Registration of Underwriters

According to the SEBI, an underwriter is an authorized risk-assessor. The underwriters evaluate the risks in the planning & performing of the other party. The underwriters must register themselves with SEBI & must be authorised by getting a license. And they mainly deal in areas like Insurance industry, debt securities, banking industry, mortgage industry, equity market & trading. They are also known as risk experts and help organisations or institutes to preclude financial losses in the long-term investments. To act as an experienced underwriter in the market, the ambitious applicant needs to get a registration/license under the SEBI. Underwriting must be performed under the guidelines established by SEBI under SEBI (Underwriters) Regulations, 1993. The Registration of Underwriters with SEBI is a regulatory requirement which authorizes the entities to engage in the business of underwriting the issue related to securities/shares in India.

What are the SEBI Regulations for Underwriting?

As per SEBI Regulations for underwriting, the issuer must decide the number of underwriters in advance. Furthermore, prior permission must be obtained from the SEBI. SEBI will grant the permission after determining the net worth of the underwriters along with their outstanding commitments. According to the instructions quoted by SEBI, the companies must allot 3 main categories of allottees:

HNI or High Net Worth Individual;
Qualified Institutional Buyers (QIB);
Retailers.

What are the Different Types of Underwriters?

Corporate Underwriters: Companies providing underwriting services for private and public offerings;
Banking & Financial Institutions: Authorized individuals that provide underwriting services while acting as a part of their undertakings;
Individual: List of registered individuals involved in the business of the underwriting of securities.

Eligibility Criteria for the Registration of Underwriters with SEBI

The applicant makes sure that if he/she is taken in prior consent from the board members & the shareholders before applying for such registration. This requirement is as per Regulation 4(a) of the SEBI (Underwriter) Rules, 1993;
According to the Regulation 6(d) of the SEBI (Underwriters) Rules, 1993 the applicant must make sure that the associated capital is sufficient or not. The capital adequacy must not be less than Rs. 20 Lakhs;
The applicant should follow the principles and compliance norms prescribed by the SEBI & other regulatory authorities. Such requirement is present under regulation 4(d) of the SEBI (Underwriters) Rules, 1993;
For the Registration of Underwriters, the entity of the applicant must have a proper infrastructure facilities present within its office. This includes office space & the presence of enough manpower to handle all the responsibilities. This is as per Regulation 6(a) of the above-mentioned SEBI regulations;
The applicant must have some experience concerning the underwriting of issues related to securities. The administrators/shareholders of the applicant entity need to have a minimum of 2 years of experience in underwriting a selected issue. This is prescribed under regulation 6(b) of the SEBI Regulations;
The applicant must be able to pay the requisite fee for the Registration with SEBI. Such requirement is stated in Regulation 4© of the SEBI (Underwriters) Rules, 1993;
The underwriter must confirm that there is a previous contract or agreement with a company that the applicant is going to give underwriting services regarding a particular issue. Such requirement is given under regulation 4(b) of the SEBI (Underwriters) Rules, 1993.

Documents Required

Certificate of Incorporation of a company;
For Partnership/LLP, Partnership Deed is required;
MoA (Memorandum of Association) and Articles of Association (AoA);
Applicant’s details;
Address proof of the company;
Details of Infrastructure facilities;
Board Resolution authorizing for Registration of Underwriters;
Declaration signed by Principal Officers;
Three years of Business Plan;
Financial Information such as capital structure, resource deployment, etc;
Any other details (if required).

Registration Procedure

The applicant has to fill out Form A from

The application has 2 major parts, namely: Part-I on General/Personal Information and Part-II on Business Information.

The Part-I of application will collect information on the applicant as mentioned below:
- General Information-Information of Applicant
- Details of Organisation Structure
- Details of Infrastructure Facilities
- Business Plans for three years
- Financial Information
The Part-II of application will collect information on the Business as mentioned below:
- Nature of Underwriting
- Experience details

If the board feels that information is incomplete and need further information from the applicant, then the applicant or principal officer to appear before the board. This gives the opportunity to the applicant to provide more information under Regulation 3, where Form-A can be used.
Application to conform to the requirements

If the application is not complete in any aspect or is not according to the instructions given in the form, then the form will be summarily rejected. Prior to rejection, the applicant will be provided one month of time to remove any objection that could have been indicated by the board. Applicants will also be provided with an additional one month to meet the requirements of the board.

FAQs

Renewal of the Registration Certificate of Underwriters

The validity of Registration Certificate of Underwriters is for 3 years. The Regulation 9 of the SEBI Rules require the applicant to renew the Registration Certificate, and such a process or renewal must be initiated at least 3 months before the expiry of the certificate. For the renewal of an existing registration certificate, the norms would be the same as the norms for the grant of the existing certificate earlier.

Benefits of Hiring a Registered Underwriter under SEBI?

All individuals or organisations need to perform the compliance activities linked with the Registration of Underwriters with SEBI. By doing this, an organisation remains compliant with the law;
A Company registered with SEBI gets notifications & updated continuously. Therefore, the company can maintain alertness for good governance & compliance;
Organisations registered under SEBI have a good reputation in the securities market;
Registered underwriters provide time to time constant updates/notifications to the organization;
It provides the client with confidence because government approval is a man factor.

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