Registration of Underwriters with SEBI

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Who are underwriters under SEBI Act?

An underwriter is an entity or a corporate that evaluates and assumes another entity’s risk for a fee, such as commission, premium, spread or interest. Underwriters operate in many aspects of the financial scenario, including the mortgage industry, insurance industry, equity markets and common type of debt securities.

In today's scenario it is very important to underwrite loans so as to ensure risk free modelling.


It is very much prevalent in the following financials sector-

Underwriting in Insurance
In the Insurance sector, underwriters determine whether an insurance agency should undertake a risk of insuring a client. They analyse the risk and exposure of client and also determine how much insurance policy should be granted to clients, and what they should pay for it and whether or not to offer an insurance policy to the client in the first instance.

Underwriting in Stock Market
In the Equity or Stock market, underwriters determines the risk and the price of a particular security. It is a process seen commonly during initial public offering, wherein the Investment Banks first buy or underwrite the securities of the issuing entity and then sell them in the market. This ensures that the issuer of the security can raise the full amount of capital while earning the underwriters a premium in return of the service.

Investors can earn a lot of money through this underwriting process as the information provided by underwriters can help them to take a more informed buying decision.

Criteria

Getting a License under underwriting involves an application to SEBI under Securities Exchange Board of India (Underwriters) Regulations, 193

1.He should hold a certificate granted to it by the Board.
2.Every stock broker or merchant banker holding a valid certificate of registration under section 12 of the Act, shall be entitled to act as an underwriter without operating a separate license.
3.He should be a fit and proper person as defined under schedule II of SEBI (Intermediaries) Regulations, 2008.
4.Capital adequacy- 20 Lakhs.

FAQ

Common List Of Questioner That Our Customer Ask From Us -Solved !
What is registration process ?
An Application by an Underwriter for a grant of certificate is made in Form A accompanied by non- refundable fees.

However the Board may require the underwriter to submit further information in order to consider the application. It may take the following things as criteria for consideration of the application.

1.Necessary infrastructure, office space, equipments’, manpower.
2.Any past experience in underwriting or has in employment minimum 2 persons who have such experience.
3.Any such persons directly or indirectly connected with applicant has not been granted certificate earlier.
4.Fulfills the capital adequacy norms.
5.Is a fit and proper person.


Therefore, after getting satisfied by the eligibility of the application, shall send an intimation to applicant, and then will issue certificate of registration or license to act as an underwriter in Form B.

Certificate shall be valid for a period of 5 years.

What Is Registration Fees Involved In This ?
1. The amount of non-refundable fees to be paid along with the Application for registration shall be Rs. 25000/- .
2. Every underwriter shall pay fees of thirteen Lakh Thirty Three Thousand and Three Hundred Rupees at the time of grant of certificate of initial registration.
3. If the underwriter wants to renew his term for permanent registration, fees of Five Lakh Rupees shall be paid.

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