SEBI ACT 1992

it is word document of SEBI ACT 1992

1. MAHARSHI DAYANAND COLLEGE

BACHELOR OF FINANCIAL MARKETS

T.Y.F.M

SEM – V

PROJECT ON:
SECURITIES AND EXCHANGE BOARD
OF INDIA ACT, 1992

2. SUBIMITTED BY-

NAME ROLL NO
ONKAR BIRJE 05
VINAYAK HALAPETI 13
PRITEE PINGALE 38
SAIPARESH WALAWALKAR 52
SOMESH ZUJAM 54

3. Contents
 Introduction
 Board
 Objectives
 Powers of SEBI
 Functions
 Role of SEBI
 SEBI guidelines
 Departments under SEBI
 SMAC
 Relation with the centralgovernment
 Current plans
 Amendment bill
 Major Challenges faced by SEBI

4.  INTRODUTION:
 The Securities and Exchange Board of India was established by the
Government of India on 12th April 1988 as an interim
administration body to promote orderly and healthy growth of
the securities market and for investor protection.
 It was functioned under the overall administrative control of the
Ministry of Finance of the GOI.
 The SEBI was given the statutory powers on 30th 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.

5.  The Board Members:

6.  OBJECTIVES:
The primary objective of SEBI is to promote healthy and orderly
growth -of the securities market and secure investor protection.
The objectives of SEBI are as follows:
1. Regulation of Stock Exchange:
The first objectives of SEBI is to regulate stock exchange
so that efficient services may be provided to all the parties
operating there.

2. Protection to the Investors:
The capital market is meaningless in the absence of the
investors. Therefore, it is very important to protect the
interest of investors.
The protection of the interest of the investors means
protecting them from the wrong information given by the
companies in their prospectus, reducing the risk of delivery
and payment, etc. Hence, the foremost objective of the SEBI
is to provide security to the investors.

7. 3. Checking the insider Trading:
Insider trading means the buying and selling of
securities by those people’s directors promoters, etc. who
have some secret information about the company and who
wish to take advantage of this secret information.
This hurts the interests of the general investors. It was very
essential to check this tendency. Many steps have been
taken to check inside trading through the medium of the
SEBI.

4. Control over Brokers:
It is important to keep an eye on the activities of the
brokers and other middlemen in order to control the capital
market. To have a control over them, it was necessary to
establish the SEBI.

8.  POWER OF SEBI
Power vested in SEBI under the SEBI Act are:
1) Relating to stock exchange and intermediaries:
SEBI has wide power regarding the stock exchange and
intermediaries dealing in securities. It can ask information
from the stock exchanges and intermediaries regarding their
business transactions for inspection/scrutiny and other
purpose.

2) Relating to monetary penalties:
SEBI has been empowered to impose monetary penalties
on capital market intermediaries and other participants for a
range of violations. It can even impose suspension of their
registration for a short period.

3) To initiate actions relating to function assigned
SEBI has a power to initiate actions in regard to function
assigned. For example, it can issue guidelines to different
intermediaries or can introduce specific rules for the
protection of interests of investors.

4) Under Securities Contracts Act:
For effective regulation of stock exchange, the Ministry of
Finance issued a Notification on 13September, 1994
delegation several of its powers under the securities
contract Act to SEBI.

9.  FUNCTIONS:

Section 11 of the SEBI Act, there are mainly two types of
functions. They are:

1.Regulatory Functions
2.Developmental Functions

1. Regulatory Functions
o Regulating stock exchanges and any other securities markets.
o Registering and regulating intermediaries
o Promoting and regulating self-regulatory organizations
o Prohibiting insider trading
o Regulating substantial acquisition of share and take over of
companies.
o Levying fees or other charges for carrying out the purpose of this
section.

2. Developmental Functions
• Promoting investor’s education
• Training of intermediaries
• Conducting research and publishing information useful to all
market participants.
• Promotion of fair practices
• Promotion of self regulatory organizations

10.  ROLE OF SEBI:

1. To make rules and regulation:
It has power to makes rules and regulation for controlling the
stock exchanges in India.

2. To educate brokers and investors:
It provides education to brokers and investors about stock market

3. To encourage investor:
It encourage investor to invest in stock market.

4. Safeguard the investors interest:
It provides and increase safeguards the investors’ interest.

5. Development of stock and share markets:
SEBI has taken initiate for development of stock and share
markets in India

6. To stop all fraud and malpractices
The main role of SEBI is stopping all fraud and malpractices going
in stock exchange.

7. Provide license to brokers
SEBI has power to provide license to broker and may cancel if any
default.

11.  SEBI Guidelines:

SEBI has brought out a number of guidelines separately, from
time to time, for primary market, secondary market, mutual
funds, merchant bankers, foreign institutional investors, investor
protection etc.

1. Guidelines for Primary Market.

(a). New Company:
A new company is one, which has not completed 12 months
commercial production and does not have results. And the
promoters do not have a track record. These companies have to
issue shares only at par.

(b).New Company set-up by Existing Companies:
When a new company is being set-up by existing companies with
a five year track record of consistent profitability and a
contribution of at least 50% in the equity of new company, it can
issue its shares at premium.

(c).Private and closely held companies:
These having a track record of consistent profitability for at least
three years, shall be permitted to price their issues freely.The
issue price shall be determined only by the issues in consultation
with lead managers ton the issue.

12. (d). Existing Listed companies:
It will be allowed to raise fresh capital by freely pricing expanded
capital provided the promoter’s contribution is 50%on first
Rs.100crores of issue, 40% on next Rs.200 crores, 30% on next
Rs.300 crores and 15% on balance issue amount.

2. Guidelines for Secondary Market:
I. Stock Exchange:
(a) Board of Directors of stock exchange has to be reconstituted so as
to include non-members, public representatives, government
representative to the extent of 50% of total number of members.
(b)Capital adequacy norms have been laid down for members of
various stock exchanges depending upon their turnover of trade and
other factors.
(c). Working hours for all stock exchanges have been fixed uniformly.
(d). All the recognized stock exchanges will have to inform about the
transaction within 24 hours.
II. Brokers:
(a). Registration of brokers and sub-brokers is made compulsory.
(b). Compulsory audit of broker’s book and filing of audit report with
SEBI have been made mandatory.
(c). In order to ensure that brokers are professionally qualified and
financially solvent, capital adequacy norms for registration of brokers
have been evolved.

13. (d). To bring about greater transparency and accountability in the
broker-client relationship, SEBI has made it mandatory for brokers to
disclose transaction price and brokerage separately in the contract
notes issued to client.
(e). No broker is allowed to underwrite more than 5% of public issue.

3.Foreign Institutional Investors(FII)
(a).Allowed to invest:
Foreign institutional investors have been allowed to invest in all
securities traded in primary and secondary markets.
(b). Restriction on volume:
There would be no restriction on the volume of investment for
the purpose of entry of FIIs.
Holding of single FII will not exceed the ceiling of 5% of equity capital
Tax rate – 10% on large capital gain, 30% on short term capital gains 20
% on dividend

14. 4.Guidelines to issue of Bonus Shares
(a). Provision in the Articles of Association:
There should be a provision in the Articles of Association of the
company for issue of bonus shares.
(b).The bonus is made out of free reserves:
The bonus is made out of free reserves built out of the genuine
profits or share premiums collected in cash only.
(c). Time period of Bonus shares:
No bonus issue can be made within 12 months of any public
issue/rights issue.


5.Guidelines for Companies Act
• Free pricing of issues:
A new issue can be priced freely provided it is backed by
promoters with good track record of at least 5 years.
• Underwriting made mandatory:
The new guidelines issued by SEBI have directed full underwriting
of public issue.
• Issue of shares at par:
A new company with no previous track record will be permitted to
issue capital only at par.

15. 6. Investor protection
• New issues:
SEBI has introduced a code of advertisement for public issues for
ensuring fair and truthful disclosures. In order to reduce the cost
of issue, the underwriting is made optional on certain terms.
• Investor education:
SEBI is aware that investor education is important for his
protection. It encourage the formation of investors associations
that disseminate information through news letters.
• Stock invest:
SEBI has introduce stock invest as a new instruments useful while
submitting application for shares. This new instrument introduced
through the co-operation of banks gives protection to investors as
they get interest on application money till the allotment of shares.

16.  VARIOUS DEPARTMENTS UNDER
SEBI
1. The Primary Market:
It deals with all policy matters and regulatory issues relating to
primary market.
2. The Issue Management and Intermediaries Department:
This department is concerned with inspection of offer documents
and other things like registration, regulation and monitoring of
issue related to intermediaries.
3. The Secondary Market:
It looks after all the policy and regulatory issues for the secondary
market; administration of the major stock exchanges and other
matters related to it.
4. Institutional Investment Department (MF and FII), Mergers and
Acquisition:
It concerned with framing policy for foreign institutional investors.
5. Legal Department (all legal matters):
In addition to this, there are two other departments: They are;
Legal Department and Investigation Department, also headed by
officials of the rank of Executive Directors.

17.  SECURITIES MARKET AWARENESS
CAMPAIGN (SMAC)

SEBI strongly believes that investors are the backbone of the
securities markets. It has launched a comprehensive education
campaign aimed at creating awareness among investor about
securities markets, which has been christened – “SECURITIES
MARKET AWARENESS CAMPAIGN (SMAC).

The Multi-Pronged approach by SMAC:

A. Workshop:
The workshops are aimed at reaching out to the
common investors and are being held primarily in small and
medium towns and cities all over the country. Till date, more
than 2188 workshops have been conducted in around 500
cities/towns across the country.

B. Advertisements:
SEBI has prepared simple “dos and don’ts” for
investors relating to various aspect of the securities market. Till
date, over 700 advertisements relating to various aspects of
Securities Market have appeared in 48 newspapers/magazines.

18. C. Educative Material:
SEBI has prepared a standardized reading material
and presentation material for the workshops. In additional,
reference guides on topics concerning investors have also been
prepared. The reference guides and booklets have been
translated into Hindi and the workshops material has been
translated into 10 major regional languages.

D. Website Dedicated to Investor Education
With a View to make information to the investor
available at one place, this dedicated investor website
(http://investor.sebi.gov.in) has been operationalized.
A simple and effective internet based response to investor
complaints has been set up. On filing of your complaint
electronically, an acknowledgement mail would be sent to your
specified email address and you will be issued a complaint
registration number instantaneously.

19. E. All India Radio
With regard to educating investors through the
medium of radio, SEBI Officials regularly participate in
programmers aired by All India Radio.

F. Cautionary Message on television
With a view of to use the electronic media to reach
out to a larger number of investors, a short cautionary message ,
in the form of a 40 seconds filmlet, has been prepared and the
same is being aired on television.

20.  RELATION WITH THE CENTRAL
GOVERNMENT
 The activities of SEBI are financed by grants from Central
Government, in addition to fees, charges etc. collected by SEBI.

 The fund called SEBI General Fund is set up, to which, all fees,
charges and grants are credited.

 This fund is used to meet the expenses of the Board and to pay
salary of staff and members of the body

 The Central Government has power to issue directions to SEBI
Board, supersede the Board, if necessary and to call for returns
and reports as and when necessary.

21.  Current Plans of SEBI

a) To impose restrictions on willful defaulters:
SEBI is looking to impose restrictions on such entities on raising
funds from the capital market.

b) overhaul of private investment fund regulation:
SEBI plans to overhaul its regulation of investment funds that pool
private capital from institutions and high net worth investor.

c) To reduce listing time period for firms:
SEBI has plan to reduce the time duration for a company to start
trading on stock exchanges after initial public offer (IPO)

d) Risk profiling of listed firms intermediaries:
To help it better regulate the marketplace and strengthen its
surveillance system, SEBI plans to set up a mechanism for “risk
profiling” of listed companies and various market intermediaries,
including stock brokers.

e) To introduce mutual fund retirement plans with tax benefits:
SEBI has proposed that a long term product, such as mutual fund
linked retirement plans, with tax incentive can play a significant
role in mobilizing household saving to the capital markets.

22.  AMENDMENT BILL

SEBI AMENDMENT BILL, 2013:-
 SEBI Amendment Bill, 2013 was passed by the RajyaSabha
on 5
th
September 2013
 The Bill will widen the area for eligible candidates for the
post of presiding officer at the Securities Appellate
Tribunal.
 The Bill was already passed by the LokSabha on 27
th

August 2013.
 The Bill extends eligibility criteria for SAT Presiding
Officer’s role & includes sitting or retired Judges of a High
Court with a minimum service of 7 years.
 The SAT is a three members appellate authority headed by
a Presiding Officer. The Presiding Officer has to be a sitting
or retired Supreme Court Judge or a sitting or retired Chief
Justice of a High Court.

23.  Major Challenges faced by SEBI

 Cross Border Trading
SEBI has signed contract with International Organization of
Securities Commissions(IOSCO), has passed a resolution asking
its members to put in place proper checks for cross border
misconduct in their respective jurisdictions

 Issuers & Investors are expanding their horizons beyond
their home markets:
In today’s Globalized world, issuers and investors optimized
their fund by investing their money in other country market.

 Investors becoming much more demanding:
Investors who were unaware of stock market and demerger
becoming effective buy shares at higher levels and lost money
when price crashed.

 Penetration of mutual fund in India:
In India mutual fund penetration is low. In urban just 9% of the
households invest in mutual fund.

24. • REGIONAL OFFICES
1. New Delhi
2. Kolkata
3. Chennai
4. Ahmadabad

• LOCAL OFFICES
1. Jaipur
2. Bangalore
3. Guwahati
4. Bhubaneswar
5. Patna
6. Kochi
7. Chandigarh


SEBI Bhavan, Mumbai Headquarters (in BandraKurla Complex)

25.  REFERANCES

• www.wikipedia.org

• www.sebi.gov.in

• Regulation of Securities Markets Book – Abdul Kadir Khan

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