1. INVESTMENT
MANAGEMENT
 STOCK EXCHANGE
 SEBI
M. Marutha Muthu Kumar
Vivekananda college

2. Definitions of stock exchange
 Stock exchange or secondary market comprises of all the places where buyer
and seller of stocks and bonds or their representative undertake transaction
involving the sale of securities
Hastings
 Organised exchanges are physical market and place where are agents of
buyer and seller operate though the auction process
Donald E. Fischer

3. FEATURES OF STOCK MARKET
• Stock Market is an organized market, where securities of govt. and semi
govt. bodies and corporate enterprises are bought and sold.
• Stock Market deals in second hand or existing securities.
• Individuals alone can buy and sell securities.
• In the Stock Market only those securities which are listed in the Stock Market
or transacted. Unlisted Securities are not permitted to be dealt in the market.
• The Stock Exchange to regulate its day-to-day operations.

4. Functions of Stock Exchange
It provide ready market for securities
It helps in price discovery of securities.
Helps in capital generation process.
Encourages capital formation
Provides proper direction to invest capital
Promotion of investment.
Give mobility to capital.
Exercise control over the working of companies.

5. Stock Exchanges in India
• There are 22 stock exchanges in India. But, two of them
are biggest.
• NSE (National stock exchange) - is the 9th largest stock
exchange in the world by market capitalization and
largest in India by daily turnover and number of trades,
for both equities and derivative trading.
• BSE (Bombay stock exchange) - is the oldest stock
exchange in Asia with a rich heritage of over 137 years
of existence.

6. National Stock
Exchange
• location: Mumbai
• Index: Nifty (National Stock Exchange Fifty)
• Consist of group of 50 Stocks
• Date of Launch:April 1994
• Base period: 1993-94

7. Bombay Stock Exchange
• Location: Mumbai
• Consist of group of 30 Stock
• Members: 852
• Date of Launch: 03 January 1986
• Base period:1978-79
•Timing: 09.30 AM – 03.30 PM

8. Members of stock exchange
 Person should have qualification
he should be an Indian citizen
minimum age should be 21 years
he should not have been adjudged insolvent
he should not have been convicted for fraud
he should not have defaulted in any other stock exchange
minimum education qualification shall pass in higher secondary
examination

9. REGISTRATION OF BROKERS
 Brokers are main player of secondary market
Brokers may classified as
jobbers
tarawaniwalas
commission Brokers
sub brokers

10.  jobbers
jobbers is an independent broker who buy and sell securities in his
own name. A jobber is capable forecasting the future price movement of
securities The jobber seeks to maximize his profitable business by adjusting
his buying and selling prices.
 tarawaniwalas
The tarawaniwalas might act against interests of investors by
purchasing securities from them in his own name at a lower price and sell the
same securities to them at higher prices. To prevent this, the Securities
Contract (Regulation) Act of 1956 provides that a member of a stock
exchange can act as a principal only for a member of a recognized stock
exchange.

11.  commission Brokers
they execute orders of their customers by buying and selling
securities on the exchange. They charge a specified commission on the
purchase or sale value. A commission broker does not buy or sell securities in
his own name. They deal with many clients with many securities.
 Sub-brokers/ Remisiers
Sub-brokers are agents of stock brokers. Since they are not
members of a stock exchange, he cannot directly deal in securities. He helps
clients to buy and sell securities only through the stock broker. In the Bombay
Stock Exchange the sub-brokers are termed as ‘Remisiers‘. They receive a
share in the brokerage commission that a commission broker charges to his
client.

12.  Eligibility requirements to become a stock exchange broker
1. Persons desiring to become brokers should clear the written test
and interview conducted by stock exchanges.
2. They should possess the required financial strength to fullfill capital
adequacy norms.
3. They should have the required infrastructure (buildings, computer
systems, connectivity)
4. They should have the required manpower to service investors.

13. INTRODUCTION OF SEBI
SEBI was established as a statutory authority through an Ordinance promulgated on
30.01.1992 by the President of India
SEBI is the regulator for the Securities Market in India
It is managed by a Board comprising of nine members including the chairman
Paradoxically this is a positive outcome of the Harshad Mehta Securities Scam of 1990-91

14. Important Act of SEBI
The Bombay Securities Contracts Control Act, 1925
The Capital Issues (Control) Act, 1947
The Securities Contracts (Regulation) Act, 1956
Registrar of Companies (The Indian Companies Act,1956) SEBI Actually
Established in the year 1988
Given statutory power in 1992.

15. Basic Objectives
 To advise SEBI to regulate intermediaries.
 To advise SEBI on issue of securities in primary market.
 To advise SEBI on disclosure requirements of companies.
 To advise for changes in legal framework and to make stock exchange more
transparent.
 To advise on matters related to regulation and development of secondary stock
exchange.
 These committees can only advise SEBI but they cannot force SEBI to take action
on their advice.

16. Function’s of SEBI
The SEBI performs functions to meet its objectives. To meet three objectives SEBI
has three important functions. These are:
 Protective functions
 Developmental functions
 Regulatory functions.

17. PROTECTIVE FUNCTIONS
(i) It Checks Price Rigging:
Price rigging refers to manipulating the prices of securities with
the main objective of inflating or depressing the market price of securities.
SEBI prohibits such practice because this can defraud and cheat the
investors.
(ii) It Prohibits Insider trading:
Insider is any person connected with the company such as
directors, promoters etc. These insiders have sensitive information which
affects the prices of the securities. This information is not available to
people at large but the insiders get this privileged information by working
inside the company and if they use this information to make profit, then it is
known as insider trading,
((Cont.…))

18. (iii) SEBI prohibits fraudulent and Unfair Trade Practices:
SEBI does not allow the companies to make misleading statements which are likely
to induce the sale or purchase of securities by any other person.
(iv) SEBI undertakes steps to educate investors so that they are able to evaluate the
securities of various companies and select the most profitable securities.
(v) SEBI promotes fair practices and code of conduct in security market by taking following
steps:
(a) SEBI has issued guidelines to protect the interest of debenture-holders wherein
companies cannot change terms in midterm.
(b) SEBI is empowered to investigate cases of insider trading and has provisions for
stiff fine and imprisonment.

19. Developmental functions
These functions are performed by the SEBI to promote and develop activities in stock exchange and increase
the business in stock exchange. Under developmental categories following functions are performed by SEBI:
(i) SEBI promotes training of intermediaries of the securities market.
(ii) SEBI tries to promote activities of stock exchange by adopting flexible and adoptable approach in following
way:
(a) SEBI has permitted internet trading through registered stock brokers.
(b) SEBI has made underwriting optional to reduce the cost of issue.
(c) Even initial public offer of primary market is permitted through stock exchange.

20. Regulatory functions
These functions are performed by SEBI to regulate the business in stock exchange. To regulate the
activities of stock exchange following functions are performed:
(i) SEBI has framed rules and regulations and a code of conduct to regulate the
intermediaries such as merchant bankers, brokers, underwriters, etc.
(ii) These intermediaries have been brought under the regulatory purview and private
placement has been made more restrictive.
(iii) SEBI registers and regulates the working of stock brokers, sub-brokers, share transfer
agents, trustees, merchant bankers and all those who are associated with stock exchange in any
manner.
(iv) SEBI registers and regulates the working of mutual funds etc.
(v) SEBI regulates takeover of the companies.
(vi) SEBI conducts inquiries and audit of stock exchanges.

21. POWERS OF SEBI
-- Power to call periodical returns from recognized stock exchanges.
-- Power to compel listing of securities by public companies.
-- Power to levy fees or other charges for carrying out the purposes of regulation.
-- Power to call information or explanation from recognized stock exchanges or their
members.
-- Power to grant approval to bye-laws of recognized stock exchanges.
-- Power to control and regulate stock exchanges.
-- Power to direct inquiries to be made in relation to affairs of stock exchanges or their
members.
-- Power to make or amend bye-laws of recognized stock exchanges.
-- Power to grant registration to market intermediaries.
-- Power to declare applicability of Section 17 of the Securities Contract (Regulation) Act
1956, in any State or area, to grant licenses to dealers in securities.

22. VARIOUS DEPARTMENT OF SEBI
•SEBI consists of four department
Primary market department
Issue management and intermediaries department
Secondary market department
Institutional investment department

23. • Primary market department
(a) Primary market department deals with all the policy matters
relating to Primary market . Intermediaries and self regulating
organisation
(b) it also deals with the redressal of investors guidance
• Issue management and intermediaries department
it deals with registration, regulating and monitoring of
intermediaries of offer of document

24. • Secondary market department
 it deals with registration, regulating and monitoring of
intermediaries of offer of document
 policy matters relating to major stock exchange
 Brokers registration
• Institutional investment department
 framing policies for foreign institutional investors
 mutual fund, mergers and acquisitions
 publication and membership in international organisation