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Indian Financial System

Notes Tasks and Responsibilities of Underwriters

The SEBI has laid down the following guidelines regarding tasks and responsibilities of
underwriters:
1. An underwriter is required to get itself registered with the SEBI and procure a certificate
of registration for undertaking the business. The SEBI issues the certificate on being satisfied
with the following conditions:

(a) Availability of necessary infrastructure like, sufficient office space, equipments, and
manpower to carry out the duties effectively.
(b) Experience in underwriting or having a minimum of two persons equipped with
the underwriting experience.
(c) Capital adequacy norm of a minimum net worth of ` 20 lakhs.
(d) No conviction of the applicant (director, principal officer or partner) in any offence.

(e) Underwriting to fulfil obligations under the SEBI Act, rules and regulations.
(f) Underwriting to abide by the prescribed code of conduct.
(g) Payment of the prescribed fee of ` 2 lakhs for the first and second years for grant of
registration certificate and ` 20,000 p.a. for its renewal.
2. An underwriter is under obligation to comply with all the formalities with regard to
registration with the SEBI, agreement with the issuing company and all other
responsibilities as spelt out by the SEBI. These include disclosures in the prospectus and its
filing with the Registrar of Companies (ROC) before signing the underwriting agreement
with the issuer, ensuring that the prospectus is delivered to the ROC within 30 days of the
underwriting agreement or within such an extended time as approved by the underwriter
in writing, subject to the limits within the law, complying with any additional disclosures
that may be made in the interests of investors or stipulated by SEBI/lead managers.

3. An underwriter cannot take up total underwriting obligations, at any point of time, under
all underwriting agreements, exceeding 20 times its net worth.
4. An underwriter will have to subscribe to securities under the agreement within 45 days of
the receipt of intimation from the issuing company.
5. An underwriter is required to observe codes of conduct which the SEBI has prescribed in
respect of the conduct of the business. The codes include observing high standards of
integrity and fairness in the conduct of the business, undertaking all efforts to protect the
interest of its clients, rendering high standards of service, exercising due diligence and
ensuring proper care and exercise of independent professional judgement, not making
untrue statement or suppressing any material fact in any documents, reports, papers or
information furnished to the SEBI, and not deriving any other direct or indirect benefit
from underwriting the issue except receiving the underwriting commission at the agreed
rate, the ceiling for which is 5% in case of underwriting of shares and 2.5% in case of
debentures.
Bankers to an Issue

Bankers represent an important segment of Indian primary market. They carry out the function
of accepting applications and application moneys from investors in respect of securities and
refunding of application money to the applicants to whom securities could not be allotted. They
also participate in the payment of dividends by companies.

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