The Securities and Exchange Board of India has notified the SEBI (Stock Brokers) (Amendment) Regulations, 2021 on March 30, 2021. The regulations are issued to amend the Securities and Exchange Board of India (Stock Brokers) Regulations, 1992. The Key changes brought by the amendment are discussed below:
- Definitions inserted in regulation 2 of SEBI (Stock Brokers) Regulations, 1992:
“(i) “Underwriter” means a person who engages in the business of underwriting of an issue of securities of a body corporate.
(j) “Underwriting” means “an agreement to subscribe to or procure subscription for securities, issued or offered for sale, remaining unsubscribed.”
(k) “issue” means an offer of sale or purchase of securities by any body corporate, or by any other person or group of persons on its or his or their behalf, as the case may be, to or from the public, or the holders of securities of such body corporate or person or group of persons through a merchant banker”
- Under Regulation 3, it is stated that every stock broker holding a valid certificate of registration shall be entitled to act as an underwriter.
- Further, every stock broker who acts as an underwriter shall enter into a valid agreement with the body corporate on whose behalf it is acting as underwriter. Further, every stock broker acting as an underwriter shall maintain the following books of account and documents, namely:
- In relation to an underwriter being a body corporate— a copy of the balance sheet and profit and loss account as at the end of each accounting period and a copy of the auditor’s report on the accounts for that period.
- In relation to an underwriter not being a body corporate— records in respect of all sums of money received and expended by them and the matters in respect of which the receipt and expenditure take place; and their assets and liabilities.
- Every stock broker acting as an underwriter shall enter into an agreement with each body corporate on whose behalf it is acting as an underwriter and the said agreement shall, amongst other things, provide for the following, namely—
- The period for which the agreement shall be in force;
- The allocation of duties and responsibilities between the underwriter and the client
- The number of underwriting obligations;
- The period, within which the underwriter has to subscribe to the issue after being intimated by or on behalf of such body corporate;
- The amount of commission or brokerage payable to the underwriter;
- Details of arrangements, if any, made by the underwriter for fulfilling the underwriting obligations.
Further, the regulations state the duties and responsibilities of a Stock Broker acting as an underwriter.
*Tanvi Singh, Editorial Assistant has put this story together.