Since its inception SEBI has been working targeting the securities and is
attending to the fulfilment of its objectives with commendable zeal and
dexterity. The improvements in the securities markets like capitalization
requirements, margining, establishment of clearing corporations etc.
reduced the risk of credit and also reduced the market.
HISTORY
ORGANIZATION STRUCTURE
Upendra Kumar Sinha was appointed chairman on 18 February 2011
replacing C.B Bhave .
Designation
Chairman
M.S.Sahoo
Dr. K.M.Abraham
Prashant Saran
Director ,Infosys
Dr.Thomas Mathe
V.K.Jairath
Member Appointed
Anand Sinha
Name
From
C.B.Bhave
18 February 2008
M.Damodaran
G.N.Bajpai
To
18 February 2005
20 February 2002
18 February 2011
18 February 2008
18 February 2005
D.R.Mehta
21 February 1995
S.S.Nadkarni
17 January 1994
G.V.Ramakrishna
24 August 1990
17January 1994
12 April 1988
23 August 1990
Dr.S.A.Dave
20 February 2002
31 January 1995
Head Office:
Mittal court 'A' Wing, Ground floor
and Chandigarh
FAX: 5768992
Eastern Regional Office:
FMC Fortuna, 5th Floor, 234/3A
32 D'Monte Colony,
SEBI ADMINISTRATION
The Securities and Exchange Board of India Act, 1992 is having
retrospective effect and is deemed to have come into force on January 30,
1992. Relatively a brief act containing 35 sections, the SEBI Act governs
all the Stock Exchanges and the Securities Transactions in India.
One each from the department of Finance and Law of the Central
Government, one from the Reserve Bank of India and two other persons
and having its head office in Bombay and regional offices in Delhi,
Calcutta and Madras.
10
INVESTORS KNOWHOW
Any company or a listed company making a public issue or a rights issue
of value of more than Rs. 50 lakhs is required to file a draft offer
document with SEBI for its observations. The company can proceed
further only after getting observations from SEBI. The company has to
open its issue within three months from the date of SEBI's observation
letter.
Through public issues, SEBI has laid down eligibility norms for entities
accessing the primary market. The entry norms are only for companies
making a public issue (IPO or FPO) and not for listed company making
a rights issue.
The entry Norms are as follows:
Entry Norm I (EN I):
The company shall meet the following requirements.
The issue size does not exceed 5 times the pre- issue net worth.
SEBI has provided two other alternative routes to company not satisfying
any of the above conditions to provide sufficient flexibility and also to
ensure that genuine companies do not suffer on account of rigidity of the
parameters, for accessing the primary Market. They are as under:
11
12
14
PRIMARY MARKET
The primary market is that part of the capital markets that deals with the
issuance of new securities. Companies, governments or public sector
institutions can obtain bonds through the sale of a new stock or bond
issue. This is typically done through a syndicate of securities dealers. The
process of selling new issues to investors is called underwriting. In the
case
of
new stock
issue,
this
sale
is
an initial
public
offering (IPO). Dealers earn a commission that is built into the price of
the security offering, though it can be found in the prospectus. Primary
markets create long term instruments through which corporate entities
borrow from capital market.
Features of primary markets are:
This is the market for new long term equity capital. The primary
market is the market where the securities are sold for the first time.
Therefore it is also called the new issue market (NIM).
In a primary issue, the securities are issued by the company
directly to investors.
The company receives the money and issues new security
certificates to the investors.
Primary issues are used by companies for the purpose of setting up
new business or for expanding or modernizing the existing
business.
The new issue market does not include certain other sources of new
long term external finance, such as loans from financial
institutions. Borrowers in the new issue market may be raising
capital for converting private capital into public capital; this is
known as "going public."
15
SECONDARY MARKET
Section 3 of SEBI Act protects the interests of the investors in securities
and also promotes the development of, and regulates, the securities
market and related matters.
The following are the financial products/instruments which the secondary
market deals with
Equity Shares
Bonus Shares
Bond
Convertible Bond
Debentures
Commercial Paper
Coupons
Treasury Bills
16
any other functions that may be specified by the SEBI Board from
time to time.
What is the exit opportunity available for investors in case a
company gets delisted?
17
These are not only corporatized but also demutualised with segregation of
ownership and trading rights of members.
18
What steps have been taken by SEBI to give a head start to the process of
demutualisation in India?
SEBI had formed a Group on Corporatisation and Demutualisation of
Stock Exchanges under the Chairmanship of Justice M H Kania, former
Chief Justice of India, for advising SEBI on corporatisation and
demutualisation of exchanges and to recommend the steps that need to be
taken to implement the same. The Group submitted its Report to SEBI on
August 28, 2002. SEBI has taken up with Central Government to amend
the SC( R) A to effect Corporatisation and Demutualization .
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MUTUAL FUNDS
To protect the interest of the investors, SEBI formulates policies and
regulates the mutual funds. It notified regulations in 1993 (fully revised in
1996) and issues guidelines from time to time. MF either promoted by
public or by private sector entities including one promoted by foreign
entities are governed by these Regulations.
Increase of load more than the level mentioned in the offer document is
applicable only to prospective investments by the MFs. For original
investments, the offer document has to be amended to make investors
aware of loads at the time of investments.
20
scheme
and
in
case
of
change
in
sponsor.
24
25
26
27
POWERS
For the discharge of its function efficiently, SEBI has been invested with
the necessary powers which are:
To approve by-laws of stock exchanges.
To require the stock exchange to amend their by-laws.
Inspect the books of accounts and call for periodical returns from
recognised stock exchanges.
Inspect the books of accounts of financial intermediaries.
Compel certain companies to list their shares in one or more stock
exchanges.
Levy fees and other charges on the intermediaries for performing
its functions.
Grant license to any person for the purpose of dealing in certain
areas.
Delegate powers exercisable by it.
Prosecute and judge directly the violation of certain provisions of
the companies Act.
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SEBI COMMITTEES
Technical Advisory Committee.
Committee for review of structure of market infrastructure
institutions.
Members of the Advisory Committee for the SEBI investor
protection and education fund.
Takeover Regulations Advisory Committee.
Primary Market Advisory Committee (PMAC).
Secondary Market Advisory Committee(SMAC)
Mutual Fund Advisory Committee.
Corporate Bonds & Securitization Advisory Committee
Takeover panel.
SEBI committee on Disclosures and Accounting Standards
(SCODA).
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TAKEOVER
Imposing of curbs on off-market deals.
i.
ii.
iii.
Reducing the time limit for completion of the open offer from 4
months at present to 3 months.
FAQs on Takeover :
What is meant by Takeovers & Substantial acquisition of
shares?
When "acquirer" takes the control of the "target company", it is
termed as Takeover. When it acquires "substantial quantity of shares
or voting rights" of the Target Company, it results into substantial
acquisition of shares.
30
31
33
Pension Funds
Mutual Funds
Investment Trust
Endowment Funds
University Funds
Nominee Companies
Trustees
Bank
34
35
SEBI will issue a no-objection letter in this regard after recording the
request of name change. The information regarding name change should
be submitted immediately after the change has taken place in the home
country and the requisite approval from the home regulator (if needed)
has to been taken.
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37
38
are
approximately
390 Depository
Facility of nomination;
Transmission
of
securities
is
done
by
DP
eliminating
OPENING OF AN ACCOUNT.
The investor has to approach a Depository Participant and fill up an
account opening form with the support proof of identity and address.
No. The demat account must be opened in the same ownership pattern in
which the securities are held in the physical form. e. g. if one share
certificate is in your individual name and another certificate is jointly
with some other, two different accounts would have to be opened.
41
DERIVATIVES
Derivatives trading take place under the Securities and Exchange Board
of India Act, 1992 and the framework including suggestive bye-law and
its Clearing Corporation/House has been laid down by Dr. L.C. Gupta
Committee, constituted by SEBI.
Some of the eligibility conditions
42
of
BSE
and
the
F&O
Segment
of
FAQs on Derivatives:
What derivative contracts are permitted by SEBI?
43
NSE.
10% of the number of shares held by non-promoters i.e. 10% of the free
float, in terms of number of shares of a company.
It is also specified that when the total open interest in a contract reaches
80% of the market wide limit in that contract, the exchanges would make
the price scan range and volatility scan range (specified) double. The
exchanges has to continuously review the impact of measures and take
further proactive risk containment measures as may be appropriate,
including, further increases in the scan ranges and levying additional
margins.
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Investment
Scheme
forms
Collective
Investment
Management Company.
These companies can raise funds from the public by launching schemes
which has to be credit rated and appraised by appraising agencies. It also
has to be approved by the Trustee and contain disclosures according to
the Regulations to enable investors to make informed decision. The offer
document to the public is issued after 21 days of filing document to SEBI
and in return no modifications are suggested by SEBI. The CIS cannot do
such.
SEBI is not responsible either for the financial soundness of any scheme
for which the offer document has been filed or for the correctness of the
statements made or opinions expressed in the offer document. CIMC has
to ensure the disclosures.
FAQs on Collective Investment Schemes:
What is the procedure for winding up of an existing Collective
Investment Scheme?
Existing CIS has to send an information memorandum to the investors
who have subscribed to the schemes, detailing the state of affairs of the
scheme, the amount repayable to each investor and the manner in which
such amount is determined.
46
If positive consent is not received from more than 25% of total existing
investors, the scheme will wound up and payment made within three
months to investors from the date of the information memorandum.
Is there some institution, which guarantees repayment of
money now?
No. SEBI do not guarantee or undertake repayment to the investors.
Whom to approach for Grievance Redressed?
To CIS. If not satisfied then they may write to SEBI. Investors can also
approach district consumer redressal forums in case entities fail to honour
their commitments or for any deficiency in service. If the cheques are
bounced, investors can move the courts under section 138 of the
Negotiable Instruments Act as the right to file criminal complaint
exclusively vests with the beneficiary of the cheque.
Investors should further note that wherever they do not have a right to the
land or to the produce arising out of the land such investment may be a
deposit and where a company fails to repay the deposits, it attracts the
provisions of section 58A of the Indian Companies Act, 1956. SEBI has
no jurisdiction over such deposits.
47
Moreover, SEBI may, in the interests of the securities market and the
investors, initiate criminal prosecution under Section 24 of the SEBI Act,
apart from passing of directions such as
Stock exchange,
49
51
The Board of SEBI in its meeting held on May 11, 1998 accepted the
recommendations and approved the introduction of derivatives trading in
India beginning with Stock Index Futures. The Board also approved the
"Suggestive Bye-laws" recommended by the LC Gupta Committee for
Regulation and Control of Trading and Settlement of Derivatives
Contracts. SEBI circulated the contents of the Report in June 98.
52
GOALS OF REGULATIONS:
Regulatory Objectives LCGC believes that regulation should be designed
to achieve specific and well-defined goals. It is inclined towards positive
regulation designed to encourage healthy activity and behaviour.
The
important
recommendations
of
L.C.Gupta
Committee
are
53
Sales Practices:
Trading Parameters:
Brokerage:
Other Recommendations:
55
Legal Amendments:
56
COMPLAINT FORMS
From Shares to Debentures, from Mutual Funds to Custodians, from
Brokers to Merchant Bankers from Securities Exchanges to Depositories,
anything of everything if you have complaint, please click to the
following selective table and leave your grievances here.
Type-I
Type-II
Non-receipt of dividend
Type-III
Type-IV
Debentures
Type-V
Type-VI
Type-VII
Capital
Investors/
Foreign
Institutional
Type-X
Securities
Exchanges/
Clearing
and
Settlement
Organizations/ Depositories
Type-IX
Derivative Trading
Type-XI
Corporate
Governance/
Corporate
Restructuring/
57
Fresh registration of
30 days -
depository/depository
participants/custodians.
Renewal of registration/
30 days -
cancellation surrenders of
depository/depository
participants/custodians.
Activities
Fresh registration
Renewal of registration
Activities
Fresh registration
21 Days.
Renewal of registration/
21 Days.
cancellation.
Observations on the offer
21 days
documents.
Activities
21 days
Rating Agency
61
21 days
30 days
30 days
Brokers
Rule 4 ( c ) approvals for
30 days
brokers
Cancellation/surrender of
30 days
Fresh registration
Renewal of registration/
cancellation.
Processing of applications for
15 days
21 days
investor associations
Activities
7 days
Mutual Funds
Applications for foreign
7 days
securities / ADRs/GD Rs
Fresh registration
21 days
21 days
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21 days
documents.
Activities
Fresh registration of
21 days
intermediaries
Renewal of registration/
21 days
cancellation.
Observations on the offer
documents.
SEBI.
21 days
Takeovers Division
documents.
SEBI
Disposal of an application
60 days
20 days
alleged violations
Disposal of a report submitted
20 days
u/r 3(4)
Activities
All Divisions
63
64
is an on-going process, the trade matching process for auction starts after
the auction.
Base Price:
The price of a security at the beginning of the trading day which is used
to determine the Day Minimum/Maximum and the Operational ranges for
that day.
Batch:
A period in the trading day for the different markets. Order entry,
matching, inquiries and other functions at the workstation are not allowed
during this period. The system maintains files and trading parameters and
downloads the reports of the trading members during this period and
makes the system available for next day.
Branch Order Value Limit:
A limit placed on the daily aggregate value of orders entered by dealers
or the Branch Manager. Orders entered by dealers or the Branch Manager
with value exceeding the Order Value Limit for the branch are not
allowed by the system.
Broadcast Circuit:
This is a virtual circuit through which the system can send messages to all
workstations. In this mode, the system does not await the response from
the workstations.
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Buyer:
The trading member who has placed the order for the purchase of the
securities.
Closing Price:
The trade price of a security at the end of a trading day. Based on the
closing price of the security, the base price at the beginning of the next
trading day is calculated.
Competitor:
The auction participant on the same side of the Initiator's order. If the
Initiator is a buyer then the competitor enters buy orders for the same
security.
Control User:
An employee of the exchange who is a user of the Capital Market system
having special control privileges. The control user can alter the master
files, trading parameters and also perform market monitoring and control
operations.
Counterparty:
When a trading member enters an order, any other trading member with
an order on the opposite side is referred to as the counterparty.
Day Minimum/Maximum Range:
The minimum/maximum price range for a security on a trading day. Buy
orders outside the Maximum of the range and sell orders outside the
66
Minimum of the range are not allowed to be entered into the system. It is
calculated as a percentage of the Base price.
Day Orders:
If any quantity of a Day order is left untraded, the order is not cancelled
by the system until the end of the trading day.
Dealer:
A user belonging to a Trading Member. Dealers can participate in the
market on behalf of the Trading Member.
Derivatives:
Derivatives, such as options or futures, are financial contracts which
derive their value off their "underlying" asset. For examples, wheat
farmers may wish to contract to sell their harvest at a future date to
eliminate the risk of a change in prices by that date. Such a transaction
would take place through a forward or futures market.
This market is the "derivative market", and the prices on this market
would be driven by the spot market price of wheat which is the
"underlying". The terms "contracts" or "products" are often applied to
denote the traded instrument.
Forward contract:
In a forward contract, two parties agree to do a trade at a future date, at a
stated price and quantity. No money changes hands at the time the deal is
signed.
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Freeze:
Orders entered into the system with price outside the Operational range
and orders with quantity greater than the Order Quantity Freeze
percentage is sent to the Exchange for approval.
Good Till Cancelled (GTC) orders:
If any quantity of a GTC order is left untraded, the order is not cancelled
by the system until it is cancelled by the dealer or after a parameterized
number of days.
Good Till Date (GTD) orders:
If any quantity of a GTD order is left untraded, the order is not cancelled
by the system until the Good Till Date mentioned in the order.
Immediate or Cancel (IOC):
When a IOC order is entered, the system will immediately try to match
this order as much as possible and cancel the remaining quantity, if any at
all. In this attempt, the order might find a partial match.
Initiator:
The trading member who starts the auction. The Initiator can be a buyer
or a seller.
Interactive Circuit:
This is a virtual circuit through which the system can send messages to a
specific workstation and vice - versa.
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Limit order:
Is an order for which the price (limit price) has been specified at the time
of making the order entry.
Market order:
Is an order for which no price has been specified at order entry.
Matching:
When a buy and a sell order satisfy the price - time priority, they can
result in a trade. This process is called as matching. The match can be full
or partial depending on the order conditions.
Minimum Fill (MF):
This is one of the special conditions where a minimum quantity is
specified for an order. The quantity of the trade involving an order with a
MF attribute should at least be this minimum quantity specified.
Negotiated Trade:
Two Trading members can negotiate a trade outside the system. However
this trade is accepted by the system only if Control approves. Both the
parties enter each side of their trade in the system specifying each other
identity.
Participant:
An entity responsible for the settlement of a trade is deemed to be a
participant. Every order in the trading system has a participant associated
with it.
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Pre-Open:
A time period in the trading day for the Normal market. Trading members
are allowed to enter orders during this period. These orders in the system
take part in the algorithm for the calculation of the opening price during
this period.
Print/Report Circuit:
This is a virtual circuit through which the system can download report
data to all workstations. In this mode, the system does not await the
response from the workstations.
Regular Lot:
The minimum quantity of an order entered into the Normal, Spot and
Auction markets. The order that does not carry any special conditions
(Minimum Fill, All or None) is treated as a regular lot order.
70