K.E.

Ss SHROFF COLLEGE OF ARTS & COMMERCE

SUBJECT: Business Law

Class:

S.Y.B.F.M. 4
th

Semester:

PRESENTATION ON: The Securities Contracts Regulation Act

Submitted to: Prof. Shweta Vadvani Academic year: 2011-12

Group Members Name

PRIYANK DARJI HARDIK NATHWANI SHASHANK PAI SAGAR PANCHAL DHARMIK PATEL KUSH SHAH SIDDARTH TAWDE

Roll No.
06 27 28 29 32 39 46

Meaning of Securities
The definition of 'Securities' as per the Securities Contracts Regulation Act (SCRA), 1956, includes instruments such as shares, bonds, scrips, stocks or other marketable securities of similar nature in or of any incorporate company or body corporate, government securities, derivatives of securities, units of collective investment scheme, interest and rights in securities, security receipt or any other instruments so declared by the Central Government. Securities may be represented by a certificate or, more typically, "non-certificated", that is in electronic or "book entry" only form. Certificates may be bearer, meaning they entitle the holder to rights under the security merely by holding the security, or registered, meaning they entitle the holder to rights only if he appears on a security register maintained by the issuer or an intermediary .
The company or other entity issuing the security is called the issuer. A country's regulatory structure determines what qualifies as a security. For example, private investment pools may have some features of securities, but they may not be registered or regulated as such if they meet various restrictions. debt securities (such as banknotes, bonds and debentures), equity securities, e.g., common stocks;

derivative contracts, such as forwards, futures, options and swaps.

Securities contract regulation

Definitions
In this Act, unless the context otherwise requires,(a) 'Contract' means a contract for or relating to the purchase or sale of securities; (b) 'Government security' means a security created and issued, whether before or after the commencement of this Act, by the Central Government or a State Government for the purpose of raising a public loan and having one of the forms specified in clause (2) of section 2 of the Public Debt Act, 1944 (13 of 1944); (c) 'member ' means a member of a recognised stock exchange; (d) 'option in securities' means a contract for the purchase or sale of a right to buy or sell, or a right to buy and sell, securities in future, and includes a teji, a mandi, a teji mandi, a galli, a put, a call or a put and call in securities; (e) 'prescribed' means prescribed by rules made under this Act; (f) 'recognised stock exchange' means a stock exchange which is for the time being recognised by the Central Government under section 4; (g) 'rules', with reference to the rules relating in general to the constitution and management of a stock exchange, includes, in the case of a stock exchange which is an incorporated association, its memorandum and articles of association; (h) 'securities' include (i) shares, scripts stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate; (ii) Government securities; and (iii) rights or interests in securities;

Security Contract Regulation Act

In addition, under Section 28A of the Securities Contracts Regulation Act (SCRA) inserted by the SEBI Act, the Government may delegate powers exercisable by it also to the SEBI, subject to such limitations/condition as may be stipulated by the Government. While delegating the powers to the SEBI, the Government may retain the power in relation to any matter under the Act. In respect of the following matters, the SEBI has been authorized to exercise powers under the SCRA which were formerly exercised by the Government:

Main Provisions: The Act empowers the Central Government or in some cases SEBI pertaining to: The grant of recognition or withdrawal of recognition to any stock exchange Approval of the bye-laws and rules of stock exchange Power to direct the stock exchange to make or amend rules and byelaws Monitoring the activities and functioning of the stock exchanges by calling for periodic returns and specific information Power to suspend business of any stock exchange Power to supersede the governing body of any stock exchange on account of specific reasons Regulation of listing of securities.

The SEBI is now exercising most of the powers under the SCRA.

Registration of Intermediaries:
All intermediaries dealing in securities are compulsorily registered with the SEBI in accordance with the regulations made under the SEBI Act. The certificate of registration contains the conditions/rules and regulations for conduct of business by the security market intermediaries. The SEBI prescribes regulations for the application form and the manner of making an application as well as the fee payable. The SEBI can suspend/cancel a certificate of a registration granted to the intermediaries in accordance with the regulations made by it on this behalf. An intermediary/person aggrieved by an order of the SEBI, suspending/canceling registration can prefer an appeal to the Government. By various regulations notified from time to time, the SEBI has prescribed the procedure for registration of various intermediaries associated with the securities market. Directions from Government: The Government of India can issue directions to the SEBI on questions of policy in writing from tem to time. It is bound to follow and observe such directions in the exercise of its powers/the performance of its functions. The government has absolute discretion to determine whether a question is one of policy or not. Its inability to discharge its functions/duties, or noncompliance to follow and act upon direction given by the Government or sGovernment.

Power to make rules and regulations:

The government is authorized to make rules for carrying out the purpose of the SEBI Act. The important matter for which rules may be framed, include, the additional functions to be performed by it, its constitution, maintenance of its accounts, manner of inquiry to impose penalty for defaults, constitution of the Securities Appellate Tribunal (SAT), the forms of appeal and fee before the SAT, the form in which reports have to be submitted to the government. To carry out its functions, the SEBI is empowered to make regulation. Every regulations made by it must have the prior approval of the Government.

Contract and option in securities Contracts in notified areas- section 13

Central Government has the power to declare a state or an area as notified area under section 13. While notifying any such state or area, due consideration is given to the nature or volume of transations or securities in such state or area.

Effect of declaration of area as notified area:

Every contract securities in such notified state or area is legal only if: i. Such contract entered into between the members of a recongnized stock exchange or stock exchange. Contracts entered between persons other than members of recognized stock exchange will be considered illegal. Any contract entered into through or with a members of a recognized stock exchange. Such contract are subject to terms and conditions as stipulated by recognized stock exchange. recognized stock exchange can lay such terms and conditions with the prior approval of SEBI.

ii.

iii.

The provisions of section 13 are not applicable to spot delivery contract.

Contracts in notified areas to be void in certain circumstances

14. (1) Any contract entered into in any State or area which is declared notified bu the central government and which is in contravention of any of the bye- laws specified in that behalf shall be void with respect t.o

(i) the rights of any member of the recognised stock exchange who has entered into such contract in contravention of any such bye-laws, and (ii) the rights of any other person who has knowingly participated in such transaction.

Power of central government to prohibit contracts in certain cases-section 16

i. central government can declare that any contract for the sale or purchase of any security shall not be made execpt with the permission of the central government. Such declaration can be made by the government only if it is of the opinion that it is necessary to prevent undesirable speculation in specified securities in any state or area. Any agreement for the sale or purchase of securities shall be illegal if made in contravention of the above provisions.

ii.

iii.

Licensing of dealers in securities in certain securitiessection 17:

Central Government may by notification in the Official Gazette declare that a person cannot carry on business of dealing in securities except under authority of a license granted by SEBI in this behalf. In other word section 17 requires a person dealing in securities in any state which has not been notified under section 13 but has been notified under section 17. It implies that licensing can be made com plusory only in respect of state/area which is not notified under section 13. The section does not apply to: a) Spot delivery contracts b) Doing of anything by or on behalf of a member of any recognised stock exchange. Thus this section makes provisions for issuing license to persons other than members of stock exchanges,in area which are not notified under section 13.

Listing in securities
Listing means admission of securities to dealings on a recognized stock exchange. The securities may be of any public limited company, Central or State Government, quasi governmental and other financial institutions/corporations, municipalities, etc. The objectives of listing are mainly to:
provide

liquidity to securities;

mobilize savings for economic development; protect interest of investors by ensuring full disclosures.

BSE Guidelines for Listing:

The BSE Limited has a dedicated Listing Department to grant approval for listing of securities of companies in accordance with the provisions of the Securities Contracts (Regulation) Act, 1956, Securities Contracts (Regulation) Rules, 1957, Companies Act, 1956, Guidelines issued by SEBI and Rules, Bye-laws and Regulations of BSE. BSE has set various guidelines and forms that need to be adhered to and submitted by the companies. These guidelines will help companies to expedite the fulfillment of the various formalities and disclosure requirements that are required at various stages of Public Issues Initial Public Offering Further Public Offering Preferential Issues Indian Depository Receipts Amalgamation Qualified Institutions Placements

securities listed on BSE has to comply with the listing requirements prescribed by it. Some of the requirements are as under: [I] Minimum Listing Requirements for New Companies:
The following eligibility criteria have been prescribed effective August 1, 2006 for listing of companies on BSE, through Initial Public Offerings (IPOs) & Follow-on Public Offerings (FPOs): 1.Companies have been classified as large cap companies and small cap companies. A large cap company is a company with a minimum issue size of Rs. 10 crore and market capitalization of not less than Rs. 25 crore. A small cap company is a company other than a large cap company. a)In respect of Large Cap Companies I. The minimum post-issue paid-up capital of the applicant company (hereinafter referred to as "the Company") shall be Rs. 3 crore; and II. III. The minimum issue size shall be Rs. 10 crore; and The minimum market capitalization of the Company shall be Rs. 25 crore (market capitalization shall be calculated by multiplying the post-issue paid-up number of equity shares with the issue price). b) In respect of Small Cap Companies I. The minimum post-issue paid-up capital of the Company shall be Rs. 3 crore; and II. III. The minimum issue size shall be Rs. 3 crore; and The minimum market capitalization of the Company shall be Rs. 5 crore (market capitalization shall be calculated by multiplying the post-issue paid-up number of equity shares with the issue price); and

IV.

The minimum income/turnover of the Company shall be Rs. 3 crore in each of the preceding three 12-months period; and

V.

The minimum number of public shareholders after the issue shall be 1000.

VI.

A due diligence study may be conducted by an independent team of Chartered Accountants or Merchant Bankers appointed by BSE, the cost of which will be borne by the company. The requirement of a due diligence study may be waived if a financial institution or a scheduled commercial bank has appraised the project in the preceding 12 months.

For all companies : a) In respect of the requirement of paid-up capital and market capitalization, the issuers shall be required to include in the disclaimer clause forming a part of the offer document that in the event of the market capitalization (product of issue price and the post issue number of shares) requirement of BSE not being met, the securities of the issuer would not be listed on BSE. b) The applicant, promoters and/or group companies, shall not be in default in compliance of the listing agreement. c) The above eligibility criteria would be in addition to the conditions prescribed under SEBI (Disclosure and Investor Protection) Guidelines, 2000.

[II] Minimum Requirements for Companies Delisted by BSE seeking Relisting on BSE
Companies delisted by BSE and seeking relisting at BSE are required to make a fresh public offer and comply with the extant guidelines of SEBI and BSE regarding initial public offerings.

[III] Permission to Use the Name of BSE in an Issuer Company's Prospectus

Companies desiring to list their securities offered through a public issue are required to obtain prior permission of BSE to use the name of BSE in their prospectus or offer for sale documents before filing the same with the concerned office of the Registrar of Companies. BSE has a Listing Committee , comprising of market experts, which decides upon the matter of granting permission to companies to use the name of BSE in their prospectus/offer documents. This Committee evaluates the promoters, company, project , financials, risk factors and several other aspects before taking a decision in this regard. Decision with regard to some types/sizes of companies has been delegated to the Internal Committee of BSE.

[IV] Submission of Letter of Application

As per Section 73 of the Companies Act, 1956, a company seeking listing of its securities on BSE is required to submit a Letter of Application to all the stock exchanges where it proposes to have its securities listed before filing the prospectus with the Registrar of Companies.

[V] Allotment of Securities:

As per the Listing Agreement, a company is required to complete the allotment of securities offered to the public within 30 days of the date of closure of the subscription list and approach the Designated Stock Exchange for approval of the basis of allotment. In case of Book Building issues, allotment shall be made not later than 15 days from the closure of the issue, failing which interest at the rate of 15% shall be paid to the investors.

[VI] Trading Permission:

As per SEBI Guidelines, an issuer company should complete the formalities for trading at all the stock exchanges where the securities are to be listed within 7 working days of finalization of the basis of allotment. A company should scrupulously adhere to the time limit specified in SEBI (Disclosure and Investor Protection) Guidelines 2000 for allotment of all securities and dispatch of allotment letters/share certificates/credit in depository accounts and refund orders and for obtaining the listing permissions of all the exchanges whose names are stated in its prospectus or offer document. In the event of listing permission to a company being denied by any stock exchange where it had applied for listing of its securities, the company cannot proceed with the allotment of shares. However, the company may file an appeal before SEBI under Section 22 of the Securities Contracts (Regulation) Act, 1956.

[VII] Requirement of 1% Security:

Companies making public/rights issues are required to deposit 1% of the issue amount with the Designated Stock Exchange before the issue opens. This amount is liable to be forfeited in the event of the company not resolving the complaints of investors regarding delay in sending refund

orders/share certificates, non-payment of commission to underwriters, brokers, etc.

[VIII] Payment of Listing Fees:

All companies listed on BSE are required to pay to BSE the Annual Listing Fees by 30th April of every financial year as per the Schedule of Listing Fees prescribed from time to time. Applicability: The above schedule of Listing Fee is uniformly applicable for all companies irrespective of whether BSE is the designated stock exchange or not. Payment date: The last date for payment of Listing Fee for the year 2011-12 is April 30, 2011. Failure to pay the Listing Fee (for equity debt segment and/or Mutual Fund) by the due date will attract interest @ 12% per annum w.e.f. May 1, 2011. Service tax: Service Tax is payable on the listing fee at the applicable rates.

[IX] Compliance with the Listing Agreement:

Companies desirous of getting their securities listed at BSE are required to enter into an agreement with BSE called the Listing Agreement, under which they are required to make certain disclosures and perform certain acts, failing which the company may face some disciplinary action, including suspension/delisting of securities. As such, the Listing Agreement is of great importance and is executed under the common seal of a company. Under the Listing Agreement, a company undertakes, amongst other things, to provide facilities for prompt transfer, registration, subdivision and consolidation of securities; to give proper notice of closure of transfer books and record dates, to forward 6 copies of unabridged Annual

Reports, Balance Sheets and Profit and Loss Accounts to BSE, to file shareholding patterns and financial results on a quarterly basis; to intimate promptly to the Exchange the happenings which are likely to materially affect the financial performance of the Company and its stock prices, to comply with the conditions of Corporate Governance, etc. The Listing Department of BSE monitors the compliance by the companies with the provisions of the Listing Agreement, especially with regard to timely payment of annual listing fees, submission of results, shareholding patterns and corporate governance reports on a quarterly basis . Penal action is taken against the defaulting companies.

[X] Cash Management Services (CMS) - Collection of Listing Fees:

In order to simplify the system of payment of listing fees, BSE has entered into an arrangement with HDFC Bank for collection of listing fees from 141 locations all over the country.Details of the HDFC Bank branches are available on our website site www.bseindia.com as well as on the HDFC Bank website www.hdfcbank.com This facility is being provided free of cost. Companies intending to utilize this facility for payment of listing fee should furnish the information (as mentioned below) in theCash Management Cash Deposit Slip. These slips are available at all the HDFC Bank branches The cheque should be drawn in favour of BSE limited and should be payable locally.companies are request to mention in the deposit slip, the financial year(s) for which the listing fee is being paid. Payment made through any other slips would not be considered. The above slips will have to be filled in quadruplicate. One acknowledged copy would be provided to the depositor by the HDFC Bank.

NSE guideliens of listing:

An Issuer has to take various steps prior to making an application for listing its securities on the NSE. These steps are essential to ensure the compliance of certain requirements by the Issuer before listing its securities on the NSE. The various steps to be taken include:

(1) Submission of Memorandum and Articles of Association:

Rule 19(2) (a) of the Securities Contracts (Regulation) Rules, 1957 requires that the Articles of Association of the Issuer wanting to list its securities must contain provisions as given hereunder. a) The Articles of Association of an Issuer shall contain the following provisions namely: b) that there shall be no forfeiture of unclaimed dividends before the claim becomes barred by law; c) that a common form of transfer shall be used; d) that fully paid shares shall be free from all lien and that in the case of partly paid shares the Issuer's lien shall be restricted to moneys called or payable at a fixed time in respect of such shares; e) that registration of transfer shall not be refused on the ground of the transferor being either alone or jointly with any other person or persons indebted to the Issuer on any account whatsoever; f) that any amount paid up in advance of calls on any share may carry interest but shall not in respect thereof confer a right to dividend or to participate in profits; g) that option or right to call of shares shall not be given to any person except with the sanction of the Issuer in general meetings.

h) permission for Sub-Division/Consolidation of Share Certificate.

(2)Submission of Application:
(a)For Issuers listing on NSE for the first time
Issuers desiring to list existing/new securities on the NSE shall make application for admission of their securities to dealings on the NSE in the forms prescribed in this regard as per details given hereunder or in such other form or forms as the Relevant Authority may from time to time prescribe in addition thereto or in modification or substitution thereof. Appendix 'A' - Clauses of Articles of Association. Appendix 'B'- Application Letter for Listing. Appendix 'C-1' - Listing Application providing pre-issue details of securities. Appendix 'C-2' - Listing Application providing post-issue details of securities. Appendix 'D'- Checklist for supporting documents ( as applicable to the issuer) Appendix 'E' - Schedule of Distribution Appendix 'F'- Listing Agreement

(b)Listing of further Issues by Issuers already listed on NSE:

Issuers whose securities are already listed on the NSE shall apply for admission to listing on the NSE of any further issue of securities made by them. The application for admission shall be made in the forms prescribed in this regard or in such other form or forms as the Relevant Authority may from time to time prescribe in addition thereto or in modification or substitution thereof. Appendix 'E' - Schedule of Distribution Appendix 'G'- Application Letter for Listing of further issues. Appendix 'H' - Listing Application providing details of securities. Appendix 'I' - Checklist for supporting documents submitted (as applicable)

(c)Listing fees:The listing fee applicable from April 1, 2011 is as follows:

Particulars Initial Listing Fees Annual Listing Fees (on paid-up share, bond and/or debenture capital) Upto Rs. 5 Crore Above Rs. 5 Crore and upto Rs.10 Crores Above Rs. 10 Crore and upto Rs.20 Crores Above Rs. 20 Crore and upto Rs.30 Crores Above Rs. 30 Crore and upto Rs.40 Crores Above Rs. 40 Crore and upto Rs.50 Crores Above Rs. 50 Crores and upto Rs.100 Crores Above Rs. 100 Crore and upto Rs.150 Crores Above Rs. 150 Crore and upto Rs.200 Crores Above Rs. 200 Crore and upto Rs.250 Crores Above Rs. 250 Crore and upto Rs.300 Crores Above Rs. 300 Crore and upto Rs.350 Crores Above Rs. 350 Crore and upto Rs.400 Crores Above Rs. 400 Crore and upto Rs.450 Crores Above Rs. 450 Crore and upto Rs.500 Crores Amount (Rs.) 50,000

18,000

31,500 57,500 90,000 1,00,000 1,05,000 1,75,000 2,00,000 2,40,000 2,75,000 3,10,000 3,40,000 3,75,000 4,35,000 5,00,000

Companies which have a paid up share, bond and/or debenture and/or debt capital, etc of more than Rs.500 crores will have to pay a minimum fees of Rs.5,00,000/- and an additional listing fees of Rs.3,400/- for every increase of Rs.5 crores or part thereof in the paid up share, bond and/ debenture and/or debt capital etc. Companies which have a paid up share, bond and/or debenture and/or debt capital, etc. of more than Rs.1,000 crores will have to pay minimum fees of Rs.8,50,000/- and an additional listing fees of Rs.3,700/- for every increase of Rs.5 crores or part thereof in the paid up share, bond and/or debenture and/or debt capital etc. The listing fees depend on the paid up share capital of the Company. (d)Listing Fees - Mutual Fund The listing fees depend on the paid up unit capital of your Scheme:

Particulars Initial Listing Fees

Amount (Rs.) -

Listing Fees where the tenure of the Scheme is upto six months (based on the Unit capital of the Scheme in crores) 0-100 100-300 300-500 500-1000 Maximum fees 16,000 29,000 47,000 78,000 125,000

Where the tenure of the scheme is more than six months, the listing fee as applicable for multiples of six months. as given in the above table shall be levied. Please draw your Cheques/Demand Drafts favouring National Stock Exchange of India Limited payable at Mumbai.

(3) Security Deposit

(Payable only for new and fresh issues and only when NSE is the Regional Stock Exchange) The Relevant Authority shall not grant admission to dealings of securities of an Issuer which is not listed or of any new (original or further) issue of securities of an Issuer excepting Mutual Funds, which is listed on the NSE unless the Issuer deposits and keeps deposited with the NSE (in cases where the securities are offered for subscription, whether through the issue of a prospectus, letter of offer or otherwise, and NSE is the Regional Stock Exchange for the Issuer) an amount calculated at 1% of the amount of securities offered for subscription to the public and or to the holders of existing securities of the Issuer, as the case may be for ensuring compliance by the Issuer within the prescribed or stipulated period of all requirements and conditions hereinafter mentioned and shall be refundable or forfeitable in the manner hereinafter stated: 1. The Issuer shall comply with all prevailing requirements of law including all requirements of and under any notifications, directives and guidelines issued by the Central Government, SEBI or any statutory body or local authority or any body or authority acting under the authority or direction of the Central Government and all prevailing listing requirements and conditions of the NSE and of each recognized Stock Exchange where the Issuer has applied for permission for admission to dealings of the securities, within the prescribed or stipulated period;

2. If the Issuer has complied with all the aforesaid requirements and conditions including, wherever applicable, its obligation under Section 73 (or any statutory modification or re-enactment thereof) of the Companies Act, 1956 and obligations arising therefrom, within the prescribed or stipulated period, and on obtaining a No Objection Certificate from SEBI and submitting it to NSE , NSE shall refund to the Issuer the said deposit without interest within fifteen days from the expiry of the prescribed or stipulated period;

3. If on expiry of the prescribed or stipulated period or the extended period referred to hereafter, the Issuer has not complied with all the aforesaid requirements and conditions, the said deposit shall be forfeited by the NSE, at its discretion, and thereupon the same shall vest in the NSE. Provided the forfeiture shall not release the Issuer of its obligation to comply with the aforesaid requirements and conditions;

4. If the Issuer is unable to complete compliance of the aforesaid requirements and conditions within the prescribed or stipulated period, the NSE, at its discretion and if the Issuer has shown sufficient cause, but without prejudice to the obligations of the Issuer under the laws in force to comply with any such requirements and conditions within the prescribed or stipulated period, may not forfeit the said deposit but may allow such further time to the Issuer as the NSE may deem fit; provided that

a) the Issuer has at least ten days prior to expiry of the prescribed or stipulated period applied in writing for extension of time to the NSE stating the reasons for non-compliance, and

b) the Issuer, having been allowed further time by the NSE, has before expiry of the prescribed or stipulated period, published in a manner required by the NSE, the fact of such extension having been allowed; provided further that where the NSE has not allowed extension in writing before expiry of the prescribed or stipulated period, the request for extension shall be deemed to have been refused; provided also that any such extension shall not release the Issuer of its obligations to comply with the aforesaid requirements and conditions.

c) 50% of the above mentioned security deposit should be paid to the NSE in cash. The balance amount can be provided by way of a bank guarantee, in the format prescribed by or acceptable to NSE. The amount to be paid in cash is limited to Rs.3 crores.

(4)Supporting Documents
Issuers applying for admission of their securities to dealings on the NSE shall submit to the NSE the following:

Documents and Information The documents and information prescribed in Appendix D or Appendix I (as the case may be) to this Regulation or such other documents and information as the Relevant Authority may from time to time prescribe, in addition thereto or in modification or substitution thereof together with any other documents and information which the Relevant Authority may require in any particular case;

Distribution Schedules Distribution Schedules duly completed in respect of each class and kind of security in the form prescribed in Appendix E (Table I, II & III) to this Regulation or in such other form or forms as the Relevant Authority may from time to time prescribe in addition thereto or in modification or substitution thereof.