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1. FINANCIAL MARKET AND SERVICES SBV OPEN - O nline P rogram for E ducatio N

2. Introduction The Securities and Exchange Board of India (SEBI) Act, 1992 was enacted to regulate the securities market in India. Its main objectives are to protect investors , promote development of the securities market , and ensure fair and transparent trading practices . SEBI plays a critical role in overseeing capital issues, pricing of securities, insider trading, and investor protection , making the financial market safe and efficient for all stakeholders

3. Capital Issues The Securities and Exchange Board of India ( SEBI ), established under the SEBI Act, 1992, is the regulator of the securities market in India. One of its important functions is to regulate capital issues – the process by which companies raise funds from the public through issue of securities (shares, debentures, bonds, etc.).

4. SEBI Guidelines on Capital Issues 1. Eligibility Norms for Public Issues A company must have a track record of profitability (at least 3 years) or net worth requirements. New companies without track record can issue securities only if appraised and backed by financial institutions. Minimum promoter’s contribution (usually 20%) is compulsory. 2. Pricing of Issues Fixed Price Issue: Company decides issue price in advance and discloses it in the prospectus. Book Building Method: Price is discovered through bids received from investors within a price band. SEBI ensures fair disclosure of basis of issue price in the offer document. 3. Disclosure Norms (Prospectus Requirements) Full and true disclosure of financials, risk factors, objects of the issue, management details, and pending litigations. Prospectus must be vetted by SEBI before circulation. Misstatement or suppression of facts attracts penalties. 4. Lock-in Requirements Promoters’ contribution is locked-in for a minimum period (generally 3 years). Prevents promoters from offloading shares immediately after issue. 5. Bonus Issues Must be made from free reserves or share premium. Cannot be issued in lieu of dividends. Fully paid-up shares only (no partly paid).

5. Insider Trading The Securities and Exchange Board of India (SEBI) Act, 1992 was enacted to regulate the securities market and protect investors.One of the most important aspects is the prohibition of insider trading , which ensures fairness and transparency in the securities market.

6. SEBI Guidelines on Insider Trading Prohibition No insider should deal in securities based on unpublished price-sensitive information (UPSI) . Disclosure Company directors, employees, and promoters must disclose their shareholding and any changes. Code of Conduct Listed companies must frame an internal code of conduct to regulate insider trading. Trading Window Companies should close the trading window during sensitive events (like results, mergers, takeovers). Information Sharing UPSI should not be shared unless it is for legitimate business purposes . Penalty If someone is caught, SEBI can impose: Fine up to ₹25 crores or 3 times the profit gained , whichever is higher. Criminal liability (imprisonment up to 10 years ).

7. Investor Protection SEBI ensures that investors are safeguarded through transparency, education, and grievance redressal. Guidelines: 1. Disclosure and Transparency Companies must give full, true, and correct information to investors. Prospectus, annual reports, and financial statements must be clear and not misleading. 2. Fair Practices in Issue of Securities Companies cannot mislead investors with false promises. SEBI regulates the pricing of new issues and ensures fair allotment of shares. 3. Prevention of Fraud and Malpractices Insider trading and unfair trade practices are strictly prohibited. Brokers and intermediaries must follow SEBI’s code of conduct. 4. Grievance Redressal Investors can approach SEBI if they face fraud, delay in transfer of shares, non-receipt of dividends, etc. SCORES platform (SEBI Complaints Redress System) helps investors register complaints online. 5. Investor Education and Awareness SEBI conducts awareness campaigns, workshops, and publishes educational material. Aim: to make investors understand their rights, risks, and responsibilities.

8. Pricing of Securities Pricing plays a vital role in ensuring market fairness and protecting investors. Guidelines: Book Building Method: SEBI allows book-building to arrive at market-driven prices for IPOs. Minimum Issue Price: Companies must justify the issue price based on valuation and earnings. Transparency: Offer documents must clearly disclose the basis of pricing, expected returns, and associated risks. SEBI strictly prohibits price manipulation to protect the interests of retail and institutional investors. Pricing disclosure: New SEBI rules require companies to clearly explain in their prospectus how they arrived at the issue price (based on factors like earnings, industry norms, etc.)

9. Conclusion The SEBI Act provides a comprehensive framework for regulating the Indian securities market. By ensuring transparent capital issues, fair pricing of securities, prohibition of insider trading, and strong investor protection , SEBI enhances investor confidence and promotes a robust and efficient financial market.

10. THANK YOU