SEBI regulates the securities market in India with the objectives of protecting investors, promoting market development, and regulating market operations. SEBI oversees primary and secondary markets, registers and monitors intermediaries like mutual funds and brokers, prohibits unfair trading practices, promotes investor education, and regulates substantial acquisitions and mergers. It oversees various aspects of the market like entry norms for listings, disclosure requirements, book building processes, and price stabilization measures. SEBI also regulates foreign institutional investments in India through registration of FIIs and monitoring of investment ceilings.

1. THE SECURITIES AND
EXCHANGE BOARD
OF INDIA (SEBI)

2. Objectives of SEBI
 To protect the interest of the investors in
securities
 To promote the development of securities
market
 To regulate the securities market

3. Functions of SEBI
Regulating the business in stock exchange and
any other securities market
Registering and regulating the workings of
intermediaries associated with securities market
Registering and regulating the working of
collective investment schemes including mutual
funds
Promoting and regulating self-regulatory
organizations
Prohibiting fraudulent and unfair trade practices
in the securities market

4. Functions of SEBI
Promoting investors education and training of
intermediaries in securities market
Prohibiting insiders trading in securities
Regulating substantial acquisition of shares and
take-over of companies
Calling for information, undertaking inspection,
conducting enquiries and audits of the stock
exchanges, intermediaries and self-regulatory
organizations in the securities market

5. Organization of SEBI
Primary Mkt. dept.
Issue Mgt. & Intermediaries Dept.
Departments
Secondary Mkt. dept.
Advisory Institutional Invt.
Committees

6. SEBI Regulates
SEBI
regulates
Foreign
Primary Secondary Mutual
Institutional
Market Market Funds
Investment
6

7. SEBI & Primary Market
Measures undertaken by SEBI:-
 Entry norms
 Promoters’ contribution
 Disclosure
 Book building
 Allocation of shares
 Market intermediaries

8. 1. Entry norms
a) Track record of dividend payment for minimum 3 yrs
preceding the issue.
b) Already listed companies - when post-issue
networth becomes more than 5 times the pre-issue
networth
c) For Manufacturing company not having such track
record – appraise project by a public financial
institution or a scheduled commercial bank.
d) For corporate body – 5 public shareholders for every
Rs.1 lakh of the net capital offer made to the public
e) Banks – 2 yrs of profitability for issues above par.
Offer documents to companies.

9. 2. Promoters’ contribution
 Should not be less than 20% of the issued
capital.
 Receiving of promoters’ contribution.
 Lock in period as per SEBI.
 Cases of non-under written public issues.
3. Disclosure
draft prospectus
Un audited financial results

10. 4. Book building
SEBI recommends two-tier under writing system
One of the mode of public issue through prospectus.
Role of syndicate members and book runners.
Minimum 30 centers.
5. Allocation of shares
Minimum application of shares
Reservation for small investors
Allotment of securities

11. 6. Market intermediaries
Licensing of merchant bankers
Licensing of underwriters, registrars, transfer
agents, etc.,
Merchant bankers net worth – Rs.5 crores
Segregate fund based from fee based activities.

12. SEBI & Secondary Market
Reforms in the secondary market:-
1. Governing board
2. Infrastructure
3. Settlement & clearing
4. Debt market
5. Price stabilization
6. Delisting
7. Brokers
8. Insider Trading

13. 1. Governing board
Brokers and non-brokers representation made
50:50
60% of brokers in arbitration, disciplinary &
default committees
For trading members 40% representation
2. Infrastructure
On-line screen based trading terminals

14. 3. Settlement & clearing
Weekly settlements
Auctions for non-delivered shares within 80 days
of settlement
Advice to set up clearing houses, clearing
corporation or settlement guarantee fund
Warehousing facilities permitted by SEBI.

15. 4. Debt market segment
Regulates thru SEBI (depository & participants)
regulation Act 1996.
Listing of debt instruments
Invt. Range for FIIs
Dual rating for above Rs.500 million

16. 5. Price stabilization
Division to monitor the unusual movements in prices.
Monitor prices of newly listed scrip from the first day
of trading.
Circuit breaker system and other monitoring
restrictions could be applied
Imposing of special margins of 25% on purchase in
addition to regular margin.
Price filters
Price bands

17. 6. Delisting
 On voluntary de-listing from regional stock
exchanges – buy offer to all share holders
 Promoters to buy or arrange buyers for the
securities
 3 yrs listing fees from companies and be kept in
Escrow A/c with the stock exchange.

18. SEBI and the FIIs
Union Govt. allowed-
Foreign Institutional Investors (FIIs)
Non-Resident Indians (NRIs), and
Persons of Indian Origin (PIOs)
to enter into both Primary & Secondary market in India through the portfolio
investment scheme (PIS), under Liberalized policy regime. Under this
scheme, FIIs/NRIs can acquire shares/debentures of Indian companies
through the stock exchanges in India.
Implications:-
Affects the sensex movements
Determines the market indications
Guidelines announced in 1992
In 1993, 12 FIIs got registered
At the end of 1996-97, 439 FIIs were registered
Can trade in securities of listed companies including OTCEI.

19. The ceiling for overall investment for FIIs:-
24% of the paid up capital of the Indian company
10% for NRIs/PIOs.
20% of the paid up capital in the case of public sector banks,
including the State Bank of India.
Modifications in ceilings:-
The ceiling of 24 % for FII investment can be raised up to sectoral
cap/statutory ceiling, subject to the approval of the board and the
general body of the company passing a special resolution to that
effect.
The ceiling of 10 % for NRIs/PIOs can be raised to 24% subject to
the approval of the general body of the company passing a
resolution to that effect.

20. Monitoring Foreign Investments
The Reserve Bank of India
monitors the ceilings on FII/NRI/PIO investments in Indian
companies on a daily basis.
For effective monitoring of foreign investment ceiling limits, the
Reserve Bank has fixed cut-off points that are two percentage
points lower than the actual ceilings.

21. SEBI guidelines for FIIs:-
According to the 1995 regulations, FIIs should hold certificate
granted by SEBI to trade in Indian stock market.
To grant the certificate the applicant should –
1. Have track record, professional & competence record, financial
soundness, general reputation of fairness and integrity.
2. Regulated by an appropriate foreign regulatory authority.
3. Permission under the provisions of FERA Act 1973.(FEMA -
2006)
Valid up to 5 yrs.

22. Custodians
Is an agency
appointment of the custodian
Maintenance of accounts
Submission of semi-annual reports (SEBI & RBI)
Inspection of accounts
SEBI Guidelines:-
Foreign brokers can operate only on behalf of registered
FIIs.
Execution of orders for sale and purchase of securities
are done by a member of an Indian stock exchange
Time stipulation for transaction b/w custodian & member
of ISE is 48 hrs.

23. Preferential allotment -To boost up the financial
resources
Regulation:-
Under mutual consent of the shareholders
As per the ceilings
Allotment on the highest price (26 weeks)
Permitted up to 15% of the equity within the ceiling
Holdings of a single FII – increased from 5% to 10% of
the equity of a company

24. Critical review of SEBI
1. Disclosures
2. Dissemination process
3. Settlement
4. Badla trade
5. Special watch
6. Capital adequacy
7. Single authority
8. Stricter registration of brokers