sebi:16510

SEBI · SEBI · 2001-09-24 · G.N. Bajpai, Chairman, SEBI

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Facts / Headnote

Lapses of Merbanc Financial Services Ltd placed on record for assessment as fit and proper person

Provisions invoked

• s. 11B
• s. 4(3)
• s. 11

Regulations

• Reg. 11
• Reg. 3
• Reg. 40

Parties

• Merbanc Financial Services Ltd

Holding

The Chairman placed on record the lapses committed by Merbanc Financial Services Ltd in the public issue of Rajesh Exports Ltd and directed that these lapses be taken into account in assessing Merbanc and its directors as fit and proper persons for any future renewal or fresh registration.

Full text

Home » Enforcement » Orders » Orders of Chairman/Members Enforcement Enforcement▼ In the Matter of Rajesh Exports Limited Jan 21, 2003 | Orders : Orders of Chairman/Members SECURITIES AND EXCHANGE BOARD OF INDIA

It was alleged that Merbanc Financial Services Ltd (hereinafter referred to as ‘Merbanc’) had failed to exercise due diligence in the above public issue. An Enquiry Officer was appointed on 26.4.2000 under the SEBI (Merchant Bankers) Regulations, 1992, to enquire into the possible violation of the provisions of the said Regulations. The Enquiry Officer submitted a Report dated 24.9.2001 finding that there is a lapse on the part of the Lead Manager in monitoring the public issue, flow of applications and allotment. The Enquiry Officer recommended for a warning to be issued to Merbanc. Pursuant to the same, a show cause notice was issued to Merbanc on 17.4.2002 alongwith a copy of the Enquiry Report and asking it to show cause in terms of Regulation 40 (1) of the said Regulations as to why the penalty as considered appropriate by the Board should not be imposed on Merbanc. Merbanc vide its letter dated May 6, 2002, replied to the above show cause inter alia stating that it, as the post issue Lead Manager, had acted with diligence and care and in close coordination with the Registrar to the issue. It had submitted that under the circumstances explained in its letter dated 16.1.2001 to the Enquiry Officer, it had no reason to suspect that there were late applications in the public issue. Subsequently, an opportunity of oral hearing was given to Merbanc on August 24, 2002 which was adjourned to August 26, 2002. In the meantime, it appears that the registration of Merbanc as a Merc

Merbanc has also replied to the four charges that are made in the above show cause notice dated 26/08/2002 which is summarised below in seratim : As a post issue Lead Manager they relied on the final certificate issued by the Banks which have been designated for collection of applications to the Registrars. It is the responsibility of the banks to abide by the rules strictly and they should not have accepted the late applications. The applications were processed as per the procedure and all the applications which were in order were considered for allotment. If the applications are in order in all respects and either applications are accompanying stock invests do not bear any date subsequent to the closure of the issue, it is impossible to suspect their genuineness and reject the same. In the absence of any scope for suspicion regarding acceptance of late applications by the banks, all the valid applications were considered for allotment and Merbanc have not violated any of the SEBI Regulations. The banks should have exercised care and should not have accepted the late applications. The third day report is based on the provisional figures orally submitted by the collecting bankers to the registrars and such figures in almost all cases are oversubscribed public issues vary from the final collection reports submitted by the banks in writing. Therefore, Merbanc has submitted that they did not have the reason to suspect any unusual feature in the public issue. The enquiry officer

Source: SecMarx — sebi:16510. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.