Role Of SEBI in Capital

Markets

MMS 2nd Sem / Div B

Babasaheb Gawde Inst. Of Mgmt. Studi
Project presented to : Prof. Rajan

Group Members
Seema Kalro

69

SEBI
Set up originally in 1988
by Government of India
Acquired statutory form
in 1992 under SEBI Act
1992
Chairman Upendra
Kumar Sinha
Headquarter - Mumbai

Objectives of SEBI
Established in 1992 with three main
objectives:
To protect the interest of the investors in
securities
To promote the development of securities
market
To regulate the securities market

Role of SEBI
Power to make rules for controlling stock exchange
Register and regulate the working of capital market
intermediaries
To Stop fraud in Capital Market
To Control the Merger, Acquisition and Takeover the
companies
To audit the performance of stock market

Contd..
To create relationship with ICAI
To Require report of Portfolio Management Activities
Prohibit insider trading in securities
Register and regulate the working of mutual funds
To educate the investors

SEBI has taken a number of steps in

the last few years to reform the Indian
capital market:

SEBI & Primary Market

Primary market is a market for raising fresh

capital in the form of shares.
Also known as"new issue market" (NIM).
Measures undertaken by SEBI:1.Entry norms
2. Promoters contribution
3. Disclosure
4. Book building
5. Allocation of shares
6. Market intermediaries

Contd..
1. Entry norms
- Net tangible assets of atleast 3 crores for 3 full years
- Net worth of atleast rs. 1 crore in 3 years
- If change in name atleast 50% revenue for preceding
1 year should be from the new activity
- Track record of dividend payment for minimum 3 yrs
preceding the issue.
- Already listed companies - post-issue net worth
should not exceed 5 times the pre-issue net worth.

2. Promoters contribution
Should not be less than 20% of the issued capital.
Lock in period as per SEBI is for 3 years from the
date of allotment or 3 years from the date of
commercial production whichever is later
Cases of non-under written public issues.
3. Disclosure
draft prospectus
Un-audited financial results

4. Book building
SEBI recommends two-tier under writing system
One of the mode of public issue thru 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

6. Market intermediaries
Licensing of merchant bankers
Licensing of underwriters, registrars, transfer
agents, etc.,
Merchant bankers net worth Rs.5 crores

SEBI & Secondary

Market

Secondary market is the financial market

where previously issued securities and
financial instruments are bought and sold.

Measures taken by SEBI:

1. Reconstitution of governing boards
2. Deficiencies in the functioning of stock
exchanges
3. Trading and settlement system
4. Broker-client relationship
5. Insider trading and other prohibitions
6. Investor protections

1.Reconstitution of Governing Boards

.Stock exchanges earlier were broker dominated
.Issued an order under SCRA to bring about a broad
based constitution of the governing boards of
Exchanges
.SEBI now requires 50 percent broker and 50% nonbroker directors.
2. Deficiencies in the functioning of Stock
Exchanges
.listing of securities, monitoring of trading and
settlement and attending to investor grievances.
.Exchanges are required to have separate departments

3. Trading and settlement system

The trading hours have been increased for stock
exchanges.
settlement periods have been reduced to T+2 for nonspecified scrips.
4. Broker-Client relationship
ensure safety of the clients and interest of the
brokers.
maintenance of separate accounts of brokers and
clients
The brokers should also issue contract notes within
24 hours

5. Insider Trading and other Prohibitions

insiders trading is punishable as per section 24 of SEBI
Act, 1992.
The section provides for a punishment of
imprisonment for a term up to 10 years or a fine up to
Rs. 25 Crores or both.
6. Investor Protections
provides investor grievance redressal and investor
education / guidance
evolved a system of redressal of investor grievances
complaints against companies, brokers and the
intermediaries.

SEBI and Mutual funds

Mutual fund is a mechanism for pooling the resources
by issuing units to the investors and investing funds in
securities in accordance with objectives as disclosed
in offer document.
The Securities and Exchange Board of India (Mutual
Fund) Regulations, 1996 has prescribed various
procedures and guidelines for mutual funds

Some of the guidelines for mutual

funds are as under:
Registration of Mutual Fund
Constitution and Management of Mutual
Fund and Operation of Trustees, etc
Rights and Obligations of Trustees
Schemes of Mutual Fund
Underwriting of Securities
Method of valuation of investments

SEBI guidelines for FIIs

According to the 1995 regulations, FIIs should hold

certificate granted by SEBI to trade in Indian stock
market.

The certificate is valid up to 5 yrs.

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.

Conclusion
Capital Market plays important role in financial
system of developing countries
SEBI plays a twin role of development and
regulation of capital market

Thank You