Appointments

PART V: APPOINTMENT OF LEAD MANAGERS, OTHER INTERMEDIARIES AND COMPLIANCE OFFICER

Regulation 121. Appointment of Lead Managers , Other Intermediaries and Compliance Officer

121(1).

• Appointment of Lead Manager(s)

  1. The issuer must appoint one or more merchant bankers as lead manager(s) for the issue.

  2. Each appointed merchant banker must be registered with SEBI.

     1. The lead manager(s) are responsible for managing and coordinating the issue process.

     2. The appointment is made by the issuer itself.

     3. Therefore, an entity cannot act as a lead manager for the issue unless it is a SEBI-registered merchant banker.

121(2).

• Responsibilities of Multiple Lead Managers

  1. When an issue is managed by more than one lead manager, the rights, obligations and responsibilities of each lead manager must be predetermined.

  2. The allocation of responsibilities must cover matters such as:

     1. Disclosures.

     2. Allotment.

     3. Refund.

     4. Underwriting obligations, where applicable.

  3. The respective responsibilities of each lead manager must be clearly allocated before the issue.

  4. This allocation must be disclosed in both:

     1. The Draft Offer Document.

     2. The Offer Document.

  5. The disclosures must be made in the manner specified in Schedule I.

121(3).

• Independence of Lead Manager(s)

  1. At least one lead manager appointed for the issue must not be an associate of the issuer.

  2. “Associate” is to be understood as defined under the SEBI (Merchant Bankers) Regulations, 1992.

     1. If any lead manager is an associate of the issuer, that lead manager must clearly disclose that it is an associate of the issuer.

     2. The role of such an associate lead manager is restricted to marketing the issue.

     3. Therefore, an issuer cannot have all its lead managers as associates, and an associate lead manager cannot perform the full range of lead management functions.

121(4).

• Appointment of Other Intermediaries

  1. The issuer must appoint other intermediaries in consultation with the lead manager(s).

     1. The appointed intermediaries must be registered with SEBI.

     2. Before their appointment, the lead manager(s) must independently assess whether the intermediaries are capable of performing their assigned obligations.

     3. The assessment focuses on the intermediary’s ability to properly carry out its responsibilities in connection with the issue.

     4. So, appointment is not based only on selection by the issuer; the lead manager(s) must first satisfy themselves about the intermediary’s capability.

121(5).

• Agreements with Lead Manager(s) and Other Intermediaries

  1. The issuer must enter into an agreement with the lead manager(s).

  2. The agreement must be in the format specified in Schedule II.

  3. The issuer must also enter into agreements with other intermediaries involved in the issue.

  4. The agreements with other intermediaries must comply with the respective SEBI regulations applicable to those intermediaries.

  5. Therefore, there are two requirements:

     1. Lead manager(s): Agreement must follow Schedule II.

     2. Other intermediaries: Agreement must follow the regulations applicable to the concerned intermediary.

• Additional Clauses in Intermediary Agreements

  1. The agreements between the issuer and intermediaries may contain additional clauses considered appropriate by the parties.

  2. However, these additional clauses cannot reduce, restrict or limit the statutory liabilities and obligations of:

     1. The lead manager(s).

     2. Other intermediaries.

     3. The issuer.

  3. These statutory obligations arise under the:

     1. SEBI Act.

     2. Companies Act, 2013.

     3. Companies Act, 1956, to the extent applicable.

     4. Securities Contracts (Regulation) Act, 1956.

     5. Depositories Act, 1996.

     6. Rules and regulations made under these laws.

  4. The same principle applies even where these laws are subsequently amended, modified or re-enacted.

  5. Therefore, contractual terms can add responsibilities or arrangements, but cannot be used to contract out of statutory obligations.

• Deemed Agreement with Self-Certified Syndicate Banks

  1. In an issue using the ASBA (Application Supported by Blocked Amount) process, the issuer must take cognisance of a deemed agreement with the Self-Certified Syndicate Banks (SCSBs).

     1. So , a separate physical agreement between the issuer and each SCSB is not necessarily required for the ASBA arrangement.

     2. The issuer is treated as having an agreement with the SCSBs for the purposes of the ASBA process.

     3. The SCSBs perform ASBA-related functions, including accepting applications and blocking the application amount in investors’ bank accounts.

     4. The issuer must recognise and give effect to this deemed contractual arrangement while conducting the issue.

121(6).

• Appointment of Syndicate Members or Bankers to an Issue

  1. For an issue made through the book building process, the issuer must appoint one or more syndicate members.

  2. For any other type of issue, the issuer must appoint bankers to an issue.

     1. The appointment must be made at the centres specified in Schedule XII.

     2. Therefore, the type of issue determines which intermediary is appointed:

        1. Book-built issue → Syndicate member(s).

        2. Other issues → Bankers to an issue.

     3. The specified centres ensure that the required issue-related services are available at the locations prescribed under Schedule XII.

121(7).

• Appointment of Registrar to the Issue

  1. The issuer must appoint a registrar to the issue.

  2. The registrar must be registered with SEBI.

     1. The registrar must have connectivity with all the depositories.

     2. If the issuer itself is a registrar, it cannot appoint itself as the registrar to the issue.

     3. The lead manager cannot act as the registrar to the issue if the same lead manager is also handling the post-issue responsibilities.

121(8).

• Appointment of Compliance Officer

  1. The issuer must appoint a compliance officer.

     1. The compliance officer must be a person qualified to be a Company Secretary.

     2. The compliance officer is responsible for monitoring compliance with securities laws.

     3. The compliance officer is also responsible for redressal of investors’ grievances.

        1. Therefore, the role has two key functions:

           1. Monitoring compliance with applicable securities laws.

           2. Addressing and resolving investors’ complaints or grievances.