sebi...

2. Why do we need a regulatory body for
Investor protection in India?
• India is an ` Informationally ' weak market
• Boosting capital market demands restoring
the confidence of investors who have been
beaten down by repeated scams
• Progressively softening interest rates and an
under performing economy have eroded
investment options, and require enhanced
investing skills.

3. SECURITIES AND EXCHANGE BOARD OF
INDIA
 It was proved over time that the provisions in the capital
issues Act were totally inadequate to regulate the growing
dimensions of capital market activity.
 The government realized the necessity of creating a broad
based and more secure environment for the business to
grow. This led to enactment of companies Act and
securities contracts (Regulation) Act in 1956.
 Then SEBI was set up as a non-statutory body. Securities
and Exchange Board of India (SEBI) is a autonomous
body created by the Government of India in 1988 and given
statutory form in 1992 with the SEBI Act 1992
 It took almost four years for the government to bring about
a separate legislation in the name of securities and
exchange board of India act, 1992 conferring statutory
powers.

4. SEBI ACT 1992
 The Securities and Exchange Board of India Act,
4th April, 1992.
 An Act to provide for the establishment of a Board
to protect the interests of Investors in securities and
to promote the development of, and to regulate,
The SEBI Act was amended to meet the
requirements of changing needs of the securities
market and responding to the development.
 The mission of SEBI is to make India as one of the
best securities market of the world and SEBI as one
of the most respected regulator in the world.

5. What the Act Includes…?
 Introduction and history
 Establishment of SEBI
 Powers and function of the board
 Finance , account, audit
 Penalties and adjudication
 Establishment, jurisdiction, authority and procedures
of appellate tribunal
 Prohibition of manipulative and deceptive devices,
insider trading and substantial acquisition of securities
and control
 Miscellaneous

6. Need for regulation by SEBI

7. Constitution and organization
• The board consists of:
– A Chairman
– Two members from amongst the officials of the
ministry of central government dealing with
finance and administration of the Companies Act,
1956.
– One member amongst the officials of the Reserve
Bank
– Five other members, of whom at least three to be
the whole time members, appointed by the central
government

8. VARIOUS DEPARTMENTS UNDER
SEBI
• The Primary market
• The Issue management and intermediaries
department
• The Secondary Market
• Institutional investment(MF and FII), mergers
and acquisition
• Legal department looks after all legal matters
• Investigation department carries out
inspection and investigation

9. HISTORY
 Stock market regulation was a pre-independence
phenomenon in India.
 During the II world war period ,in the defense
Rules of India,1943, provisions were made to
check to flow of capital into production of essential
commodities .These rules ,which were promulgated
as a temporary measure continued after the war and
culminated in to the capital issues (control) Act
,1947.

10. Overview Stock Markets
 Stock Market is an organized public
market set-up with a regulatory
body and the members for the
trading of company stock and
derivatives at an agreed price; these
are securities listed on a stock
exchange as well as those only
traded privately. There are mainly
two types of Stock Market. Primary
and Secondary.
 Stock exchange is that place where
trading of shares is done in terms of
sale and purchase.

11. Two Major Stock Exchanges
BSE
There are 23 stock exchanges in the
India. Mumbai's (earlier known as
Bombay), Bombay Stock Exchange
is the largest, with over 6,000 stocks
listed. The BSE accounts for over
two thirds of the total trading volume
in the country. Established in 1875,
the exchange is also the oldest in
Asia. Among the twenty-two Stock
Exchanges recognized by the
Government of India under the
Securities Contracts (Regulation)
Act, 1956, it was the first one to be
recognized and it is the only one
that had the privilege of getting
permanent recognition ab-initio.
NSE
The National Stock Exchange
(NSE), located in Bombay, is
India's first debt market. It was
set up in 1993 to encourage
stock exchange reform through
system modernization and
competition. It opened for
trading in mid-1994. It was
recently accorded recognition as
a stock exchange by the
Department of Company Affairs.
The instruments traded are,
treasury bills, government
security and bonds issued by
public sector companies

12. OBJECTIVES OF SEBI
1. Registering and regulating the working of stock
brokers, sub-brokers, share transfer agents ,
underwriters……….who may be associated
securities market in any manner.
2. Registering and regulating the working of
collective investment scheme including mutual
funds.
3. Prohibiting insider trading in securities.
4. Regulating substantial acquisition of shares and
takeovers of companies.

13. Contd……
• 5. Calling for information from ,undertaking
inspection ,conducting inquiries and audits of
stock exchanges and intermediaries and self
regulatory organizations in the securities market.
• 6. Performing such function and exercising such
powers under the provisions of the capital issues
(control) act 1947 and SCRA 1956 ,as may be
delegated to it by the central government.
• 7. Performing such other functions as may be
prescribed.

14. POWERS OF SEBI
 Regulating the business in stock exchanges and any other
securities markets
 Registering and regulating the working of stock brokers, sub–
brokers etc.
 Promoting and regulating self-regulatory organizations
 Prohibiting fraudulent and unfair trade practices
 Calling for information from, undertaking inspection, conducting
inquiries and audits of the stock exchanges, intermediaries, self –
regulatory organizations, mutual funds and other persons
associated with the securities market.

15. FUNCTIONS
It shall be the duty of the board to protect the interests of investors in
securities and promote the development of, and to regulate the
securities market, by such measures as it thinks fit.
The measures may provide for –
1. Regulating the business in stock exchange and any other
securities markets;
2. Registering and regulating 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 and such
other intermediaries who may be associated with securities
markets in any manner;
3. Registering and regulating the working of the depositories,
participants, custodians of securities, foreign institutional
investors, credit rating agencies and such other intermediaries
as the board may, by notification , specify in this behalf;

16. Contd…
4. Registering and regulating the working of the depositories,
participants, custodians of securities, foreign institutional
investors, credit rating agencies and such other
intermediaries as the board may, by notification , specify in
this behalf;
5. Promoting and regulating self- regulatory organizations;
6. Prohibiting fraudulent and unfair trade practices relating to
securities markets;
7. Promoting investors’ education and training of
intermediaries of securities markets;
8. Prohibiting insider trading in securities;
9. Regulating substantial acquisition of shares and take- over
of companies;

17. Contd…
10. Calling for information from, undertaking inspection, conducting
inquiries and audits of the stock exchanges, mutual funds,
other persons associated with the securities market,
intermediaries and self- regulatory organizations in the
securities market;
11. Calling for information and record from any bank or any other
authority or board or corporation in respect of any transaction
in securities which is under investigation or inquiry by the
board;
12. Performing such functions and exercises such powers under
the provisions of the securities contracts (regulation) act, 1956
,as may be delegated to it by the central government ;
13. Levying fees or other charges for carrying out the purposes of
this session;
14. Conducting research for the above purposes;

18. Contd…
15. Calling from or furnishing to any such agencies, as may be
specifies by the board, such information as may be considered
necessary by it for the efficient discharge of its functions;
16. The board may take measures to undertake inspection of any
book, or register, or other document or record of any public
listed company, or a public company which intend to get its
securities listed on any recognized stock exchange where the
board has reasonable grounds to believe that such company has
been indulging in under trading or fraudulent and unfair trade
practices relating to security market

19. Tribunals

20. guidlines

21. STOCK MARKET SCAMS
• The Securities Scam of 1992
• The IPO Bubble
• Preferential Allotment Rip Off
• CRB’s House of Cards
• Plantation Companies' Puffery
• Mutual Funds Disaster
• The Collapse in 1998
• The K 10 Gimmick
• Satyam Fiasco
Harshad Mehta: India's best-known Scamster

22. SHORTCOMINGS OF SEBI
No Dent on price manipulation
Poor rate of conviction and very few cases of exemplary penal
action
No Due process for framing/ changing regulations
Waking up to trouble spots too late
Turning a blind eye in bullish markets
Implementation of existing disclosure norms inadequate
Regulatory bias towards corporate sector and large investors
Indications of extraneous pressures, including government
No disclosure norms for mergers/ demergers/ asset sell off/ inter-
corporate transactions

23. SEBI INITIATIVES
Major Corporate Governance reforms – Whistle Blower Policy, Audit Committee, Code of conduct and
mandatory disclosures as under Clause 49, Section 10 of Listing Agreement.
IPO Grading for investor protection and guidance
Settlement cycle on a T+1 basis.
Transformation to a paperless and transparent trading system.
ECS for settlements and investor refunds
SEBI Guidelines amended to include Government companies to raise funds through IPO’s
Investment limit of Mutual Funds in Foreign Securities raised to USD 4 billion