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Registration of Underwriters with SEBI: Procedures

Ashish M. Shaji

| Updated: Feb 17, 2020 | Category: SEBI Registration

Procedure of Registration of Underwriters with SEBI

According to the rules of SEBI or Securities and Exchange Board of India, an underwriter is an authorized risk assessing entity that works for someone in exchange for some fee. The practice of underwriting is used in commercial, insurance, and investment banking industries. The underwriters assume and evaluate the risk involved in the planning and functioning of the other party. The guidelines for underwriters are prescribed under the Securities and Exchange Board of India (Underwriters) Regulations, 1993. To function as an underwriter, the desiring applicant needs to procure license or registration under the SEBI. In this article, we have discussed the procedure of registration of underwriters with SEBI.

Who is an Underwriter?

An underwriter is a part of a financial organization. They work for the Insurance industry, mortgage industry, debt securities, equity market, trading, and banking industry. Every industry has its own underwriters, and these individuals must understand the complexity of their specific field. Underwriters determine if providing a loan or issuing an insurance policy will work in favor of their company. They use their knowledge to assess the risk of an applicant. However, if a contract turns out to be risky, the underwriters are held accountable for the loss.

Once the underwriters receive a license of certification after going through the procedure of registration of underwriters under SEBI, can they act as an underwriter for a body corporate.

What is the Eligibility for Underwriters to obtain registration under SEBI?

The applicant who wishes to function as a licensed underwriter must follow the guidelines of the SEBI and receive a certificate of registration from them. 

Underwriters need to satisfy specific essential criteria and abide by some fixed procedures, which are mentioned below:

  • The applicant must have the required office space, workforce, and instruments to carry out his work effectively.
  • The candidate must have prior experience in underwriting or employ a minimum of two people who have experience in underwriting.
  • Any individual involved with the applicant directly or indirectly who has undergone any disciplinary action cannot apply for underwriting. 
  • The applicant needs to fulfil the capital requirements as prescribed in Regulation 7:
  • The applicant should have capital, not less than the net worth of Rs 20 lakhs.
  • According to Stock Brokers and Sub-Broker Regulations, 1992, the underwriter should fulfil the capital adequacy requirements specified by the stock exchange in case he is involved in stocks.
  • The underwriter shall fulfil the Securities and Exchange Board of India (Merchant Banker) Regulations 1992 if he is involved with the banks.
  • The underwriter should fall under the “Fit and Proper” personality type as prescribed by the Government of India.
  • Any merchant banker or stockbrokers holding a certificate of registration as prescribed in section 12 only shall be permitted to work as an underwriter without obtaining a separate license from the SEBI.

What is the Procedure of Registration of Underwriters under SEBI?

The applicant, after satisfying the eligibility, can file an application for obtaining registration to work as an underwriter. The applicant has to fill out Form A from the link[1].

The application for registration of underwriter consists of two parts, namely:

application for registration of underwriter

Part 1 –General or Personal Information

The general information by the applicant for fulfilling the procedure of registration of underwriters are as follows:

General or Personal Information - Procedure of Registration of Underwriters

Part 2- Business Information

Business information will collect details on the business, as mentioned below:

Business information
  • If the board finds everything to be fit and proper, it shall inform the applicant and then grant “certificate of registration” to the underwriter in Form B.
  • The underwriter receives the registration from SEBI by following the steps mentioned in Regulation but the essential point to remember is that the certification of initial registration holds a validity of only five years.
  •  The non-refundable fee of Rs. 25, 000 is payable in both the events of whether it be acceptance or rejection to the SEBI along with the application FORM A.
  • After obtaining the registration, the underwriter needs to pay Rs 3, 33,300 as certification fee.
  • In case the underwriter wishes to renew the registration and make it permanent he needs to file the application of permanent registration at least three months before the expiry of initial registration with a fee of Rs. 5 lakhs.

Conditions of registration of Underwriters as prescribed by the SEBI

The SEBI has set up some directions for registration for either new or renewed registration:

  • When the underwriter desires to change its condition or status, it must get prior permission from the SEBI.
  • The body corporate or entity on whose behalf the underwriter is working shall enter into a valid agreement.
  • The entire fee must be paid as per the requirements set by SEBI in the prescribed format.
  • The minimum capital adequacy must be maintained during its function.
  • The certificate of registration remains valid for a period of five years from its date of issuance.

Fee Guidelines for Registration of Underwriters under SEBI

The applicant, after fulfilling all the eligibility criteria, will get a certificate in Form-B. The board will send a letter to intimate the applicant about filling of Form B.

The candidate to get registered as underwriter has to pay fees as per Regulation 12 mentioned below:

  • The underwriter must pay the registration fee of Rs. 5 lakhs at the time of receiving a license certificate from the board.
  • The underwriter should pay a renewal fee of Rs. 2 lakhs in every three years.
  • The fee must be paid within 15 days from the date of receipt of intimation from the board.
  • The underwriter can pay the fees through a Demand Draft (DD) in the name of ‘Securities and Exchange Board of India’ payable at Mumbai or any regional office.

Code of Conduct of Underwriter

The underwriter’s need to follow the following code of conduct:

  • The underwriters must maintain high-quality standards of integrity, dignity, and fairness with clients.
  • The dealings of underwriter’s with the body corporate must be ethical.
  • The underwriter must not harm the interest of other underwriters by indulging in unfair competition.
  • The underwriter should not make misrepresent any type of facts to its clients.
  • The underwriter must not divulge any confidential information to others like Press or any party.
  • The underwriter must not hide any material facts in any documents or reports of information furnished to the board.

Why Enterslice?

We at Enterslice will help you in the procedure of registration of underwriters:

Why Choose Enterslice?

Conclusion

Underwriters play a critical role in many financial situations. The process of underwriting has many complexities, all of which are based on how well the specifics of your finances line up with the company’s policies. It would be best if you asked questions about the underwriting process during your conversation with your agent or broker or the company in general. The underwriters help the financial institutes and other bodies in its functioning. Therefore the procedure of registration of underwriters is critical.

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Ashish M. Shaji

Ashish M. Shaji has done his graduation in law (BA. LLB) from CCS University. He has keen interests in doing extensive research and writing on legal subjects especially on criminal and corporate law. He is a creative thinker and has a great interest in exploring legal subjects.

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