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CS Professional · Strategic Management and Corporate Finance · Role of Intermediaries in Fund Raising

Sundaram Textiles Ltd plans an IPO and appoints a merchant banker as lead manager. Which of the following is a duty of the lead manager that is correctly described?

The lead manager must exercise due diligence so that offer document disclosures are true, fair and adequate, and submit a due diligence certificate to SEBI. It does not issue incorporation certificates, guarantee post-listing prices or act as trustee for equity shareholders.

  1. AIt must issue the certificate of incorporation of the issuer
  2. BIt must ensure the disclosures in the offer document are true, fair and adequate by exercising due diligence and submit a due diligence certificate to SEBICorrect
  3. CIt guarantees that the issue price will be quoted at a premium after listing
  4. DIt acts as trustee for the equity shareholders after allotment

Explanation

The lead manager must carry out due diligence and furnish a due diligence certificate to SEBI confirming adequacy of disclosures. It does not issue incorporation certificates, which is the Registrar of Companies' role. It cannot guarantee listing price performance, and trustee duties relate to debenture holders, not equity.

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