The Securities Contracts (Regulation ) Act ,1956

Made by :-Akshay Agarwal

INTRODUCTION
Stock market plays a significant role in development of the economy Stock market facilities mobilizations of funds from small savings of investors and channelize these resources into various departments needs of various sectors of the economy Thus stock market facilities transactions in securities . In order to prevent undesirable transaction in securities ,promote healthy stock market . The Securities Contracts (Regulation ) Act ,1956 was enacted by the Parliament Vide Act No.42 .This act is applicable to whole India .

Corporatisation
The Corporatisation intends to make a stock exchange a corporate entity limited by shares. In the new legisatation under section 2 (aa) the term corporatisation has been defined as the sucession of a recognised stock exchange being a body of individual or a society registered under the Societies Registration Act 1860 ,by another stock exchange being acompany incoprporated for the purpose of assisting ,regulating or controlling the business of buying ,selling or dealing in securities carried on by such individual or society

Demutualisation
Demutualisation is the process of seperating the ownership ,trading and managemnt of stock exchange .This process shall prevent conflict of interest , which may arise when stockbroker involved in the managemnt of stock exchange.It is defined under section 2(ab )as the segregation of ownership and management from the trading rights of the members of a recognized stock exchange in accordance with the scheme approved by the Securities and Exchange Board Of India .

Highlights of The Securities Contracts (Regulation ) Act ,1956

The following are the salient features of the new legislation which amemded The Securities Contracts (Regulation ) Act ,1956

1) New definition on Corporatisation and De-mutualisation for the same

Highlights of The Securities Contracts

(Regulation ) Act ,1956 (Cont.)

2) The definitions of securities now include units or any such instruments issued to the investors under any mutual fund scheme. 3) The definitions of securities to include swap ,options and hybrid instruments and other contracts for difference .
4) Central Government to regulate spot transactions

Highlights of The Securities Contracts

(Regulation ) Act ,1956 (Continued)

5) De-listing of securities subject to prior approval of the holder of securities .
6) Establishment of a clearing corporation instead of clearing house as at present. 7) Assests of client to be dealt by the intermediary as directed by the investor .

Highlights of The Securities Contracts

(Regulation ) Act ,1956 (Continued)

8) Empowers SEBI to restrict the voting rights of the shareholders who are also stockbrokers of the recognized stock exchange. 9) SEBI can restrict the right of the shareholder or stockbroker of the recognized stock exchange to appoint representative on the governing body.

Highlights of The Securities Contracts

(Regulation ) Act ,1956 (Continued)

10) Further the SEBI can restrict the maximum number of representative of the broker of the recognized stock exchange to be appointment on the governing body of the stock exchange.
11) Every stock exchange whose scheme for Corporatisation and De-mutualisation has been approved by SEBI ,should ensure that at least 51% of its equity share capital is held ,within 12 months of the SEBI order by the public other than share holder having trading rights.

12) Stock exchanges are allowed to make fresh issue of the equity share to the public or subject to SEBI Regulations in any other manner can increase its equity share capital to fulfill the Norm above 13) New scheme for Penalty .