c


à Stock market regulation was a pre-

pre-independence
phenomenon in India.

à During the II world war period ,in the defence 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.
c

   

à To further the growth of companies with sound capital

structure.

à To avoid undue congestion or overcrowding of public

issues in a particular period.

à To ensure that investment takes in conformity with the

objectives of five year plan.

à To ensure orderly and healthy growth of capital

markets with adequate protection to investors.
  
à The securities and exchange board of India act, 4th
April, 1992.

à 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.

à 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.
c
   
à The World Bank and the International Monetary Fund
(IMF) have introduced a benchmark i.e., Financial
Services Assessment Programme (FSAP) to strengthen
the monitoring of financial systems

à The FSAP is designed to help countries enhance their

resilience to crisis and cross-
cross-border contagion, and to
foster growth by promoting financial system soundness
and financial sector diversity.

à SEBI endeavors to achieve the standards of

IOSCO/FSAP. Amendments will be required to be made
in the Securities Laws especially the SEBI Act, which
will facilitate India and SEBI to achieve above objective.

   
à The SEBI Board had decided to constitute an Expert
Group to identify the deficiencies / inconsistencies in the
existing provisions of the SEBI Act and also to suggest
new provisions that can be incorporated in the SEBI Act.

à To make it more effective and investor friendly, taking

into account recommendations of the JPC as also
recommendations of other expert groups constituted by
SEBI from time to time in this regard. The SEBI Board in
its meeting held on August 05, 2004 constituted the
Expert Group.

 




 

à For the purpose of achiving the objectives, an office

of the controller of capital issues was entrusted with
the responsibility of regulating the capital issues in
the country. the CCI was vested the powers to
approve the kind of instruments , size, timing and
premium of issues.

  





à 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.

à 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.


 
c
 

..


à With the growth of security market the number of
malpractices also increased in both the primary and
secondary markets. The malpractices were noticed in
the case of companies, merchant bankers and brokers
who are all operating in the market. For e.g. ,
à Manipulation of security prices:
à Price rigging:
à Insider trading:
à Delay in settlement:
CASE STUDY

Harshad Mehta: India's best-known scamster.

c   
 
 

  

à èo person shall directly or indirectly Use or employ, in
connection with the issue, purchase or sale of any securities
Listed or proposed to be listed on a recognized stock
exchange.

à Employ any device, scheme or artifice to defraud in

connection with issue or dealing in securities which are listed
or proposed to be listed on a recognised stock exchange;

à Engage in any act, practice, course of business which operates

or would operate as fraud or deceit upon any person, in
connection with the issue, dealing in securities which are listed
or proposed to be listed on a recognised stock exchange
c   
 
 

  

à Engage in insider trading

à Deal in securities while in possession of material or non-

non-
public information or communicate such material or non-non-
public information to any other person, in a manner which
is in contravention of the provisions of this Act or the
rules or the regulations made there under.

à Acquire control of any company or securities more than

the percentage of equity share capital of a company
whose securities are listed or proposed to be listed on a
recognised stock exchange in contravention of the
regulations made under this Act.

  

c
 

 

à Under this circumstance, the government felt the need for

setting up of an apex body to develop and regulate the
stock market in India. Eventually, the securities and
exchange board of India (SEBI) was set up on April 12,
1988.

à SEBI was set up as a non-

non-statutory body.
 !"#
$%!"&'!#'( "#! (
 ) is a autonomous body
created by the Government of India in 1988 and given
statutory form in 1992 with the SEBI Act 1992

  

c
 

 

à 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.
  

à According to the preamble of the SEBI act, the primary
objective of the SEBI is to orderly growth of the securities
market the SEBI monitors the activities of not only the stock
exchanges but also merchant bankers etc. the objectives of
SEBI are as follows:
à To protect the interest of investors so that there is a steady
flow of savings into the capital market.
à To regulate the securities market and ensure Fair practices
by the issuers of securities so That they can raise resources
at minimum cost.
à To promote efficient services by broker¶s merchant bankers
& other intermediaries so that they become competitive And
professional.
 

à Regulatory Functions.

à Development Functions.


à Power to call periodical returns from recognized Stock
Exchanges.

à Power to call any information or explanation from recognized

stock exchanges or their Members.

à Power to direct enquiries to be made in relation to affairs

of stock exchanges or their members.

à Power to grant approval to bye-

bye-laws of Recognized stock
exchanges.


à Power to make or amend bye-

bye-laws of recognized Stock
exchanges.
à Power to compel listing of securities by public
Companies.
à Power to control and regulate stock exchanges.
à Power to grant registration to market intermediaries.
à Power to levy fees or other charges for carrying Out the
Purpose of regulation.

    

à SEBI has brought out a number of guidelines separately,
for primary market, secondary market, mutual funds,
merchant bankers, foreign institutional investors etc.They
are as follows.
à Primary market for the public issue:
à Secondary markets : stock exchange, Brokers.
à Foreign institutional investors {fii}
à Debentures
à Underwriters
à Book building
à Buy back of shares
c
 
 c

à Penalty for failure to furnish information, return, etc.

à Penalty for failure by any person to enter into agreement

with clients.

à Penalty for failure to redress investors' grievances.

à Penalty for certain defaults in case of mutual funds.

c
 
 c


à Penalty for failure to observe rules and regulations by

an asset management company.

à Penalty for failure in case of stock brokers.

à Penalty for insider trading.


 
 c


à Penalty for fraudulent and unfair trade practices.

à Penalty for contravention where no separate

penalty has been provided.
ACCOUèTS & AUDIT

à The Board shall maintain proper accounts and other

relevant records and prepare an annual statement of
accounts in such form as may be prescribed by the
Central Government in consultation with the Controller
and Auditor-
Auditor- General of India.

à The accounts of the Board shall be audited by the

Controller and Auditor General of India at such intervals
as may be specified by him
ACCOUèTS & AUDIT
à The Comptroller and Auditor-
Auditor-General of India and any
other person appointed by him in connection with the
audit of the accounts of the Board shall have the same
rights and privileges and authority in connection with
such audit.

à The accounts of the Board as certified by the Comptroller

and Auditor-
Auditor- General of India or any other person
appointed by him in this behalf together with the audit
report thereon shall be forwarded annually to the Central
Government and that Government shall cause the same to
be laid before each House of Parliament.
Ê