Direct Tax
Consulting
ESG Advisory
Indirect Tax
Growth Advisory
Internal Audit
BFSI Audit
Industry Audit
Valuation
RBI Services
SEBI Services
IRDA Registration
AML Advisory
IBC Services
Recovery of Shares
NBFC Compliance
IRDA Compliance
Finance & Accounts
Payroll Compliance Services
HR Outsourcing
LPO
Fractional CFO
General Legal
Corporate Law
Debt Recovery
Select Your Location
CA, CS, law firms, and consulting firms are not limited to compliance work only. They are now also involved in major financial work, such as IPO, fundraising, restructuring, and valuation. Many firms are already providing capital market-related advice to clients. So, a question arises: can these firms themselves become merchant bankers?
In short, structure is more important here than profession. So, you don’t have to be a CA or a lawyer. You have to follow the legal structure properly. SEBI regulates this whole thing.
SEBI ensures that the market is safe, investors are protected, and companies give proper disclosure. So being a merchant banker means a proper legal setup, and maintaining compliance is very important.
Merchant bankers help companies raise funds in the capital market. They do many important things, from launching IPOs to handling restructuring. Their work is very sensitive. So, they are strictly regulated by SEBI.
The key services are:
A merchant banker acts as a bridge between investors and companies. If there is a mistake, the investor may suffer a loss. Therefore, following SEBI rules is very important.
SEBI has given clear rules for merchant banker registration. If you do not follow these, you will not get a license. SEBI gives a license to entities, not to individuals.
Basic requirements are:
A proprietorship or normal partnership is not eligible
Promoters and directors must have a clean background
Minimum net worth must be maintained (different according to category)
People with a finance, law, or accounting background will be required
A specific exam must be cleared
The compliance officer will ensure that SEBI rules are being followed properly.
Office, system, and record-keeping must all be proper
Most importantly:
Many people think a CA firm or law firm can apply directly. But actually, the problem is the structure.
The basics of the legal form problem:
It is run in the name of an individual
Traditional partnership firms do not have a separate legal identity and are not considered eligible body corporates for this purpose
It is also not a body corporate; SEBI does not consider it eligible.
Reasons for Rejection
Key takeaway:
It means being a CA, CS, or lawyer is not enough. You have to create a proper company or LLP. It will apply for merchant banker registration. This is a practical and safe route.
A CA, CS, law firm, or consultancy can become a merchant banker, but not directly. They have to follow a proper structure. The most practical way is to create a separate entity.
The easiest and safest route is to create a new company or LLP. This new entity will apply to SEBI for a merchant banker license. The old CA firm or law firm can remain separate. It will continue its own work, such as audit, taxes, legal advice, etc.
The new entity must have some important things:
This entity will officially be a merchant banker. Many people think that everything can be done with the same firm, but that is not possible. SEBI has clearly said that a separate structured entity is required.
Here, the roles need to be clearly divided. Otherwise, there may be problems in the future.
A merchant banker entity will do the following:
These are core-regulated tasks. These cannot be given to anyone else.
A professional firm will do the following:
These can be done as support services.
The most important rule:
The biggest challenge of becoming a merchant banker is the capital requirement. Many firms get stuck here.
It is money or assets that can be converted into cash very easily.
For example:
A merchant banker has to take a lot of financial responsibility. Funds should be ready in a sudden situation. It is not easy to arrange this amount for a small or mid-size CA, CS, or consulting firm. So many firms:
SEBI has now divided merchant bankers into two categories- Category I and Category II.
Category I is a full-service merchant banker. They can do all kinds of work:
If a firm wants to handle a main board IPO, then Category I is mandatory. But the problem is that the capital requirement is very high. So, it is generally possible only for big firms or those with strong financial backing.
Category II is a bit limited in scope. They can do:
Category II merchant bankers cannot handle public issues of equity shares proposed to be listed on the main board of a recognized stock exchange. This category is a better option for small firms or advisory-focused firms. The capital requirement is low, and the risk is also relatively low. Many firms start with Category II first and then consider Category I as they grow.
No, individuals cannot apply. SEBI grants merchant banker licenses only to companies or LLPs. But individuals are not completely out. They can play an important role.
What can an individual do?
Key roles:
Principal Officer:
Compliance Officer:
Before applying for a merchant banker registration, keep this checklist in mind:
Must have a proper legal entity
Must maintain capital as per category
NISM certification required
Must be a separate role, conflict-free
Must have experience (minimum 5 years)
Must have a proper office, IT system, and data management
All transactions must be properly maintained
Conflict of interest policy
Outsourcing policy
Risk management policy
Must have a system to handle client complaints
Promoters must have a clean background
These are basic requirements, but practical implementation is the real challenge.
Professional firms follow three models when entering merchant banking. It depends on capital, risk, and long-term plans.
This is the most common and safest model. Here, the firm creates a new company or LLP, which applies for merchant banker registration. This structure is clean because the roles are clearly divided.
Key Points:
The merchant banker entity must be real. It is not enough to create a company just for the sake of a name. A proper team, system, and capital must be there. SEBI will not approve.
The firm partners with an already registered merchant banker or investor. Capital and experience can be shared.
Key points:
But there are downsides too. Control has to be shared; profit has to be shared. If the agreement is not clear, there can be conflict in the future.
In this model, the firm does not take a license. It only works as an advisor.
But there are limitations. You cannot lead the deal. Many firms start with this model first and later take a license when they grow.
Although merchant banking is attractive, the challenges are no less. The key risks are:
A large amount of investment is required
Regular filings, audits, and monitoring
Sometimes inspections may be required
Tough to handle conflict if you have group firms
Not easy to find experienced people
Even a small mistake can become a big issue
You should clearly understand the risks before entering this sector.
Becoming a merchant banker is not just about getting a license. Sustaining it long-term is equally important. SEBI has set some minimum revenue expectations.
Minimum Revenue Requirement
This revenue must be generated on a cumulative basis over the three immediately preceding financial years.
Important points:
Many firms become inactive after getting a license. SEBI now wants to ensure that only serious players are in the market. So, it is necessary to have a clear business plan before applying.
The merchant banker registration process is complex. Here, Enterslice can provide end-to-end support.
Our services:
Checking whether your firm is ready
Company or LLP setup planning
Net worth requirement planning
Preparing SEBI application documents
Ensuring proper submission
Compliance, conflict, and outsourcing policies
Ongoing filings, updates, and monitoring
PMS, AIF, advisory license support
So, Enterslice is a one-stop solution. The guidance is very helpful for those coming to merchant banking for the first time.
A CA, CS, law firm, or consultancy cannot directly become a merchant banker. This requires a proper company or LLP structure.
Skill is important here, but structure is more important. If you do not plan properly, your application may be rejected, or compliance issues may arise later.
So, it is better to take a structured approach from the beginning. Enterslice can guide you here. If you have proper guidance, the process becomes much smoother. We guide you from planning to registration. Contact us today for better, hassle-free compliance.
No, a CA firm cannot apply directly for a merchant banker license if it is a proprietorship or traditional partnership. Because such a firm is not a “body corporate,” SEBI only licenses companies or LLPs. However, if the partners of a CA firm want to, they can form a separate company or LLP and apply through that entity. This is a practical approach.
A law firm cannot become a merchant banker directly if it is in a traditional partnership structure. However, the partners of a law firm can form a separate company or LLP and apply for a merchant banker license. Lawyers need to follow the Bar Council rules. So, creating a separate entity is the safer option.
Yes, LLP (Limited Liability Partnership) is eligible for merchant banker registration. However, all conditions have to be fulfilled. For example, minimum capital, qualified employees, a compliance officer, a proper system, etc. It is not enough to form an LLP; all SEBI requirements must also be met. Many professional firms choose the LLP route because it provides a flexible structure.
No, an individual cannot get a merchant banker license in his own name. SEBI only gives licenses to companies or LLPs. However, an individual is not completely out. He can work as a director, employee, or promoter. Many times, experienced professionals take on the role of principal officer or compliance officer. So, indirect individual involvement is possible, but not direct licensing.
Some employees working in merchant banker entities will need NISM certification. The most common is NISM Series-IX (Merchant Banking). Additional certification is required for a compliance officer, such as NISM Series-IIIA. This certification ensures that the person understands SEBI rules. It is better to have this certification at the time of application; there may be delays.
The main job of a compliance officer is to ensure that the company is following all SEBI rules. He monitors filings, reporting, and internal policies. This role should be independent. It cannot overlap with the principal officer. Basically, the compliance officer is the regulatory backbone of the company. This role is very important to avoid small mistakes.
The entire work cannot be outsourced. SEBI has clearly stated that the outsourcing of core merchant banking activities is not allowed. For example, IPO management, due diligence, and offer documents. However, support services can be outsourced, such as legal drafting or accounting help. The main responsibility will always remain with the registered merchant banker.
Category I is a full-service merchant banker. It has a higher capital requirement and higher risk. It can do IPO (main board) and fundraising. Category II is of limited scope. It is an easier entry point, especially for small firms. It cannot handle a main-board IPO but can handle open offers, buybacks, and advisory services.
SEBI merchant banker registration is not for any fixed short period. It is generally valid as long as the company follows the rules. This means there is no tension of regular renewal, but compliance has to be maintained. If rules are broken or there is a serious issue, then SEBI can suspend or cancel the license. So, it is important to get registered and maintain it.
CA, CS, law firms, and consulting firms are not limited to compliance work only. They...
The region has gained strategic significance as a preferred destination of choice for internati...
The Reserve Bank of India released the draft guidelines for the RBI Prudential Norms on Specifi...
Suriname is becoming known as a new business destination. Many foreign investors are interested...
Mexico has emerged as one of the best destinations for foreign investments because of...
Are you human?: 2 + 1 =
Easy Payment Options Available No Spam. No Sharing. 100% Confidentiality
On April 1, 2020, the Reserve Bank of India (RBI) published few questions along with its answers for an easy unders...
26 Jun, 2020
Payment of Gratuity is governed by the provisions of the “Payment of Gratuity Act, 1972”. Gratuity is a monetar...
25 Aug, 2020
9870310368 
8860712800