Can't believe the capital markets lobby in law firms will allow SEBI to get away with this. Law firms will lose a great source of revenue if this practice area is taken away. Is SEBI overstepping it's jurisdiction by barring outsourcing? Across all jurisdictions like U.S, U.K historically law firms have always been part of the issue process through due diligence and drafting.

Simply because no judge or minister is involved in the entry of foreign law firms, it's all in the hands of the BCI. Corporate attorneys are relevant to nobody except the cigarette vendors below their buildings, so there is no power concentration. Law firm EPs/MPs have less clout in the echelons of power than the average office boy. Money will perhaps sway the lobby guard at the Camellias but no one else.

2. But law-firm capital markets practices WILL be impacted operationally
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### A. Outsourcing prohibitions restrict what merchant bankers can outsource to law firms

Law firms historically handled:

- Drafting sections of offer documents,
- Some parts of due diligence,
- Transaction structuring memos,
- Regulatory verification notes.

Under the 2025 amendment (new Reg. 9A):
Merchant bankers cannot outsource due diligence or document preparation.

Effect:

- Law firms will still draft legal sections (risk factors, business legal, litigation, regulatory chapters), but merchant bankers must own, supervise, and perform core diligence themselves.
- Law firms may now receive more formal legal diligence mandates, but merchant banker must still perform financial and regulatory diligence internally.

Expect more extensive instruction letters, more iterative rounds of review, and more pressure on law firms to coordinate with merchant bankers' internal teams.

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### B. More compliance burden & documentation will fall on law firms indirectly

Merchant bankers now require:

- Continuous compliance, filings, and certifications,
- Higher internal controls and supervisory documentation.

Capital markets lawyers will need to:

- Prepare more detailed compliance opinions,
- Assist in documenting “reasonable care and diligence”,
- Provide written evidence for merchant banker files to show non-outsourcing of core obligations.

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### C. Higher capital requirements will reduce the number of Category I merchant bankers

Many mid-size merchant bankers will struggle with Rs 50 crore net-worth requirement.

As a result:

- Fewer merchant bankers will remain active in IPO/QIP/Rights Issue management.
- Law firms will see consolidation in repeat clients (large banks, top-tier merchant banks).
- Smaller firms entering capital markets work may decline.

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### D. Minimum revenue requirement pressures merchant bankers to take more transactional mandates

This will likely mean:

- Tighter timelines for deal execution;
- Larger volumes of transactions run in parallel;
- More instructions to law firms to move faster.

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### E. Continuous involvement in fairness opinions, takeovers, delistings, buybacks

Regulation 13K codifies merchant bankers’ central role in SAST, Buyback, Delisting, Schemes of Arrangement.

Law firms in capital markets/M&A will:

- Work even more closely with merchant bankers on fairness opinions, public announcements, disclosures, and compliance.
- Need stronger understanding of merchant banker obligations to avoid drafting misalignments.

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3. Interactions between law firms and merchant bankers will become more formalised
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Expect:

- More structured diligence questionnaires
- More reliance on certification letters from lawyers
- Tighter division of responsibility matrices
- More SEBI-driven scrutiny on roles performed by external advisors

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3. Bottom-line Impact Summary
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AreaImpactMerchant banking eligibilityMuch tighter – law firms cannot qualify.Due diligenceMerchant banker must perform core diligence; law firms will still do legal diligence, but must clearly document scope.Offer document draftingMerchant bankers must lead; law firms will draft legal chapters but with stricter oversight.Market consolidationFewer merchant bankers → concentration of work with large firms.ComplianceIncreased filings and oversight will require more legal advisory support.Valuation/Fairness opinionsHigher demand for sophisticated legal support on related regulations.

From what I understand, they are still allowed to give "legal advice" wrt. an issue. The legal advice would include DD and drafting, but now, as the amended 9A says and how I interpret it, the vetting of these documents needs to be done by the MB/IB, and that vetting cannot be outsourced. So now every MB engaging a counsel needs to have an ECM execution team to give a green light to the same, which was originally practised by top Indian banks like Kotak/JM/Axis, etc.

(This is my interpretation; I do not know for a fact.)

Any update now, given SEBI has clarified on the amendment? I feel it really is the death of capital markets, ironically during a IPO boom.

8. Merchant Bankers not to outsource its core merchant banking activities:

8.1. In terms of amended clause (i) of sub-regulation (1) of regulation 9A of MB

Regulations, Merchant Bankers shall not outsource its core merchant banking activities from the effective date. Board has been empowered to specify time and manner of compliance of this provision for existing MBs.

It is, accordingly, specified that an existing MB having an open mandate/ existing agreement as on effective date, through which core merchant banking activities have been outsourced to a third party, shall be required to close the same within ninety days from the Effective Date. i.e., on or before April 03, 2026