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Registration of Underwriters with SEBI

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Who are considered as underwriters under Securities Exchange Board of India (SEBI)?

An underwriter is any person or corporation who assesses and bears the cost of a charge from another individual, such as tax, bonus, spread or profit. Underwriters work in many areas of the financial situation, including the mortgage, pension, equity and rising forms of debt securities.

It is very important to underwrite loans in today's scenario in order to ensure risk-free modeling. This is in itself a kind of training.

Various types of underwriting in the following financial sectors:

1. Insurance underwriting

In the division of insurance, underwriters decide if the cost of insuring a customer should be borne by an insurance agency. We decide the client's liability and cost, as well as how much protection a client will get, what they should pay for it, and whether or not to give the person an insurance policy first.

2. Underwriting in stock market

Underwriting includes assessing the cost and price of a given asset in the bond or stock market. It is a mechanism generally seen during initial public offerings in which investment banks first purchase or lend to the selling entity's shares and then sell them on the market. This ensures that the issuers of the security can raise the full amount of capital while earning the underwriting.

Investors earn a lot from the underwriting phase as an underwriting agency's knowledge will enable them make a more informed purchase decision. An underwriter that holds a large chunk of a particular company's shares or is the market maker for such a security offers the central investment visibility which improves price stability and networks of distribution.

3. Banking Underwriting

Underwriters in the banking sector carry out the essential task of assessing a potential customer's credit worthiness and soundness and whether or not to give them a loan. We determine the customer's credit history through their past financial reports, accounts and collateral interest, Among other parameters & then determine whether or not they are liable for the loan amount.

EXAMPLES: Bajaj Allianz General Insurance Company Ltd., IDBI, IFCI etc.

What criteria is defined for obtaining the license as Underwriters?

Criteria for the same are mentioned below:

  • The applicant must hold a certificate issued by the Board.
  • Any stock broker or merchant banker with a valid registration certificate pursuant to section 12 of the Act is entitled to act as an underwriter without a separate authorization.
  • Capital Requirement: 20 Lakhs
  • The applicant must be a genuine person as per the Schedule II of Securities Exchange Board of India (SEBI).

Approach

A proposal for the issuance of a certificate by an underwriter is made in Form A followed by non-refundable payments.

Nonetheless, to approve the claim, the Board may allow the underwriter to provide additional information. It may take the following items as conditions for the submission to be accepted.

  • Necessary resources, infrastructure, office space, staff, appliances including manpower.
  • Some previous experience of underwriting or dealing with a total of 2 people.
  • No earlier certificate has been issued to any individual directly or indirectly relevant to the claimant.
  • Completes resource adequacy requirements.
  • Is the right, fit and genuine person.

Henceforth, if the board is pleased with the applicant's qualifications, it shall send a intimation to the applicant and then issue a certificate of registration or a license to work as an underwriter in Form B.

*Certificate shall be valid for a period of 5 years.

Login criteria

  • When an underwriter proposes a change in control, it shall obtain prior approval of Board to continue to Act after the change.
  • Agree with Body Corporate on the terms of which it functions as such.
  • The necessary payments for the initial / permanent registration as set out in Schedule II shall be paid.
  • The capital adequacy standards shall be preserved.
  • The Code of Conduct as defined in Schedule III shall be followed at all times by each underwriter.
  • No direct or indirect benefit shall be obtained from the problem by Underwriter other than the fee or brokerage payable.
  • Gross underwriting duties do not surpass the net value of 20 years.

Meaningful points

  • Any Underwriter who is authorized to subscribe to Body Corporate securities pursuant to the signed Agreement shall subscribe to such securities within 45 days of receipt of such intimation by that Body Corporate.
  • Each user shall keep the Account Books & other documents for a minimum period of 5 years.
  • Before carrying out an examination, the Board shall provide the underwriter with a reasonable notice. After the inspection process has stopped, the inspecting authority can send to the board an inspection report.

Compliance Fees

• The amount of Non-refundable fees to be charged in accordance with the Registration Form shall be 25000/-

• Every underwriter shall pay fees of thirteen lakh thirty-three thousand and three hundred rupees at the time of the issuance of the initial registration certificate.

• A charge of five lakh rupees shall be paid if the underwriter wants to extend his period of permanent registration.

* As specified in Schedule III (Underwriters ' Code of Conduct) of the applicable legislation, underwriters shall always make every effort to protect the interests of investors.

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