Explain the effect of refusal to grant certificate to an intermediary.

Section 12 of the SEBI Act, 1992, mandates that any intermediary operating in the capital market must function only under a Certificate of Registration issued by SEBI. If SEBI refuses to grant a certificate of registration to an intermediary (either a new applicant or an existing intermediary whose application for renewal/grant is refused), the intermediary faces significant consequences: Cessation of Activities: The intermediary must forthwith cease to act as such intermediary in the securities market. They can no longer perform any functions requiring SEBI registration. Transfer of Activities/Client Withdrawal: The intermediary is required to: Transfer its activities to another intermediary that has been granted a certificate for carrying on such activity, OR Allow its clients or investors to withdraw or transfer their securities or funds held in its custody. Crucially, this transfer or withdrawal must be facilitated without any additional cost to such client or investor. Provision for Liabilities: The intermediary must make adequate provisions regarding any liability incurred or assumed by them during their operation. This ensures that client interests are protected even after the cessation of business. Compliance with SEBI Directions: The intermediary must take any other action within the specified time period and in the manner as may be required under the relevant regulations or as may be directed by SEBI. This gives SEBI the power to issue specific instructions to manage the transition and protect market integrity. Furthermore, while refusing to grant a certificate, SEBI may impose such conditions upon the intermediary as it deems fit for the protection of investors or clients of the intermediary or the securities market. These conditions must be complied with by the intermediary.