Securities Contract Regulations Act 1956

It explains SCRA

1. The Securities Contracts (Regulation) Act, 1956

2. SCRA 1956: The Securities Contracts (Regulation) Act, 1956, extends to the whole of India and came into force on February 20, 1957. The Act defines various terms in relation to Securities and provides the detailed procedure for the Stock exchanges to get recognition from Government/SEBI, procedure for listing of securities of companies and operations of the brokers in relation to purchase and Sale of Securities on behalf of investors. 2A. Interpretation of certain words and expressions . Words and expressions used herein and not defined in this Act but defined in the Companies Act, 1956 or SEBI act 1992 or the Depositories Act, 1996 shall have the same meanings respectively.

3. SCRA 1956: Definitions 2(h) Securities include - shares, scrips, stocks , bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or a pooled investment vehicle or other body corporate; - derivative ; - units or any other instrument issued by any Collective Investment Scheme to the Investors in such schemes; - Security receipt as defined in clause (zg) of Section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; - units or any other such instrument issued to the investors under any mutual fund scheme ( include any ULIP or any such instrument issued under Insurance Act, 1938 ) units or any other instrument issued by any pooled investment vehicle Government securities Rights or interest in securities SEBI, IRDA: stop fighting, start talking - Hindustan Times

4. SCRA 1956: Definitions ( Marketable securities ) Whether the hybrid OFCDs fall within the definition of "Securities" within the meaning of Companies Act, SEBI Act and SCRA so as to vest SEBI with the jurisdiction to investigate and adjudicate. Observations of SC: The Supreme Court held that although the OFCDs issued by the two companies are in the nature of "hybrid" instruments, it does not cease to be a "Security" within the meaning of Companies Act, SEBI Act and SCRA. It says although the definition of "Securities" under section 2(h) of SCRA does not contain the term "hybrid instruments", the definition as provided in the Act is an inclusive one and covers all "Marketable securities". As in this case such OFCDs were offered to millions of people there is no question about the marketability of such instrument. And since the name itself contains the term "Debenture", it is deemed to be a security as per the provisions of Companies Act, SEBI Act and SCRA.

5. SCRA 1956: Definitions Securitization Process:

6. SCRA 1956: Definitions 2 (aa) “corporatisation” means the succession of a recognised stock exchange, being a body of individuals or a society registered under the Societies Registration Act, 1860 (21 of 1860), by another stock exchange, being a company incorporated for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities carried on by such individuals or society; 2 (ab) “demutualisation” means the segregation of ownership and management from the trading rights of the members of a recognised stock exchange in accordance with a scheme approved by the Securities and Exchange Board of India;

7. RECOGNISED STOCK EXCHANGES: Section 3 - Application for recognition of stock exchanges. Section 4 - Grant of recognition to stock exchanges. Section 5 - Withdrawal of recognition

8. Power of Central Government : Section 11 - to supersede governing body of a recognised stock exchange Section 12 - Power to suspend business of recognised stock exchanges Section 12A - Power to issue directions

9. SAT gives ICEX another chance, quashes withdrawal of permanent r ecognition The Securities Appellate Tribunal (SAT) quashed an order passed by SEBI. The tribunal held that the exchange should be given another chance to revive. SAT pulled up SEBI over its conclusion that exit of top officials like the managing director, chief executive and public interest directors would necessarily lead to closure of the exchange. “Merely because the MD, CEO and PIDs have left the company it does not mean that the exchange cannot revive itself. The ship may be sinking, but the leaks could be plugged,” said SAT in an order. “The rats leave a sinking ship; MDs, CEOs and PIDs see their own interest and leave for greener pasture, but this does not deter a company and its shareholders from making continuous efforts to revive,”

10. SEC 10 - Power of SEBI to make /amend bye- laws of Stock Exchanges. SEBI to make /amend bye- laws - on a request in writing received from the governing body of SE or - on its own motion . Bye-laws so made or amended shall be published in the Gazette of India and also in the Official Gazette of the State in which the principal office of the recognised stock exchange is situate. Governing body of a recognized stock exchange objects to any bye- laws made or amended under this section within two months of the publication after giving an opportunity to the governing body of the stock exchange to be heard in the matter

11. Section 17A - Public issue & listing of securities referred to section 2(h) (ie) no securities [under 2(h)(ie)] shall be offered to the public or listed on any recognised stock exchange unless the issuer fulfils such eligibility criteria and complies with such other requirements Every issuer shall make an application, before issuing the offer document to the public, to one or more recognised stock exchanges for permission to list on SE. If permission has not been granted or refused by the SE, the issuer shall repay all Moneys within eight days after the issuer becomes liable to repay Penalty- every director or trustee after the expiry of the eighth day, be jointly and severally liable to repay that money along with interest at the rate of 15% p.a. Explanation- Public holidays under the Negotiable Instruments Act, 1881 shall not be counted in 8 days. All the other provisions relating to listing of securities of a public company on a recognised stock exchange shall, mutatis mutandis, apply to the listing of the securities by a special purpose distinct entity.

12. SCRA - 1956 Stock exchanges other than recognised stock exchanges prohibited Prohibition of options in securities Conditions for listing 21A. Delisting of securities Right of appeal against refusal of stock exchanges to list securities of public companies 22A. Right of appeal to SAT against refusal of stock exchange to list securities of public companies 22B. Procedure and powers of Securities Appellate Tribunal

13. SCRA - 1956 22C. Right to legal representation 22D. Limitation 22E. Civil court not to have jurisdiction 22F. Appeal to Supreme Court

14. PENALTIES AND PROCEDURE Section Contravention Penalty 23A(a) Any person who fails to furnish any information, document, books, returns or report to the recognised stock exchange or to the SEBI, fails to furnish the same within the time Specified therefor in the listing agreement or conditions or bye- laws of the recognised stock exchange or the Act or rules made thereunder, or who furnishes false, incorrect or incomplete information, document, books return or report. at least Rs. 1 lakh may extend to Rs. 1 lakh per day during which such failure continues, subject to a maximum of Rs. 1 crore. 23A(b) Any person who fails to maintain books of account or records, as per the listing agreement or conditions, or bye- laws of a recognised stock exchange 23B Any person who fails to enter into an agreement with clients 23C Failure by a stock broker or sub- broker or a listed company or proposed listed company to redress investors grievances within the time stipulated by SEBI or recognised stock exchange

15. Section Contravention Penalty 23D Failure to segregate securities or money of client or clients or using the securities or money of client for self- use or for any other client At least 1 lakh rupees but may extend to rupees 1 crore 23E Failure to comply with the provisions of listing conditions or delisting conditions or grounds or breach thereof is committed, by a company or a person managing collective investment scheme or mutual fund or real estate investment trust or infrastructure investment trust or alternative inveStment fund. At least Rs. 5 lakh but may extend to Rs. 25 crores 23F If any issuer make an excess dematerialisation or delivery of unlisted securities 23G Failure by recognised stock exchange to furnish periodical return or furnish false, incorrect or incomplete periodical returns to SEBI or fails or neglects to make or amend its rules or bye- laws as directed by SEBI or fails to comply with the directions of SEBI PENALTIES AND PROCEDURE

16. Section Contravention Penalty 23GA Where a stock exchange / a clearing corporation fails to conduct its business with its members /any issuer/ its agent/ any person associated with the securities markets in a manner not in accordance with the rules/ regulations made by the SEBI and the directions issued by it under this Act Penalty at least Rs. 5 crore rupees which may extend to Rs. 25 crore or three times the amount of gains made out of such failure, whichever is higher. 23H Whoever fails to comply with any provision of this Act, the rules of articles or bye- laws or the regulations of recognised stock exchange or directions issued by SEBI for which no separate penalty has been provided At least 1 lakh rupees which may extend to rupees 1 crore PENALTIES AND PROCEDURE

17. CASE STUDY Karvy Stock Broking Limited (KSBL) vs. National Stock Exchange of India (NSE) KSBL: - The appeal was filed by the KSBL (appellant) seeking quashment of the NSE order/circular dated December 2, 2019. - Vide the said circular respondent NSE had suspended the present appellant from its membership due to the alleged non compliance of the regulatory provisions of the Exchange. NSE : - Learned counsel for the respondent raised objection on the maintainability of the present appeal on the ground that the equally efficacious remedy is available to the appellant under NSE Rules. - He therefore submitted that the appeal be not entertained.

18. CASE STUDY Karvy Stock Broking Limited (KSBL) vs. National Stock Exchange of India (NSE) SAT ORDER - The Rules are framed by respondent NSE in exercise of the powers of the Section 9 of the SCRA. - The appellant has equally efficacious remedy to challenge the impugned order before the relevant authority of the respondent NSE. SAT did not find any reason to entertain the appeal. - The appeal is disposed of. Appellant would be at liberty to file an appeal as provided by Rule 13A(d) of the NSE Rules.

19. "The Securities and Exchange Board of India has withdrawn the recognition granted to the Indian Commodity Exchange Limited, vide notification dated May 18, 2022," according to a press release issued by the regulator. The withdrawal of recognition follows an order passed by Sebi on May 10 after finding the bourse non-compliant on several grounds like net worth and infrastructural requirements. Consequent to the withdrawal, ICEX has been directed to transfer the money available in the Investor Protection Fund and Investor Services Fund of ICEX to Sebi's Investor Protection and Education Fund. Sebi withdraws permanent recognition granted to ICEX