
The lead merchant banker shall also submit to the Board the daft offer document on

a computer floppy in the format specified in Schedule XXIII. The Lead Merchant Banker
shall submit two copies of the printed copy of the final offer document to dealing offices of
the Board within three days of filing offer document with Registrar of companies/concerned
Stock Exchange(s) as the case may be. -The lead merchant banker shall submit one
printed copy of the final offer document to the Primary Market Department, SEBI, Head
Office, -within three days of filing the offer document with Registrar of Companies/concerned
Stock Exchange(s) as the case may be.? The lead merchant banker shall submit a computer
floppy containing the final prospectus/letter of offer to the Primary Market Department,
SEBI, Head Office, as specified in Schedule XXIII within three days of filing the final
prospects/letter of offer with the Registrar of Companies/concerned Stock Exchange(s).
Along with the floppy, the lead manager shall submit an undertaking to SEBI certifying that
the contents of the floppy are in HTML, format, and are identical to the printed version of
the proposes/letter of offer filed with the registrar of Companies/concerned Stock Exchange,
as the case may be. Wherever offer documents (for public/rights issues, takeovers or for any other
purpose)
are filed with any Department/Office of the Board, the following details -certified as correct?
shall be given by the lead merchant banker in the forwarding letters:

a. Registration number

b. Date of registration/Renewal of registration

c. Date of expiry of registration

d. If applied for renewal, date of application

e. Any communication from the Board prohibiting them from acting as a

f. merchant banker

g. Any inquiry/investigation being conducted by the Board

h. Period up to which registration/renewal fees has been paid

i. Whether any promoter/group and/or associate company of the issuer company

is associated with securities-related business and registered with SEBI

j. If any one or more of these persons/entities are registered with SEBI, their

respective registration numbers

k. If registration has expired, reasons for non-renewal

l. Details of any enquiry/investigation conducted by SEBI at any time

m. Penalty imposed by SEBI

n. Outstanding fees payable to SEBI by these entities, if any

Offer documents not accompanied by the information as contained above may be

rejected. Lead merchant bankers shall obtain similar information from other intermediaries

to ensure that they comply with these guidelines and are eligible to be associated with the

concerned issue. The intermediaries shall also indicate in their letters that they have obtained

such information from other intermediaries.

2. Dispatch of issue material : Lead merchant bankers shall ensure that whenever

there is a reservation for NRIs, 10 copies of the prospectus together with 1000 application

forms are dispatched in advance of the issue opening date, directly along with a letter

addressed in person to Adviser (NRI), Indian Investment Centre, Jeevan Vihar Building

Sansad Marg, New Delhi. Twenty copies of the prospectus and application forms shall be

dispatched in advance of the issue opening date to the various Investors Associations.

3. Underwriting

While selecting underwriters and finalizing underwriting arrangement, lead merchant

bankers shall ensure that the underwriters do not overexpose themselves so that it becomes

difficult to fulfill their underwriting commitments. The overall exposure of underwriter(s)

belonging to the same group or management in an issue shall be assessed carefully by the

lead merchant banker. OTC Dealers registered with the Board under SEBI (Stock Brokers
and Sub-Brokers) Rules and Regulations, 1992 shall be treated at par with the brokers of

other stock exchanges in respect of underwriting arrangement.

4. Compliance obligations

The merchant banker shall ensure compliance with the following post-issue obligations

a. Association of resource personnel : In terms of Clause 7.1 of Chapter VII of these

Guidelines, in case of over-subscription in public issues, a Board nominated public

representative shall be associated in the process of finalization of the basis of allotment.

The lead merchant banker shall intimated to the person so nominated the date, time, venue

etc. regarding the process of finalization of the basis of allotment.

The expenses of the public representatives associated in the allotment process of

oversubscribed issues shall be borne by the lead merchant bankers, and recovered from

the issues. Honorarium at a minimum of Rs.500/- per day, plus normal conveyance charges

shall be paid to them, and the Boards Regional Managers at New Delhi, Chennai and

Calcutta shall be associated with them.

b. Redressal of investor grievances

The merchant bankers shall assign high priority to investor grievances, and take all

preventive steps to minimize the number of complaints. The lead merchant banker shall set

up a proper grievance monitoring and redressal system in co-ordination with the issuers
and the Registrars to Issue.. They shall take all necessary measures to resolve the grievances

quickly. They shall actively associate with post-issue refund and allotment activities and

regularly monitor investor grievances arising there from.

c. Submission of post issue monitoring reports

The concerned lead merchant banker shall submit, in duplicate, the Post Issue

Monitoring Reports specified in Clause 7.2 of Chapter VII of these Guidelines, within 3

working days from the due dates, either by registered post or deliver them at the respective

regional offices/head office give in Schedule XXII. Where the offer documents have been

dealt with by any of the regional offices of the Board, a copy of the report shall be sent to

the Boards Head office, Mumbai. The Lead Merchant Banker(s) shall inform the Board

on important developments about the particular issues being lead managed by them during

the period intervening the reports.

d. Issue of No objection Certificate (NOC)

In accordance with the Listing Agreement of the Stock Exchanges, the issuer companies

shall deposit 1% of the amount of securities offered to the public and/or to the holders of

the existing securities of the company, as the case may be, with the regional Stock Exchange.

These securities can be related by the concerned Stock Exchange only after obtaining an

NOC from the Board. An application for NOC shall be submitted by the issue company
to the Board in the format specified in Schedule XXIV.

The following conditions shall be complied with before submitting the application for

the issue of NOC.

Completion of 4 months from the date of obtaining the listing permission from the

concerned Regional Stock Exchange, or the last date when the listing permission

was obtained from any of the other Stock Exchanges, where the securities are

proposed to be listed, whichever is later

Satisfactory redressal of all complaints received by the Board against the company

Certificate from the Regional Stock Exchange to the issuer company to the effect

that underwriting/brokerage commission as well as the Registrars/Lead merchant

bankers fees been duly paid by the company

Application for issue of NOC shall be filed with the concerned regional office of the

Board , under the jurisdiction in which the registered office of the issuer company falls, as

specified in Schedule XXII..

In cases where issues fail, and the investors monies are fully refunded, an NOC from

the Board may not be required, and the concerned regional Stock Exchange can refund

the 1% security deposit after duly verifying that the refund orders have actually been

dispatched.
The complaints with respect to non-receipt of underwriting/brokerage commission

and Registrars/Lead merchant bankers fees may be filed with the concerned regional

Stock Exchanges. Responses to complaints forwarded by the Board to the concerned

companies shall be submitted to the Board in the proforma specified in Schedule XXV for

updation of records.

e. Registration of merchant bankers

Application for renewal of Certificate of Registration shall be made by the merchant

bankers according to Regulation 9 of SEBI (Merchant Bankers) Rules and Regulations,

1992. While filing the renewal application for the certificate of registration as merchant

banker, it shall provide a statement highlighting the changes that have taken place in the

information that was submitted to the Board for the earlier registration, and a declaration

stating that no other changes besides those mentioned in the above statement have taken

place.

Merchant Bankers, while forwarding the renewal application in Form A of the SEBI

(Merchant Bankers) Rules and Regulations, 1992, shall also forward the additional

information as specified in Schedule XXVI. Registered Merchant Bankers shall inform

the Board of their having become a member of AMBI, with the relevant details.

f. Reporting requirements
In terms of Regulation 28 of SEBI (Merchant Bankers Regulation) 1992, the merchant

bankers shall send a half yearly report, in the format specified in Schedule XXVII, relating

to their merchant banking activities. The report referred to in sub-clause (a) shall be

submitted twice a year, on March 31 and September 30, and it should reach the Board

within three months from the close of the period to which it relates.

g. Impositions of penalty points

Penalty points may be imposed on the merchant banker for violation of any of the

provisions for operational guidelines. The merchant banker, on whom penalty points of

four or more has been imposed, may be restrained from filing any offer document or

associating or managing any issues for a particular period.

The Board may initiate action under the SEBI (Merchant Bankers) Regulations against

the merchant bankers, irrespective of whether any penalty point is imposed or not.

Imposition of penalty point is not a precondition for initiation of proceedings against the

merchant banker under the SEBI (Merchant Bankers) Regulations.

Guidelines on Advertisement

Following are the guidelines applicable le to the lead merchant banker who shall

ensure due compliance by the issuer company :

1. Factual and truthful

An issue advertisement shall be truthful, fair and clear, and shall not contain any

statement that is untrue or misleading. Any advertisement reproducing, or purporting to

reproduce, any information contained in an offer document shall reproduce such information

in full and disclose all relevant facts. It should not be restricted to select extracts relating to

that item. An issue advertisement shall be considered to be misleading, if it contains :

a. Statements made about the performance or activities of the company in the absence

of necessary explanatory or qualifying statements, which may give an exaggerated

picture of the performance or activities.

b. An inaccurate portrayal of past performance, or its portrayal in a manner which

implies that past gains or income, will be repeated in the future.

2. Clear and concise

An advertisement shall be set forth in a clear, concise and understandable language.

Extensive use of technical, legal terminology or complex language and the inclusion of

excessive details, which may distract the investor, shall be avoided.

3. Promise or profits

An issue advertisement shall not contain statements which promise or guarantee rapid

increase in profits. An issue advertisement shall not contain any information that is not
contained in the offer document.

4. Mode of advertising

No models, celebrities, fictional characters, landmarks, caricatures or the likes shall

be displayed on or form part of the offer documents or issue advertisements. Issue

advertisements shall not appear in the form of crawlers (the advertisements which run

simultaneously with the program in a narrow strip at the bottom of the television screen) on

television. Similarly, no advertisement shall include any issue slogans or brand names for

the issue, except the normal commercial name of the company or commercial brand names

of its products already in use. No slogans, expletives or non-factual and unsubstantiated

titles shall appear in the issue advertisements or offer documents.

5. Financial data

If any advertisement carries any financial data, it shall also contain data for the past

three years and shall include particulars relating to sales, gross profit, not profit, share

capital, reserves, earnings per share, dividends, and book values.

6. Risk factors

All issue advertisements carried in the print media such as newspapers, magazines,

brochures or, pamphlets shall contain highlights relating to any issue, besides containing

detailed information on the risk factors. The print size of highlights and risk factors in issue
advertisements shall not be less than point 7 size. It shall contain the names of issuer

company, address of its registered office, names of the main lead merchant bankers and

Registrars to the Issue. No issue advertisement shall be released without giving -Risk

Factors? in respect of the concerned issue, provided that an issue opening/closing

advertisement which does not contain the highlights need not contain risk factors.

7. Issue date

No corporate advertisement of issuer company shall be issued after 21 days of filing

of the offer document with the Board until the closure of the issue, unless the risk factors

which are required to be mentioned in the offer document, are mentioned in the

advertisement.

8. Product advertisement

No product advertisement of the company shall contain any reference, directly or

indirectly, to the performance of the company during the period.

9. Subscription

No advertisement shall be issued stating that the issue has been fully subscribed or

oversubscribed during the period the issue is open for subscription, except to the effect

that the issue is open or closed.

10. Issue closure

No announcement regarding closure of the issue shall be made except on the closing

date. If the issue is fully subscribed before the closing date stated in the offer document,

the announcement should be made only after the issue is fully subscribed , and such

announcement is made on the date on which the issued is to be closed. Announcements

regarding closure of the issue shall be made only after the lead merchant banker is satisfied

that at least 90% of the issue has been subscribed, and a certificate has been obtained to

that effect from the Registrar to the issue.

11. Incentives

No incentives, apart from the permissible underwriting commission and brokerage,

shall be offered through advertisements to anyone associated with marketing the issue.

12. Reservation

In case there is a reservation for NRIs, the issue advertisement shall specify the same,

and also indicate the place in India from where the individual NRI applicant can procure

application forms.

13. Undertaking

An undertaking has to be obtained from the issuer as part of the MoU between the

lead merchant banker and the issue company to the effect that the issuer company shall not

directly or indirectly release, during any conference or at any other time, any material or
information which is not contained in the offer documents.

14. Availability of copies

To ensure that the issuer company obtains approval for all issue advertisements and

publicity materials from the lead merchant banker responsible for marketing the issue and

also ensure the availability of copies of all issue related materials with the lead merchant

banker, at least until the allotment is completed.

by the SEBI.