EXECUTIVE SUMMARY

Introduction

..to protect the interests of investors in securities and to promote the development of,
and to regulate the securities market and for matters connected therewith or incidental
thereto

There was a long felt need to monitor the working of security market in order to protect the
interest of the investors accordingly the govt. of India set up a body called security exchange
board of India in April 1988.

However the real beginning of sebi started in 1992 when sebi act 1992 was passed and assented
by the president of India. The act empowered sebi with necessary power to regulate the activities
connected with marketing of securities and investment of stock exchange, merchant banking,
port folio management, stock brokers and others in India,.

1
 CONCEPT OF TOPIC
All you wanted to know about SEBI

The Securities and Exchange Board of India is perhaps

the most important regulatory body. Similar to the
Securities Exchange Commission in the US, it is the
authority that has to always be on its toes. More so,
when the markets are doing well and there are a spate of
IPOs (initial public offerings) or FPOs (follow-on
public offerings) like now.

Its main mandate is to protect the interest of investors in

the securities markets and to promote the development
of and to regulate the securities markets so as to
establish a dynamic and efficient securities market.

When investors have complaints against listed companies or registered intermediaries, SEBI acts
as the nodal agency for addressing these complaints, if they are not solved directly between the
parties concerned, or if the investor is not happy with the response.

SEBI has listed certain categories of grievances for which investors can file complaints with it.
These include:

Non-receipt of refund order or allotment advice in case of investment in IPO's, FPO's and
rights issues

Non-receipt of dividend from listed companies

Non-receipt of share certificates after transfer from listed companies

Non-receipt of debentures after transfer or non-receipt of interest or principal on

redemption and non-receipt of interest on delayed repayment

Non-receipt of rights offer letter

2
Brokers - This is the most common area of complaints for the average investor. Complaints
against brokers stem from disputes over brokerage rates, non-receipt of purchased shares or
payments for sold shares, auction of shares sold and delivered timely, but delay at broker's end,
etc.

Complaints against securities lending intermediaries may arise due to non-receipt of shares lent
by the investor or interest thereupon, or non-receipt of funds upon return of borrowed shares or
excessive interest charged upon borrowing.

Complaints against merchant bankers, registrar and transfer agents, bankers to issues and
underwriters generally stem from problems in primary market issues, like non-disclosures,
service issues etc.

Complaints against securities exchanges, clearing or settlement houses or depositories - these

concern irregularities or failure to act diligently, like the Calcutta Stock Exchange in the last
securities scam or the NSDL in the recent IPO scam.

Derivative trading - Many investors sign legal papers empowering the broker to trade on their
behalf, without proper knowledge and wake up on seeing their margin money eroded due to
sustained losses.

In other instances, major complaints are against brokers squaring off outstanding derivatives
positions due to lack of margins or not giving the client adequate time or notice, leading to huge
losses for investors/traders. These happen especially when markets turn volatile of see sustained
and large one- way movements.

There are other areas such as corporate governance, corporate restructuring, acquisitions,
buybacks, delisting and other compliance related issues for which one could approach SEBI. For
all this one can

File complaints electronically on the SEBI website

Get a complaint registration number

Track the status of the complaint online

3
 COMPANY PROFILE

Establishment Of SEBI

The Securities and Exchange Board of India was established on April 12, 1992 in accordance with the
provisions of the Securities and Exchange Board of India Act, 1992.

Preamble

The Preamble of the Securities and Exchange Board of India describes the basic functions of the
Securities and Exchange Board of India as "...to protect the interests of investors in securities and to
promote the development of, and to regulate the securities market and for matters connected therewith or
incidental thereto"

The Board

Organisation Structure

Code on Conflict of Interests for Members of Board

Functions of Departments / Divisions

4
 Board Meetings

Addresses of Offices of SEBI

Powers and Functions of the Board

SEBI Committees

Securities Appellate Tribunal (SAT)

SEBI Benchmarks

Former Chairmen / WTMs of the SEBI

Public Holidays
Updated List
Historical Data
Issued Year Rules

2014 Companies (Issue of Global Depositories Receipts) Rules, 2014

2014 Companies (Prospectus and Allotment of Securities) Rules, 2014

2014 Companies (Share Capital and debentures) Rules, 2014

2005 Depositories (Procedure for Holding Inquiry and Imposing Penalties by

Adjudicating Officer) Rules, 2005

2005 Securities Contracts (Regulations) (Procedure for Holding Inquiry and

Imposing Penalties by Adjudicating Officer) Rules, 2005

2004 Securities Transaction Tax Rules, 2004

2003 Securities Appellate Tribunal (Salaries, Allowances and other Terms and
Conditions of Presiding Officer and other Members) Rules, 2003

2000 Securities Appellate Tribunal (Procedure) Rules, 2000

2000 Securities Contracts (Regulations) (Appeal to Securities Appellate Tribunal)

Rules, 2000

1998 Depositories (Appeal to Central Government) Rules, 1998

1997 Securities Appellate Tribunal (Salaries and Allowances and other

Conditions of Service of the Officers and Employees) Rules, 1997

1997 Securities Contracts (Regulations) Rules, 1957

5
Issued Year Rules

1995 SEBI (Procedure for Holding Inquiry and Imposing Penalties by

Adjudicating Officer) Rules, 1995

1994 SEBI (Annual Report) Rules, 1994

1994 SEBI (Form of Annual Statement of Accounts and Records) Rules, 1994

1993 SEBI (Appeal to Central Government) Rules, 1993

1992 SEBI (Terms and Conditions of Service of Chairman and Members) Rules,
1992

1986 Securities Contracts (Reference to the Company Law Board) Rules, 1986

6
 INTRODUCTION OF THE TOPIC

Stock market indices reflects the economic conditions and the strength of a countrys economy.
It is very important that the indices show a true and clear picture about growth and strength of
the economy. The indices increases when there is a export surplus or we can say that the exports
are more than the imports. So it becomes crucial for every country that the figures shown by the
indices are true and accurate. SEBI has a great responsibility in this scenario

All modern economies, therefore, recognise the need for sound regulation of securities markets.
This is needed not just for proper functioning of these markets, but also for their very survival. It
is good regulation that will ensure that markets are safe and perceived to be safe by the public at
large. It is good regulation that will ensure that necessary information is available to the public
so that they can take informed decisions about investments. It is good regulation that will further

7
 manipulators in the system. Today securities market regulation has evolved to include three
principal objectives: (a) Fair, efficient and transparent markets; (b) Investor protection; (c)
Reduction of systemic risk. I am happy to say that SEBI is shouldering the responsibility in all
these three areas with great deal of efficiency and commitment.

SCOPE

Following are the main financial products/instruments dealt in the secondary market:

Equity:

The ownership interest in a company of holders of its common and preferred stock. The various
kinds of equity shares are as follows

8
Equity Shares:

An equity share, commonly referred to as ordinary share also represents the form of fractional
ownership in which a shareholder, as a fractional owner, undertakes the maximum
entrepreneurial risk associated with a business venture. The holders of such shares are members
of the company and have voting rights. A company may issue such shares with differential rights
as to voting, payment of dividend, etc.

Rights Issue/ Rights Shares: The issue of new securities to existing shareholders at a ratio
to those already held.

Bonus Shares: Shares issued by the companies to their shareholders free of cost by
capitalization of accumulated reserves from the profits earned in the earlier years.

Preferred Stock/ Preference shares: Owners of these kind of shares are entitled to a fixed
dividend or dividend calculated at a fixed rate to be paid regularly before dividend can be
paid in respect of equity share. They also enjoy priority over the equity shareholders in
payment of surplus. But in the event of liquidation, their claims rank below the claims of
the companys creditors, bondholders / debenture holders.

Cumulative Preference Shares. A type of preference shares on which dividend

accumulates if remains unpaid. All arrears of preference dividend have to be paid out before
paying dividend on equity shares.

9
JPC gives clean chit to RBI, NSE

Prakash Mani Tripathi, chairman of the 30-member Joint Parliamentary

Committee set up to probe the recent stock market scam, has given the
Reserve Bank of India and the National Stock Exchange a clean chit in a
preliminary announcement on Wednesday evening.

The JPC led by Tripathi met the RBI Governor Dr Bimal Jalan, the two
deputy governors, the executive director, the regional director and other
senior RBI officials in the morning.

10
"Within the constraints of our system, the RBI has done a good job. But of course, more needs to
be done. It is an on-going process," Tripathi said expressing satisfaction with the way the RBI is
functioning.

"Unlike the Calcutta Stock Exchange, we found a great deal of transparency at the NSE. Real
time information is clearly available. And we do not think that there has been any systemic
failure or irregularities there. However, the fund clearing and settlement system is what needs
improvement," he said.

11
The JPC also met four broker representatives of the NSE for their views.

While the committee has been given till the end of the monsoon session to place its report before
the Parliament, Tripathi said that he could not promise delivery on schedule.

"This is a dynamic situation. New views keep coming to light every day. So, I am not in a
position to tell now about when we will complete the report. We will try to give it on time but
whether we can will become apparent only in two weeks," he said.

Protesting against any suggestions that political interference could have played a role in the
recent scam, Tripathi asserted, "We have no facts to support this view. I believe that this is just a
theory held by many, which does not have any supporting evidence. The JPC will not go by
views. It will definitely consider this view point but only if there is any evidence to go with it."

He clarified that the JPC, so far, has not come across any evidence of political interference or
political hand in the recent scam.

"There is no evidence to suggest interference by politicians and I believe that the JPC will not go
by just viewpoints on this issue," he said, sidestepping pointed queries about the role of a few
prominent politicians in the recent scam.

On Thursday, the JPC team will go to the Bombay Stock Exchange in the morning and later on
summon Sebi officials for a hearing. The Sebi officials are again expected to be quizzed on the
action taken after the 1992 scam to plug the system loopholes.

Where is the justice after never-ending trials?

17 Apr, 2006

Consider this: A fast-track court at Jaipur hands out a guilty verdict in the rape of a German girl
in exactly 26 days. On the other hand, it takes 14 years for the case that unravelled the massive
Securities Scam of 1992 to end in a verdict.

This, after the government enacted the Special Court (Trial of Offences relating to Transaction in
Securities) Act, 1992, and set up a Special Court in Mumbai and a Custodian to take charge of
scam-related assets. That is why, when Special Case 4 of 1996 was decided last week one only
felt a sense of dismay.

12
But first some background. On April 23, 1992, I wrote about how stock broker Harshad Mehta,
once described as the Amitabh Bachchan of the stock market, had siphoned off Rs 500 crore
from the State Bank of Indias (SBI) treasury. The amount turned out to be Rs 770 crore and it
set in motion the process of unravelling a Rs 5,000 crore Securities Scam that sank two small
banks, ensnared the biggest Indian and foreign banks and tarnished innumerable reputations.

The government went into a frenzy of action. The Special Courts Act was enacted to ensure swift
trial, a special court was set up, all the scam-accused were notified and their assets attached by
the Custodian appointed under the Act. The Reserve Bank of India (RBI) set up the Janakiraman
Committee which came up with a series of investigation reports and a Joint Parliamentary
Committee (JPC) began its investigation.

The only lesson that has been learnt and applied in subsequent scams is not to follow any part of
the drill described above. In fact, even when a JPC was set up following the Ketan Parekh scam,
it was packed with political friends of all the accused brokers and their corporate cronies.

In 1992, however, the Central Bureau of Investigation (CBI) went on a rampage and arrested 13
people starting from SBIs Managing Director to Harshad Mehta, his brother Ashwin and a
bunch of their employees. After 107 days of custody, the CBI forgot about the case. The charge-
sheet was filed only in 1996 after some uproar and the charges were actually framed in 1999.
Those charge-sheeted were carefully chosen to make up a long enough list of accused and keep
out everyone with connections.

By then SBIs 1992 Chairman M.N. Goiporia had passed away (he was asked to proceed on
leave after the scam), so had C.L. Khemani, SBIs Managing Director in charge of investments
who earned a lot of money for the bank through skilful treasury operations, but was shattered and
humiliated. He died a few years later.

R.L. Kamath, who headed vigilance and actually went to Pilani to bring back the rouge official
R. Sitaraman (who colluded with Harshad Mehta) has also passed away, but not before the
mortification of being named the second accused in the case. Since the first accused had to be a

13
big enough name, P.V. Subba Rao, an MD and investment committee member was chosen. He
too passed away a couple of years ago, without the chance to have his name cleared.

Three other bankers were included as accused (K. Kailasham, A. Padhye and A.N. Bavedekar)
along with R. Sitaraman, the rogue banker who actually colluded with Harshad Mehta.

In the messy operations of SBIs treasury, where there wasnt even an instruction manual,
investment decisions were taken at the corporate head-office and relayed to Sitaraman at the
investment department at the Main Branch, these three officials were authorised to counter-sign
cheques and confirmations which they did on trust.

14
Last week, Padhye and Kailasham (who had signed fewer documents) were acquitted and
Bavdekar was sentenced to five years of rigorous imprisonment and a fine of Rs two lakhs. Since
the judgement is not yet available, the reasoning is unknown. Another official, Makarand
Shidhaye of UCO bank has similarly been severely punished with a fine of Rs four lakh and five
years of rigorous imprisonment for blindly crediting cheques into Harshads account on
instructions from his seniors.

From my investigation of the 1992 Scam, I have learnt that barring R. Sitaraman, the rouge
banker who colluded with Harshad Mehta to falsify documents and give him dubious access to
over Rs 700 crore of bank funds, none of the others in SBI had a clue about the mischief.
Similarly, the late Harshad Mehta had one contact point in UCO Bank.

All the short-cuts and conveniences that were practiced by bankers and brokers in order to speed
up transactions while dealing with the slow, manual systems at Public Debt Office of the RBI
were held as criminal actions, but only if the case went to court. ANZ Grindlays Bank famously
argued in its case against National Housing Bank (NHB) that crediting Bankers cheques to
brokers current accounts had become an accepted market practice.

The case has been settled without anyone being jailed for crediting cheques to Harshad Mehtas
account. But Shidaye of UCO Bank, who has been living on tuition fee earnings, has been
harshly punished and has no means to pay the fine.

As the trial trundled through the years, many of the events and situations lost their relevance. The
CBI saw several different teams of officials handling the case and it is unclear if they can even
relate to the banks operations as they happened in 1991-92 or understand the complexities and
exigencies of the situation then. After all, automation and liberalisation has transformed Indian
capital market processes beyond recognition in the last decade.

Even the judges hearing the case changed repeatedly. The hearings started with Justice Rane,
were continued by Justice D.K. Trivedi and Justice Kapadia and judgement was finally delivered
last week by Justice S.K. Shah. Now check the contrast. All the bank officials accused of
corruption, collusion and conspiracy had to depend on legal aid. Some turned lucky. All the
brokers and their employees had the best and most expensive legal brains working for the full 14
years.

15
RESEARCH OF OBJECTIVE

16
 CURRENT SCENARIO

Table No. 1

Comparative View of Market Capitalization & Turnover Ratios

RATIO USA UK CHINA JAPAN

INDIA

Market

Capitalization 358.8 130.7 73.6 66.4 54.5

Turnover 200.8 66.6 158.3 69.9 374.7

(Source: S&P Emerging Markets Fact Book, 2001)

The above figure in fact looks quite impressive. Further, India ha s been placed 23rd in
world ranking in terms of market capitalization and 14th in terms of value of trades on stock
exchanges by standard.

RBI, SEBI need to rethink on rating mechanism

1 Oct, 2007, 1710 hrs IST, Mythili Bhusnurmath, TNN

We could argue endlessly over whether our stock markets have decoupled from the Dow and the
Footsie and so on, but one thing is beyond dispute. We have certainly decoupled from the rest of
the world as far as the debate on the culpability of rating agencies is concerned.

The issue has seized the western world. In the United States, the Presidents Working Group on
Financial Markets that includes representatives from the Federal Reserve and the treasury has
launched a probe into securitization and rating agencies. The SEC is independently reviewing
rating agencies policies and looking at potential conflicts of interest.

Share prices of the two main rating agencies Moodys and S&P have both shown a sharp
decline since the sub prime crisis began a little over two months ago. The decline is partly a

17
reflection of the fact that business will slow down in the immediate aftermath of the crisis; but, it
is equally a reflection of the realization that it can no longer be a return to business as usual for
these agencies.

However, theres little or no debate about rating in India. In fact, shares of both Crisil and ICRA,
the two major rating agencies in India in which S&P and Moodys respectively have a stake,
have shown a sharp increase exactly during the period when the shares of their overseas partners
dipped.

Part of the reason could be that many of the key take-aways from the sub prime crisis that
independence of central banks is more imagined than real, that dispersion of risk doesnt risk-
proof the system, that qualified institutional buyers dont always know better, that even the most
sophisticated mathematical models can and do go wrong, that securitization has its pluses and
minuses do not have immediate application in the Indian context, given the stage of
development of our financial system.

Hence, the mainstream interest has largely been limited to whether, and to what extent, India will
feel the ripple effects of the crisis roiling most of the developed world, especially what it will
mean for interest and exchange rates.

But the issue of ratings has much greater immediacy for us than even the west. The reason is
two-fold. One, we are the only major market in the world to insist on compulsory rating of initial
public offerings (IPOs). And, beginning April 2008, the amount of capital to be held by banks in
India will be determined by the ratings accorded to their loan assets. So there is much more
riding on rating agencies in India than anywhere else in the world.

By extension, we should be seriously debating the issue of how the present model of ratings can
be improved. Especially since these agencies have clearly failed, and repeatedly. This is not the
first time. Soon after the East-Asian crisis, major rating agencies came in for a great deal of flak
for their failure to give any advance warning of the impending crises until it was too late. Then
we had the Enron and WorldCom fiascos when again rating agencies were found to have slipped

18
up badly. But unlike auditors who were severely chastened by the Enron fiasco, rating agencies
bounced back each time, in better fettle than before.

This is the third time in less than 10 years that they have been found wanting. Complex
securitised instruments continued to receive favourable ratings despite the apparent decline in
lending standards and slowing of the housing market

Ratings are about assessing the probability of default. And so like all probabilistic exercises, they
are dependant, among other things, on historical data. The problem is that whenever there is a
new product, as in the case of collateralised debt obligations (CDOs) and other asset-backed
commercial paper (ABCP), etc., there will always be a long lead time before the rating agency is
able to collect the required historical data that is crucial to its pricing. Hence, it is almost by
definition a bit like batting in the dark.

It is not enough that Moodys has announced it will change the way it rates complex debt
products backed by US subprime mortgage bonds to reflect the new realities of risks such as the
gumming or freezing of liquidity. Or that S&P too is reported to be finessing its ratings
procedures. As financial innovation continues apace (as indeed it must) there is always going to
be a new risk that catches rating agencies unawares, simply because no one has ever seen its like
before. This is exactly what happened in the subprime crisis; no one had ever envisaged that
liquidity could dry up like this and so abruptly.

There are numerous other problems of conflict of interest, of rating agencies being paid by the
rated, lack of follow-up of ratings once the initial assignment is done or lack of transparency or
lack of comprehension of complex financial instruments, and the oligopolistic nature of the
business. These have all been extensively written about. But as far as rating agencies are
concerned, its like water off a ducks back. So we need to think completely out of the box; a
mere tweaking of the existing system to take care of an added risk here or an added risk there
will not do.

In a remarkably prescient paper, How and why rating agencies are not like other financial gate-
keepers, Frank Partnoy of San Diego University points to how the present model is basically

19
flawed. And how suggestions such as allowing more players or using market-based measures of
risk will not really help. The reality is that there were many rating agencies in the past but there
has been consolidation over the years. As for market-based measures of risk, they are of little use
for OTC (over-the-counter) products that are often illiquid and become more so in times of
distress.

The question is not so much how the existing model of ratings needs to be overhauled (that it
doubtless does) but rather whether we should accord such centrality to these agencies pending a
complete overhaul.

In the 1990s, Thomas Friedman, author of the best-selling book The World is Flat, quipped,
there are only two super-powers in the world, the United States and Moodys ...and believe me,
its not clear sometimes whos more powerful. Judging by the way rating agencies have defied
all efforts to tame them, he wasnt far off the mark.

SEBIs preparing for Global India

The recent decision of the Reserve Bank of India (RBI) to allow foreign investment up to 49
percent in stock exchanges, depositories and clearing corporations is hailed as a good
development for the securities industry.

Reflect on these recent developments:

- Deutsche Boerse, Europe's top stock exchange and transaction service provider has signed an
agreement to buy 5 percent equity in the Bombay Stock Exchange (BSE) for $43 million. BSE is
the oldest bourse in Asia. The deal values the exchange at $910 million on an expanded equity
base.

- Singapore Stock Exchange (SGX) says its short listed for BSE stake. It claimed that it has been
short listed to buy a 5 percent stake in the bourse. BSE is understood to have finalized its plans to
have SGX as its second foreign partner.

- US major, NYSE, bought 5 per cent in the National Stock Exchange for $115 million. This
values NSE at $2.3 billion.

20
- Few weeks back Goldman Sachs acquired five per cent in the National Stock Exchange.

- Goldman Sachs has proposed to buy a stake in the Multi Commodity Exchange (MCX), India's
largest commodity bourse.

- London Metal Exchange and The Tokyo Commodity Exchange have also initiated talks with
MCX.

- NASDAQ Stock Market Inc., London Stock Exchange Group PLC and NYSE Group Inc. have
also been touted as bidders for a stake in BSE.

- NASDAQ has reportedly expressed its keenness to pick up stake in BSE.

- Foreign stock exchanges are now eyeing equity stake in the Over the Counter Exchange of
India (OTCEI). Recently, officials from the China Shanghai Stock Exchange visited the OTCEI
and it is learnt that the Chinese may be willing to buy 5 per cent in the exchange as permitted
under current guidelines.

- Sources say that London's AIM and the South Korean stock exchange may be willing to buy
stakes in the OTCEI exchange

-According to sources, the Inter-connected Stock Exchange of India (ISE), an exchange floated
by a group of small exchanges, is attracting global peers like the London Stock Exchange (LSE),
Singapore Stock Exchange (SGX) and some top private equities players.

Indian exchange business is becoming increasingly global. The consolidation and alliance wave
has reached Indian shores as well. India is currently growing at the rate of 8% per annum and has
been doing so for a few years. Third, India is now the 4th largest country in the world in terms of
purchasing power parity. If the current growth rate continues it will soon be the third largest,
overtaking Japan and just behind the US and China. The fast growing stock markets in India are
attracting major global investors.

The international bourses feel that investments in India's Stock Exchanges (SEs) compliment
their global growth strategy. Through a mutually beneficial partnership, the foreign groups will
extend their global reach. Major global stock exchanges have been merging and forming
alliances in recent years. As companies spread their global operations, such merged entities and
alliances can offer listing possibilities in multiple markets. Regulatory controls in select markets
like the US have also furthered this consolidation wave.
21
After completing a round of domestic consolidation, US stock exchanges have stepped out and
are acquiring exchanges in Europe besides forming alliances in Asia where outsight acquisitions
may not be possible.

Though RBI said it will allow up to 49 percent foreign investment in stock exchanges, the
Securities and Exchange Board of India (SEBI) may say no to foreign players from becoming
strategic investors in domestic stock exchanges. The SEBI may allow a foreign player to invest
not more than 5 per cent in an exchange.

According to the de-mutualisation plan laid out by the government, all corporatised stock
exchanges are expected to divest 51per cent of their equity to public investors. The internal
group suggested that of the 51per cent to be divested, 25 per cent could be offered to an Indian
strategic partner. The rest could be offered to others, including foreign players and resident
Indian investors, with no investor holding over 5 per cent each.

In other words, the capital market regulator has capped the individual investment, direct or
indirect, in such exchanges at five per cent. This means many investors need to join together to
have a strategic control.

Under the new rules, foreign direct investment would be limited at 26 percent, while foreign
portfolio investments would be capped at 23 percent in all these entities, the central bank said. It,
however, said portfolio investments would be allowed only through buying in the secondary
market.

22
 FUTURE PROSPECTS
Global controlling bodies

There are 118 total no. of regulatory bodies across the globe.

The following are few of the stock exchange boards of developed countries. The following is
the comparison among SEBI and other regulatory bodies.

Parameters SEBI SEC FSA SESC

(India) (USA) (UK) (JAPAN)
(Securities and (securities and (
Exchange Board Of exchange commission)
India)
1. about The Securities and The mission of the The Financial Services A series of so-called
regulatory Exchange Board of U.S. Securities and Authority (FSA) is an securities and financial
bodies India was Exchange independent non- scandals involving
established on April Commission is to governmental body, major securities
12, 1992 in protect investors, companies in the
given statutory powers
accordance with the maintain fair, orderly, summer of 1991, had
by the Financial
provisions of the and efficient markets, ignited discussions
Securities and and facilitate capital Services and Markets about inspections and
Exchange Board of formation. Act 2000. We are a surveillance system over
India Act, 1992. company limited by securities companies and
The Preamble of the guarantee and market intermediaries.
Securities and financed by the the Securities and
Exchange Board of financial services Exchange Surveillance
India describes the industry. The Commission (SESC)
basic functions of Treasury appoints the was formally established
the Securities and FSA Board, which on July 20, 1992 within
Exchange Board of currently consists of a the ambit of the Ministry
India as of Finance for the
Chairman, a Chief
..to protect the purpose of ensuring fair
interests of Executive Officer, transactions in both
investors in three Managing securities and financial
securities and to Directors, and 9 non- futures markets and
promote the executive directors maintaining the
development of, (including a lead non- confidence of investors
and to regulate the executive member, the in these markets.
securities market Deputy Chairman).
and for matters This Board sets our In June 1998, the
connected overall policy, but Financial Supervisory
therewith or Agency and the SESC
day-to-day decisions
incidental thereto were split up from the
and management of Ministry of Finance.
the staff are the

23
 responsibility of the Currently, the SESC is
Executive. established within the
ambit of the Financial
Services Agency, which
was renamed from the
Financial Supervisory
Agency.

2.TYPE PRIMARY SECONDARY SECONDARY SECONDARY

3. POWERS Found in Chapter The SEC oversees the They are an As a market watchdog
AND IV, this section key participants in the independent body that independent of
FUNCTIONS defines the role of securities world, regulates the financial supervisory authorities,
the Board. It deals including securities services industry in the SESC is expected to
with the regulation exchanges, securities play a primary role in
the UK.
of the securities brokers and dealers, maintaining fair,
market in all its investment advisors, We have been given a equitable, transparent,
manifestations, and and mutual funds. wide range of rule- and sound markets
contains wide Here the SEC is making, investigatory through exerting its
powers over concerned primarily and enforcement powers authority of criminal
Companies, Venture with promoting the in order to meet our four investigations into
Capital Funds, Stock disclosure of statutory objectives. In securities fraud,
Exchanges and important market- meeting these, we are administrative civil
Brokers. related information, also obliged to have monetary penalties
maintaining fair regard to the Principles investigations,
FUNCTIONS: dealing, and protecting disclosure document
of Good Regulation.
Investor protection. against fraud. inspections, inspections
Regulation of The FSA was set up by of securities companies,
Security market and Crucial to the SEC's government. The market surveillance, etc
Stock Exchanges. effectiveness in each government is FUNCTIONS:
Regulation of of these areas is its responsible for the
Intermediaries. enforcement authority. overall scope of the Functions
To Restrict Insider Each year the SEC FSAs regulatory
Trading. brings hundreds of activities and for its
civil enforcement Five Pillars of the SESC
powers.
actions against
individuals and The FSA regulates most Market Surveillance
companies for financial services
violation of the The Market Surveillance
markets, exchanges and
securities laws. firms. It sets the Division can require
Typical infractions standards that they must
include insider trading information from
meet and can take action
trading, accounting against firms if they fail securities companies,
fraud, and providing to meet the required
false or misleading standards. and conducts market
information about oversight.
securities and the
companies that issue
them.
Compliance

24
One of the major Inspection
sources of information
The Inspection Division
on which the SEC
relies to bring inspects whether
enforcement action is
securities companies
investors themselves
another reason that observe laws and
educated and careful
regulations, and conduct
investors are so
critical to the their business in
functioning of
accordance with market
efficient markets. To
help support investor rules.
education, the SEC
offers the public a
wealth of educational Since July 1, 2005 the
information on this
scope of the SESC's
Internet website,
which also includes inspection has been
the EDGAR database
expanded to include
of disclosure
documents that public securities businesses
companies are
such as the financial
required to file with
the Commission. solvency inspection,
which was conducted by
Though it is the
primary overseer and the Inspection Bureau of
regulator of the U.S. the FSA. Also,
securities markets, the
SEC works closely investment trust
with many other management companies
institutions, including
Congress, other and investment advisory
federal departments companies have become
and agencies, the self-
regulatory subject to the SESC's
organizations (e.g. the inspection.
stock exchanges), state
securities regulators,
and various private
sector organizations.
Disclosure Document
In particular, the
Chairman of the SEC, Inspection
together with the
The Civil Penalties
Chairman of the
Federal Reserve, the Investigation and
Secretary of the
Disclosure Documents
Treasury, and the
Chairman of the Inspection Division

25
 Commodities Futures inspects disclosure
Trading Commission,
documents such as
serves as a member of
the President's financial statements and
Working Group on
registration statements,
Financial Markets.
etc

In case false statements

are admitted, the SESC
recommends that the
Prime Minister and the
Commissioner of the
FSA should order the
submission of amended
reports of the disclosure
documents.
4. AIMS & to protect the the common interest of We summarise our SESCs objective is to
OBJECTIVES interests of investors all Americans in a Statutory Objectives and maintain fair, equitable,
in securities and to growing economy that Principles of Good transparent, and sound
promote the produces jobs, Regulation in three markets through
development of, and improves our standard Strategic Aims: exerting its authority of
to regulate the of living, and protects criminal investigations
securities market the value of our Promoting efficient, into securities fraud,
and for matters savings means that all orderly and fair markets; administrative civil
connected therewith of the SEC's actions Helping retail consumers monetary penalties
or incidental must be taken with an achieve a fair deal; and investigations,
thereto eye toward promoting disclosure document
the capital formation Improving our business inspections, inspections
that is necessary to capability and of securities companies,
sustain economic effectiveness market surveillance, etc
growth.

If we compare SEBI with regulatory bodies of developed countries we can see that SEBI has
more power than other regulatory bodies, but here the problem is that there is lot of interference
of RBI. SEBI does have decision taking authority but RBI often comes in between Whereas
other regulatory bodies are just like watch dogs where they just examine the situation and give
the report to the decision taking authority. Since there is no good coordination between SEBI and
RBI therefore SEBI is not able to perform up to the mark, where as other countries are very
systematic regarding their decisions and laws.

26
27
Global market regulators to discuss hedge fund challenges

MUMBAI: India will host for the first time a global market regulators' annual conference here
next year that will highlight challenges posed to capital markets by fly-by-night hedge funds.

The Securities and Exchange Board of India (SEBI) will host the 32nd annual conference of
IOSCO (International Organisation of Securities Commissions) from April 9 to 12, next year, a
SEBI release said.

The opening session for all participants will be on securities exchange evolution and regulation
of trans-national securities exchange. There will also be a full session on accounting and auditing
with an international perspective.

The crucial session will be on hedge funds - new regulatory challenges as it will be the focus of
the meet.

Hedge funds usually are vicious to stock markets as they are in the form of hot money with large
corpus and they enter and exit capital markets by way of participatory notes through foreign
institutional investors, making it difficult to trace the source .

Capital markets and economic development where new avenues to finance small and medium
enterprises will be another major session.

IOSCO's membership of over 100-jurisidictions is responsible for regulating over 90 per cent of
the world's securities market.

SEBI Chairman Mr M Damodaran was elected IOSCO's Emerging Markets Committee (EMC)
chairman in June 2006. EMC has more than 70 countries on its list. - PTI

To stop terrorism funding Sebi came up with Anit money laundering act.

Among the important clauses of the SCRA are :

Recognition of Stock Exchanges: Broadly covered by Sections 3, 4 and 5 of the SCRA,

these provisions detail the procedure for a Stock Exchange to obtain recognition from the
Central Government. This enables the Government to review the rules and byelaws of the
Exchange, as well as require the Exchange to confirm to certain additional conditions that
the Government may impose as a condition for recognition. Section 5 also gives the

28
 Government the power to withdraw recognition after giving the Exchange an opportunity
to be heard.

Framing of Stock Exchange rules: The Act, in sections 7A 10, lays down the basic
framework under which an Exchange can frame rules and/or byelaws. The Act allows the
Central Government to issue a fiat to the Exchange to draft rules for themselves or send
across rules for the Exchange. It also allows SEBI to make or amend byelaws of
recognised Stock Exchanges. These sections ensure that there is a semblance of
Government control over the internal functioning of Stock Exchanges.

Superceding a Stock Exchange: Under Section 11, the Central Government, can
supersede the Governing Board of a Stock Exchange and replace them with a different set
of persons to look after the Exchange.

Preventing unauthorised Stock Exchanges: This is a crucial part of the Act, enunciated
in section 19. It states that anyone wanting to operate a Stock Exchange should confirm
to the regulations and requirements of the Central Government and its agencies such as
SEBI.

Prohibition of contracts (other than spot delivery contracts) outside a Stock

Exchange: This section states that security transactions can be traded only in a Stock
Exchange. By this the Central Government maintains a level of control and regulation
over all the transactions taking place in an Exchange.

As a result all securities trading (other than spot delivery contracts) have to take place
through the members of the particular exchange, over which the Government has control.

Appeal to the Securities Appellate Tribunal against a refusal of a stock exchange to

list the securities of a public company: This allows companies which have been refused
listing by a stock exchange the facility to appeal to the Securities Appellate Tribunal
against the decision of the Stock Exchange.

SECURITIES CONTRACTS (REGULATION) RULES, 1957

The Securities Contracts (Regulation) Rules, 1957 ("the SCRR") were framed pursuant to the
provisions of the SCRA. The SCRR clarifies some of the provisions of the SCRA.

29
The SCRR lays down details of:

Granting recognition to a Stock Exchange: The Rules specify the contents of an

application, the form of the approval to be granted to such application and the documents
to be filed along with the application. Further, the Rules also detail the renewal
procedure.

Qualifications to be a member of a recognised Stock Exchange: Detailed in Rule 8,

these set out the exact eligibility criteria for obtaining the membership of a recognised
Stock Exchange. These rules are laid out for both individuals and companies. The criteria
that must be fulfilled by members subsequent to their obtaining membership are also laid
down.

SEBI nominees for governing bodies of Stock Exchanges: Rule 10 gives SEBI the
power to nominate members to the governing body of Stock Exchanges. A maximum of
three members can be nominated to the Exchange. These members have the same powers
as other members of the governing body.

Accounting procedures: This section lays down rules on the type of books, accounts,
their contents and the time period for which they must be maintained.

Requirements for listing securities on a recognised Stock Exchange: Details for listing
a security on a recognised Stock Exchange is laid down in Rule 19. They include
documentation, undertakings of the company, statements required to ensure listing. A
company wishing to list itself on a recognised Stock Exchange must fulfil all these.

THE DEPOSITORY ACT, 1996

The Depository Act lays the foundation for dematerialisation of securities and provides for the
regulations of depositories in securities. It allows the creation of the bodies involved in this
process as well as outlining the modalities of the functioning of the depository process.

The Depository Act provides inter alia for:

30
 SUGGESTIONS
Program Scope

MCA21 program will provide for anytime anywhere electronic services with speed and certainty
to all the stakeholders. It will include:

Design and development of application system

Setting up of IT infrastructure

Setting up the Digital Signature/PKI delivery mechanisms and associated security

requirements

Setting up of Physical Front Offices (PFOs)

Setting up of temporary FOs for the peak periods to meet with the requirements and
subsequent shutdown of temporary FOs at the end of such peak periods

Migrating legacy data and digitization of paper documents to the new system

Providing MCA services to all MCA21 stakeholders in accordance with the Service
Oriented Approach

Providing user training at all levels and all offices (Front and Back Offices)

The MCA21 is designed to automate processes related to the proactive enforcement and
compliance of the legal requirements under the Companies Act, 1956. However, it does
not include processes related to OL.

Front Office

The implementation of Front Offices (FO) is done in two ways. These can be called as Virtual
Front Office (VFO) and Physical Front Office (PFO).

The VFO is what the citizen has in front while accessing the MCA21 portal. The PFO will be a
replacement to the existing RoC counters. The PFO will also accept paper documents. However,
these will be converted into electronic documents by customer service agents manning PFO.
Also, the authorised person(s) will have to sign these documents digitally. Consequently the
authorised signatories for a given document will need to appear in person at the PFO for the
purpose of digitally signing the document.
31
The user can avail the following services on MCA21 portal

eFiling

o Viewing public document

o Requesting certified copies

o Registering investor complaint

o Tracking transaction status

Back Office

The back office is what MCA employee has in front which accessing back office portal. The
back office process relates to:

Dynamic routing of documents that have been electronically filed to the concerned official
within MCA based on the type of service request.

Electronic workflow systems to support speed and certainty in service delivery

Supporting all routine tasks such as registrations and approvals

Storing of all approved documents of companies as part of electronic records, including

provision of access to electronic records for the stakeholders

Enhancing identification of defaulters

Increasing efficiency of Technical Scrutiny

Ensuring close follow-up on matters related to compliance management including prosecutions

Enabling quicker responses to investor grievances

Providing alerts when the tasks are not carried out within stipulated period

32
 CONCLUSION
SEBI is gaining more powers and authority but however to perform up to the expectations
it is important that there should be good coordination amongst the regulatory bodies. If that is
possible then the Indian financial markets will definitely touch new heights and we find no
reason why SEBI will lag behind the regulatory bodies of other countries.

With the help of coordination and framing of systematic rules and laws and proper
implementation of such rules and laws will definitely help SEBI to touch new heights and
perform up to the peoples expectations

33
 BIBLIOGRAPHY

1. www.numa.com/links/regulat.htm

2. http://www.thehindubusinessline.com/businessline/blnus/05251009.htm

34
 INDEX
S.NO. TITLE Page No.

1 Executive Summary

2 Concept of topic

3 Company profile

4 Introduction of Topic,

Characteristics, Pros & Cons,

Types & Forms

5 Role in Business

6 Current Scenario

7 Future Prospects

9 Recommendation

10 Conclusion

11 Bibliography

35