SECURITIES & EXCHANGE BOARD OF INDIA (SEBI)

INTRODUCTION SEBI is the regulator for the securities market in India. It was established in 1988 and became statutory body in April 1992, through the SEBI Act, 1992. SEBI has its Headquarters at Bandra - Kurla complex in Mumbai and has regional offices in New Delhi, Kolkata, Chennai & Ahmedabad. Initially, SEBI was authority without any statutory power. In the year 1995 was given statutory power through an Amendment to SEBI Act, 1992. In 1998, SEBI was constituted as the regulator of Capital Markets in India.

OBJECTIVES OF SEBI

To promote healthy and orderly growth of securities market and to secure investors protection. To protect the interests of investors so that there is steady flow of savings into the capital market. To regulate the securities market and ensure fair practices To promote efficient services by brokers, merchant bankers and other intermediaries so that they become competitive and professional.

SEBI is managed by the following ESTABLISHMENT OF SEBI members: [SEC. 4] Chairman appointed by the Central Govt. Two members officers from the Union Finance Ministry, nominated by the Central Govt. One member from Reserve Bank of India, nominated by Reserve Bank of India. Five members appointed by the Central Govt. out of which three shall be whole time members)

 The general superintendence, direction ESTABLISHMENT OF SEBI and management of the affairs shall [SEC. 4] (cont) vest in the Board of Members. The Chairman shall have powers of general superintendence and direction of the affairs of the Board. The Chairman and five members appointed by the Central Govt. shall be persons of ability, integrity and standing who have shown capacity in dealing with problems relating to securities market or having special knowledge or experience of law, finance, economics, accountancy, administration or any other discipline which shall be useful to the Board, in the opinion of the Central Govt.

TERM OF OFFICE AND CONDITIONS OF SERVICE [SEC. 5]

The term of office and other conditions of service of the Chairman and the five members appointed by the Central Govt. shall be as may be prescribed. The Central Govt. shall have right to terminate the services of the Chairman and 5 members at any time, by giving notice of at least 3 months in writing or salary or allowances in lieu thereof. The Chairman or member shall have the right to relinquish his office, at any time before the end of their term, by giving to the Central Govt. notice of at least 3 months in writing.

REMOVAL OF MEMBER [SEC. 6]

The Central Govt. shall remove a member from office if; He is, or any time has been, adjudicated as insolvent. He is of unsound mind and stands so declared by a competent court. He has been convicted of an offence which, in the opinion of the Central Govt. involves moral turpitude; He has, in the opinion of the Central Govt., so abused his position, as to render his continuation in office, detrimental to public interest. However a member can be removed only after giving him a reasonable opportunity of being heard in the matter.

The Board shall have meetings and observe rules and MEETINGS [SEC. 7 & SEC. 7A] procedure as may be provided in the regulations. The Chairman shall preside over the meetings. If for any reason he is unable to attend the Board meeting, then any other member chosen by the members present shall preside over the meeting. All questions shall be decided by a majority of votes of the members present and voting. If the votes are equal, then the Chairman shall have a second or casting vote. Any member, who is director of a company and has direct or indirect interest in any matter before the meeting, has to disclose nature of his interest at the meeting and this disclosure shall be recorded in the proceedings of the Board. Such member shall not take part in such a matter.

MAIN FUNCTIONS OF SEBI

Regulating the business in stock exchanges; Registering and regulating the working of stock brokers; Registering and regulating the working of depositories; Registering and regulating the working of venture capital funds and collective schemes; Promoting and regulating self-regulatory organizations;

MAIN FUNCTIONS OF SEBI (cont)

Prohibiting fraudulent and unfair trade practices relating to securities market; Prohibiting insider trading in securities; Promoting investors education; Promoting training in intermediaries of securities markets; Regulating substantial acquisition of shares and takeover by companies;

MAIN FUNCTIONS OF SEBI (cont)

Inspection, inquiries, audits and asking of information of the stock exchanges, mutual funds, etc. Taking information or records from banks and others when it is necessary for investigation or inquiry relating to transaction in securities. Taking or giving information to or from authorities in India or abroad for prevention or detection of violations of securities laws.

MAIN FUNCTIONS OF SEBI (cont)

Levying fees or charges. Conducting research Performing such other functions as may be prescribed. Regulating or prohibiting issue of prospectus. Approving collective investment schemes

POWERS OF SEBI

Powers to issue directions. Power of investigation Powers of Civil Court in following matters The discovery & production of books of accounts & other documents Summoning and enforcing attendance and examining persons on oath Inspection of books, registers, records & documents Issuing commissions for examination of witnesses.

POWERS OF SEBI (cont)

For discharge of functions, SEBI is vested with following powers: To approve bye-laws of stock exchanges To require stock exchanges to amend their bye-laws To inspect books of accounts of stock exchanges. Call for records and periodic returns from recognized stock exchanges. Inspect books of accounts of financial intermediaries. Compel certain companies to list their shares in one or more stock exchanges. Control the issue of prospectus of companies.

EXPLANATION

SEBI attends to needs of 3 groups which constitute the market: Issuer of Securities Investors Market Intermediaries SEBI discharges 3 functions simultaneously: Quasi Legislative drafting of regulations QuasiJudicial passing of rulings & orders Quasi-Executive conducting investigation and enforcement action.

 Any person aggrieved by the order of SEBI may file an appeal with SAT SECURITIES APPELLATE within 45 days after receiving copy of the order. TRIBUNAL [SAT] SAT is comprised of a Presiding Officer and two other members appointed by the Central Govt. Presiding Officer should be a sitting or retired Judge of the SC or a sitting or retired Judge of the High Court. It is presently headed by a former Chief Justice of High Court. Members of the Tribunal shall be persons of integrity, ability & standing with expertise in dealing with matters of corporate law, securities law, finance, economics & accountancy.

 Tenure of the Presiding Officer is a term of 5 years or sixty eight years SECURITIES APPELLATE of age, whichever is earlier. TRIBUNAL [SAT] Tenure of the Members is sixty five years or for a period of 5 years, whichever is earlier Any person aggrieved by the order of the SAT can make a second appeal to the Supreme Court of India within 60 days from the date of communication of the order The Appellate Tribunal has powers of the Civil Court and may regulate its own procedure. Appeal can be made to SC only on any question of law.

ACHIEVEMENTS OF SEBI

Making market electronic and paperless Setting up regulations as required by law Doing away with paper certificates that were prone to postal delay, theft and forgery. Passing Depositories Act, 1996 Increased Disclosures to be made by companies.

PENALTIES IMPOSED 1. A penalty of one lakh rupees for each day during which such BY BOARD failure continues or one crore (SEC. 15)

rupees whichever is less may be imposed on any person furnishing false information to the Board 2. A penalty of one lakh rupees for each day during which the such failure continues or one crore rupees whichever is less may be imposed on any person who is registered as an intermediary and refuses to enter into contract as required under the law with clients.

PENALTIES IMPOSED BY BOARD (cont..) (SEC. 15)

3. A penalty of 1 lakh rupees for each day during which such failure continues or 1 crore rupees whichever is less may be imposed on the listed company or intermediary as the case may be when it fails to redress grievance as stipulated by the Board 4. A penalty of one lakh rupees for each day of default or one crore rupees whichever is less may be imposed on any person guilty of certain defaults in case of mutual funds.

PENALTIES IMPOSED 5. A penalty of one lakh rupees BY BOARD (cont..) for each day of default or one (SEC. 15) crore rupees whichever is

less may be imposed on any asset management company that fails to comply with the law. 6. A penalty of one lakh rupees for each day of default or one crore of rupees whichever is less may be imposed on any stock broker failing to comply with the requirements of law.

penalty of twenty- five crores or PENALTIES IMPOSED 7. A three times the amount of profts BY BOARD (cont..) made whichever is higher may be imposed on those involved in insider (SEC. 15)

trading 8. A penalty of twenty five crores or three times the amount of profits made whichever is higher may be imposed for non-disclosure of acquisition of shares and take-over may be imposed on any person who fails to disclose information of acquisition or takeover. 9. A penalty of twenty-five crores or three times the amount of profits made whichever is higher may be imposed on any person guilty of fraud or unfair trade practice. 10. For offences where no specific penalty is mentioned, penalty up to one crore rupees may be imposed.