1. Which of the following is NOT a function typically performed by a Merchant Banker?
Corporate Advisory Services
Loan Syndication
Managing Public Issues (IPOs)
Accepting Demand Deposits (Savings/Current) from the public
Explanation:
Merchant Bankers are capital market intermediaries regulated by SEBI. Unlike commercial banks, they are not allowed to carry out core banking functions like accepting demand deposits from the general public.
2. Only a "Category I" Merchant Banker registered with SEBI can act as a:
Advisor to an Issue.
Lead Manager to an Issue.
Portfolio Manager.
Underwriter.
Explanation:
SEBI regulations classify Merchant Bankers into categories. Only Category I Merchant Bankers are authorized to act as Lead Managers for public issues (IPOs/FPOs). Other categories have restricted roles.
3. Regarding "IPO Grading" in India, which statement is correct?
It guarantees the returns from the IPO.
It assesses the "price" of the IPO.
It is optional and assesses the "fundamentals" of the issuer relative to other listed peers.
It is mandatory for all IPOs.
Explanation:
SEBI made IPO Grading optional in 2014. Grading (on a scale of 1 to 5) reflects the assessment of the company's fundamentals, not the issue price or potential returns.
4. The process of "Reverse Book Building" is primarily used for:
Initial Public Offering (IPO)
Rights Issue
Delisting of shares from stock exchanges
Bonus Issue
Explanation:
Reverse Book Building is the mechanism used for price discovery when a company decides to delist its shares from the stock exchanges and buy back shares from the public.
5. The "Due Diligence Certificate" submitted to SEBI before a public issue implies that:
The RBI has approved the issue.
The company will definitely make a profit.
The Merchant Banker has verified the contents of the prospectus and found them to be true, fair, and adequate.
The Merchant Banker guarantees the share price.
Explanation:
It serves as a declaration by the Lead Manager that they have exercised reasonable care in verifying the disclosures made in the offer document.
6. A Merchant Banker's registration with SEBI is valid for:
5 Years
1 Year
3 Years
Permanent (unless suspended/cancelled)
Explanation:
SEBI amended regulations to grant permanent registration to intermediaries like Merchant Bankers, subject to payment of fees and compliance.