“Regulatory Framework – Secondary Market”

1. “Regulatory Framework –
Secondary Market”
Date: 09.02.2022
Time: 10.00 to 11.30 AM
Arun Jaitley National Institute of Financial Management
Dr. Ajay Garg
Corporate Valuer, Counsel & Lawyers

2. Dr. Ajay Garg
Business Coach, Mentor and Practicing Professional
Dr. AJAY GARG is a Business coach, Mentor, Diversified Professional,
Effective Speaker, Technical Author and Social Entrepreneur with total
experience of 35 years. He is also MA(Eco), M.com, MBA, FCS, LLB, PhD,
IBBI Registered Valuer, Qualified Insolvency Professional and Independent
Director. He served as Director of Corporation Bank. He is Hony. Secretary
General of NORMI (National Odour Research and Management Institute)
for the year 2021 and 21-22. He has authored 4 books. Latest being “COME
ON! START THE BUSINESS!!”. Presently, he is into corporate practice. He is
mentor in Startup India portal and currently 56 Startups are under his
mentorship. His initiative www.myvaluationbank.com is runaway success
with more than 3,80,000 hits.
gargajay24@yahoo.co.in
9811386723

3. Story Time
Arjun and the Bird’s Eye

4. Securities Contracts Regulation
Act & Rules - Objects
 To prevent undesirable
transaction in securities
 Corporatization of Stock
Exchanges
 Demutualization of Stock
Exchanges
 Restricting voting rights of
brokers as shareholders
 Conferring powers on SEBI to
issue directions to stock
exchanges
 Strengthening grievance
redressal mechanism
 Setting up of SAT Dr. Ajay Garg
Corporate Valuer, Counsel & Lawyers

5.  BSE Limited >>> Equity / Debt /
Derivatives – equity, currency, interest
rate, commodity
 India Commodity Exchange Limited >>>
Commodity Derivatives
 Metropolitan Stock Exchange of India
Limited >>> Equity / Debt / Derivatives –
equity, currency, interest rate
 National Commodity and Derivative
Exchange Limited >>> commodity
derivatives
 National Stock Exchange Limited >>>
Equity / Debt / Derivatives – equity,
currency, interest rate, commodity
 NSE IFSC Limited >>> Derivatives –
equity, (single & index), currency,
commodity, Debt securities (masala
bonds)
Securities Contracts Regulation Act &
Rules – Recognition of Stock Exchanges
Dr. Ajay Garg
Corporate Valuer, Counsel & Lawyers

6.  Prior to 1992, SE were even AOP, Society
or Trust; were dominated by Members of
Stock Exchanges wherefrom Conflict of
Interest issues and Investor Protection
issues came up resulting into tightening of
laws and emergence of SEBI
 SCR Act >> Primarily to Recognize and
regulate Stock Exchanges
 SCR Rules >> Facilitate SE, Security
Listing, delisting and Many More
 With emergence of SEBI, all routine
powers of CG are increasingly vested in
SEBI
 Now all the Stock Exchanges are public
limited companies and demutualized form
clutches of the SE members
Securities Contracts Regulation Act &
Rules – Recognition of Stock Exchanges
Dr. Ajay Garg
Corporate Valuer, Counsel & Lawyers

7.  Two digit Code allotted by SEBI BSE 01 NSE
23
 Application for Recognition >> Section 3
 Grant of Recognition >> Section 4
 Net worth + Nation wide trading terminals
+ Online surveillance capability to monitor
position, prices and volume + Corporate
entity only + adequate arbitration an
dinvestor grievance redressal mechanism +
adequate inspection capability + risk
management and surveillance system + real
time information about trade price and
quote + few more
 BSE 1875 as (Native shares & stock brokers
association) today with speed of 6 micro
second for each transaction. Now listed
entity
Securities Contracts Regulation Act & Rules
– Recognition of Stock Exchanges1
Dr. Ajay Garg
Corporate Valuer, Counsel & Lawyers

8. SCR Act Section 2(h) defines
‘Securities’
 Shares, scrips, stock, debenture,
bonds, debenture stock or other
marketable securities
 Derivative
 Unit or any other instrument
issued under CIS
 Security Receipts under SARFAESI
 Units of MF
 Units of Pooled investment vehicle
 Government Securities
 …
Securities Contracts Regulation Act & Rules –
Listing of Securities – Documentation and
Penalties
Dr. Ajay Garg
Corporate Valuer, Counsel & Lawyers

9. Listing of Securities
Documentation S17A+R19
 R19(1) Application to SE
 R19(2) Need to satisfy SE about
 R19(2) Minimum offer and
allotment to the public
 R19A Continuous Listing
Requirement
 R20 Unit of CIS
 R21 Delisting of Securities
 …
Securities Contracts Regulation Act & Rules –
Listing of Securities – Documentation and
Penalties
Dr. Ajay Garg
Corporate Valuer, Counsel & Lawyers

10. Securities Contracts Regulation Act & Rules –
Listing of Securities – Documentation and
Penalties
Dr. Ajay Garg
Corporate Valuer, Counsel & Lawyers
Listing of Securities
Penalties R23
 Penalty shall, without prejudice to any
award of penalty by the Adjudicating
Officer (or SEBI) under this Act, on
conviction, be punishable with
imprisonment for a term which may extend
to ten years or with fine, which may extend
to twenty five crore rupees, or with both.
 Any person who enters into any contract in
contravention of the provisions contained
in section 15 or section 21 or section 21A or
section 22 with the orders of the SAT on
conviction, be punishable with
imprisonment for a term which may extend
to ten years or with fine, which may extend
to twenty-five crore rupees, or with both.

11. SCRR 8 >>> Qualification for Membership
of Recognized Stock Exchange >>>
 R8(1) General Negative Conditions >>>
Individual Member >>> Who all are not
eligible
 R8(2) >>>General Positive Conditions
 R8(3) >>>Conditions for continuing as
Member
 R8(4)&(4A) >>> Conditions for Copany
to become member
 R8(5) >>> Conditions for Continuing as
a firm
 R8(6) >>> Conditions for LLP as a
member
 R8(7) >>> Any representative of
Provident Fund of EPF&MP Act, 1952
MEMBERSHIP QUALIFICATION
Dr. Ajay Garg
Corporate Valuer, Counsel & Lawyers

12. SCR R8(8) >>> Qualification for
Membership of Recognized Stock
Exchange >>> Contd. Specific Institutions
 IFCI
 IDBI
 Insurance Company granted registration
by IRDA
 UTI
 ICICI
 Subsidiary of above
 Any Bank
 EXIM Bank
 NABARD
 NHB
 Central Board of Trustees EPFO
 Any pension fund regulated by PFRDA
 FPI category I and category II
Contract need to be signed between RSE and
members
MEMBERSHIP QUALIFICATION
Dr. Ajay Garg
Corporate Valuer, Counsel & Lawyers

13. SCRR 11 >>> Obligation of Governing
Bodies to take Disciplinary action against
members if directed by SEBI
 Institution of Enquiry under
Section 6(3)(b) of SCRA by SEBI
 Report of an enquiry
 SEBI empowered to take action as
it may deem proper
 And may direct SE to take
disciplinary action against
offending member
OBLIGATION OF GOVERNING BODIES1
Dr. Ajay Garg
Corporate Valuer, Counsel & Lawyers

14. SCRR 11 >>> Obligation of Governing
Bodies to take Disciplinary action against
members if directed by SEBI
 Fine, expulsion or suspension or any
other penalty of like nature
 Governing body is duty bound to follow
directions of SEBI
 Shall not revoke, commute or modify
the action taken on the directions of
SEBI
 The SEBI may at its own or on the
representation of the member may
modify or withdraw its directions to the
governing body
OBLIGATION OF GOVERNING BODIES1
Dr. Ajay Garg
Corporate Valuer, Counsel & Lawyers

15.  37 Page Regulation last amended in
2017; less used now-a-days;
 Why less used Now ??? REIT; InViT and
very High premium in Equity Market
 Why Less Used Now ??? Heavy flow of
FPI, FDI, FII and Acquisition of running
companies by VCF
 Why Less Used Now ??? Direct access
to Overseas SE; Access to ECB
 Why Less Used Now ??? High cost of
managing Trust and Trustees
Public Offer & Listing of Securitized Debt
Instrument Regulation 2008
Dr. Ajay Garg
Corporate Valuer, Counsel & Lawyers

16.  Chapters >>>
o C-I>>Preliminary;
o C-II>> Registration of
Trustees;
o C-III>>Constitution of
Special Purpose Distinct
Entities and Incidental
Matters
o C-IV>>Scheme of Special
Purpose Distinct Entities
Public Offer & Listing of Securitized
Debt Instrument Regulation 2008
Dr. Ajay Garg
Corporate Valuer, Counsel & Lawyers

17.  Chapters >>> Contd.
o C-V>>Public Offer of Securitized
Debt Instruments
o C-VI>>Rights of Investors
o C-VII>>Listing of Securitized
Debt Instruments
o C-VIII>>Inspection and
Disciplinary Proceedings
o C-IX>>Procedure for Action in
case of Default
o C-X>>Miscellaneous
Public Offer & Listing of Securitized
Debt Instrument Regulation 2008
Dr. Ajay Garg
Corporate Valuer, Counsel & Lawyers

18. Some interesting Definitions
 ‘Asset Pool’ >> total debt or
receivables assigned to special purpose
distinct entity ‘SPDE’ in which investors
have beneficial interest
 ‘Liquidity Provider’ >> means a person
who agrees to provide funds to SPDE
for settlement of payments due to
investors
 ‘Originator’ >> means the assignor of
debt or receivables to a SPDE for the
purpose of securitization
 SPDE >> means a trust which acquires
debt or receivables out of funds
mobilized by it by issuance of SDI
through one or more schemes
Public Offer & Listing of Securitized
Debt Instrument Regulation 2008
Dr. Ajay Garg
Corporate Valuer, Counsel & Lawyers

19. Few More Facts
 Obligation of Trustee are many and
have resulted into exorbitant cost of
hiring Trustees
 Still one an see debt Instruments being
traded on BSE and NSE both
 https://www.bseindia.com/stock-
share-price/debt-
other/scripcode/960245/960245/
 https://www.nseindia.com/market-
data/debt-market-reporting-corporate-
bonds-traded-on-exchange
Public Offer & Listing of Securitized
Debt Instrument Regulation 2008
Dr. Ajay Garg
Corporate Valuer, Counsel & Lawyers

20. Story Time
Arjun and the Bird’s Eye

21. Dr. Ajay Garg
MA(E), M. Com, MBA, LLB, FCS, FICA, PhD, IPR Attorney,
IBBI Registered Valuer, Qualified IP, Qualified ID
+91-9811386723 Email - gargajay24@yahoo.co.in
www.myvaluationbank.com www.geecorplegal.com