PROJECT REPOET

SECURITY EXCHANGE BOARD OF INDIA (SEBI)

SUBMITTED BY
PRIYA RANJANA
M.B.A. (FINANCE AND CONTROL)
(SEMESTER V th)

SUBMITTED TO
UNIVERSITY OF KANPUR

PROJECT GUIDE
NAME OF THE GUIDE
Mr

ACADEMIC YEAR
2017 – 2019

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 DECLARATION

I MS. PRIYA RANJANA of CHHATRAPATI SHAHU JI MAHARAJ

UNIVERSITY, student of M.B.A(FINANCE AND CONTROL) Semester IVth,
hereby declare that I have completed my project title SECURITY EXCHANGE
BOARD OF INDIA (SEBI)

I also declare that this project which has been the partial fulfilment of the
requirement of the degree of M.B.A( FINANCE AND CONTROL ) of the “Kanpur
University” has been the result of my efforts.

Signature of Student

PRIYA RANJAN

M.B.A (FC) 4th semester

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3
 ACKNOWLEDGEMENT

I have sincerely done my project alloted to me. I would like to thank Dr.
Arpana Katiyar the guide for giving her valuable suggestion and guidance.

It gives me immense pleasure to present this project in the course of Finance

and control, and I would like to thank all those people who gave me their
opinion without their help this project would not be possible to submit in time.

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 INDEX
Sr no. Topic
Chapter: 1 History

Chapter:2 Introduction

Chapter:3 Establishment of SEBI

Chapter:4 Organization structure

Chapter:5 Powers and function

Chapter:6 Objective

Chapter:7 Administration

Chapter:8 Department of SEBI and its functions

Chapter:9 Penalties and adjudication

Chapter:10 Under SEBI formation

Chapter:11 Registration certificate

Chapter:12 Investigation, enforcement and surveillance

Chapter:13 Recently SEBI to take up further market reforms

Chapter:14 Case study

Chapter:15 Conclusion

Chapter:16 Bibliography

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 CHAPTER:1
HISTORY
Before 1992, the three principal Acts governing the securities markets were:
(a) the Capital issues (Control) Act, 1947, which restricted issuer’s access to the
securities market and controlled the pricing of issues; (b) the Companies Act,
1956, which sets out the code of conduct for the corporate sector in relation to
issue, allotment and transfer of securities, and disclosures to be made in public
issues; and (c) the Securities Contract (Regulation) Act, 1956, which provides
for regulation of transactions in securities through control over stock exchanges.
The capital issues (Control) Act, 1947 had its origin during the war in 1943
when the objective was to channel resources to support the war effort. The Act
was retained with some modifications as a means of controlling the raising of
capital by companies and to ensure that national resources were channeled into
proper lines, i.e, for desirable purpose to serve goals and priorities of the
government, and to protect the interests of investors. Under the Act, any firm
wishing to issue securities had to obtain approval from the Central Government,
which also determined the amount, type and price of the issue.
Major part of the liberalization process was the repeal of the capital issues
(Control) Act, 1947 in May 1992. With this, Government’s control over issue of
capital, pricing of the issues, fixing of premia and rates of interest on debentures
etc. ceased. The office which administered the Act was abolished and the
market was allowed to allocate resources to competing uses. However to ensure
effective regulation of the market, SEBI Act, 1992 was enacted to empower
SEBI with statutory powers for (a) protecting the interests of investors in
securities, (b) promoting the development of the securities market, and (c)
regulating the securities market. Its regulatory jurisdiction extend over corporate
in the issuance of capital and transfer the securities in addition to all
intermediaries and persons associated with securities market. SEBI can specify
the matters to be disclosed and the standards of disclosure required for the
protection of investors in respect of issues; can issue directions to all
intermediaries and other persons associated with the securities market in the
interest of investors or of orderly development for securities market; and can
conduct enquiries, audits and inspection of all concerned and adjudicate
offences under the Act. In short, it has been given necessary autonmy and
authority to regulate and develop an orderly securities market.

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 CHAPTER:2
INTRODUCTION

The capital market has witnessed tremendous growth in

recent times characterized particularly by the increasing Securities and Exchange Board of India
participation of public. Investors confidence in the capital
market can be sustained largely by ensuring investor भारतीय प्रततभूतत और तितिमय बोर्ड
protection. With this end in view, the government
decided to vest SEBI immediately with statutory powers
required to do effectively with all matters relating to
capital market.
It was felt by the government that by transferring the
powers of the controller of capital issues to an
independent body it would enable it to effectively
regulate, promote and monitor the working of stock
exchange in the country.
Earlier, the regulation of the securities market was being
done through the office of controller of capital issues
under the capital issues (control) Act, 1947 which has
been since reapled.
Accordingly, SEBI has been set up under the SEBI Act,
1992. The CCI Act has now ceased to have any
application and stand withdrawn from the law w.e.f
246.5.1992. The Securities Exchange Board Of India Act
was passed by the parliament as Act No.15 of 1992 and
received the assent of the President on 4th April, 1992.
SEBI Bhavan, Mumbai headquarters
The Securities and Exchange Board of India Act,
1992 (the SEBI Act) was amended in the years 1995, Agency overview
1999 and 2002 to meet the requirements of changing
needs of the securities market and responding to the Formed 12 April 1992[1]
development in the securities market. Based on the
Report of Joint Parliamentary Committee (JPC) dated Jurisdiction Government of India
December 2, 2002, the SEBI Act was amended to address
certain shortcomings in its provisions. The mission of Headquarters Mumbai, Maharashtra
SEBI is to make India as one of the best securities market
of the world and SEBI as one of the most respected Employees 525 (2009)[2]
regulator in the world. SEBI also endeavours to achieve
the standards of IOSCO/FSAP. Agency executive U. K. Sinha, Chairman

In this background, the internal group constituted by

Website
SEBI consisting of its senior officers had proposed
certain amendments to the SEBI Act. The SEBI Board
www.sebi.gov.in
had constituted an Expert Group under the Chairmanship
of Mr Justice M. H .Kania (Former Chief Justice of

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 India) to consider the proposals. The report of the Expert Group is placed for eliciting public
comments on the recommendations.
ESTABLISHMENT OF THE
SECURITIES AND EXCHANGE BOARD OF INDIA
 Establishment and incorporation of Board:-

 With effect from such date as the Central Government may, by notification,
appoint, there shall be established, for the purposes of this Act, a Board by
the name of the Securities and Exchange Board of India.

 The Board shall be a body corporate by the name aforesaid, having perpetual
succession and a common seal, with power subject to the provisions of this
Act, to acquire, hold and dispose of property, both movable and immovable,
and to contract, and shall, by the said name, sue or be sued.

 The head office of the Board shall be at Bombay.

 The Board may establish offices at other places in India.

 Management of the Board:-

 The Board shall consist of the following members, namely:-

 a Chairman;
 two members from amongst the officials of the [Ministry] of the Central
Government dealing with Finance [and administration of the Companies
Act, 1956(1 of 1956)];
 one member from amongst the officials of [the Reserve Bank];
 five other members of whom at least three shall be the whole-time
members] to be appointed by the central Government.

 The general superintendence, direction and management of the affairs of the

Board shall vest in a Board of members, which may exercise all powers and
do all acts and things which may be exercised or done by the Board.

 Save as otherwise determined by regulations, the Chairman shall also have

powers of general superintendence and direction of the affairs of the Board
and may also exercise all powers and do all acts and things which may be
exercised or done by that Board.

 The Chairman and members referred to in clauses (a) and (d) of sub-section
(1) shall be appointed by the Central Government and the members referred
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 to in clauses (b) and (c) of that sub-section shall be nominated by the Central
Government and the [Reserve Bank] respectively.

 The Chairman and the other members referred to in clauses (a) and (d) of
sub-section (1) shall be persons of ability, integrity and standing who have
shown capacity in dealing with problems relating to securities market or
have special knowledge or experience of law, finance, economics,
accountancy, administration or in any other discipline which, in the opinion
of the Central Government, shall be useful to the Board.

 Term of office and conditions of service of Chairman and members of the

Board:-
 The term of office and other conditions of service of the Chairman and the
members referred to in clause (d) of sub- section (1) of section 4 shall be
such as may be prescribed.

 Notwithstanding anything contained in sub-section (1), the Central

Government shall have the right to terminate the services of the Chairman or
a member appointed under clause (d) of sub-section (1) of section 4, at any
time before the expiry of the period prescribed under sub-section (1), by
giving him notice of not less than three months in writing or three months’
salary and allowances in lieu thereof, and the Chairman or a member, as the
case may be, shall also have the right to relinquish his office, at any time
before the expiry of the period prescribed under sub-section (1), by giving to
the Central Government notice of not less than three months in writing.

 Removal of member from office:-

The Central Government shall remove a member from office if he –
 is, or at any time has been, adjudicated as insolvent;

 is of unsound mind and stands so declared by a competent court;

 has been convicted of an offence which, in the opinion of the Central

Government, involves a moral turpitude;

 has, in the opinion of the Central Government, so abused his position as to

render his continuation in office detrimental to the public interest:
Provided that no member shall be removed under this clause unless he has
been given a reasonable opportunity of being heard in the matter.

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 Meetings:-

 The Board shall meet at such times and places, and shall observe such rules
of procedure in regard to the transaction of business at its meetings
(including quorum at such meetings) as may be provided by regulations.

 The Chairman or, if for any reason, he is unable to attend a meeting of the
Board, any other member chosen by the members present from amongst
themselves at the meeting shall preside at the meeting.

 All questions which come up before any meeting of the Board shall be
decided by a majority votes of the members present and voting, and, in the
event of an equality of votes, the Chairman, or in his absence, the person
presiding, shall have a second or casting vote.

 Member not to participate in meetings in certain cases:-

Any member, who is a director of a company and who as such director has
any direct or indirect pecuniary interest in any matter coming up for
consideration at a meeting of the Board, shall, as soon as possible after relevant
circumstances have come to his knowledge, disclose the nature of his interest at
such meeting and such disclosure shall be recorded in the proceedings of the
Board, and the member shall not take any part in any deliberation or decision of
the Board with respect to that matter”.

 Vacancies etc., not to invalidate proceedings of Board:-

No act or proceeding of the Board shall be invalid merely by reason of –
 any vacancy in, or any defect in the constitution of, the Board; or

 any defect in the appointment of a person acting as a member of the Board;

or

 any irregularity in the procedure of the Board not affecting the merits of the
case.

 Officers and employees of the Board:-

 The Board may appoint such other officers and employees as it considers
necessary for the efficient discharge of its functions under this Act.

 The term and other conditions of service of officers and employees of the
Board appointed under sub- section (1) shall be such as may be
determined by regulations.

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 ORGANISATION STRUCTURE

Ajay Tyagi was appointed chairman on 10 January 2017, replacing U K

Sinha, and took charge of the chairman office on 1 March 2017.
The board comprises:

Name Designation

Ajay Tyagi Chairman

Gurumoorthy
Whole time member
Mahalingam

S.K Mohanty Whole time member

Ananta Barua Whole time member

Madhabi Puri
Whole time member
Buch

Subhash
Chandra Part-time member
Garg

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 Injeti Srinivas Part-time member

N.S.
Part-time member
Vishwanathan

Arun P. Sathe Part-time member

Functions and Responsibilities

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 there with or incidental
there to".
SEBI has to be responsive to the needs of three groups, which constitute the
market:

 issuers of securities
 investors
 market intermediaries
SEBI has three functions rolled into one body: quasi-legislative, quasi-
judicial and quasi-executive. It drafts regulations in its legislative capacity, it
conducts investigation and enforcement action in its executive function and it
passes rulings and orders in its judicial capacity. Though this makes it very
powerful, there is an appeal process to create accountability. There is a
Securities Appellate Tribunal which is a three-member tribunal and is currently
headed by Justice Tarun Agarwala, former Chief Justice of the Meghalaya High
Court. A second appeal lies directly to the Supreme Court. SEBI has taken a
very proactive role in streamlining disclosure requirements to international
standards.
Powers
For the discharge of its functions efficiently, SEBI has been vested with the
following powers:

 To approve by−laws of Securities exchanges.

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 To require the Secuities exchange to amend their by−laws.
 Inspect the books of accounts and call for periodical returns from recognized
Securities exchanges.
 Inspect the books of accounts of financial intermediaries.
 Compel certain companies to list their shares in one or more Securities
exchanges.
 Registration of Brokers and sub-brokers

There are two types of brokers:

 Discount brokers
 Merchant brokers
SEBI committees
Technical Advisory Committee

 Committee for review of structure of market infrastructure institutions

 Advisory Committee for the SEBI Investor Protection and Education Fund
 Takeover Regulations Advisory Committee
 Primary Market Advisory Committee (PMAC)
 Secondary Market Advisory Committee (SMAC)
 Mutual Fund Advisory Committee
 Corporate Bonds & Securitization Advisory Committee
Eliminate mal practices in security market.

OBJECTIVE SEBI

In 1988 the Securities and Exchange Board of India (SEBI) was established by
the Government of India through an executive resolution, and was subsequently
upgraded as a fully autonomous body (a statutory Board) in the year 1992 with
the passing of the Securities and Exchange Board of India Act (SEBI Act) on
30th January 1992. In place of Government Control, a statutory and
autonomous regulatory board with defined responsibilities, to cover both
development & regulation of the market, and independent powers have been set
up. Paradoxically this is a positive outcome of the Securities Scam of 1990-91.

The basic objectives of the Board were identified as:

 To protect the interests of investors in securities;

 To promote the development of Securities Market;
 To regulate the securities market and
 For matters connected therewith or incidental there to.

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Since its inception SEBI has been working targeting the securities and is
attending to the fulfillment of its objectives with commendable zeal and
dexterity. The improvements in the securities markets like capitalization
requirements, margining, establishment of clearing corporations etc. reduced the
risk of credit and also reduced the market.

SEBI has introduced the comprehensive regulatory measures, prescribed

registration norms, the eligibility criteria, the code of obligations and the code
of conduct for different intermediaries like, bankers to issue, merchant bankers,
brokers and sub-brokers, registrars, portfolio managers, credit rating agencies,
underwriters and others. It has framed bye-laws, risk identification and risk
management systems for Clearing houses of stock exchanges, surveillance
system etc. which has made dealing in securities both safe and transparent to the
end investor.

Another significant event is the approval of trading in stock indices (like S&P
CNX Nifty & Sensex) in 2000. A market Index is a convenient and effective
product because of the following reasons:

 It acts as a barometer for market behavior;

 It is used to benchmark portfolio performance;
 It is used in derivative instruments like index futures and index options;
 It can be used for passive fund management as in case of Index Funds.

Two broad approaches of SEBI is to integrate the securities market at the

national level, and also to diversify the trading products, so that there is an
increase in number of traders including banks, financial institutions, insurance
companies, mutual funds, primary dealers etc. to transact through the
Exchanges. In this context the introduction of derivatives trading through Indian
Stock Exchanges permitted by SEBI in 2000 AD is a real landmark.

SEBI appointed the L. C. Gupta Committee in 1998 to recommend the

regulatory framework for derivatives trading and suggest bye-laws for
Regulation and Control of Trading and Settlement of Derivatives Contracts. The
Board of SEBI in its meeting held on May 11, 1998 accepted the
recommendations of the committee and approved the phased introduction of
derivatives trading in India beginning with Stock Index Futures. The Board also
approved the "Suggestive Bye-laws" as recommended by the Dr LC Gupta
Committee for Regulation and Control of Trading and Settlement of Derivatives
Contracts. SEBI then appointed the J. R. Verma Committee to recommend Risk
Containment Measures (RCM) in the Indian Stock Index Futures Market. The
report was submitted in November 1998.

However the Securities Contracts (Regulation) Act, 1956 (SCRA) required

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amendment to include "derivatives" in the definition of securities to enable
SEBI to introduce trading in derivatives. The necessary amendment was then
carried out by the Government in 1999. The Securities Laws (Amendment) Bill,
1999 was introduced. In December 1999 the new framework was approved.

Derivatives have been accorded the status of `Securities'. The ban imposed on
trading in derivatives in 1969 under a notification issued by the Central
Government was revoked. Thereafter SEBI formulated the necessary
regulations/bye-laws and intimated the Stock Exchanges in the year 2000. The
derivative trading started in India at NSE in 2000 and BSE started trading in the
year 2001.

SEBI - SEBI ADMINISTRATION

The Securities and Exchange Board of India Act, 1992 is having retrospective
effect and is deemed to have come into force on January 30, 1992. Relatively a
brief act containing 35 sections, the SEBI Act governs all the Stock Exchanges
and the Securities Transactions in India.

A Board by the name of the Securities and Exchange Board of India (SEBI) was
constituted under the SEBI Act to administer its provisions. It consists of one
Chairman and five members.

One each from the department of Finance and Law of the Central Government,
one from the Reserve Bank of India and two other persons and having its head
office in Bombay and regional offices in Delhi, Calcutta and Madras.

The Central Government reserves the right to terminate the services of the
Chairman or any member of the Board. The Board decides questions in the
meeting by majority vote with the Chairman having a second or casting vote.

Section 11 of the SEBI Act provides that to protect the interest of investors in
securities and to promote the development of and to regulate the securities
market by such measures, it is the duty of the Board. It has given power to the
15
 Board to regulate the business in Stock Exchanges, register and regulate the
working of stock brokers, sub-brokers, share transfer agents, bankers to an
issue, trustees of trust deeds, registrars to an issue, merchant bankers,
underwriters, portfolio managers, investment advisers, etc., also to register and
regulate the working of collective investment schemes including mutual funds,
to prohibit fraudulent and unfair trade practices and insider trading, to regulate
take-overs, to conduct enquiries and audits of the stock exchanges, etc.

All the stock brokers, sub-brokers, share transfer agents, bankers to an issue,
trustees of trust deed, registrars to an issue, merchant bankers, underwriters,
portfolio managers, investment advisers and such other intermediary who may
be associated with the Securities Markets are to register with the Board under
the provisions of the Act, under Section 12 of the Sebi Act. The Board has the
power to suspend or cancel such registration. The Board is bound by the
directions vested by the Central Government from time to time on questions of
policy and the Central Government reserves the right to supersede the Board.
The Board is also obliged to submit a report to the Central Government each
year, giving true and full account of its activities, policies and programmers.
Any one of the aggrieved by the Board's decision is entitled to appeal to the
Central Government.

DEPARTMENT OF SEBI AND ITS FUNCTIONS

 MARKET INTERMEDIARIES REGULATION AND SUPERVISION

DEPARTMENT (MIRSD):-
The Market Intermediaries Regulation and Supervision Department is
responsible for the registration, supervision, compliance monitoring and
inspections of all market intermediaries in respect of all segments of the
markets viz. equity, equity derivatives, debt and debt related derivatives. The
Department also handles the work related to action against the intermediaries
for regulatory violations (As regards action it is clarified that the current
practice of issuing show cause notices, appointment of Enquiry/Adjudication
officers and consequential action up to serving of Chairman’s order and
maintenance of database will be with the respective Divisions). The following
divisions will perform the functions of the department.
 MIRSD-1 (A-M)
This division would look after work relating to registration,
monitoring, supervision, inspection, investor grievances and policy related
issues of Stock Brokers and Fees related matters including coordination of
summary proceedings.
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  MIRSD-2 (N-Z)
This division would look after the work relating to Registration,
monitoring, supervision, inspection, investor grievances and policy related
issues of Stock Brokers and Sub-Brokers.

 MIRSD-3
This division would look after the work relating to Registration,
monitoring, supervision, inspection, investor grievances and policy related
issues of the following Primary market related intermediaries:
 Merchant Bankers
 Registrars to Issue
 Bankers to Issue
 Underwriters.

 MIRSD-4
This division would look after the work relating to Registration,
monitoring, supervision, inspection, investor grievances and policy related
issues of the following intermediaries:
 Debenture Trustees,
 Credit Rating Agencies
 Depository Participants

 MIRSD-5
This division looks into the matters relating to the following
intermediaries:
 Sub-brokers
 Debenture Trustees
 Bankers to Issue

 MARKET REGULATION DEPARTMENT (MRD):-

The Market Regulation Department is responsible for supervising the
functioning and operations (except relating to derivatives) of securities
exchanges, their subsidiaries, and market institutions such as Clearing and
settlement organizations and Depositories. ( here in after collectively referred
to as ‘Market SROs) The following Divisions will perform the functions of the
Department:

 Division of Policy
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 The Division will handle the work related to policy and practice
relating to Market SROs i.e., securities exchanges, clearing and settlement
organizations and depositories; market policy, trading, clearance, settlement
issues, risk management, and related areas; Reviewing rules and rule-change
proposals of these Market SROs relating to market policy issues (except for
listing matters standards in purview of Corporation Finance Department);
Procedures for suspending trading of securities.

 Division of SRO Administration

The Division will handle the work related to Registration and
recognition of the Market SROs; administration of these Market SROs;
Demutualization or Corporatization of exchanges; reviewing rule change
proposals relating to non-market policy issues; supervision of the
market SROs to the extent of compliance with regulatory provisions through
periodical reports and regulatory action. (As regards action it is clarified that
the current practice of issuing show cause notices, appointment of
Enquiry/Adjudication officers and consequential action up to serving of
Chairman’s order and maintenance of databse will be with the Division).

 Division of Market supervision

The Division will hand the work related to conducting compliance,
examinations and inspections of Market SROs.

 Investor Complaints Cell

The cell would receive complaints relating to the market SROs from
the Office of Investor Assistance and Education (OIAE) and take follow up
action and report back to the OIAE. If regulatory action is required, the Cell
shall inform the Division of SRO Administration besides reporting to OIAE.

 DERIVATIVES AND NEW PRODUCTS DEPARTMENT (DNPD):-

 Division of Policy and Supervision

The Division is responsible for supervising the functioning and
operations of derivatives exchanges and related market organizations. In
order to accomplish its tasks, this division would be responsible for the
following:
 Derivatives market policy issues.
 Approval of new derivative products
 Monitoring the functioning of derivatives exchanges including
conducting inspections and compliance exams.
 Prescribing and Monitoring risk management and settlement practices in
derivatives exchanges
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  Developing the trading and settlement framework for new products.
 Regulatory action were required. As regards action it is clarified that
the current practice of issuing show cause notices, appointment of
 Enquiry/Adjudication officers and consequential action up to serving of
Chairman’s order and maintenance of database will be with the Division.

 Investors Complaint Cell

The cell would receive complaints relating to the derivatives
exchanges and related organizations from the Office of Investor Assistance
and Education (OIAE) and take follow up action and report back to the
OIAE. If regulatory action is required, the Cell shall inform the Division of
Policy and supervision besides reporting to OIAE.

 CORPORATION FINANCE DEPARTMENT (CFD):-

The Corporation Finance Department deals with matters relating to (i) Issuance
and listing of securities, including initial and continuous listing requirements
(ii) corporate governance and accounting/auditing standards (iii) corporate
restructuring through Takeovers / buy backs (iv) Delisting etc.The following
divisions form part of this Corporation Finance Department:-

 Division of Issues and Listing (DIL)

 Policy pertaining to (i) primary market (ii) disclosures (initial as well as

continuous) (iii) listing (iv) corporate governance (v) Employee Stock
Option (vi) Preferential issues (vii) Qualified Institutional Placement
(QIP) (viii) common electronic filing platforms viz. EDIFAR
& CFDs (ix) listing conditions and (x) vanishing companies in
consultation with Ministry of Corporate Affairs (MCA) through the
framework of Coordination and Monitoring Committee (CMC), set up
by Government of India.
 Issue of observations on the draft offer documents of public and rights
issues.
 Operational matters pertaining to accounting standards, compliance with
corporate governance, guidance to Stock Exchanges on listing matters,
vanishing companies in consultation with respective Registrar of
Companies, allegations of non-compliance with listing agreement etc.
 The following Committees of SEBI:-
o Primary Market Advisory Committee (PMAC)- to advise SEBI on
policy issues pertaining to Primary Market.
o SEBI Committee of Disclosures and Accounting (SCODA) - to
advise SEBI on disclosures and accounting related issues.
 Regulatory action where required(As regards action it is clarified that
the current practice of issuing show cause notices, appointment of
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 Enquiry/Adjudication officers and consequential action upto serving of
Chairman’s order and maintenance of database will be with the
Division).”

 Division of Corporate Restructuring:

The Division will handle the work relating to:
 Policy related to corporate restructuring
 Substantial Acquisition and Takeovers
 Buy back of securities
 Delisting of Securities
 Coordinating with the Takeover Panel
 Regulatory action where required. (As regards action it is clarified that
the current practice of issuing show cause notices, appointment of
Enquiry/Adjudication officers and consequential action up to serving of
Chairman’s order and maintenance of database will be with the Division).
 Investor complaints relating to corporate restructuring.

 INVESTMENT MANAGEMENT DEPARTMENT (IMD):-

The Investment Management department is responsible for registering and
regulating mutual funds, venture capital funds, foreign venture capital
investors, collective investment schemes, including plantation schemes,
Foreign Institutional Investors, Portfolio Managers and Custodians. The
following Divisions will perform the functions of the Department;
 Division of Funds 1((Portfolio Managers, Venture Capital, Corporate Bonds,
etc.) 2 (Mutual Funds) and 3 (Inspection of Mutual Funds):
The Divisions handle the following works related to their respective entities:
 Registrations
 Policy related issues
 Inspections
 Investor Complaints
 Regulatory actions.

Investor Complaints Cell:

The cell would receive complaints relating to their respective entities from the
OIAE and take follow up action and report back to OIAE. If regulatory action is
required, the Cell shall keep the OIAE informed.

 Division of Foreign Institutional Investors and Custodian

The Division will handle all work related to:
 FIIs
 Custodians
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  Regulatory action wherever required.
Investor Complaints Cell:
The cell would receive complaints relating to FIIs and custodians from the
OIAE and take follow up action and report back to OIAE. If regulatory
action is required, the cell shall keep the OIAE informed.

 Division of Collective Investment Schemes:

This Division administers the SEBI (Collective Investment Schemes)
Regulations 1999. It includes work relating to the following :
 Existing CIS entities
 Investigating complaints of purported CIS entities
 Grant of provisional registration to existing CIS entities in terms
of regulation 73 of the Regulation
 Taking action against the entities for non compliance with the
regulations like, prohibitory orders and launching prosecutions
against errant entities and their promoters/ directors and key
management personnel.
 Providing evidences in courts pertaining to prosecution
proceedings.
 Registration of Collective Investment Management Companies -
CIMC
The above activities are also conducted at the regional offices of SEBI,
wherever the address of the CIS entity is located.
Investor Complaints Cell: The cell shall address the complaints of investors
relating to CIS or alleged CIS entities from the OIAE. The Division shall
take action and report back to OIAE about the same. The Regional Offices of
SEBI report the status of complaints to Head Office Division of CIS. In case
of regulatory actions, the OIAE shall be informed about the same.

 INTEGRATED SURVEILLANCE DEPARTMENT (ISD):-

 The integrated Surveillance department is responsible for monitoring

market activity through market systems, data from other departments and
analytical software. The department would be responsible for

 Developing, maintaining and operating an integrated market surveillance

system including monitoring of all segments of the markets.

 Methodologies for capturing information from media review, public

complaints and tips, other agencies, exchanges, and direct solicitations;
assignment of staff to handle functions; method of logging and cataloguing
information; criteria for evaluating and distributing information; input into
tracking and other systems.
21
  Recognizing potentially illegal activities and referrals to Investigations,
Enforcement or other departments

 INVESTIGATIONS DEPARTMENT (IVD):-

The Investigations department is responsible for:

 Conducting investigations on potentially illegal market activities

.
 Providing referrals to the enforcement department.

 Assisting the enforcement department in enforcing SEBI action against

violators.

 (As regards action, the current practice of issuing show cause notices,
appointment of Enquiry/Adjudication officers and consequential action up
to serving of Chairman’s order and maintenance of database will be with the
Department).

 ENFORCEMENT OF DEPARTMENT (EFD):-

Enforcement Department is responsible for proceedings related to
regulatory action and obtaining redress for violations of securities laws and
regulations against all market participants, issuers and individuals and other
entities that breach securities laws and regulations. The following Divisions
will perform the functions of the Department;

 Division of Regulatory Action

The division shall enforce action against market misdemeanors through
SEBI administrative proceedings. The role of the Division shall commence
from the time the hearing before Chairman/Board is proposed. The Division
will assist the Chairman/Board in its proceedings, prepare the
orders, handle all matters relating to SAT, appeals against SAT orders and
Court cases relating to regulatory action. The Division will also frame the
procedures relating to the above matters.

 Division of Prosecutions
The division shall handle work related to filing prosecution proceedings
through the courts and follow up to obtain conviction. The Division will

22
 also frame procedures for cooperation with public prosecutors, other
agencies and for making referrals to prosecutors and other government
agencies

 LEGAL AFFAIRS DEPARTMENT (LAD):-

The Department of Legal Affairs would be responsible to provide legal counsel

to the Board and to its other departments, and to handle non-enforcement
litigation. The following Divisions will handle the functions of the Department.

 Division of Policy:
The division would work to formulate SEBI’s legislative initiatives and
review and comment upon proposed legislation that would affect the
securities industry or SEBI’s authority or operation. It would handle
testimony and statutory drafting assistance. The division would also be
responsible for establishing a clear legal framework and basis for the
various categories of SEBI pronouncements (e., regulations, guidelines,
circulars, instructions, etc.,); the hierarchy of their force and effect; the
procedure for their promulgation, amendment or repeal.

 Division of Regulatory Assistance

The division would support other SEBI departments in meeting their
objectives by providing assistance and guidance wherever necessary in
developing market rules and interpretations.

 ENQUIRIES AND ADJUDICATION DEPARTMENT (EAD)

The Enquiries and Adjudication Department would handle quasi
judicial matters and provide timely hearings and initiate adjudication brought
by the other Departments against alleged violators who are
within SEBI’s disciplinary jurisdiction. The department would directly report
to Chairman.
 OFFICE OF INVESTOR ASSISTANCE AND EDUCATION (OIAE)
The Office will support SEBI’s operations by handling investor complaints
centrally and be the focal point of SEBI’s investor education effort. The
Office would be the single point interface with investors and would receive
complaints relating to all departments, forward to the concerned
departments, follow up and respond to investors. The office shall set up
necessary systems and procedures to handle his function.
The Office will also receive complaints relating to issues, transfer of shares,
dividends, compliance with listing conditions, corporate governance issues
under the purview of the Corporation Finance department (Division of
Issues and Listing) and take follow up action.

23
 GENERAL SERVICES DEPARTMENT (GSD)
This department would support all of the internal operations of
SEBI. The Department will have the following divisions.
 Treasury and Accounts Division
The Division will handle work related to:
 Development of SEBI’s internal budget and accounting systems
 Presentation of reports and budgets to the SEBI Board
 Maintaining internal accounting records, developing internal control
systems for collections and disbursements and other financial controls
 Managing SEBI’s investments

 Facilities Management Division

The division will be responsible for the establishment and maintenance of
the physical facility housing the regulator and related needs.

 Official Language Division

The Division will handle the work related to compliance with Government’s
official language policy and Translation of certain documents into the
official language.

 Office of the Secretary to the Board

The Office of the Secretary shall coordinate Board meetings, record and
maintain Board decisions.

 Protocol and Security Division

The division will handle work related to:
 Protocol duties for visits/ meetings of senior officials of SEBI and co-
coordinating visits of dignitaries to SEBI,
 Security and Fire fighting duties in the office and residential premises
of SEBI,
 Functioning of mailing desk and reception,
 General upkeep of the office premises and maintenance of SEBI
buildings,
 Verification of dead stock inventory for SEBI's offices and residential
premises

 DEPARTMENT OF ECONOMIC AND POLICY ANALYSIS (DEPA):-

The Department will handle its functions through the following Divisions:
 Division of Policy Analysis (DPA)
This division would look after the following:
 Partnering/vetting of policy/concept papers.
 Need based research

24
  Regulatory Impact Assessment (RIA) and benchmarking of
regulations.
 Research Support to Committees and Working Groups set up by SEBI.
 Development of Strategic Action Plan/Vision Statement.
 Any other tasks that may be assigned.

 Division of Economic Analysis (DEA)

This division would look after the following:
 Tracking and analysis of market developments.
 Tracking and analysis of other economic developments.
 Repository of data (and data analysis)
 Preparation and publication of Annual Report.
 Preparation and publication of SEBI Bulletin and Handbook of
Statistics.
 Conducting periodic Investor Survey.
 History of Securities Market Project.
 Any other tasks that may be assigned.

 OFFICE OF THE CHAIRMAN (OCH)

 Office of the Executive Assistant to Chairman

The office will be responsible to provide such administrative and other
support as the Chairman may require. The functions would include
strategic planning and managing new initiatives.

 Office of International Affairs

The office would perform the following:
 Implement information-sharing initiatives with international regulators
 Participate in international regulatory organizations
 Handle all matters related to Foreign assisted projects
 Establish guidelines for interaction with foreign Government agencies
and foreign jurisdictions, including providing technical assistance.

 Communications Division
The division would be responsible for all communications of SEBI. These
include:
 Media releases and other forms of communication including the
publication of SEBI materials.
 News conferences and responding to inquiries from the press

 Human Resources Division

25
 The Human Resources Division will perform all the functions in its role as
the principal personnel and human resources authority in SEBI.

 INFORMATION TECHNOLOGY DEPARTMENT:-

This department would perform its role as the technical support group for
SEBI.

 THE REGIONAL OFFICES (RO's):-

The Regional Office will handle work as per existing delegation and shall
continue to report to functional heads for specific departmental functions
while reporting administratively to SEBI Executive Directors.

PENALTIES AND ADJUDICATION

 Penalty for failure to furnish information, return, etc:-

If any person, who is required under this Act or any rules or regulations made
there under,-
 to furnish any document, return or report to the Board, fails to furnish the
same, he shall be liable to a penalty of one lakh rupees for each day
during which such failure continues or one crore rupees, whichever is less

 to file any return or furnish any information, books or other documents

within the time specified there for in the regulations, fails to file return or
furnish the same within the time specified there for in the regulations, he
shall be liable to a penalty of one lakh rupees for each day during which
such failure continues or one crore rupees, whichever is less.

 To maintain books of accounts or records, fails to maintain the same, he

shall be liable to a penalty of one lakh rupees for each day during which
such failure continues or one crore rupees, whichever is less.

 Penalty for failure by any person to enter into agreement with clients:-
If any person, who is registered as an intermediary and is required under this
Act or any rules or regulations made there under to enter into an agreement
with his client, fails to enter into such agreement, he shall be liable to a
penalty of one lakh rupees for each day during which such failure continues
or one crore rupees, whichever is less.

 Penalty for failure to redress investors' grievances:-

26
 If any listed company or any person who is registered as an intermediary,
after having been called upon by the Board in writing, to redress the
grievances of investors, fails to redress such grievances within the time
specified by the Board, such company or intermediary shall be liable to a
penalty of one lakh rupees for each day during which such failure continues
or one crore rupees, whichever is less.

 Penalty for certain defaults in case of mutual funds:-

If any person, who is –
 Required under this Act or any rules or regulations made there under to
obtain a certificate of registration from the Board for sponsoring or
carrying on any collective investment scheme, including mutual funds,
sponsors or carries on any collective investment scheme, including
mutual funds, without obtaining such certificate of registration, he shall
be liable to a penalty of one lakh rupees for each day during which he
sponsors or carries on any such collective investment scheme including
mutual funds, or one crore rupees, whichever is less.

 Registered with the Board as a collective investment scheme, including

mutual funds, for sponsoring or carrying on any investment scheme, fails
to comply with the terms and conditions of certificate of registration, he
shall be liable to a penalty of one lakh rupees for each day during which
such failure continues or one crore rupees, whichever is less.

 Registered with the Board as a collective investment scheme, including

mutual funds, fails to make an application for listing of its schemes as
provided for in the regulations governing such listing, he shall be liable
to a penalty of one lakh rupees for each day during which such failure
continues or one crore rupees , whichever is less.

 Registered as a collective investment scheme including mutual funds

fails to despatch unit certificates of any scheme in the manner provided
in the regulation governing such despatch, he shall be liable to a penalty
of one lakh rupees for each day during which such failure continues or
one crore rupees, whichever is less.

 Registered as a collective investment scheme, including mutual funds,

fails to refund the application monies paid by the investors within the
period specified in the regulations, he shall be liable to pay a penalty of
one lakh rupees for each day during which such failure continues or one
crore rupees, whichever is less.

27
  Registered as a collective investment scheme, including mutual funds,
fails to invest money collected by such collective investment schemes in
the manner or within the period specified in the regulations, he shall be
liable to a penalty of one lakh rupees for each day during which such
failure continues or one crore rupees, whichever is less.

 Penalty for failure to observe rules and regulations by an asset

management company:-
Where any asset management company of a mutual fund registered under
this Act, fails to comply with any of the regulations providing for restrictions
on the activities of the asset management companies, such asset management
company shall be liable to a penalty of one lakh rupees for each day during
which such failure continues or one crore rupees, whichever is less.

 Penalty for failure in case of stock brokers:-

If any person, who is registered as a stock broker under this Act, -
 fails to issue contract notes in the form and in the manner specified by the
stock exchange of which such broker is a member, he shall be liable to a
penalty not exceeding five times the amount for which the contract note
was required to be issued by that broker;

 fails to deliver any security or fails to make payment of the amount due to
the investor in the manner within the period specified in the regulations,
he shall be liable to a penalty of one lakh rupees for each day during
which such failure continues or one crore rupees, whichever is less.

 charges an amount of brokerage which is in excess of the brokerage

specified in the regulations, he shall be liable to a penalty of one lakh
rupees] or five times the amount of brokerage charged in excess of the
specified brokerage, whichever is higher.

 Penalty for insider trading:-

If any insider who,-
 either on his own behalf or on behalf of any other person, deals in
securities of a body corporate listed on any stock exchange on the basis of
any unpublished price sensitive information; or

28
  communicates any unpublished price- sensitive information to any
person, with or without his request for such information except as
required in the ordinary course of business or under any law; or counsels,
or procures for any other person to deal in any securities of any body
corporate on the basis of unpublished price-sensitive information, shall be
liable to a penalty of twenty-five crore rupees or three times the amount
of profits made out of insider trading, whichever is higher.

 Penalty for non-disclosure of acquisition of shares and take-overs:-

If any person, who is required under this Act or any rules or regulations
made there under, fails to,-
 disclose the aggregate of his shareholding in the body corporate before he
acquires any shares of that body corporate; or

 make a public announcement to acquire shares at a minimum price;

 make a public offer by sending letter of offer to the shareholders of the

concerned company; or

 make payment of consideration to the shareholders who sold their shares

pursuant to letter of offer. He shall be liable to a penalty twenty-five
crore rupees or three times the amount of profits made out of such failure,
whichever is higher.

 Penalty for fraudulent and unfair trade practices.-

If any person indulges in fraudulent and unfair trade practices relating to
securities, he shall be liable to a penalty of twenty-five crore rupees or three
times the amount of profits made out of such practices, whichever is higher.

 Penalty for contravention where no separate penalty has been

provided.-
Whoever fails to comply with any provision of this Act, the rules or the
regulations made or directions issued by the Board there under for which no
separate penalty has been provided, shall be liable to a penalty which may
extend to one crore rupees.

 Power to adjudicate.-

29
  For the purpose of adjudging under sections 15A, 15B, 15C, 15D, 15E,
15F, 15G, 54 [15H, 15HA and 15HB] ,the Board shall appoint any of its
officers not below the rank of a Division Chief to be an adjudicating
officer for holding an inquiry in the prescribed manner after giving any
person concerned a reasonable opportunity of being heard for the purpose
of imposing any penalty.

 While holding an inquiry, the adjudicating officer shall have power to

summon and enforce the attendance of any person acquainted with the
facts and circumstances of the case to give evidence or to produce any
document which in the opinion of the adjudicating officer, may be useful
for or relevant to the subject matter of the inquiry and if, on such inquiry,
he is satisfied that the person has failed to comply with the provisions of
any of the sections specified in sub-section (1), he may impose such
penalty as he thinks fit in accordance with the provisions of any of those
sections.

 Factors to be taken into account by the adjudicating officer:-

While adjudging quantum of penalty under section 15 I, the adjudicating
officer shall have due regard to the following factors, namely:
 the amount of disproportionate gain or unfair advantage, wherever
quantifiable, made as a result of the default;

 the amount of loss caused to an investor or group of investors as a result

of the default;

 the repetitive nature of the default.

 .Crediting sums realized by way of penalties to Consolidated Fund of

India.-
All sums realised by way of penalties under this Act shall be credited to the
Consolidated Fund of India.

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 UNDER SEBI FORMATION

MUTUAL FUND

An investment vehicle that is made up of a pool of funds collected from many

investors for the purpose of investing in securities such as stocks, bonds, money
market instruments and similar assets. Mutual funds are operated by money
managers, who invest the fund's capital and attempt to produce capital gains and
income for the fund's investors. A mutual fund's portfolio is structured and
maintained to match the investment objectives stated in its prospectus.
SECURITIES AND EXCHANGE BOARD OF INDIA
(MUTUAL FUNDS)
(SECOND AMENDMENT) REGULATIONS, 2012.

No. LAD-NRO/GN/2012-13/17/21502 - In exercise of the powers conferred

under section 30 of the Securities and Exchange Board of India Act, 1992 (15
of 1992), the Board hereby makes the following regulations to amend the
Securities and Exchange Board of India (Mutual Funds) Regulations, 1996,
namely:-
31
 These regulations may be called the Securities and Exchange Board of India
(Mutual Funds) (Second Amendment) Regulations, 2012.
 These regulations shall come into force on the first day of October, 2012.

 In the Securities and Exchange Board of India (Mutual Funds) Regulations,

1996-
 in regulation 48, sub-regulation (2) and the proviso shall be substituted
with the following, namely -"(2) The Net Asset Value of the scheme
shall be calculated on daily basis and published in at least two daily
newspapers having circulation all over India.".
 after regulation 51, the following new regulation shall be inserted,
namely- “Credit of exit load to scheme.
51A. The exit load charged, if any, after the commencement of the SEBI
(Mutual Funds) (Second Amendment) Regulations, 2012, shall be
credited to the scheme.”
 in regulation 52,-
o sub- regulation (2) shall be substituted with the following, namely-
“(2) The asset management company may charge the scheme with
investment and advisory fees which shall be fully disclosed in the
offer document.”.
o in sub-regulation (4), the words “mutual fund” shall be substituted
with the word “scheme”.
o in sub-regulation (6),-
 for clause (a), the following shall be substituted, namely- “(a) in
case of a fund of funds scheme, the total expenses of the scheme
including weighted average of charges levied by the underlying
schemes shall not exceed 2.50 per cent of the daily net assets of the
scheme.”.
 in clause (b), the words “weekly average” shall be substituted with
the words “daily”.
 in clause (c), the words "or average weekly" and “or weekly
average” wherever appearing shall be omitted.
o after sub-regulation (6), the following new sub-regulation shall be
inserted, namely-"(6A) In addition to the limits specified in sub-
regulation (6), the following costs or expenses may be charged to the
scheme, namely-
 brokerage and transaction costs which are incurred for the purpose
of execution of trade and is included in the cost of investment,
not exceeding 0.12 per cent in case of cash market transactions
and 0.05 per cent in case of derivatives transactions;
 expenses not exceeding of 0.30 per cent of daily net assets, if the
new inflows from such cities as specified by the Board from time
to time are at least –

32
 (i) 30 per cent of gross new inflows in the scheme, or;
(ii) 15 per cent of the average assets under management (year to
date) of the scheme, whichever is higher:
Provided that if inflows from such cities is less than the
higher of sub-clause (i) or sub- clause (ii), such expenses on
daily net assets of the scheme shall be charged on
proportionate basis: Provided further that expenses charged
under this clause shall be utilised for distribution expenses
incurred for bringing inflows from such cities:
Provided further that amount incurred as expense on
account of inflows from such cities shall be credited back to
the scheme in case the said inflows are redeemed within a
period of one year from the date of investment;
 additional expenses, incurred towards different heads mentioned
under sub-regulations (2) and (4), not exceeding 0.20 per cent of
daily net assets of the scheme.”.
 in sub-regulation (7), the words, symbols and number "sub-
regulation (6)" shall be substituted with the words, symbols and
numbers "subregulations (6) and (6A)".
 for regulation 59, the following shall be substituted, namely-“Half-yearly
Disclosures.
o A mutual fund and asset management company shall within one
month from the close of each half year, that is on 31stMarch and on
30thSeptember, host a soft copy of its unaudited financial results on
their website:
Provided that the half-yearly unaudited report referred to in this
subregulation shall contain details as specified in Twelfth Schedule
and such other details as are necessary for the purpose of providing a
true and fair view of the operations of the mutual fund.
o A mutual fund and asset management company, shall publish an
advertisement disclosing the hosting of such financial results on their
website, in atleast one English daily newspaper having nationwide
circulation and in a newspaper having wide circulation published in
the language of the region where the Head Office of the mutual fund
is situated.”.

 In Twelfth Schedule, in serial number 6.5, the words and symbols

"daily/weekly average" wherever appearing shall be substituted with the
word "daily".

33
 CAPITAL MARKET

ROLE OF SEBI IN INDIAN CAPITAL MARKET

SEBI is regulator to control Indian capital market. Since its establishment in
1992, it is doing hard work for protecting the interests of Indian investors. SEBI
gets education from past cheating with naive investors of India. Now, SEBI is
more strict with those who commit frauds in capital market. The role of security
exchange board of India (SEBI) in regulating Indian capital market is very
important because government of India can only open or take decision to open
new stock exchange in India after getting advice from SEBI. If SEBI thinks that
it will be against its rules and regulations, SEBI can ban on any stock exchange
to trade in shares and stocks. Now, we explain role of SEBI in regulating Indian
Capital Market more deeply with following points:
 Power to make rules for controlling stock exchange :-
SEBI has power to make new rules for controlling stock exchange in India.
For example, SEBI fixed the time of trading 9 AM and 5 PM in stock
market.

 To provide license to dealers and brokers :-

SEBI has power to provide license to dealers and brokers of capital market.
If SEBI sees that any financial product is of capital nature, then SEBI can
also control to that product and its dealers. One of main example is ULIPs
case. SEBI said, " It is just like mutual funds and all banks and financial and
insurance companies who want to issue it, must take permission from
SEBI."

 To Stop fraud in Capital Market:-

SEBI has many powers for stopping fraud in capital market.
 It can ban on the trading of those brokers who are involved in fraudulent
and unfair trade practices relating to stock market.
 It can impose the penalties on capital market intermediaries if they
involve in insider trading.

 To Control the Merge, Acquisition and Takeover the companies :

Many big companies in India want to create monopoly in capital market.
So, these companies buy all other companies or deal of merging. SEBI sees
whether this merge or acquisition is for development of business or to harm
capital market.

34
 To audit the performance of stock market :
SEBI uses his powers to audit the performance of different Indian stock
exchange for bringing transparency in the working of stock exchanges.

 To make new rules on carry - forward transactions :

 Share trading transactions carry forward can not exceed 25% of broker's
total transactions.
 90 day limit for carry forward.

 To create relationship with ICAI:-

ICAI is the authority for making new auditors of companies. SEBI creates
good relationship with ICAI for bringing more transparency in the auditing
work of company accounts because audited financial statements are mirror
to see the real face of company and after this investors can decide to invest
or not to invest. Moreover, investors of India can easily trust on audited
financial reports. After Satyam Scam, SEBI is investigating with ICAI,
whether CAs are doing their duty by ethical way or not.
 Introduction of derivative contracts on Volatility Index:-
 For reducing the risk of investors, SEBI has now been decided to permit
Stock Exchanges to introduce derivative contracts on Volatility Index,
subject to the condition that;
 The underlying Volatility Index has a track record of at least one
year.
 The Exchange has in place the appropriate risk management
framework for such derivative contracts.

 Before introduction of such contracts, the Stock Exchanges shall submit

the following:
 Contract specifications
 Position and Exercise Limits
 Margins
 The economic purpose it is intended to serve
 Likely contribution to market development
 The safeguards and the risk protection mechanism adopted by the
exchange to ensure market integrity, protection of investors and
smooth and orderly trading.
 The infrastructure of the exchange and the surveillance system to
effectively monitor trading in such contracts, and
 Details of settlement procedures & systems
 Details of back testing of the margin calculation for a period of one
year considering a call and a put option on the underlying with a
delta of 0.25 & -0.25 respectively and actual value of the underlying.

35
 To Require report of Portfolio Management Activities:-
SEBI has also power to require report of portfolio management to check the
capital market performance. Recently, SEBI sent the letter to all Registered
Portfolio Managers of India for demanding report.

 To educate the investors:-

Time to time, SEBI arranges scheduled workshops to educate the investors.
On 22 may 2010 SEBI imposed workshop. If you are investor, you can get
education through SEBI leaders by getting update information on this page.

36
 VENTURE CAPITAL
APPLICATION FOR GRANT OF CERTIFICATE OF
REGISTRATION AS VENTURE CAPITAL FUND
SECURITIES AND EXCHANGE BOARD OF INDIA
INSTRUCTIONS
 This form is meant for use by the company or trust (hereinafter referred to
as the applicant) for application for grant of certificate of registration as
venture capital fund.
 The applicant should complete this form, and submit it, along with all
supporting documents to the Board at its head office at Mumbai.
 This application form should be filled in accordance with these regulations.
 The application shall be considered by the Board provided it is complete in
all respects.\
 All answers must be legible.
 Information which needs to be supplied in more detail may be given on
separate sheets which should be attached to the application form.
 The application must be signed and all signatures must be original.
 The application must be accompanied by an application fee as specified in
the Second Schedule to these regulations.
 Name, address of the registered office, address for correspondence,
telephone number(s), fax number(s), telex number(s) of the applicant
and the name of the contact person.
 Please indicate to which of the following categories the applicant
belongs.
 a company established under the Companies Act, 1956 (1 of 1956)
 a trust set up under the Indian Trusts Act, 1882 (2 of 1882).
 Date and place of incorporation or establishment and date of
commencement of business (enclose certificate of incorporation,
memorandum and articles of association or trust deed in terms of which
incorporated or established).
 Details of members of the Board of Trustees or directors of the trustee
company, as the case may be, in case the applicant has been set up as a
trust. Details of members of the Board of Directors of the venture capital
fund in case the applicant has been set up as a company.
 Please state whether the applicant, his partner, director or principal
officer is involved in any litigation connected with the securities market
which has an adverse bearing on the business of the applicant; or has at
any time been convicted for any moral turpitude or at any time has been
found guilty of any economic offence. In case the applicant is a trust, the
above information should be provided for the members of the Board of
Trustees or of the abovementioned persons connected with the trustee
company. If yes, the details thereof.
37
 Please also state whether there has been any instance of violation or non
adherence to the securities laws, code of ethics/conduct, code of business
rules, for which the applicant, or its parent or holding company or
affiliate may have been subject to economic, or criminal, liability, or
suspended from carrying out its operations, or the registration revoked
temporarily.
 Details of asset management company, if any (enclose copy of
agreement with the asset management company).
 Declaration statement (to be given as below).We hereby agree and
declare that the information supplied in the application, including the
attachment sheets, is complete and true. AND we further agree that, we
shall notify the Securities and Exchange Board of India immediately
any change in the information provided in the application. We further
agree that we shall comply with, and be bound by the Securities and
Exchange Board of India Act, 1992, and the Securities and Exchange
Board of India (Venture Capital Funds) Regulations, 1996, and
Government of India guidelines/instructions as may be announced by the
Securities and Exchange Board of India from time to time. We further
agree that as a condition of registration, we shall abide by such
operational instructions/directives as may be issued by the Securities and
Exchange Board of India from time to time.

38
 PRIMARY MARKET’
Review of certain policies in the primary market - Amendments to SEBI
(Issue of Capital and Disclosure Requirements) Regulations, 2009 / Equity
Listing Agreement.
The Board considered the Memorandum and decided as under:
 Public Announcement by Companies proposing to access the capital
market:-
While filing Draft Offer Document (DoD) with SEBI, the issuer company
shall make a public announcement about the filing, simultaneously but not
later than one day from the date of filing the (DoD) with SEBI.

 Preferential issue of equity shares or convertible securities or warrants

to promoters and promoter group:-
In case of preferential issues, where any promoter or any member of the
promoter group has previously subscribed to the warrants of the company
but failed to exercise the warrants, the promoters and promoter group shall
be ineligible for issue of equity shares or convertible securities or warrants
for a period of one year from the date of expiry of the currency /cancellation
of the warrants. Further, if any member of the promoters/ promoter group
has sold shares in the previous six months, then the promoters/ promoter
group would be ineligible for allotment on preferential basis.

 News reports appearing in the media after filing of Draft Offer

Document (DOD) with SEBI :-
The merchant bankers shall submit a compliance certificate as to whether
the contents of the news reports/ articles that appear after filing of DOD are
supported by disclosures in the offer document or not. This would apply in
respect of news reports/ articles appearing in newspapers stipulated in ICDR
for issue advertisements, major business magazines and also in the print and
electronic media controlled by a media group where the media group has a
private treaty/ shareholders’ agreement with the issuer company/ promoters
of the issuer company.

 Uniform/ single payment option in rights issues:-

Only one payment option shall be given by the issuer to all the shareholders,
i.e.,either (i) part payment on application with balance money to be paid on
calls, or (ii) full payment on application. Where the issuer opts for part
payment, it shall be incumbent on the issuer to obtain approvals, if any, as
may be necessary for the purpose.

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 Minimum Promoters’ contribution in Further Public Offers (FPOs):-
The requirement of promoters’ contribution shall not be applicable to FPOs
where equity shares of the issuer are not infrequently traded in a recognised
stock exchange for three years and the issuer has a track record of dividend
payment for three years.

 Allocation in public issues:-

Pursuant to recent amendments to SCRR, consequential amendments shall
be made in ICDR Regulations by deleting the second proviso to clause (c)
of subregulation (2) of Regulation 43.

 Extension of applicability of clause 5A of Equity Listing Agreement for

unclaimed equity shares in physical form:-
Clause 5A of the Equity Listing Agreement shall be amended to provide
that the unclaimed shares issued in physical form shall be dealt in the
manner similar to the unclaimed shares issued in demat form.

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 SECONDARY MARKET
SEBI AND ITS ROLE IN THE SECONDARY MARKET
The SEBI is the regulatory authority established under Section 3 of SEBI
Act 1992 toprotect the interests of the investors in securities and to promote the
development of,and to regulate, the securities market and for matters connected
therewith andincidental thereto.Securities and Exchange Board of India
constituted under the Resolution of theGovernment of India in the Department
of Economic Affairs No.1 (44)SE/86, dated the12th day of April, 1988;The
Board shall consist of the following members, namely:-1. A Chairman2. Two
members from amongst the officials of the Ministry of the CentralGovernment
dealing with Finance (and administration of the Companies Act,1956;) 2 of
19343. One member from amongst the officials of [the Reserve Bank 4. Five
other members of whom at least three shall be the whole-time members
Departments of SEBI regulating trading in the secondary market
 Market Intermediaries Registration and Supervision department (MIRSD):-
Registration, supervision, compliance monitoring and inspections of all
market intermediaries in respect of all segments of the markets viz. equity,
equity derivatives, debt and debt related derivatives.

 Market Regulation Department (MRD):-

Formulating new policies and supervising the functioning and operations
(except relating to derivatives) of securities exchanges, their subsidiaries,
and market institutions such as Clearing and settlement organizations and
Depositories(Collectively referred to as µMarket SROs.

 Derivatives and New Products Departments (DNPD):-

Supervising trading at derivatives segments of stock exchanges, introducing
new products to be traded, and consequent policy changes.

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 STOCK EXCHANGES
Powers of sebi in stock exchanges
 Power to call for information:-
The Board may from time to time call for any information, documents or
records from the recognised stock exchange or the recognised clearing
corporation, or their governing board or any shareholder thereof.

 Power of inspection:-
 The Board may at any time undertake inspection, conduct inquiries and
audit of any recognised stock exchange or recognised clearing
corporation, any associate of such exchange or clearing corporation, any
shareholder of such stock exchange or clearing corporation or any
associate and agent of such shareholder.
 Where an inspection under sub-regulation (1) is undertaken by the Board,
such recognised stock exchange or recognised clearing corporation or
shareholder or associate and every manager, director, managing director,
chairperson or officer and other employee of such recognised stock
exchange, recognised clearing corporation, shareholder or associate shall
co-operate with the Board.

 Directions by the Board:-

Without prejudice to exercise of its powers under the provisions of the Act
or the Securities and Exchange Board of India Act, 1992 and rules and
regulations made there under, the Board may, either suo motu or on receipt
of any information or during pendency of any inspection, inquiry or
investigation or on completion thereof, in the interest of public or trade or
investors or the securities market, issue such directions as it deems fit,
including but not limited to any or all of the following:
 directing a person holding equity shares or rights over equity shares in a
recognised stock exchange or recognised clearing corporation in
contravention of these regulations to divest his holding, in such manner
as may be specified in the direction;

 directing transfer of any proceeds or securities to the Investor Protection

Fund of a recognised stock exchange or Settlement Guarantee Fund of a
recognised clearing corporation;

 debarring any recognised stock exchange or recognised clearing

corporation, any shareholder of such recognised stock exchange or
recognised clearing corporation, or any associate and agent of such
shareholder, or any transferee of shares from such shareholder, directors
and key management personnel of recognised stock exchange and
42
 recognised clearing corporation from accessing the securities market or
dealing in securities for such period as may be determined by the Board.

 Power to remove difficulties:-

In order to remove any difficulties in the interpretation or application of the
provisions of these regulations, the Board shall have the power to issue
directions through guidance notes or circulars.
 Power to specify procedures, etc. and issue clarifications.
For the purposes of implementation of these regulations and matters
incidental thereto, the Board may specify norms, procedures, processes,
manners or guidelines as specified in 21 these regulations, by way of
circulars to recognised stock exchange(s) and recognised clearing
corporation(s).

 Repeal and savings.:-

 On and from the commencement of these regulations, the Securities
Contracts (Regulation) (Manner of Increasing and Maintaining Public
Shareholding in Recognized Stock Exchanges) Regulations, 2006, shall
stand repealed.

 Notwithstanding such repeal, anything done or any action taken or

purported to have been taken or contemplated under the repealed
regulations before the commencement of these regulations shall be
deemed to have been done or taken or commenced or contemplated under
the corresponding provisions of these regulations.

 After the repeal of the regulations referred to in sub-regulation (1), any

reference thereto in any regulation, guideline, circular or direction issued
by the Board shall be deemed to be a reference to the relevant provisions
of these regulations.

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 REGISTRATION CERTIFICATE

 Registration of stock brokers, sub-brokers, share transfer agents, etc.

 No stock-broker, sub- broker, share transfer agent, banker to an issue,
trustee of trust deed, registrar to an issue, merchant banker, underwriter,
portfolio manager, investment adviser and such other intermediary who
may be associated with securities market shall buy, sell or deal in
securities except under, and in accordance with, the conditions of
certificate of registration obtained from the Board in accordance with the
[regulations] made under this Act:
Provided that a person buying or selling securities or otherwise dealing
with the securities market as a stock- broker, sub-broker, share transfer
agent, banker to an issue, trustee of trust deed, registrar to an issue,
merchant banker, underwriter, portfolio manager, investment adviser and
such other intermediary who may be associated with securities market
immediately before the establishment of the Board for which no
registration certificate was necessary prior to such establishment, may
continue to do so for a period of three months from such establishment
or, if he has made an application for such registration within the said
period of three months, till the disposal of such application.
Provided further that any certificate of registration, obtained immediately
before the commencement of the Securities Laws (Amendment) Act,
1995, shall be deemed to have been obtained from the Board in
accordance with the regulations providing for such registration.
 No depository, [participant,] custodian of securities, foreign
institutional investor, credit rating agency or any other
intermediary associated with the securities market as the Board
may by notification in this behalf specify, shall buy or sell or deal
in securities except under and in accordance with the conditions of
a certificate of registration obtained from the Board in accordance
with the regulations made under this Act:
Provided that a person buying or selling securities or otherwise
dealing with the securities market as a depository, [participant,]
custodian of securities, foreign institutional investor or credit rating
agency immediately before the commencement of the Securities
Laws (Amendment) Act, 1995, for which no certificate of
registration was required prior to such commencement, may
continue to buy or sell securities or otherwise deal with the
securities market until such time regulations are made under clause
(d) of sub-section (2) of section 30.
 No person shall sponsor or cause to be sponsored or carry on or
cause to be carried on any venture capital funds or collective
investment schemes including mutual funds, unless he obtains a
44
 certificate of registration from the Board in accordance with the
regulations:
Provided that any person sponsoring or causing to be sponsored,
carrying on or causing to be carried on any venture capital funds
or collective investment schemes operating in the securities market
immediately before the commencement of the Securities Laws
(Amendment) Act, 1995, for which no certificate of registration
was required prior to such commencement, may continue to
operate till such time regulations are made under clause (d) of sub-
section (2) of section 30.
 Every application for registration shall be in such manner and on payment
of such fees as may be determined by regulations.
 The Board may, by order, suspend or cancel a certificate of registration in
such manner as may be determined by regulations. Provided that no order
under this sub-section shall be made unless the person concerned has
been given a reasonable opportunity of being heard.

45
 CHAPTER:13
RECENTLY SEBI TO TAKE UP FURTHER MARKET
REFORMS
In a series of reforms, capital market regulator Sebi's
board on Wednesday cleared easing of norms to kick-start
startup listings and allowed mutual funds to segregate
distressed assets to safeguard investment returns.
At a meeting held here, the Sebi board also approved a
proposal to expand the offer-for-sale mechanism for
reduction of stake in listed companies and relaxed
clubbing of investment limit norms for well-regulated
foreign investors.
The expansion of offer-for sale scheme will include all companies with Rs
1,000-crore and above market-capitalisation.

Currently, FPIs are treated as part of the same investor group and the investment
limits of all such entities are clubbed for deriving the investment limit as
applicable to a single FPI in case of the same set of ultimate beneficial owners
investing through multiple entities.

"The proposal that clubbing of investment limit for FPIs will be on the basis of
common ownership of more than 50 per cent or common control was
approved," Sebi said in a statement.

However, the clubbing of investment limits would not be applicable in case of

entities having common control if the FPIs are appropriately regulated public
retail funds.

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Chidambaram said the government has taken note of the SEBI recommendation
on RGESS and he has asked the Department of Economic Affairs, Capital
Markets division, to examine the recommendation of SEBI. "I expect that it
would be possible to take a decision shortly," he added.
"Government has noted with satisfaction that the measures announced by SEBI
yesterday have been widely welcomed by all the stakeholders," the minister
said.
Chidambaram recalled that in a statement on August 6 he had said that: "In the
next few weeks, we will announce a number of decisions to attract more people
to invest in mutual funds, insurance policies and other well-designed
instruments".
"In the context of that statement (of August 6), Government welcomes the
decisions taken by Sebi," he said.
In wide-ranging changes to its various regulations, SEBI made it easier and
more cost effective to invest and raise funds through IPOs, while allowing the
Mutual Funds (MFs) flexibility in using their fund expense charges and
proposing a national mutual fund policy.
Besides, SEBI has also made provisions for retail investors getting an assured
minimum lot of shares in IPOs (Initial Public Offers) and asked the companies
to announce their price band at least five days in advance of the issue.
The market regulator also made it mandatory for all the investment advisers
providing their services for a fee to get themselves registered, while putting
checks and balances against possible misuse of funds garnered from investors
through IPOs and MFs.

47
 CASE STUDY
Sebi suspects growing insider trading trend; ups vigil
Press Trust of India / New Delhi Nov 14, 2010, 13:21 IST
Suspecting an uptick in the insider trading activities in the recent market rally,
SEBI has enhanced its surveillance for possible violations of rules prohibiting
trading based on prior and inside information.

The market watchdog has come across over two dozen instances of major
suspected violations of insider trading norms during the recent rally to new
record levels above 21,000 level and the subsequent correction last week, a
senior official said.

While the suspicious trading activities have been noticed in the SEBI's routine
surveillance of market activities, the regulator has decided to probe further into
these cases and enhance its oversight for such matters going ahead, he added.

Major violations have been suspected in trading of 25-30 stocks over the past
few weeks, the official said, adding that suspicious activities have been noticed
in many other shares also but those are minor in terms of trade value and
nature.

Insider trading relates to purchase or sale of shares by people having prior and
privileged information about an upcoming development by virtue of they
themselves or those related to them having holding a position in the company.

As per the SEBI's Prohibition of Insider Trading Regulations, an 'insider' is

defined as any person "who is or was connected with the company or is
deemed to have been connected with the company, and who is reasonably
expected to have access to unpublished price sensitive information in respect of
securities of a company, or who has received or has had access to such
48
unpublished price sensitive information."

The stock market benchmark SENSEX recently crossed 21,000 level to record
its highest closing level at 21,004.96 points on November 5, after a sharp rally
over the past few weeks, but has corrected about 900 points since then. The
sentiments have been upbeat on the bourses, as also reflected in robust
response to recent IPOs like Coal India.

Insider trading activities increase during market rally and an environment of

improved investor sentiments makes it easier for insiders to make money on
the bourses, experts said.

SEBI has systems in place to monitor unusual stock trends and suspicious
activities are probed further for violations of norms including those regulating
insider trading.

Recently, SEBI slapped a penalty of Rs 2 crore on Gujarat NRE Coke

promoters A K Jagatramka and G L Jagatramka and their companies for
indulging in insider trading. This is said to be the largest fine imposed this year
for violations of insider trading norms. Later, the company said it would
challenge the order.

"Many cases of insider trading do go undetected. Only a very small percentage

of the total number of insider trading cases comes under regulatory scrutiny,"
said Sudip Bandyopadhyay, MD & CEO, Convexity Solutions and former
CEO and MD of Anil Ambani group firm Reliance Money.

"It is difficult to specify the exact extent or percentage of insider trading.

However, it does happen," he added. Bandyopadhyay said that the regulations
are in well in place, but the difficulty lies in implementing them and detecting
the offence. He advocated enhancement of powers of Sebi for seeking
cooperation of other relevant regulatory authorities in matters of insider
trading.

Another market observer Arun Kejriwal, director of KRIS, said that Sebi
should keep a watch on dealing rooms of brokers and fund managers as also
the companies' board meetings.

"Insider trading is rampant... It appears that almost all spiked movement in

49
Indian markets can be linked to insider trading," he added.

CONCLUSION

The enactment of the SEBI Act within the context of other statutes such as the
Companies Act and Depositories Act has provided a strong regulatory
framework for the Indian market. Subsequently much of the growth of the
Indian market can be attributed to the robust processes for issuance, pricing,
allotment and listing of securities enabled by SEBI. Strengthening SEBI's power
in the investigative, administrative and legal aspects of enforcement would
enable it to speedily address legal challenges such as those faced during
dematerialization or disclosure requirements. In the future, SEBI should adopt
more transparency to gain higher public confidence.

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 BIBLOGRAPHY

www.google.com
www.wikipedia.com
www.sebi.gov.in
www.slideshare.com
www.scribd.com

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