Click to edit Master subtitle style

Introduction to
SEBI
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 THRUST OF SEBIs

REGULATION OF EQUITY MARKET

ACCESS PRIMARY MARKET INSTRUMENTS

: RESTRICTED : 6/4/12

History :
TheSecurities and Exchange

Board of India was established by the government of India on 12 April 1988 as an interim administrative body to promote orderly and healthy growth of the securities market and for investor protection.
It was to function under the 6/4/12

History :
The SEBI was given a

statutory status on 30 Jan 1992 through an ordinance.

The ordinance was later

replaced by an Act of Parliament known as the Securities and Exchange Board of India Act 1992.
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Reasons for the establishment of SEBI

The capital market had witnessed

a tremendous growth during the 1980s characterized by the increasing participation of the public.
This ever expanding investor

population and market capitalization led to a variety of malpractices on the part of companies, brokers, merchant 6/4/12 bankers, investment consultants

Continued
The glaring examples of these

malpractices include existence of self styled merchant bankers, unofficial private placements, rigging of prices, unofficial premium on new issues, non adherence of provisions of The Companies Act , violation of rules and regulations of stock exchanges and listing requirements, delay in delivering 6/4/12

Continued
The government and the stock

exchanges were rather helpless in redressing the investors problems because of lack of proper penal provisions in the existing legislation.
Therefore the GOI decided to set

up SEBI a separate regulatory body

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PURPOSE & ROLE OF SEBI :

To the issuers it aims to provide

a market place in which they can confidently look forward to raising finances they need in an easy fair and efficient manner.
To the investors it provides

protection of their rights and interests through adequate accurate and authentic information and disclosure of 6/4/12 information on a continuous

Continued
To the intermediaries it offers a

competitive , professionalized and expanding market with adequate and efficient infrastructure so as to render better service to investors and issuers.

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Objectives:
To regulate stock exchanges and

the securities industry and to promote their orderly functioning.

To guide , educate and protect

the rights and interests of individual investors.

To prevent trading malpractices

and achieve a balance between self regulation by the securities 6/4/12

Continued
To regulate and develop a code

of conduct and fair practices by brokers , merchant bankers with a view to make them competitive and proffesional.

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Functions of SEBI :
REGULATORY

FUNCTIONS
Registration of brokers and

sub brokers and other players in the market

6/4/12 Registration of collective

Regulatory functions :
Prohibition of fraudulent and

unfair trade practices

Controlling insider trading

and takeover bids and imposing penalties for such practices

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Development functions :
Investor education Training of intermediaries Promotion of fair practices and

code of conduct of all SROs

Conducting research and
6/4/12 publishing information useful to

Organization structure
The activities of SEBI have been

divided into 5 operational departments.

Each department is headed by an

Executive Director
apart from its head office at

Mumbai SEBI has regional offices in Kolkata, Chennai, Delhi to attend to investor complaints and liaise with the issuers, 6/4/12

Continued
SEBI has formed 2 advisory

committees
Primary market advisory

committee
Secondary market advisory

committee
These committees are non

statutory in nature and SEBI is

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Power :
SEBI has the right to search and

seizure where just cause can be given. In matters of security trading, SEBI has the power to restrict and allow trading in a given scrip without any external (i.e. judicial or executive) intervention.
Mutual funds cannot invest more

than 10 per cent of the total net 6/4/12 assets of a scheme in the short-

Announcing guidelines for parking of funds in short-term deposits of scheduled commercial banks (SCBs) by mutual funds, the regulator said that investment cap would also take into account the deposit schemes of the bank's subsidiaries.

The SEBI has also defined 'short term' for funds' investment purposes as a period not exceeding 91 days.

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NEW SEBI Click to edit Master subtitle style GUIDELINES

For mutual funds

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The Security Exchange Board Of India ( SEBI) has brought in sweeping changes for the mutual fund industry. The impact of which will be felt on the investor in more ways than one.
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NEW FUND OFFERS :

They willonly be open for 15

days. (ELSS funds though will continue to stay open for up to 90 days) It will save investors from a prolonged NFO period and being harangued by advisors and advertisements. The motivation behind the rule seems to be simple if you can invest anytime, why keep NFO period long? 6/4/12

Earlier, Mutual funds would keep

NFOs can only be invested at the close of the NFO period :

an NFO open for 30 days, and the minute they received their first cheque, the money would be directly invested in the market; creating a skewed accounting for those that entered later since they get a fixed NFO price. The market regulator has corrected this by extending 6/4/12 Application Supported by Blocked

By the ASBA process one can continue to earn interest in the bank account until the NFO closes (remember there is usually no rejection or oversubscription in a mutual fund NFO) which means that the cheque goes for clearing after the NFO has closed irrespective of when it was sent. The fund manager will be able to invest once the NFO closes.
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It will reduce both the quantum

Dividends can now only be paid out of actually realized gains :

of dividends announced, and the measures used by MFs to garner investor money using dividend as a carrot to entice new investors.

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This will help mutual funds

Equity Mutual Funds play a more active role in corporate governance

become more active and not just that, they must reveal, in their annual reports from next year, what they did in each vote.

SEBI has now made it mandatory

for funds to disclose whether they voted for or against moves (suggested by companies in which they have invested) such as mergers, demergers, 6/4/12

1% Management fees removed

Equity Funds were allowed to

charge 1% more as management fees if the funds were no-load; but since SEBI has banned entry loads,this extra 1% has also been removed.

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Regarding the Fund-ofFund

The market regulator states that

information documents that Asset Management Companies (AMCs) have been entering into revenue sharing arrangements with offshore funds in respect of investments made on behalf of Fund of Fund schemes create conflict of interest. Henceforth, AMCs shall not enter into any revenue sharing arrangement 6/4/12

Securities lending by Mutual Funds

Mutual

funds
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The specifications regarding the valuation of the collateral have been prescribed in the guidelines to minimize the risk involved in securities lending transactions. To ensure adequate checks and balances regarding the securities lending transactions, the requirement of reporting to trustees and SEBI have been stipulated.

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Thank You

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