CS Professional · Strategic Management and Corporate Finance
Role of Intermediaries in Fund Raising for CS Professional
Intermediaries are SEBI-registered or regulated entities that help a company raise funds from the public or investors. They include merchant bankers, registrars, underwriters, bankers to an issue, debenture trustees, rating agencies, depositories and brokers. For each one, learn the role, key duties, who can act and the main obligations.
What this chapter covers
This chapter sits in the Corporate Finance part of Paper 5, Strategic Management and Corporate Finance. It explains the market professionals who make a public issue, rights issue or debt issue work in practice. A company decides how much to raise and in what form. These intermediaries carry out the process under SEBI regulation.
The chapter is mostly about roles and responsibilities. You learn what each intermediary does, who may act as one, what registration or eligibility it needs, and what duties it owes to the issuer, the investor and SEBI. Merchant bankers manage the issue. Registrars handle applications, allotment and refunds. Underwriters back the issue. Bankers collect application money. Debenture trustees protect debenture holders. Rating agencies assess credit risk. Depositories, brokers and advisers support holding and trading.
The chapter links to the sources of finance and capital-raising topics in the same paper. It also connects to Paper 3 on compliance and due diligence, and to your drafting work, since a company secretary coordinates these parties. Treat it as the process map for any fund-raising question.
Paper 5 carries 100 marks, with Corporate Finance worth 60. Fund-raising questions are usually case-based: a company plans an issue, and you must say which intermediaries are needed, what each must do and what the company secretary should check. This chapter is descriptive, so it rewards clear structure and precise terms rather than calculation. If you learn each intermediary on the same frame, you can answer short notes and case questions quickly. Use the SEBI regulations as taught in the ICSI study material for exact conditions.
Role of Intermediaries in Fund Raising: topics in the order to study them
- 1Merchant Bankers and Lead ManagersStart here because the lead manager runs the whole issue and ties together all the other intermediaries.
- 2Registrars to an Issue and Share Transfer AgentsNext, follow the issue process from applications to allotment, refunds and transfers, which the registrar handles.
- 3Underwriters and Bankers to an IssueThese two cover the money side: backing the issue and collecting and refunding application money.
- 4Debenture Trustees and Credit Rating AgenciesMove to debt-specific intermediaries once the equity issue flow is clear, since both are central to debt issues.
- 5Other Intermediaries: Depositories, Stock Brokers and AdvisersFinish with the supporting market participants, which are easier once the main issue roles are fixed.
How to prepare Role of Intermediaries in Fund Raising
This chapter is about roles, rules and duties. Prepare it with one repeatable frame so that nothing blurs together.
- Make a one-page table with a row per intermediary and columns for role, who can act, registration, key duties and key restrictions.
- Read each topic from the ICSI study material and the relevant SEBI regulation, and note the exact conditions in your own words.
- Trace one public issue from start to finish and mark where each intermediary enters. This fixes the sequence.
- Compare similar roles in pairs: merchant banker and underwriter, registrar and banker to an issue, trustee and rating agency.
- Practise three or four case questions in the format of provision, analysis of facts and conclusion, naming the intermediary and its duty.
- Write short notes from memory on each intermediary in five to six lines, then check against your table.
- Revise the table again in the last week, focusing on conditions and limits.
Common mistakes in Role of Intermediaries in Fund Raising
Mixing up the roles of the merchant banker and the underwriter.
Fix: Remember that the merchant banker manages the process, while the underwriter commits to take up unsubscribed securities.
Confusing the registrar to an issue with the banker to an issue.
Fix: The banker handles the money, and the registrar handles records, allotment and the dispatch or credit of securities.
Writing general descriptions without regulatory conditions.
Fix: Add who may act, registration needs and specific duties from the SEBI regulations to every answer.
Treating debenture trustees and rating agencies as optional extras in debt issue answers.
Fix: In any debt-issue case, name the trustee and the rating requirement and state what each does.
Giving a list of duties without applying them to the facts.
Fix: Use the provision, analysis and conclusion format, and tie each duty to the facts given.
Quoting regulation details from memory without checking the study material.
Fix: Use the current ICSI study material and the updates for your session, and do not state numbers you are unsure of.
Last-day revision: Role of Intermediaries in Fund Raising
- A merchant banker manages the issue and must be registered with SEBI.
- The lead manager coordinates due diligence, documents, marketing and the allotment process.
- A registrar to an issue handles applications, allotment, refunds and credit of securities.
- A share transfer agent maintains records of holders and processes transfers on behalf of the company.
- An underwriter agrees to take up securities not subscribed by the public, up to its commitment.
- A banker to an issue collects application money and handles refunds.
- A debenture trustee acts for debenture holders and monitors security and compliance.
- A credit rating agency gives an opinion on the credit risk of a debt instrument.
- Depositories hold securities in electronic form through depository participants.
- Stock brokers execute trades for investors on exchanges.
- Investment advisers give advice for a fee and are regulated separately from brokers.
- For every intermediary, remember the role, the regulator and the main duty.
Role of Intermediaries in Fund Raising practice questions
- Which of the following best describes the difference between a Registrar to an Issue and a Share Transfer Agent?
- A stock broker executes a client's purchase order on the exchange. Which statement correctly describes the broker's status and role?
- Vistara Infra Ltd issues secured debentures of ₹50 crore. The trust deed requires asset cover of 1.25 times. The security consists of a mort…
- Which of the following is a correct statement about the due diligence certificate in a public issue handled by a lead manager?
- Meera wants to hold shares of Tata Steel in demat form. Through whom does she access the services of a depository?
- A stock broker registered with SEBI is acting for a client in the cash segment. Which of the following is a duty of the broker under the SEB…
- Rohan, a SEBI-registered investment adviser, charges clients fees for advice. Which conduct is consistent with the regulatory framework for …
- Which statement best describes a 'firm underwriting' arrangement, as distinguished from a standby arrangement?
Role of Intermediaries in Fund Raising in other exams
The same ground in other exams, if you are preparing for more than one or want another angle on it.
Role of Intermediaries in Fund Raising: frequently asked questions
Is this chapter theory or numerical?
It is descriptive. You write about roles, eligibility and duties, usually in short notes or case-based questions. There are no calculations.
Which intermediary should I study first?
Start with merchant bankers and lead managers. They run the issue, so the other roles make more sense after you understand theirs.
How should I write a case answer on this chapter?
State the relevant provision or role, apply it to the facts, and give a clear conclusion. Mention what the company secretary should ensure in practice.
How do I remember so many intermediaries?
Use one table with the same columns for each: role, who can act, key duties and limits. Then trace a single issue from start to finish to fix the sequence.