Sebi Main Project

SECURITIES AND EXCHANGE BOARD OF INDIA

1. INTRODUCTION The SEBI, that is, the Securities and the Exchange Bard ! India, is the natina" regu"atr# $d# !r the securities %ar&et, set u' under the securities and Exchange Bard ! India act, ())*, t +'rtect the interest ! inestrs in securities and t 'r%te the dee"'%ent !, and t regu"ate the securities %ar&et and !r %atters cnnected there-ith and incidenta" t./ SEBI has its head !!ice in 0u%$ai and it has n- set u' regina" !!ices in the %etr'"itan cities ! 1"&ata, De"hi, and Chennai. The Bard ! SEBI c%'rises a Chair%an, t- %e%$ers !r% the centra" gern%ent re'resenting the %inistries ! !inance and "a-, ne %e%$er !r% the Resere Ban& ! India and t- ther %e%$ers a''inted $# the centra" gern%ent. As 'er 'er the the SEBI SEBI act, act, ())*, ())*, the '-er '-er and and !unc !uncti tin nss ! the the Bar Bard d enc% enc%'a 'ass ss the the regu"atin ! Stc& Exchanges and ther securities %ar&ets2 registratin and regu"atin ! the -r&ing stc& $r&ers, su$3$r&ers, $an&ers t an issue 4a 'u$"ic !!er ! ca'ita"5, trustees ! trust trust deeds, deeds, regist registrar rarss t an issues issues,, %ercha %erchant nt $an&ers $an&ers,, under under -rite -riters, rs, 'rt! 'rt!"i "i %anager %anagers, s, inest%ent adisrs and such ther inter%ediaries -h %a# $e assciated -ith the stc& %ar&et in an# -a#2 registratin and regu"atins ! %utua" !unds2 'r%tin and regu"atin ! se"!3 regu"atr# rgani6atins2 'rhi$iting Fraudu"ent and un!air trade 'ractices and insider trading in securities %ar&ets2 cnducting necessar# research !r a$e 'ur'ses and 'er!r%ing such ther !unctins as %a# $e 'rescri$es !r% ti%e t ti%e. SEBI as the -atchdg ! the industr# has an i%'rtant and crucia" r"e in the %ar&et in ensuring that the %ar&et 'artici'ants 'er!r% their duties in accrdance -ith the regu"atr# nr%s. The Stc& Exchange as a res'nsi$"e Se"! Regu"atr# Organi6atin 4SRO5 !unctins t regu"ate regu"ate the %ar&et and its 'rices as 'er the 'rea"ent 'rea"ent regu"atins. regu"atins. SEBI and the Exchange '"a# c%'"i%entar# r"es t enhance the inestr 'rtectin and the era"" 7ua"it# ! the %ar&et.

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2. THE PURPOSE AND OBJECTIVE OBJECTIV E OF SEBI

Purpose and Role o SEBI! SEBI -as set u' -ith the %ain 'ur'se ! &ee'ing a chec& n %a"'ractices and 'rtect the interest ! inestrs. It -as set u' t %eet the needs ! three gru's. 1. Issuers!

Fr issuers it 'rides a %ar&et '"ace in -hich the# can raise !inance !air"# and easi"#. 2. In"es#ors!

Fr inestrs it 'rides 'rtectin and su''"# ! accurate and crrect in!r%atin. $. In#er%ed&ar&es!

Fr inter%ediaries it 'rides a c%'etitie 'r!essina" %ar&et.

O'(e)#&"es o SEBI! The era"" $8ecties ! SEBI are t 'rtect the interest ! inestrs and t 'r%te the dee"'%ent ! stc& exchange and t regu"ate the actiities ! stc& %ar&et. The $8ecties ! SEBI are9 (. T regu"ate the actiities ! stc& exchang e. *. T 'rtect the rights ! inestrs and ensuring sa!et# t their inest%ent. ine st%ent. :. T 'reent !raudu"ent and %a"'ractices $# haing $a"ance $et-een se"! regu"atin ! $usiness and its statutr# regu"atins. ;. T regu"ate and dee"' a cde ! cnduct !r inter%ediaries such as $r&ers, under-riters, etc. 2


2. THE PURPOSE AND OBJECTIVE OBJECTIV E OF SEBI

Purpose and Role o SEBI! SEBI -as set u' -ith the %ain 'ur'se ! &ee'ing a chec& n %a"'ractices and 'rtect the interest ! inestrs. It -as set u' t %eet the needs ! three gru's. 1. Issuers!

Fr issuers it 'rides a %ar&et '"ace in -hich the# can raise !inance !air"# and easi"#. 2. In"es#ors!

Fr inestrs it 'rides 'rtectin and su''"# ! accurate and crrect in!r%atin. $. In#er%ed&ar&es!

Fr inter%ediaries it 'rides a c%'etitie 'r!essina" %ar&et.

O'(e)#&"es o SEBI! The era"" $8ecties ! SEBI are t 'rtect the interest ! inestrs and t 'r%te the dee"'%ent ! stc& exchange and t regu"ate the actiities ! stc& %ar&et. The $8ecties ! SEBI are9 (. T regu"ate the actiities ! stc& exchang e. *. T 'rtect the rights ! inestrs and ensuring sa!et# t their inest%ent. ine st%ent. :. T 'reent !raudu"ent and %a"'ractices $# haing $a"ance $et-een se"! regu"atin ! $usiness and its statutr# regu"atins. ;. T regu"ate and dee"' a cde ! cnduct !r inter%ediaries such as $r&ers, under-riters, etc. 2


$. FUNCTIONS OF SEBI The SEBI 'er!r%s !unctins t %eet its $8ecties. T %eet three $8ecties SEBI has three i%'rtant !unctins. These are9 i.
These !unctins are 'er!r%ed $# SEBI t 'rtect the interest ! inestr and 'ride sa!et# ! inest%ent. As pro#e)#&"e un)#&ons SEBI peror%s ollo*&n+ un)#&ons! ,&- I# Ce)/s Pr&)e R&++&n+!

Insider is an# 'ersn cnnected -ith the c%'an# such as directrs, 'r%ters etc. These insiders hae sensitie in!r%atin -hich a!!ects the 'rices ! the securities. This in!r%atin is nt aai"a$"e t 'e'"e at "arge $ut the insiders get this 'rii"eged in!r%atin $# -r&ing inside the c%'an# and i! the# use this in!r%atin t %a&e 'r!it, then it is &n-n as insider trading, e.g. e.g.,, the the dire direct ctr rss ! a c%' c%'an# an# %a# &n- that that c%'a c%'an# n# -i"" -i"" issu issuee Bnu Bnuss shar shares es t its its shareh"ders at the end ! #ear and the# 'urchase shares !r% %ar&et t %a&e 'r!it -ith $nus 3


issue. This is &n-n as insider trading. SEBI &ee's a strict chec& -hen insiders are $u#ing securities ! the c%'an# and ta&es strict actin n insider trading. ,&&&- SEBI pro&'&#s raudulen# and Una&r Trade Pra)#&)es!

SEBI des nt a""- the c%'anies t %a&e %is"eading state%ents -hich are "i&e"# t induce the sa"e r 'urchase ! securities $# an# ther 'ersn. ,&"- SEBI underta&es ste's t educate inestrs s that the# are a$"e t ea"uate the securities !

arius c%'anies and se"ect the %st 'r!ita$"e securities. ,"- SEBI 'r%tes !air 'ractices and cde ! cnduct in securit# %ar&et $# ta&ing !""-ing

ste's9 4a5 SEBI has issued guide"ines t 'rtect the interest ! de$enture3h"ders -herein c%'anies cannt change ter%s in %idter%. 4$5 SEBI is e%'-ered t inestigate cases ! insider trading and has 'risins !r sti!! !ine and i%'risn%ent. 4c5 SEBI has st''ed the 'ractice ! %a&ing 're!erentia" a""t%ent ! shares unre"ated t %ar&et 'rices. 2. DEVE0OPENTA0 FUNCTIONS!

These !unctins are 'er!r%ed $# the SEBI t 'r%te and dee"' actiities in stc& exchange and increase the $usiness in stc& exchange. Under dee"'%enta" categries !""-ing !unctins are 'er!r%ed $# SEBI9 4i5 SEBI 'r%tes training ! inter%ediaries ! the securities %ar&et. 4ii5 SEBI tries t 'r%te actiities ! stc& exchange $# ad'ting !"exi$"e and ad'ta$"e a''rach in !""-ing -a#9 4a5 SEBI has 'er%itted internet trading thrugh registered stc& $r&ers. 4


4$5 SEBI has %ade under-riting 'tina" t reduce the cst ! issue. 4c5 Een initia" 'u$"ic !!er ! 'ri%ar# %ar&et is 'er%itted thrugh stc& exchange. $. REU0ATOR3 FUNCTIONS!

These !unctins are 'er!r%ed $# SEBI t regu"ate the $usiness in stc& exchange. T regu"ate the actiities ! stc& exchange !""-ing !unctins are 'er!r%ed9 4i5 SEBI has !ra%ed ru"es and regu"atins and a cde ! cnduct t regu"ate the inter%ediaries such as %erchant $an&ers, $r&ers, under-riters, etc. 4ii5 These inter%ediaries hae $een $rught under the regu"atr# 'urie- and 'riate '"ace%ent has $een %ade %re restrictie. 4iii5 SEBI registers and regu"ates the -r&ing ! stc& $r&ers, su$3$r&ers, share trans!er agents, trustees, %erchant $an&ers and a"" thse -h are assciated -ith stc& exchange in an# %anner. 4i5 SEBI registers and regu"ates the -r&ing ! %utua" !unds etc. 45 SEBI regu"ates ta&eer ! the c%'anies. 4i5 SEBI cnducts in7uiries and audit ! stc& exchanges. REU0ATOR3 FUNCTIONS 

Reg u"a ti n ! st c& exc han ge, se" ! reg u"a tr # rgani6atins and an# ther



securities %ar&et. Registratin and regu"atin ! stc& $r&ers, su$3$r&ers, Registrars t a"" issues,



%erchant $an&ers, under-riters, 'rt!"i %anagers etc. Re gistra tin and r eg u"atin ! the - r&ing ! c""ectie inest%ent sche%es inc"uding



%utua" !unds.
 

%ar&et.

4. DUTIES AND PO5ERS OF SEBI DUTIES OF SEBI!  Regu"atin ! Stc& Exchanges and ther securities %ar&ets2 Registratin and regu"atin ! the -r&ing stc& $r&ers, su$3$r&ers, $an&ers t an 

issue 4a 'u$"ic !!er ! ca'ita"5, trustees ! trust deeds, registrars t an issues, %erchant $an&ers, under -riters, 'rt!"i %anagers, inest%ent adisrs and such



ther inter%ediaries -h %a# $e assciated -ith the stc& %ar&et in an# -a#2 Registratin and regu"atins ! %utua" !unds2


%ar&ets2 Regu"ating su$stantia" ac7uisitin ! shares and ta&eer ! c%'anies2 ca""ing !r

 

in!r%atin !r%, underta&ing ins'ectin, cnducting in7uiries and audits ! stc& 

exchanges, inter%ediaries and se"!3 regu"atr# rgani6atins ! the securities %ar&et2 ?, "e#ing arius !ees and ther charges, cnducting necessar# research !r a$e 'ur'ses and 'er!r%ing such ther !unctins as %a# $e 'rescri$es !r% ti%e t ti%e.

PO5ERS OF SEBI

Fr the discharge ! its !unctins e!!icient"#, SEBI has $een inested -ith the necessar# '-ers -hich are9 (. T a''re $#@"a-s ! stc& exchanges. 6


*. T re7uire the stc& exchange t a%end their $#@"a-s. :. Ins'ect the $&s ! accunts and ca"" !r 'eridica" returns !r% recgni6ed stc& exchanges. ;. Ins'ect the $&s ! accunts ! !inancia" inter%ediaries. >. C%'e" certain c%'anies t "ist their shares in ne r %re stc& exchanges. ?. e# !ees and ther charges n the inter%ediaries !r 'er!r%ing its !unctins. =. Grant "icense t an# 'ersn !r the 'ur'se ! dea"ing in certain areas. . De"egate '-ers exercisa$"e $# it. ).
REASONS FOR ESTAB0ISHENT OF SEBI!

ith the gr-th in the dea"ings ! stc& %ar&ets, "t ! %a"'ractices a"s started in stc& %ar&ets such as 'rice rigging, un!!icia" 're%iu% n ne- issue, and de"a# in de"ier# ! shares, i"atin ! ru"es and regu"atins ! stc& exchange and "isting re7uire%ents. Due t these %a"'ractices the cust%ers started "sing cn!idence and !aith in the stc& exchange. S gern%ent ! India decided t set u' an agenc# r regu"atr# $d# &n-n as Securities Exchange Bard ! India 4SEBI5.

Te Or+an&6a#&onal S#ru)#ure o SEBI! (. SEBI is -r&ing as a cr'rate sectr. *. Its actiities are diided int !ie de'art%ents. Each de'art%ent is headed $# an executie directr. 7


:. The head !!ice ! SEBI is in 0u%$ai and it has $ranch !!ice in 1"&ata, Chennai and De"hi. ;. SEBI has !r%ed t- adisr# c%%ittees t dea" -ith 'ri%ar# and secndar# %ar&ets. >. These c%%ittees cnsist ! %ar&et '"a#ers, inestrs assciatins and e%inent 'ersns.

ana+e%en# o SEBI! As

nted

a$e,

SEBI

is

statutr#

Bard

i.e.

Bard

!r%ed

under Statue. The Bard sha"" $e headed $# a chair%an. In additin, there -i"" $e eight %e%$ers9 4a5

T-

%e%$ers

!r% a%ngst

the

!!icia"s

!

the

0inistries

!

the

Centra"

Gern%ent dea"ing -ith Finance and a-2 4$5 One %e%$er !r% a%ngst the !!icia"s ! the Resere $an& ! India2 4c5 Fie ther %e%$ers ! -h at "east three sha"" $e the -h"e ti%e %e%$ers. Thus, there are nine %e%$ers inc"uding chair%an. Accrding"# t sectin ;4*5 ! the Act, this Bard exercise genera" su'erintendence, directin and %anage%ent ! the a!!airs ! the SEBI. The Chair%an ! the Bard can exercise a"" '-ers ! the Bard, exce't thse s'eci!ied in the regu"atins !ra%ed under SEBI Act. The Chair%an and the %e%$ers are a''inted $# the Centra" Gern%ent exce't that %e%$er !r% Resere Ban& ! India is a''inted $# the RBI. The Chair%an and ther %e%$ers sha"" $e 'ersns ! a$i"it#, integrit# and standing -h hae sh-n ca'acit# in dea"ing -ith 'r$"e%s re"ating t securities %ar&et and hae s'ecia" &n-"edge r ex'erience ! "a-, !inance, ecn%ics, accuntanc#, ad%inistratin etc.

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O'(e)#&"es o #e #*o Co%%&##ees are! (. T adise SEBI t regu"ate inter%ediaries. *. T adise SEBI n issue ! securities in 'ri%ar# %ar&et. :. T adise SEBI n disc"sure re7uire%ents ! c%'anies. ;. T adise !r changes in "ega" !ra%e-r& and t %a&e stc& exchan ge %re trans'arent. >. T adise n %atters re"ated t regu"atin and dee"'%ent ! secndar# stc& exchange. These c%%ittees can n"# adise SEBI $ut the# cannt !rce SEBI t ta&e actin n their adice. SEBI COITTEES

(. Technica" Adisr# C%%ittee *. C%%ittee !r reie- ! structure ! %ar&et in!rastructure institutins :. 0e%$ers ! the Adisr# C%%ittee !r the SEBI Inestr .
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(.SEBI C%%ittee n Disc"sures and Accunting Standards 4SCODA5 ((.High <-ered Adisr# C%%ittee n cnsent rders and c%'unding ! !!ences (*.Deriaties 0ar&et Reie- C%%ittee (:.C%%ittee n In!rastructure Funds (;.Regu"atin er Financia" Ter%s ! arius Authrities.

7. ACHIEVEENTS OF SEBI u&del&nes #o Issu&n+ Co%pan&es!

The SEBI had issued detai"ed guide"ines !r a"" c%'anies  "d as -e"" as ne-  !r disc"sure ! in!r%atin and 'rtectin ! the interests ! inestrs. The guide"ines re"ate t !irst issue ! ne- c%'anies, !irst issue $# existing c%'anies, issue ! cnerti$"e de$ entures, etc. The guide"ines are in additin t ther "ega" 'risins in existence. The 'ur'se is t reduce the cst ! issue. The 'ur'se $ehind issuing these guide"ines is t gie 'rtectin t s%a"" inestrs and aid their ex'"itatin due t %is"eading in!r%atin.

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The SEBI can ta&e actin against c%'anies i! these guide"ines are nt !""-ed in the right s'irit. The SEBI %a# issue !resh guide"ines !r% ti%e3t3ti%e. This suggests that SEBI has ne!!ectie cntr" n the ne- issue %ar&et. This is ne achiee%ent ! SEBI. Re+ula#&on o Por#ol&o ana+e%en# Ser"&)es!

The high"# in!ringed 'rt!"i %anage%ent serices 4<0S5 -ere '"aced under the regu"atin ! SEBI since anuar# ((, ()):. The i"atins ! the <0S sche%e and si%i"ar sche%es !!ered $# arius $an&s and %erchant $an&ing su$sidiaries had c%e t "ight during the securities sca%. It is nticed that the r"e ! RBI as su'erisr# head had $een high"# ine!!icient in regard t <0S. The sa%e is the case -ith the Finance 0inistr#. SEBI has n- $een entrusted -ith the 8$ ! '"icing the 'rt!"i %anagers and 'ride ade7uate 'rtectin t the inestrs. This is a gd $eginning n the 'art ! SEBI and can $e treated as ne achiee%ent ! SEBI. Re+ula#&on o u#ual Funds!

The 0utua" Funds -ere '"aced under SEBI cntr" n anuar# *, ()):. Next t 'rt!"i %anage%ent serices, it is the !i!th !inancia" actiit# t $e $rught under SEBIJs regu"atr# !ra%e-r&. 0utua" !unds hae $een $arred !r% indu"ging in 'tin trading, shrt se""ing r carr#ing !r-ard transactins in securities.
SEBI has 'rsecuted %an# c%'anies !r de"a#ing share trans!ers and !r de"a# in re!und ! 'u$"ic issue %ne#. This ste' gies 'rtectin t inestrs and aids their ex'"itatin thrugh de"a#ed 'a#%ents. Issue o +u&del&nes #o &n#er%ed&ar&es!

In ())(, the Narasi%ha% C%%ittee %ade certain rec %%endatins re"ating t ca'ita" %ar&et. It suggested that SEBI shu"d !r%u"ate a ne- set ! guide"ines t 'rtect inestrs. B# issuing di!!erent t#'es ! guide"ines, the SERI has executed this rec%%endatin ! the C%%ittee and hae Lissued guide"ines t inter%ediaries. This is an exa%'"e ! 'sitie r"e ! SEBI u&del&nes on Ta/eo"ers and er+ers!

SEBI has issued guide"ines as regards ta&eers and %ergers. The 'ur'se is t ensure trans'arenc# in ac7uisitin ! shares, !air and truth!u" disc"sure thrugh 'u$"ic an nunce%ent

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and aidance ! un!air 'ractices in ta&eers and %ergers. The guide"ines issued $# SEBI are !r the 'rtectin ! the interest ! s%a"" inestrs. Edu)a#&on and u&dan)e o In"es#ors!

SEBI has $rught ut nu%$er ! 'u$"icatins !r the educatin and guidance ! inestrs and ther inter%ediaries. The 'u$"icatins inc"ude InestrsJ Grieances L Rights and Re%edies, 0erchant Ban&ers L Ru"es and Regu"atins, SEBI Act L ())*, SEBI 0ar&et Reie- and SEBI Ne-s "etter. Re+ula#&on o Fore&+n Ins#&#u#&onal In"es#ors!

SEBI has started the registratin ! !reign institutina" inestrs. This is in 'ursuance ! the gern%ent guide"ines !r inest%ents $# !reign institutina" inestrs issued in Se'te%$er, ())*. This is a ste' in the right directin !r e!!ectie cntr" n such inestrs -h are "i&e"# t inest n a %assie sca"e in the near !uture. Con#rol on er)an# Ban/&n+!

0erchant $an&ing has $een statutri"# $rught under the regu"atr# !ra%e-r& ! SEBI. 0erchant $an&ers are n- t $e authri6ed SEBI. The# hae t ad't the sti'u"ated ca'ita" ade7uac# nr%s, a$ide $# the cde ! cnduct -hich s'eci!ies a high degree ! res'nsi$i"it# t-ards inestrs in res'ect ! 'ricing and 're%iu% !ixatin ! issues and d isc"sures in the 'rs'ectus.

9. REU0ATOR3 FRAE5OR: OF SECURITIES AND E;CHANE BOARD OF INDIA ,SEBISEBI acts as a dee"'er and regu"atr ! the ca'ita" %ar&et in India. SEBI has de"egated '-ers t t- exchanges 4B%$a# Stc& Exchange, Natina" Stc& Exchange5 t ensure that their %e%$ers adhere t the SEBI regu"atins and instructins. The tta" %ar&et ca'ita"i6atin as n 0arch :(, *(( ! "isted c%'anies in India at B%$a# Stc& Exchange is RS.?, :),; crres as 'er SEBIJs annua" re'rt !r the #ear ending 0arch :(, *((. S%e ! the r"es that the SEBI 'er!r%s as a %ar&et regu"atr are9

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T regu"ate the %ar&et $# creating ru"es !r !unctining ! arius 'rducts. T a''reKa%end the "a-s ! stc& exchanges. T ins'ect the $&s ! accunts and ca"" !r 'eridica" returns !r% recgni6ed stc&

•

exchanges. T ins'ect the $&s ! accunts ! !inancia" inter%ediaries and "e# !eesKcharges n

• •

• • •

the%. T 'rhi$it and 'reent insider trading. T regu"ate the issues ! ca'ita" and de$t in 'ri%ar# and secndar# %ar&et. T 'reent un!air trade 'ractices and %ar&et %ani'u"atin.

<. SEBI AND CORPORATE OVERNANCE SEBI has set ut cr'rate gernance 'risins that are intended t drie in a %ini%u% standard ! cr'rate gernance a%ng "isted c%'anies in India. This is issued as a 'art ! the "isting agree%ent that each "isted c%'an# signs -ith the stc& exchange under the tit"e c"ause ;)J.c"ause ;) re%ains the %st signi!icant cr'rate gernance re!r% and esta$"ished a necr'rate gernance regi%e. i&e Cr'rate Gernance standards in the United States and United 1ingd%, IndiaJs cr'rate gernance re!r%s !""-ed !iduciar# and agenc# cst %de" ! cr'rate gernance. These nr%s "a# criterins !r9

•

A''int%ent ! inde'endence directrs in $ards. A''int%ent, c%'sitins and '-er ! audit c%%ittee. C%'ensatin that can $e 'aid t nn executie directrs. Functining ! re%uneratin c%%ittee, inestrJs grieances redressa"

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c%%ittee. Certi!icatin $# CEOKCFO n ade7uac# ! interna" cntr" s#ste%, crrectness !

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the re'rted !inancia"s. hist"e $"-er '"ic#

• • •

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S#ud8 on s#a#e o )orpora#e +o"ernan)e &n Ind&a.

Eentua""#, c%'"iance ! cr'rate gernance %ust $e carried ut $#9 • • • • • • • • • • •

Issuer c%'anies Stc& exchanges Centra" securities de'sitrs Stc& $r&ers 0utua" !unds Freign institutina" !unds Inest%ent $an&s De'sitr# 'artici'ants Credit rating agencies enture !unds Registrars and under-riters

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=. DIFFERENT DEPARTENTS OF SEBI 1. ar/e# In#er%ed&ar&es Re+ula#&on and Super"&s&on Depar#%en#!

The 0ar&et Inter%ediaries Regu"atin and Su'erisin De'art%ent is res'nsi$"e !r the registratin, su'erisin, c%'"iance %nitring and ins'ectins ! a"" %ar&et inter%ediaries in res'ect ! a"" seg%ents ! the %ar&ets i6. e7uit#, e7uit# deriaties, de$t and de$t re"ated deriaties. 2. ar/e# Re+ula#&on Depar#%en#!

Res'nsi$"e !r su'erising the !unctining and 'eratins 4exce't re"ating t deriaties5 ! securities exchanges, their su$sidiaries, and %ar&et institutins such as C"earing and sett"e%ent rgani6atins and De'sitries. $. Der&"a#&"es and Ne* Produ)#s Depar#%en#s!

This de'art%ent is res'nsi$"e !r su'erising the !unctining and 'eratins ! deriaties exchanges, and addresses inestr c%'"aints. 4. Corpora#&on F&nan)e Depar#%en#!

The Cr'ratin Finance De'art%ent dea"s -ith %atters re"ating t 4i5 Issuance and "isting ! securities, inc"uding initia" and cntinuus "isting re7uire%ents 4ii5 cr'rate gernance and accuntingKauditing standards 4iii5 cr'rate restructuring thrugh Ta&eers K $u# $ac&s 4i5 De"isting etc. 7. In"es#%en# ana+e%en# Depar#%en#!

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The Inest%ent 0anage%ent de'art%ent is res'nsi$"e !r registering and regu"ating %utua" !unds, enture ca'ita" !unds, !reign enture ca'ita" inestrs, c""ectie inest%ent sche%es, inc"uding '"antatin sche%es, Freign Institutina" Inestrs, <rt!"i 0anagers and Custdians. 9. In#e+ra#ed Sur"e&llan)e Depar#%en#!

The integrated Surei""ance de'art%ent is res'nsi$"e !r %nitring %ar&et actiit# thrugh %ar&et s#ste%s, data !r% ther de'art%ents and ana"#tica" s!t-are.

<. In"es#&+a#&ons Depar#%en#!

The Inestigatins de'art%ent is res'nsi$"e !r9 Cnducting inestigatins n 'tentia""# i""ega" %ar&et actiities.
En!rce%ent De'art%ent is res'nsi$"e !r 'rceedings re"ated t regu"atr# actin and $taining redress !r i"atins ! securities "a-s and regu"atins against a"" %ar&et 'artici'ants, issuers and indiidua"s and ther entities that $reach securities "a-s and regu"atins. >. 0e+al Aa&rs Depar#%en#!

It is res'nsi$"e t 'ride "ega" cunse" t the Bard and t its ther de'art%ents, and t hand"e nn3en!rce%ent "itigatin. 1?. En@u&r&es and Ad(ud&)a#&on Depar#%en#!

Hand"es 7uasi38udicia" %atters and 'ride ti%e"# hearings and initiate ad8udicatin $rught $# the ther De'art%ents against a""eged i"atrs -h are -ithin SEBIJs disci'"inar# 8urisdictin. 11. O&)e O In"es#or Ass&s#an)e and Edu)a#&on!

The !!ice -i"" su''rt SEBIJs 'eratins $# hand"ing inestr c%'"aints centra""# and $e the !ca" 'int ! SEBIJs inestr educatin e!!rt.

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12. eneral Ser"&)es Depar#%en#!

This de'art%ent su''rts a"" ! the interna" 'eratins ! SEBI. 1$. Treasur8 and A))oun#s D&"&s&on!

The Diisin -i"" hand"e -r& re"ated t9 Dee"'%ent ! SEBIJs interna" $udget and accunting s#ste%s
The diisin -i"" $e res'nsi$"e !r the esta$"ish%ent and %aintenance ! the 'h#sica" !aci"it# husing the regu"atr and re"ated needs.

17. Depar#%en# o E)ono%&) and Pol&)8 Anal8s&s!

The De'art%ent -i"" hand"e its !unctins thrugh the !""-ing Diisins9 Diisin ! <"ic# Ana"#sis 4D
19. O&)e o #e Ca&r%an!

This has i%'rtant su$ diisins such as O!!ice ! Internatina" A!!airs, C%%unicatins Diisin, Hu%an Resurces Diisin and O!!ice ! the Executie Assistant t the Chair%an.

1<. Inor%a#&on Te)nolo+8 Depar#%en#!

This de'art%ent -u"d 'er!r% its r"e as the technica" su''rt gru' !r SEBI.

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>. DETAI0S OF SEBI UIDE0INES  FOR CAPITA0 AR:ET (. SEBI guide"ines -ere issued a!ter the re'ea" ! the CIC Act -here$# the CCI guide"ines $eca%e ut ! date. Ne- guide"ines $# SEBI -ere issued starting !r% the %nth ! une, ())*. S%e CCI guide"ines -ere sti"" retained, as in the case ! thse !r 're%iu% !ixatin. *. Guide"ines !r ne- issues %ade $# ne- C%'anies 9 The# hae t $e issued at 'ar. Free 'ricing is 'er%itted n"# i! the ne- c%'an# is 'r%ted $# the existing c%'an# -ith nt "ess than >M ! e7uit#. :. Ne- issues %ade $# #ears. Nt "ess than *M ! e7uit# is t $e !!ered t the 'u$"ic, in such cases. ;. (M -i"" hae t get

18


the 'rices a''red in the genera" $d# %eeting $# a s'ecia" res"utin under Sec. ( 4A5 ! the C%'anies Act, and su$8ect t RBI a''ra". ;. Co%pos&#e Issues ! Issues t the 'u$"ic $# existing c%'an# can $e 'riced di!!erent"# as c%'ared t the rights issued t shareh"ders. >. Reser"a#&on &n &ssues ! The unresered 'rtin !!ered t 'u$"ic shu"d nt $e "ess than the %ini%u% re7uired !r "isting 'ur'ses.  cres, the c%'an# -i"" "untari"# disc"se the arrange%ents %ade t uti"ise 'rceeds. hen the tta" issue 'rceeds exceed Rs. > crres, there is need !r %a&ing c%'u"sr# disc"sure and !r the !inancia" institutins t %nitr the de'"#%ent ! !unds, t the stc& exchanges. <. &n&%u% &n#er"al 'e#*een #*o &ssues ! (* %nths shu"d e"a'se $et-een the 'u$"ic r rights issue and Bnus issue. The 'r%ters shu"d $ring in their share ! the ca'ita" $e!r ethe 'u$"ic issue.

1?. UIDE0INES TO INVESTORS (. Dea" -ith a registered %e%$er ! the stc& exchange. I! #u are dea"ing -ith a su$3 $r&er, %a&e sure that a"" $i""s and cntracts are %ade in the na%e ! a registered $r&er. *. Insist that a"" #ur dea"s are dne in the trading ring, r e"ectrnica""# recrded. :. Gie s'eci!ic rders t $u# r se"" -ithin the !ixed 'rice "i%its andKr ti%e 'erids -ithin -hich rders hae t $e executed. ;. Insist n cntract ntes t $e 'assed n t #u n the dates, -hen the rders are executed. >. 0a&e sure that #ur dea" is registered -ith the stc& exchange in a sda B"c& B& r recrded e"ectrnica""#. In the case ! a dis'ute, this -i"" he"' trace the detai"s ! the dea" easi"#. ?. C""ect a sett"e%ent ta$"e !r% the stc& exchange %entining the 'a#3in and 'a#3ut da#s. Each stc& exchange has its -n trading 'erids -hich are ca""ed sett"e%ents. A"" transactins dne -ithin this 'erid are sett"ed at the end ! it. A"" 'a#%ents !r shares $ught and there de"ieries ta&e '"ace n the 'a#3in da #. An a-areness ! 'a#3in and 'a#3 ut da#s is use!u" -hen a $r&er tries t %a&e excuses. =. 1ee' se'arate recrds ! dea"ings in s'eci!ied shares 4Gru' A5 and nn3 s'eci!ied shares 4Gru' B(, and B*5. The sett"e%ent !r each is n di!!erent da#s. =. Execute 'eridic sett"e%ents ! dues and de"ier# ! shares t aid accu%u"atin ! transactins.

19


. Insist n de"ier#. I! the c%'an# returns #ur 'a'ers and shares -ith $8ectins, cntact #ur $r&er i%%ediate"#. ). Ensure that shares $ught are trans!erred in #ur na%e $e!re the c%'an#Js $& c"sure date. This is necessar# t %a&e sure that #u receie $ene!its "i&e diident, interest and $nus shares. A"" c%'anies hae t $& c"sure date n -hich the "ist ! shareh"ders in the c%'an# is !ina"ised. (. C%'"ain i! the $r&er des nt de"ier the shares $ught in #ur na%e.
20


11.

PROTECTION OF THE INVESTORS BY SEBI

So%e &%por#an# l&nes #a# are oered '8 #e ded&)a#ed #o #e )ause o &n"es#ors pro#e)#&on! El&+&'&l Nor%s For Co%pan&es Issu&n+ Se)ur&#&es!

 "acs, un"ess the "etter ! !!er is !i"ed -ith the Bard, thrugh an e"igi$"e 0erchant Ban&er, at "east *( da#s 'rir t the !i"ing ! the etter ! O!!er -ith RSE.
These 'risins are $eing dea"t in the Cha'ter3III ! the guide"ines. A "isted c%'an# -hse 21


e7uit# shares are "isted n a stc& exchange, %a# !ree"# 'rice its e7uit# shares and an# securit# cnerti$"e int e7uit# at a "ater date, !!ered thrugh a 'u$"ic r rights issue. An un"isted c%'an# e"igi$"e t %a&e a 'u$"ic issue and desirus ! getting its securities "isted n a recgni6ed stc& exchange 'ursuant t a 'u$"ic issue, %a# !ree"# 'rice its e7uit# shares r an# securities cnerti$"e at a "ater date int e7uit# shares. An e"igi$"e c%'an# sha"" $e !ree t %a&e 'u$"ic r rights issue ! e7uit# shares in an# den%inatin deter%ined $# it in accrdance -ith Su$3sectin 4;5 ! Sectin (: ! the C%'anies Act, ()>? and in c%'"iance -ith the !""-ing and ther nr%s as %a# $e s'eci!ied $# SEBI !r% ti%e t ti%e9 In case ! initia" 'u$"ic !!er $# an un"isted c%'an #, i! the issue 'rice is Rs. >K3 r %re, the issuer c%'an# sha"" hae a discretin t !ix the !ace a"ue $e"- Rs. (K3 'er share su$8ect t the cnditin that the !ace a"ue sha"" in n case $e "ess than Rs. ( 'er share2 and, i! issue 'rice is "ess than Rs. > 'er share, the !ace a"ue sha"" $e Rs. (K3 'er share2 The disc"sure a$ut the !ace a"ue ! shares 4inc"uding the state%ent a$ut the issue 'rice $eing +X/ ti%es ! the !ace a"ue5 sha"" $e %ade in the adertise%ent, !!er dcu%ents and in a''"icatin !r%s in identica" !nt si6e as that ! issue 'rice r 'rice $and.5 Pre Issue O'l&+a#&ons!

The 're issue $"igatins are 'rided in Cha'ter3, the# are as !""-s93  The "ead %erchant $an&er sha"" exercise due di"igence.  The standard ! due di"igence sha"" $e such that the %erchant $an&er sha"" satis!# hi%se"! a$ut a"" the as'ects ! !!ering, eracit# and ade7uac# ! disc"sure in the !!er dcu%ents.  The "ia$i"it# ! the %erchant $an&er sha"" cntinue een a!ter the c%'"etin ! issue 'rcess. N c%'an# sha"" %a&e an issue ! securit# thrugh a 'u$"ic r rights issue un"ess a 0e%randu% ! Understanding has $een entered int $et-een a "ead %erchant $an&er and the issuer c%'an# s'eci!#ing their %utua" rights, "ia$i"ities and $"igatins re"ating t the issue. Con#en#s O Oer Do)u%en#!

In additin t the disc"sures s'eci!ied in Schedu"e II  ! the C%'anies Act, ()>?, the 'rs'ectus sha"" a"s cntain a"" %ateria" in!r%atin -hich sha"" $e true and ade7uate s as t ena$"e the inestrs t %a&e in!r%ed decisin n the inest%ents in the issue. The 'rs'ectus sha"" a"s cntain the in!r%atin and state%ents s'eci!ied in this cha'ter and sha"" as !ar as 'ssi$"e 22


!""- the rder in -hich the re7uire%ents are "isted in this cha'ter and su%%arised in Schedu"e IIA. Conse@uen)e O NonO'ser"an)e O Te u&del&nes

SEBI in case ! nn3$serance ! these guide"ines 4Sectin ((B5 as it see%s t $e a $ar !r% ding such things -hich %a# 're8udice the interest ! the inestrs the $ard can gie the !""-ing directins93 Direct the 'ersns cncerned t re!und an# %ne# c""ected under an issue t the inestrs -ith r -ithut re7uisite interest, as the case %a# $e, direct the 'ersns cncerned nt t access the ca'ita" %ar&et !r a 'articu"ar 'erid, direct the stc& exchange cncerned nt t "ist r 'er%it trading in the securities, direct the stc& exchange cncerned t !r!eit the securit# de'sit de'sited $# the issuer c%'an#, an# ther directin -hich the Bard %a # dee% !it and 'r'er in the circu%stances ! the case.
SEBI $eing a 're%iere institutin !r dea"ing -ith the 'r$"e%s re"ating t securities has adanced a "ng -a# t-ards 'rtecting the inestrs !r% the ha6ards ! the 'redatrs existing in the %ar&et. As a"read# stated $e!re it has c%'i"ed a great $unch ! guide"ines dedicated t this cause. But the rea" scenari -hich ca%e as a cnse7uence -as that n"# the $ig !ishes cu"d esca'e the net and the s%a"" nes -ere sti"" striing t u'h"d their existence. In this %atter, accrding t a dai"# ne-s'a'er it has $ec%e c"ear that SEBI had a"read# receied suggestin and adice regarding the need !r a se'arate enact%ent cncerning the s%a"" inestrs. As !ar as it is cncerned, the Gern%ent has thught ! intrducing an inde'endent "egis"atin n inestr 'rtectin t sa!eguard the interests ! s%a"" inestrs. A se'arate "egis"atin had a"s $een rec%%ended in the re'rt 're'ared $# 0r. 0itra, -h -as c%%issined $# the Finance 0inistr# t dra- u' the ter%s ! re!erence !r a ne- Bi"". A de$ate has $een n er the need !r a se'arate "egis"atin !r 'rtecting the interests ! s%a"" inestrs, cnsidering that there are %u"ti'"e agencies in"ed in '"icing c%'anies that raise !unds !r% the 'u$"ic $e it 'u$"ic 23


"isted c%'anies, r NBFCs 4Nn Ban&ing Financia" C %'anies5. These inc"ude the ca'ita" %ar&ets regu"atr, SEBI, the $an&ing regu"atr, RBI, and the De'art%ent ! C%'an# A!!airs 4DCA5 -hich is res'nsi$"e !r regu"ating un"isted c%'anies. SEBI has $een in !aur ! a se'arate regu"atr# agenc# !r the 'rtectin ! s%a"" inestrs. The regu"atr had ear"ier su$%itted a 'r'sa" t the Finance 0inistr#, ut"ining the need !r a ne- Act.

12. E0IIBI0IT3 NORS FOR COPANIES ISSUIN SECURITIES CONDITIONS FOR ISSUE OF SECURITIES 4The c%'anies issuing securities !!ered thrugh an !!er dcu%ent sha"" satis!# the !""-ing at the ti%e ! !i"ing the dra!t !!er dcu%ent -ithSEBI: and a"s at the ti%e ! !i"ing the !ina" !!er dcu%ent -ith the Registrar ! C%'aniesK Designated Stc& Exchange.

F&l&n+ o oer do)u%en#

N issuer c%'an# sha"" %a&e an# 'u$"ic issue ! securities, un"ess dra!t
i! the Bard s'eci!ies changes r issues $seratins n the dra!t
the 'erid -ithin -hich the Bard %a# s'eci!# changes r issue $seratins, i! an#, n the dra!t
-here the Bard has sught an# c"ari!icatin r additina" in!r%atin !r% the ead 0anagerKs t the Issue, the 'erid -ithin -hich the Bard %a# s'eci!# changes r issue $seratins, i! an#,

24


n the dra!t da#s !r% the date ! recei't ! satis!actr# re'"# !r% the ead 0anagerKs t the Issue. Pro"&ded ur#er #a#

-here the Bard has %ade an# re!erence t r sught an# c"ari!icatin r additina" in!r%atin !r% an# regu"atr r such ther agencies, the Bard %a# s'eci!# changes r issue $seratins, i! an#, n the dra!t
the Bard %a# s'eci!# changes r issue $seratins, i! an#, n the dra!t  "acs,5 un"ess a dra!t "etter ! !!er has $een !i"ed -ith the Bard, thrugh a 0erchant Ban&er, at "east : da#s 'rir t the !i"ing ! the "etter ! !!er -ith the D esignated Stc& Exchange 4DSE5. Pro"&ded #a#

i! the Bard s'eci!ies changes r issues $seratin sn the dra!t etter ! O!!er 4-ithut $eing under an# $"igatin t d s5, the issuer c%'an# r the ead 0anager t the Issue sha"" carr# ut such changes in the dra!t etter ! O!!er r c%'"# -ith the $seratins issued $# the Bard $e!re !i"ing the etter ! O!!er -ith DSE. Pro"&ded ur#er #a#

the 'erid -ithin -hich the Bard %a# s'eci!# changes r issue $seratins, i! an#, n the dra!t etter ! O!!er sha"" $e : da#s !r% the date ! recei't ! the dra!t etter ! O!!er $# the Bard. Pro"&ded ur#er #a#

-here the Bard has sught an# c"ari!icatin r additina" in!r%atin !r% the ead 0anagerKs t the Issue, the 'erid -ithin -hich the Bard %a# s'eci!# changes r issue $seratins, i! an#, n the dra!t etter ! O!!er sha"" $e (> da#s !r% the date ! recei't ! satis!actr# re'"# !r% the ead 0anagerKs t the Issue. Pro"&ded ur#er #a#

-here the Bard has %ade an# re!erence t r sught an# c"ari!icatin r additina" in!r%atin !r% an# regu"atr r such ther agencies, the Bard %a# s'eci!# changes r issue $seratins, 25


i! an#, n the dra!t etter ! O!!er a!ter recei't ! c%%ents r re'"# !r% such regu"atr r ther agencies . Pro"&ded ur#er #a#

the Bard %a# s'eci!# changes r issue $seratins, i! an#, n the dra!t etter ! O!!er n"# a!ter recei't ! c'# ! in3'rinci'"e a''ra" !r% a"" the stc& exchanges n -hich the issuer c%'an# intends t "ist the securities 'r'sed t $e !!ered thrugh the etter ! O!!er.

(:. SEBI OPERATIONS

C",'" $"r%&'

Pr!"r# $"r%&'

S&()*+"r#

INTRODUCTION:-

The ca'ita" %ar&et is a '"ace -here the su''"iers and users ! ca'ita" %eet t share ne antherJs ie-s, and -here a $a"ance is sught t $e achieed a%ng dierse %ar&et 'artici'ants. The securities decu'"e indiidua" acts ! saing and inest%ent er ti%e, s'ace and entities and thus a""- saings t ccur -ithut cnc%itant inest%ent. 0reer, #ie"d3 $earing securities %a&es 'resent cnsu%'tin %re ex'ensie re"atie t !uture cnsu%'tin, inducing 'e'"e t 26


sae. The c%'sitin ! saings changes -ith "ess ! it $eing he"d in the !r% ! id"e %ne# r un'rductie assets, 'ri%ari"# $ecause %re diisi$"e and "i7uid assets are aai"a$"e. The ca'ita" %ar&et acts as a $ra&e n channe"ing saings t "-3 #ie"ding enter'rises and i%'e"s enter'rises t !cus n 'er!r%ance. Thus, the ca'ita" %ar&et cnerts a gien stc& ! inesti$"e resurces int a "arger !"- ! gds and serices and aug%ents ecn%ic gr-th. In !act, the "iterature is !u"" ! theretica" and e%'irica" studies that hae esta$"ished causa" r$ust 4statistica""# signi!icant5 t-3-a# re"atin $et-een the dee"'%ents in the securities %ar&et and ecn%ic gr-th. The Indian ca'ita" %ar&ets dates $ac& t the (th centur# -hen the securities ! the East India C%'an# -ere traded in 0u%$ai and 1"&ata. H-eer, the rder"# gr-th ! the ca'ita" %ar&et $egan -ith the setting u' ! The Stc& Exchange, B%$a# in u"# (=> and Ah%eda$ad Stc& Exchange in ();. Eentua""#, ** ther Exchanges in arius cities s'rang u'. Gien the signi!icance ! ca'ita" %ar&et and the need !r the ecn%# t gr- at the 'r8ected er  'er cent 'er annu%, the %anagers ! the Indian ecn%# hae $een assiduus"# 'r%ting the ca'ita" %ar&et as an engine ! gr-th t 'ride an a"ternatie #et e!!icient %eans ! resurce %$i"i6atin and a""catin. Further, the g"$a" !inancia" enirn%ent is underging unre%itting trans!r%atin. Gegra'hica" $undaries hae disa''eared. The da#s ! insu"ated and is"ated !inancia" %ar&ets are histr#. The success ! an# ca'ita" %ar&et "arge"# de'ends n its a$i"it# t a"ign itse"! -ith the g"$a" rder. IPORTANCE OF CAPITA0 AR:ET!

The ca'ita" %ar&et seres a er# use!u" 'ur'se $# '"ing the ca'ita" resurces ! the cuntr# and %a&ing the% aai"a$"e t the enter'rising inestrs -e""3dee"'ed ca'ita" %ar&ets aug%ent resurces $# attracting and "ending !unds n the g"$a" sca"e. A dee"'ed ca'ita" %ar&et can s"e this 'r$"e% ! 'aucit# ! !unds. Fr an rgani6ed ca'ita" %ar&et can %$i"i6e and '" tgether een the s%a"" and scattered saings and aug%ent the aai"a$i"it# ! inesti$"e !unds. hi"e the ra'id gr-th ! ca'ita" %ar&ets, the gr-th ! 8int stc& $usiness has in its turn encuraged the dee"'%ent ! ca'ita" %ar&ets. 27


A dee"'ed ca'ita" %ar&et 'rides a nu%$er ! 'r!ita$"e inest%ent ''rtunities !r s%a"" saers.

PRIAR3 AR:ET INTRODUCTION!

a5 Trac& recrd ! diidend 'a#%ent !r %ini%u% : #rs 'receding the issue. $5 A"read# "isted c%'anies 3 -hen 'st3issue net -rth $ec%es %re than > ti%es the 're3issue net -rth. c5 Fr 0anu!acturing c%'an# nt haing such trac& recrd L a''raise 'r8ect $# a 'u$"ic !inancia" institutin r a schedu"ed c%%ercia" $an&. d5 Fr cr'rate $d# L > 'u$"ic shareh"ders !r eer# Rs.( "a&h ! the net ca'ita" !!er %ade t the 'u$"ic e5 Ban&s L * #rs ! 'r!ita$i"it# !r issues a$e 'ar. O!!er dcu%ents t c%'anies. 2. Pro%o#ers )on#r&'u#&on! 

a5 $5 c5 d5

Shu"d nt $e "ess than *M ! the issued ca'ita". Receiing ! 'r%tersJ cntri$utin. c& in 'erid as 'er SEBI. Cases ! nn3under -ritten 'u$"ic issues.

$. D&s)losure! 

a5 Dra!t 'rs'ectus $5 Un audited !inancia" resu"ts 28


4. Boo/ 'u&ld&n+! 

a5 $5 c5 d5

SEBI rec%%ends t-3tier under -riting s#ste%. One ! the %des ! 'u$"ic issue thru 'rs'ectus. R"e ! s#ndicate %e%$ers and $& runners. 0ini%u% : centers.

7. Allo)a#&on o sares!

a5 0ini%u% a''"icatin ! shares. $5 Reseratin !r s%a"" inestrs. c5 A""t%ent ! securities. 9. ar/e# &n#er%ed&ar&es!

a5 icensing ! %erchant $an&ers $5 icensing ! under-riters, registrars, trans!er agents, etc., c5 0erchant $an&ers net -rth L Rs.> crres d) Segregate !und $ased !r% !ee $ased actiities. SECONDAR3 AR:ET

INTRODUCTION

Secndar# %ar&et is the '"ace !r sa"e and 'urchase ! existing securities. It ena$"es an inestr t ad8ust his h"dings ! securities in res'nse t changes in his assess%ent a$ut ris& and return. It a"s ena$"es hi% t se"" securities !r cash t %eet his "i7uidit# needs. It essentia""# c%'rises ! the stc& exchanges, -hich 'ride '"at!r% !r trading ! securities and a hst ! inter%ediaries -h assist in trading ! securities and c"earing and sett"e%ent ! trades. The securities retarded, c"eared and sett"ed as 'er 'rescri$ed regu"atr# !ra%e-r& unde r the su'erisin ! the Exchanges and ersight ! SEBI. 0&s#&n+ o se)ur&#&es!

isting %eans ad%issin ! securities ! an issuer t trading 'rii"eges n a stc& exchange thrugh a !r%a" agree%ent. The 'ri%e $8ectie ! ad%issin t dea"ings n the Exchange is t 'ride "i7uidit# and %ar&eta$i"it# t securities, as a"s t 'ride a %echanis% !r e!!ectie %anage%ent ! trading. Reor%s &n #e se)ondar8 %ar/e#! 1. o"ern&n+ 'oard

a5 Br&ers and nn3$r&ers re'resentatin %ade >9> $5 ?M ! $r&ers in ar$itratin, disci'"inar#  de!au"t c%%ittees c5 Fr trading %e%$ers ;M re'resentatin

29


*. In!rastructure a5 On3"ine screen $ased trading ter%ina"s :. Sett"e%ent  c"earing a5 ee&"# sett"e%ents $5 Auctins !r nn3de"iered shares -ithin  da#s ! sett"e%ent c5 Adice t set u' c"earing huses, c"earing cr'ratin r sett"e%ent guarantee !und. d5 arehusing !aci"ities 'er%itted $# SEBI. 4. De'# %ar/e# se+%en#

a5 $5 c5 d5

Regu"ates thru SEBI 4de'sitr#  'artici'ants5 regu"atin Act ())?. isting ! de$t instru%ents Inest%ent. Range !r FIIs Dua" rating !r a$e Rs.> %i""in

7. Pr&)e s#a'&l&6a#&on

a5 $5 c5 d5 e5 !5

Diisin t %nitr the unusua" %e%ents in 'rices. 0nitr 'rices ! ne-"# "isted scri' !r% the !irst da# ! trading. Circuit $rea&er s#ste% and ther %nitring restrictins cu"d $e a''"ied I%'sing ! s'ecia" %argins ! *>M n 'urchase in additin t regu"ar %argin.
9. Del&s#&n+

a5 On "untar# de3"isting !r% regina" stc& exchanges L $u# !!er t a"" share h"ders $5
14. C0EARIN AND SETT0EENT INTRODUCTION!

The stc& exchanges in India -ere !""-ing a s#ste% ! accunt 'erid sett"e%ent !r cash %ar&et transactins, exce't !r transactins in a !e- actie securities, -hich -ere sett"ed under TP: r""ing sett"e%ent. The stc& exchanges -ere a"s !!ering de!erra" 'rducts t 'ride "eerage t %e%$ers t 'st'ne their sett"e%ent $"igatins. The transactins are nt 30


sett"ed i%%ediate"# $ut a!ter * da#s a!ter the trade da#. The %e%$ers receie the !undsKsecurities in accrdance -ith the 'a#3inK'a#3ut schedu"es nti!ied $# the res'ectie exchanges. Gien the gr-ing "u%e ! trades and %ar&et "ati"it#, the ti%e ga' $et-een trading and sett"e%ent gies rise t sett"e%ent ris&. In recgnitin ! this, the exchanges and their c"earing cr'ratins e%'"# ris& %anage%ent 'ractices t ensure ti%e"# sett"e%ent ! trades. The regu"atrs hae a"s 'rescri$ed e"a$rate %argining and ca'ita" ade7uac# standards t secure %ar&et integrit# and 'rtect the interests ! inestrs. The exchanges nt 'riding cunter3'art# guarantee hae $een adised $# SEBI t set u' trade guarantee !unds, -hich -u"d hnr 'a#3in "ia$i"ities in the eent ! de!au"t $# a %e%$er. 0e%ent ! securities has $ec%e a"%st instantaneus in the de%ateria"ised enirn%ent. T- de'sitries i6., Natina" Securities De'sitries td. 4NSD5 and Centra" De'sitries Serices td. 4CDS5 'ride e"ectrnic trans!er ! securities and %re than ))M ! turner is sett"ed in de%ateria"ised !r%. A"" actie"# traded scri's are he"d, traded and sett"ed in de%at !r%. The $"igatins ! %e%$ers are d-n"aded t %e%$ersKcustdians $# the c"earing agenc#. Se"ect $an&s hae $een e%'ane""ed $# c"earing agenc# !r e"ectrnic trans!er ! !unds. The %e%$ers are re7uired t %aintain accunts -ith an# ! these $an&s. The %e%$ers are in!r%ed e"ectrnica""# ! their 'a#3in $"igatins ! !unds. The %e%$ers %a&e aai"a$"e re7uired !unds in their accunts -ith c"earing $an&s $# the 'rescri$ed 'a#3in da#. The c"earing agenc# !r-ards !unds $"igatins !i"e t c"earing $an&s -hich, in turn, de$it the accunts ! %e%$ers and credit the accunt ! the c"earing agenc#. In s%e cases, the c"earing agenc# runs an e"ectrnic !i"e t de$it %e%$ersQ accunts -ith c"earing $an&s and credit its -n accunt. As 'er the schedu"e ! a""catin ! !unds deter%ined $# the c"earing agenc#, the !unds are trans!erred n the 'a#3ut da# $# the c"earing $an&s !r% the accunt ! the c"earing agenc# t the accunts ! %e%$ers. In s%e cases, the c"earing agenc# direct"# credits the %e%$ersQ accunts -ith c"earing $an&s and de$its its -n accunt. The 'a#3in and 'a#3ut ! !unds as -e"" as securities ta&e '"ace * -r&ing da#s a!ter the trade date. SETT0EENT PROCESS 93

31


The

Natina" Securities C"earing

Cr'ratin

td.

4NSCC5

deter%ines the

!undsKsecurities $"igatins ! the trading %e%$ers and ensures that trading %e%$ers %eet their $"igatins. The c"earing $an&s and de'sitries 'ride the necessar# inter!ace $et-een the custdiansKc"earing %e%$ers 4-h c"ear !r the trading %e%$ers r their -n transactins5 !r sett"e%ent ! !undsKsecurities $"igatins ! trading %e%$ers. Te )ore un)#&ons &n"ol"ed &n #e pro)ess are!

a5Trade Re)ord&n+! The &e# detai"s a$ut the trades are recrded t 'ride $asis !r sett"e%ent. These detai"s are aut%atica""# recrded in the e"ectrnic trading s#ste% ! the exchanges. $5 Trade Con&r%a#&on! The cunter'arties t trade agree u'n the ter%s ! trade "i&e securit#, 7uantit#, 'rice, and sett"e%ent date, $ut nt the cunter'art# -hich is the NSCC. The e"ectrnic s#ste% aut%atica""# 'artici'ants.

generates

cn!ir%atin

$#

direct

The u"ti%ate $u#ersKse""ers ! securities a"s a!!ir% the ter%s, as the

!undsKsecurities -u"d !"- !r% the%, a"thugh the direct 'artici'ants are res'nsi$"e !r sett"e%ent ! trade. c5 De#er%&na#&on o O'l&+a#&on! The next ste' is deter%inatin ! -hat cunter3'arties -e, and -hat cunter3'arties are due t receie n the sett"e%ent date. The NSCC inter'ses itse"! as a centra" cunter'art# $et-een the cunter'arties t trades and nets the 'sitins s that a %e%$er has securit# -ise net $"igatin t receie r de"ier a securit# and has t either 'a# r receie !unds. d5 Pa8&n o Funds and Se)ur&#&es! The %e%$ers $ring in their !undsKsecurities t the NSCC. The# %a&e aai"a$"e re7uired securities in designated accunts -ith the de'sitries $# the 'rescri$ed 'a#3in ti%e. The de'sitries %e the securities aai"a$"e in the accunts ! %e%$ers t the accunt ! the NSCC. i&e-ise %e%$ers -ith !unds $"igatins %a&e aai"a$"e re7uired !unds in the designated accunts -ith c"earing $an&s $# the 'rescri$ed 'a#3in ti%e. The CC sends e"ectrnic instructins t the c"earing $an&s t de$it %e%$erQs accunts t the extent ! 'a#%ent $"igatins. The $an&s 'rcess these instructins, de$it accunts ! %e%$ers and credit accunts ! the NSCC. e5 Pa8ou# o Funds and Se)ur&#&es! A!ter 'rcessing !r shrtages ! !undsKsecurities and arranging !r %e%ent ! !unds !r% sur'"us $an&s t de!icit $an&s thrugh RBI c"earing, the NSCC sends e"ectrnic instructins t the de'sitriesKc"earing $an&s t re"ease 'a#3ut ! securitiesK!unds. The de'sitries and c"earing $an&s de$it accunts ! 32


the NSCC and credit accunts ! %e%$ers. Sett"e%ent is c%'"ete u'n re"ease ! 'a#3 ut ! !unds and securities t custdiansK%e%$ers. !5 R&s/ ana+e%en#! A sund ris& %anage%ent s#ste% is integra" t an e!!icient sett"e%ent s#ste%. The NSCC ensures that trading %e%$ersQ $"igatins are c%%ensurate -ith their net -rth. It has 'ut in '"ace a c%'rehensie ris& %anage%ent s#ste%, -hich is cnstant"# %nitred and u'graded t 're3e%'t %ar&et !ai"ures.

17.SEBI IN THE NE5 I00ENNIU B# $eginning ! the ne- %i""enniu% in * SEBI has strengthened and esta$"ished itse"! as an a"" '-er!u" regu"atr# $d# !r the ca'ita" %ar&et, a"" inter%ediaries in it, SROs, stc& Exchanges, "isted c%'anies, enture Funds 0utua" Funds inc"uding 0.0.F.s, etc. A"read# it has $een regu"ating the FFIs and FIIs and ther !reign $dies in res'ect ! their 'eratins in the ca'ita" %ar&et A cde ! cnduct has $een "aid d-n !r each ! the categr# ! '"a#ers in the ca'ita" %ar&et.

33


Ear"# in anuar# *, the SEBI has c%e ut -ith a series ! %easures t enhance trans'arenc# and dee'en the ca'ita" %ar&et. These %easures inc"ude 'er%issin !r e3$r&ing, share trading ia net -ith rders t $e ruted thrugh the -e$sites ! $r&ers, acce'tance ! 1u%ar %anga"an Bir"a Re'rt n. Cr'rate Gernance and ! 1.B. Chandrase&har  c%'anies in 'articu"ar t $sere the cde ! cr'rate gernance $# 0arch end *(. The SEBI has re"axed the entr# nr%s !r I3*. In the c%ing #ears the tas&s set !r itse"! are the !""-ing in 'articu"ar.

19.

CONC0USION

Securit# Exchange Bard ! India SEBI has $een '"a#ing an i%'rtant r"e in regu"ating the $usiness in stc& exchanges and an# ther securities %ar&ets and t 'rtect the interests ! inestrs. The SEBI is a regu"atr# $d# -hich is eighteen #ears "d and the ca'ita" %ar&et s#ste% is %re than ( #ears "d. This %atured ca'ita" %ar&et s#ste% re7uires %nitring rather than er3regu"atin. The SEBI shu"d su'erise this ca'ita" %ar&et s#ste% in such a %anner that a"" su$3s#ste%s $ec%e se"!3regu"atr# rgani6atins 4srs5 gradua""#.

34


Hence, the SEBI shu"d st' $eing 're3ccu'ied -ith da#3t3da# regu"atins and $ec%e %re ! a isinar#. The SEBI can ensure a !ree and !air %ar&et and ta&e India int "eague ! %a8r g"$a" ca'ita" %ar&ets in the next rund ! re!r%s. T ena$"e this, it has t thrugh"# reie- its structure and !unctining. The SEBI has t $a"ance $et-een the csts ! regu"atin and %ar&et dee"'%ent. There shu"d $e crss3$rder c'eratin $et-een arius regu"atrs and $et-een regu"atrs and industr#. The e%ergence ! the securities %ar&et resu"ted as a %a8r surce ! !inance !r trade and industr# acrss India. A gr-ing nu%$er ! c%'anies are accessing the securities %ar&et rather than de'ending n "ans !r% FIsK$an&s. 0reer the Indian securities %ar&et is cntri$uting t Indian GD< gr-th i%%ense"#. The ca'ita" %$i"isatin in $th 'ri%ar# %ar&et and secndar# %ar&et has $een -itnessing 'hen%ena" gr-th  er the #ears. Indian securities %ar&et is getting increasing"# integrated -ith the rest ! the -r"d. Indian c%'anies hae $een 'er%itted t raise resurces !r% a$rad thrugh issue ! ADRs, GDRs, FCCBs and ECBs. ADRsKGDRs hae t-3-a# !ungi$i"it#. Indian c%'anies are 'er%itted t "ist their securities n !reign stc& exchanges $# s'nsring ADRKGDR issues against $"c& shareh"ding.

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