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About SEBI

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  1. 1.  In order to prevent undesirable transactions in securities and to regulate the working of stock changes in the country, the central government enacted the Securities Contracts (Regulation) Act in 1956.  It came into force on February 20, 1957.The Act applies to the whole India
  2. 2.  Grant of recognition of stock exchange  Withdrawal of recognition  Government control over trading methods  Power of recognized stock exchange to make rules restricting voting rights  Power of central government to direct rules to be made or to make rules.  Power of recognized stock exchanges to make bye- laws.  Power of Securities and Exchange Board of India to make or amend bye-laws of recognized stock exchanges.  Nominees of SEBI on governing body
  3. 3.  SEBI (Securities Exchange Board of India) was constituted on April 12, 1988 as a non-statutory body.  It is an apex body to develop and regulate the stock market in India.  SEBI is the regulator for the securities market in India , original set up by the govt. of India in 1988, it acquired statutory form in 1992 with SEBI Act,1992 being passed by the Indian Parliament.
  4. 4.  Shall be a body corporate with perpetual succession an common seal with power to acquire hold and dispose of property.  HQ will be in Mumbai and may establish offices at other places in India.  Chairman and members of board will be appointed by the central government.  Government can prescribe terms of offices and other conditions of service of the board and chairman.  Primary duties of the board is to protect the interest of the investors.
  5. 5.  The SEBI act 1992 has entrusted with two functions they are Functions Regulatory functions Developmental function
  6. 6.  Regulation of stock exchanges and self regulatory organizations.  Registration and regulation of stock brokers , sub- brokers , registrars of all issues, merchant bankers, underwriters, portfolio managers..etc  Registration and regulation of the working of collective investment schemes including mutual funds.  Prohibition of fraudulent and unfair trade practices relating to securities market.  Prohibiting of insider trading.  Regulating substantial acquisition of shares and takeovers of the company.
  7. 7.  Promoting investors education.  Training of intermediaries.  Conducting research and publishing information useful to all market participants.  Promoting of fair practices.  Promotion of self regulatory organizations
  8. 8.  The general superintendence, direction and management of the SEBI shall vest in the Board of members. Those members exercise all powers and do all acts and things which may be exercised by the Board (SEBI)  Central government has power to issue direction to the board on the policy matters and shall supersede the board in the event of default by the Board
  9. 9.  The board shall consists of following members:  Chairman  Two members, one from amongst the officials of the central government dealing with finance and another from the administration of companies act of 1956.  One members from amongst the officials of the reserve bank of India.  Five other members of whom at least three shall be the whole-time members to be appointed by the central government.
  10. 10. Primary Market Issue Management and Intermediaries Secondary Market Institutional Investment
  11. 11.  1.Primary Market Department: It deals with all policy matters and regulatory issues relating to primary market.  2.Issue Management and Intermediaries Departments: This department is concerned with inspection of offer documents and other things like registration, regulation and monitoring of issue related to intermediaries.  3.Secondary Market Department: It looks after all the policy and regulatory issues for the secondary market; administration of the major stock exchanges and other matters related to it.  4.Institutional Investment Department: It concerned with framing policy for foreign institutional investors.
  12. 12.  Primary market  Secondary market  Foreign institution investor  price issue  bonus issue  debentures  Underwriters  Buy back of shares
  13. 13. Stock Exchange:-  Board of Directors of stock exchange have to be reconstituted so as to include non-members ,public represtatives , government representatives to the extent of 50% of total number of members  Working hours for all stock exchanges have been fixed to be from 12.00noon to 3.00 pm.  All the recognized stock exchanges will have to inform about the transaction within 24 hrs.  Guidelines have been issued for introducing the system of market making in less liquid scrip's in a phased manner in all stock exchanges
  14. 14. Brokers:-  Registration of Broker & Sub-broker is compulsory  Broker should be professionally qualified and financially solvent.  Compulsory audit of broker’s book and filing of audit report with SEBI have been made mandatory.  No broker is allowed to underwrite more than 5%of public issue.  To bring about greater transparency and accountability in broker - client relationship.
  15. 15. 1. Minimum offering of 25% of post issue capital to the public. This requirement was relaxed to 10% first for IT sector, later it was relaxed to all the sectors. 2. IPO of issue size up to 5 times of pre-issue , shall be allowed only to those companies having consistent track record of making profit at least for 5 years. 3. For issue above Rs. 100 corers book building route has been made compulsory for comp. making IPO. 4. Time for finalizing the allotment of shares and refund has been reduced from 30 to 15 days. 5. Issue shall open within 12 months from the date of issue of observation letter by SEBI. 6. Should disclose price band at least 2 working days before opening of bid by announcement in all newspapers in which pre-issue advt. was released.
  16. 16.  All foreign institutional investors including pension funds, mutual funds, asset management companies and portfolio managers were permitted to invest in Indian capital market fulfilling the following conditions:-  The FIIs are required to obtain certificate of registration from the SEBI. For grant of certificate SEBI checks the applicants track record, professional competence, financial soundness, experience, general reputation of fairness and integrity.  They have to obtain approval from RBI under Foreign Exchange Regulation Act (FERA), 1973.  Certificate of registration is granted for period of 3 years and after it can be renewed.  FIIs are permitted to invest in securities in the primary and secondary markets including shares, debentures
  17. 17.  SEBI has announced the following guidelines for the issue of bonus shares  The article of association of the company should contain provisions for the issue of shares.  Bonus issue is capitalisation of profit, Bonus shares should be issued from free reserves created out of genuine profits or share premiums collected  Any reserve created through revaluations of fixed assets cannot be capitalised  Bonus shares cannot be issued in lieu of dividend  At the time of issuing, bonus shares, there should not be partly paid up shares
  18. 18.  There should not be any default on the part of the company in payment of statutory dues to employees such as provident fund, gratuity, bonus etc. similarly, there should not be default in payment of interest on fixed deposits or interest or principal amount thereof  There should be a gap of at least 12 months between the public or right issue and bonus issue  The proposal of bonus issue must be implemented within six months from the date of such approval by the Board of Directors  If the issue of bonus shares results in excess of subscribed and issued capital over the authorised capital resolution will be passed at the general body meeting for increasing the authorised capital  No bonus issues will be made if it dilutes the rights of debenture holders whose debentures are convertible fully or partly.
  19. 19.  The debt equity ration should not exceed 2:1, which means the amount of debentures can be two times the equity capital  The rate of interest payable on debentures can be decided by the company  Debentures should be redeemed on the expiry of seven years from the date of allotment. Debentures above seven years cannot normally be issued. Non convertible debentures may be redeemed at 5% premium  Debentures issued to public should be secured and registered  A debenture redemption fund should be created for non convertible debentures  SEBI insists on prior licensing of debenture trustees. Trust deed should be ready within 6 months from the date of allotment.
  20. 20.  Only those holding certificate of registration, issued by SEBI can act as underwriters  The certificate of registration is valid for three years from the date of issue  The underwriting obligation accepted by the underwriter should not exceed 20 times of his net worth  In the event of inadequate subscription from the public, the company shall inform the underwriter about his liability towards subscription, within 30 days of receipt of such intimation, the underwriter should subscribe to such securities  The underwriter should, within six months from the end of financial year, submit the document as required by SEBI  The underwriter should preserve his books of accounts and records for a minimum period of five years.
  21. 21.  Companies Act allows the promoters of the companies to buy back the company’s own shares and other securities to the extent of 25% of the paid up capital and free reserves.  Buyback is financed out of company’s free reserves, securities premium account  Buyback has the effect of cancellation of share capital of the company already issued  Ex: reduction in equity base, repayment of surplus cash to shareholders, increase in share value etc.
  22. 22.  Investor protection is a wide term which stands for various measures introduced to protect the investors from malpractices of companies, brokers, merchant bankers, issue managers, registrars, of new issues etc.  As all investments have some inherent risks, an investor should be cautious while investing his money in securities.  apart from this personal risk, investors have to be safeguarded against the malpractices of companies, brokers etc.  Complaints against members of stock exchanges and  Complaints against companies listed for trading on the stock exchanges  As per rules, stock exchanges cannot certain the complaints against sub-brokers, agents, merchant bankers issue managers etc.