Describes the procedure of issuing securities. A company must adhere to certain rules and regulations that it must follow if it wants to issue bonds/securities. These are discussed

1. ISSUING SECURITIES:
PROCEDUREAND
REGULATIONS

2. INTRODUCTION
• A financial instrument that represents: an ownership position in
a publicly-traded corporation (stock), a creditor relationship
with governmental body or a corporation (bond), or rights to
ownership as represented by an option.
TYPES OF SECURITY
DEBT SECURITY – E.g.. Banknotes, Bonds ,Debentures
EQUITY SECURITY – E.g.. Common Stocks
HYBRID SECURITY – E.g.. Preference shares
DERIVATIVES SECURITY – E.g. Forwards, Futures, Options
and Swaps

3. DEBT SECURITIES
Debt securities are any debt instrument that can be bought or sold
between two parties and has basic terms defined. The original
buyer of the debt security lends the issuer money in exchange for
the security. The holder of a debt security is typically entitled to
the payment of principal and interest, together with other
contractual rights under the terms of the issue.

4. TYPES OF DEBT SECURITIES
Government
Securities
Corporate
Bonds
Debentures
Certificate of
Deposits

5. EQUITY SECURITIES
An equity security is a share of equity interest in an entity
such as the capital stock of a company, trust or
partnership. The most common form of equity interest is
common stock, although preferred equity is also a form of
capital stock. The holder of an equity is a shareholder,
owning a share, or fractional part of the issuer

6. HYBRID SECURITIES
Hybrid securities combine some of the characteristics of both debt
and equity securities. E.g. Preference Shares
Preference shares form an intermediate class of security
between equities and debt.
If the issuer is liquidated, they carry the right to receive interest
and/or a return of capital in priority to ordinary shareholders.
From a legal perspective, they are capital stock and therefore may
entitle holders to some degree of control depending on whether
they contain voting rights.

7. Derivative security
 “A security derived from a debt instrument, share,
loan, risk instrument or any other form”.
 “A contract which derives its value from price of
underlying securities”.
 WHAT IS THE USE OF DERIVATIVE ?
 Hedging
 Speculation & Arbitrage

8. TYPES OF DERIVATIVES & ITS
MEANING
• OTC (Over the Counter)
- contracts that are privately negotiated and traded directly
between two parties, without going through an exchange or
other intermediary
• Exchange traded Derivative
- derivatives products that are traded via specialized
derivatives exchanges or other exchanges
• Derivative includes forward, future, options, etc.

9. • Future contract ?
• It is legally binding agreement to buy or sell the underlying
security at future date.
• Option contract ?
• It is contract for purchase or sale of securities in future
which includes put & call in securities.
• Option to buy is called as call option.
• Option to sell is called as put option.

10. SECURITIES MARKETS
• There are two types of security market Primary and
Secondary market.
• In the primary market, the money for the securities is received
by the issuer of the securities from investors, typically in an
Initial Public Offering (IPO)
• In the secondary market, the securities are simply assets held by
one investor selling them to another investor, with the money
going from one investor to the other.

11. Procedure for Issuing Securities
The basic steps for issuing securities are –
1. Approval from the Board of Directors.
2. The Firm must file a Registration Statement with the SEBI. This
statement contains financial information, financial history and plans for
future.
3. The SEBI studies the registration statement during a waiting period.
During this time the firm may distribute copies of a preliminary
prospectus of the potential investors. This is called Red Herring
because bold red letters are printed on the cover.
The company cannot sell the securities during the waiting period.

12. 4. A registration statement will become effective on the 20th day
after its filing unless the SEBI sends a letter of comment
suggesting changes.
5. On the effective date of the registration ,a price is determined
and a full fledged selling effort starts.
6. A final prospectus must accompany the delivery of securities or
confirmation of sale whichever comes first.

13. REGULATORYFRAMEWORK
The SEBI has framed regulations under these acts for registration and
regulation of the market intermediaries and for prevention of unfair
trade practices.
The responsibility for regulating the securities market is shared jointly
by Department of Economic Affairs (DEA), Department of Company
Affairs (DCA), Reserve Bank of India (RBI) and SEBI.
The four main legislations governing the securities market are :
• (a) The SEBI Act, 1992 - The SEBI Act, 1992 was enacted to
empower SEBI with statutory powers for protecting the interests of
investors in securities, promoting the development of the securities
market, and regulating the securities market

14. (b) The Companies Act, 1956 - It deals with issue, allotment and transfer
of securities and various aspects relating to company management. It
provides for standards of disclosure in the public issues, particularly in the
fields of company management and projects, information about other listed
companies under the same management.
(c) The Securities Contracts (Regulation) Act, 1956 - It gives the Central
Government regulatory jurisdiction over (a) stock exchanges through a
process of rrecognition and continued supervision, contracts in securities,
and listing of securities on stock exchanges.
(d) The Depositories Act, 1996 – It provides for the establishment of
depositories for securities to ensure transferability of securities with speed,
accuracy and security. This it provides for electronic maintenance and
transfer of ownership of demat securities.

15. Present scenario of bonds & securities
 RBI (2011) observed that listed corporate debt forms are
only 2% of GDP.
 Very low as compare to Malaysia, Korea and China.
 Follows chart shows that corporate bonds are not highly
appreciable: