The Hindu Business Line : Merchant bankers to form panel to review public issue process

MERCHANT bankers are forming a "core committee" to review the process of public issues and fix definitive responsibilities for each of the intermediaries involved.

This was decided in a meeting between the chief executive officers of merchant banking companies and Mr G.N. Bajpai, Chairman and Mr A.K. Batra, Whole-time member, Securities and Exchange Board of India. According to sources, the meeting was not about "finger pointing and placing blame" for what happened during the ONGC deal, and the focus was entirely on "what needs to be done in the future."

Two of the prime suggestions raised by the merchant bankers were for the processes to be simplified and for responsibilities to be fixed between the intermediaries.

The committee would revisit each of the processes involved in the offer. They would specially view it from "possible points of inflection" and proactively seek to plug holes before they morph into areas of concern, stated a participant.

Further, it was clarified to SEBI that for various processes the merchant banker strictly plays only a coordination role. They felt it would not be possible for merchant bankers to be held responsible for each of these processes.

"The merchant banker functions as a coordinator for a lot of the processes during the issue and is not in a direct position to prevent mishaps, if any. In view of this, the responsibility should also be restricted to what can be directly controlled by the merchant banker," said a source.

The core committee would also put in place various compliance and reporting requirements to ensure that "human error" is nipped in the bud.

The constituents of the core committee are expected to be announced within the next few days, according to merchant banking sources.

Concerns were also raised about the quality of infrastructure among intermediaries, especially registrars. The merchant bankers and SEBI conceded that with issue sizes increasing substantially and the manifold increase in the number of retail applications, there has to be an upgradation of the infrastructure that the intermediaries employ. This not only includes computer hardware and software, but also the level of staffing in intermediaries, stated a source.

The Association of Merchant Bankers of India (AMBI), which has been dormant during the last few years is being called to take an active part in the industry and in interacting with regulators and other intermediaries, claimed sources.

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