An entity registered only as a stock broker cannot undertake the role of a merchant banker in the capital markets, regulator Sebi has said.
The Securities and Exchange Board of India has stated this position in reply to an ‘interpretive letter’ sought by Almondz Global Securities (AGSL), who had asked whether it, as a stock broker, can handle any issue of debt securities offered on a private placement basis.
In case of AGSL, Sebi further said that although it was registered as a merchant banker too, it was barred by Sebi in March 2014 from taking up fresh assignments as a merchant banker for a period of five years.
In March 2014, Sebi had prohibited AGSL from taking up new assignment or involvement in any new issue like an IPO, follow on issue etc from the securities market for five years in the matter of PG Electroplast.
Later in April, Sebi also suspended AGSL (as a merchant banker) for six months in the matter of Bhartiya Global Infomedia.
According to Sebi, in the present case, the activities specified by AGSL are in the nature of activities carried out by a merchant banker, therefore AGSL (stock broker) cannot perform such activities.
