project on sebi

Roll No

Name

32

Hetal Patel

34

Khushboo Patel

58

Karishma Waghela Karishma Waghela

Sr No

Particular

1

Introduction

2

History

3

Objective

4

Function

5

Administration

6

Role Of Sebi In Indian Capital Market

7

Promotion And Regulation Of Self Regulatory Organisations

8

Difference Between RBI & SEBI

9

Policies And Programmes

10

Reforms And Development

11

Role Of Sebi In A Public Issue

12

Role Of Sebi In Primary & Secondary Market

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Without a proper combination of inspection and perspiration, it’s not

●

easy to achieve anything. There is always a sense of gratitude, which we express to others for the help and the needy services they render during the different phases of our lives. We too would like to do it as we really wish to express my gratitude toward all those who have been helpful to me directly or indirectly during the development of this project. ● We would like to thank our Kavita Mam who was always there to help and guide us when we needed help. Her perceptive criticism kept us working to make this project more full proof. We are thankful to her for her encouragement and valuable support. Working for this project was an extremely knowledgeably and enriching experience for us. We are very thankful to mam for all the value addition a ddition and enhancement done to us.







*Introduction Introduction** In 1988 the Securities and Exchange Board of India (SEBI) was established by the Government of India through an executive resolution, and was subsequently upgraded as a fully autonomous body (a statutory Board) in the year 1992 with the passing of the Securities and Exchange Board of India Act (SEBI Act) on 30th January 1992. In place of Government Control, a statutory and autonomous regulatory board with defined responsibilities, to cover both development & regulation of the market, and independent powers have been set up. Paradoxically this is a positive outcome of the Securities Scam of 1990-91.

*History * It was formed officially by the Government of India in 1992 with SEBI Act 1992[2] being passed by the Indian Parliament. Parliament. SEBI SEBI is headquartered headquartered in the business district of Bandra-Kurla of Bandra-Kurla complex in Mumbai, and has Northern, Eastern, Southern and Western regional offices in New Delhi, Kolkata, Chennai and Ahmedabad. Controller Controller of Capital Issues was the regulatory regulatory authority before SEBI came into existence; existence;[3] it derived authority from the Capital Issues (Control) Act, 1947. Initially SEBI was a non statutory body without any statutory power. However in 1995, the SEBI was given additional statutory power by the Government of India through an amendment to the securities and Exchange Board of India Act 1992. In April, 1998 the SEBI was constituted constituted as the the regulator of of capital market in India under a resolution of the Government of India.







*Objectives Of The Board* Board *    

to protect the interests of investors in securities; to promote the development of Securities Market; to regulate the securities market and for matters connected therewith or incidental thereto.

Since its inception SEBI has been working targetting the securities and is attending to the fulfillment of its objectives with commendable zeal and dexterity. The improvements in the securities markets like capitalization requirements, margining, establishment of clearing corporations etc. reduced the risk of credit and also reduced the market. SEBI has introduced the comprehensive regulatory measures, prescribed registration norms, the eligibility criteria, the code of obligations and the code of conduct for different intermediaries like, bankers to issue, merchant bankers, brokers and sub-brokers, registrars, portfolio managers, credit rating agencies, underwriters and others. It has framed bye-laws, risk identification and risk management systems for Clearing houses of stock exchanges, surveillance system etc. which has made dealing in securities both safe and transparent to the end investors. Two broad approaches of SEBI is to integrate the securities market at the national level, and also to diversify the trading products, so that there is an increase in number of traders including banks, financial institutions, insurance companies, mutual funds, primary dealers etc. to transact through the Exchanges. In this context the introduction of derivatives trading through Indian Stock Exchanges permitted by SEBI in 2000 AD is a real landmark. SEBI appointed the L. C. Gupta Committee in 1998 to recommend the regulatory framework for derivatives trading and suggest bye-laws for Regulation and Control of Trading and Settlement of Derivatives Contracts. The Board of SEBI in its meeting held on May 11, 1998 accepted the recommendations of the committee and approved the phased introduction of derivatives trading in India beginning with Stock Index Futures. The Board also approved the "Suggestive Bye-laws" as recommended by the Dr LC Gupta Committee for Regulation and Control of Trading and Settlement of Derivatives Contracts. SEBI then appointed the J. R. Verma Committee to recommend Risk Containment Measures (RCM) in the Indian Stock Index Futures Market. The report was submitted in november 1998. However the Securities Contracts (Regulation) Act, 1956 (SCRA) required amendment to include "derivatives" in the definition of securities to enable SEBI to introduce trading in derivatives. The necessary amendment was then carried out by the Government in 1999. The Securities Laws (Amendment) Bill, 1999 was introduced. In December 1999 the new framework was approved. Derivatives have been accorded the status of `Securities'. The ban imposed on trading in derivatives in 1969 under a notification issued by the Central Government was revoked.







*Functions of SEBI* SEBI* 1. To protect the interests of investors through proper education and guidance as regards their investment in securities. For this, SEBI has made rules and regulation to be followed by the financial intermediaries such as brokers, etc. SEBI looks after the complaints received from investors for fair settlement. It also issues booklets for the guidance and protection of small investors. 2. To regulate and control the business on stock exchanges and other security markets. For this, SEBI keeps supervision on brokers. Registration of brokers and sub-brokers is made compulsory and they are expected to follow certain rules and regulations. Effective control is also maintained by SEBI on the working of stock exchanges. 3. To make registration and to regulate the functioning of intermediaries such as stock brokers, sub-brokers, share share transfer agents, merchant merchant bankers and other intermediaries intermediaries operating on the securities market. In addition, to provide suitable training to intermediaries. This function is useful for healthy atmosphere on the stock exchange and for the protection of small investors. 4. To register and regulate the working of mutual funds including UTI (Unit Trust of India). SEBI has made rules and regulations to be followed by mutual funds. The purpose is to maintain effective supervision on their operations & avoid their unfair and anti-investor activities. 5. To promote self-regulatory organization of intermediaries. SEBI is given wide statutory powers. However, self-regulation is better than external regulation. Here, the function of SEBI is to encourage intermediaries to form their professional associations and control undesirable activities of their members. SEBI can also use its powers when required for protection of small investors. 6. To regulate mergers, takeovers and acquisitions of companies in order to protect the interest of investors. For this, SEBI has issued suitable guidelines so that such mergers and takeovers will not be at the cost of small investors. 7. To prohibit fraudulent and unfair practices of intermediaries operating on securities markets. SEBI is not for interfering in the normal working of these intermediaries. Its function is to regulate and control their objectional practices which may harm the investors and healthy growth of capital market. 8. To issue guidelines to companies regarding capital issues. Separate guidelines are prepared for first public issue of new companies, for public issue by existing listed companies and for first public issue by existing private companies. SEBI is expected to conduct research and publish information useful to all market players (i.e. all buyers and sellers).







10. To restrict insider trading activity through suitable measures. This function is useful for avoiding undesirable activities of brokers and a nd securities scams.

* Administration Administration** The Securities and Exchange Board of India Act, 1992 is having retrospective effect and is deemed to have come into force on January 30, 1992. Relatively a brief act containing 35 sections, the SEBI Act governs all the Stock Exchanges and the Securities Transactions in India. A Board by the name name of the Securities and and Exchange Board of India India (SEBI) was constituted constituted under the SEBI Act to amminister its provisions. It consists of one Chairman and five members. One each from the department of Finance and Law of the Central Government, one from the Reserve Bank of India and two other persons and having its head office in Bombay and regional offices in Delhi, Calcutta and Madras. The Central Government reserves the right to terminate the services of the Chairman or any member of the Board. The Board decides questions in the meeting by majority vote with the Chairman having a second or casting vote. Section 11 of the SEBI Act provides that to protect the interest of investors in securities and to promote the development of and to regulate the securities market by such measures, it is the duty of the Board. It has given power to the Board to regulate the business in Stock Exchanges, register and regulate the working of stock brokers, sub-brokers, share transfer agents, bankers to an issue, trustees of trust deeds, registrars to an issue, merchant bankers, underwriters, portfolio managers, investment advisers, etc., also to register and regulate the working of collective investment schemes including mutual funds, to t o prohibit fraudulent and unfair trade practices and insider trading, to regulate take-overs, to conduct enquiries and audits of the stock exchanges, etc. All the stock brokers, sub-brokers, sub-brokers, share transfer agents, agents, bankers to an issue, issue, trustees of trust deed, registrars to an issue, merchant bankers, underwriters, portfolio managers, investment advisers and such other intermediary who may be associated with the Securities Markets are to register with the Board under the provisions of the Act, under Section 12 of the Sebi Act. The Board has the power to suspend or cancel such registration. The Board is bound by the directions vested by the Central Government from time to time on questions of policy and the Central Government reserves the right to supersede the Board. The Board is also obliged o bliged to









*Role of Sebi in Capital Markets* Markets * 1. Power To Make Rules For Controlling Stock Exchange : SEBI has power to make new rules for controlling stock exchange in India. For example, SEBI fixed the time of trading 9 AM and 5 PM in stock market.

2. To Provide License To Dealers And Brokers : SEBI has power to provide license to dealers and brokers of capital market. If SEBI sees that any financial product is of capital nature, then SEBI can also control to that product and its dealers. One of main example isULIPs case. SEBI said, " It is just like mutual funds and all banks and financial and insurance companies whowant whowant to issue it, must take take permission from SEBI."

3. To Stop Fraud In Capital Market : SEBI has many powers for stopping fraud in capital market.It can ban on the trading of those brokers who are involved in fraudulent and unfair unfair trade practices relating relating to stock market. It can impose the penalties on capital market intermediaries if they involve in insider trading.

4. To Control The Merge, Acquisition And Takeover The Companies : Many big companies in India want to create monopoly in capital market. So, these companies buy all other companies or deal of merging. merging. SEBI sees whether this merge or acquisition acquisition is for development of business or to harm capital market.

5. To Audit The Performance Of Stock Market : SEBI uses his powers to audit the performance of different Indian stock exchange for bringing transparency in the working of stock exchanges.

6. To Make New Rules On Carry - Forward Transactions : Share trading transactions carry forward can not exceed 25% of broker's total transactions.90







underlying Volatility Index has a track record of at least one year. The Exchange has in place the appropriate risk management framework for such derivative contracts.

9. To Require Report Of Portfolio Management Management Activities SEBI has also power to require report of portfolio management to check the capital market performance.Recently, performance.Recently, SEBI sent the letter to t o all Registered Portfolio Managers of India for demanding report.

10. To Educate The Investors : Time to time, SEBI arranges scheduled workshops to educate the investors. On 22 may 2010 SEBI imposed workshop. If you are investor, you can get education through SEBI leaders by getting update information on this page.







*Promotion And Regulation Of Self Regulatory Organisations** Organisations SEBI during 1996-96 took several steps to promote and regulate self regulatory organisations. The measures taken by SEBI are discussed below.

Association of of Merchant Merchant Bankers of India India (AMBI) AMBI was granted recognition to set up professional standards for providing providing efficient services and establish standard practices in merchant banking and financial services. It was promoted for healthy business practice and to exercise overall supervision over its members in the matters of compliance with statutory rules and regulations pertaining to merchant banking and other activities. AMBI in consultation with SEBI is working towards improving disclosures standards in the offer document as well as meeting the statutory requirement requirement in a systematic s ystematic manner.

Association of of Mutual Funds of India (AMFI) (AMFI) The Association of Mutual Funds of India (AMFI) has been set up. SEBI undertakes regular consultations with members of AMFI on various issues affecting mutual funds. In February 1997, SEBI held a meeting with trustees of all mutual funds to discuss with them their responsibilities for prudential oversight of mutual funds in the light of SEBI (Mutual Funds) Regulations, 1996.

Association of of Custodial Agencies Agencies of India India (ACAI) Following the notification of the SEBI (Custodians of S Securities) ecurities) Regulations, 1997, custodians of securities have registered an association, ACAI. While ACAI is still in its preliminary stages, SEBI has been engaging in a dialogue with ACAI to streamline custodial practices and to ensure that custodians do not function in isolation from the clearing and settlement systems. ACAI has also highlighted highlighted to SEBI SEBI from time to time time difficulties encountered by custodians on behalf of their clients clients who are mainly foreign institutional institutional investors, domestic domestic mutual funds, financial institutions, corporates and high networth individuals. Registrars Association of India (RAIN) The Registrars Association of India (RAIN) a self regulatory organisation for registrars to an







*RBI RBI** RBI stands for Reserve Bank of India and is the central bank of the country. It is the banker to all banks and the government of India. It was established in 1935 and was nationalized in 1949 after India got independence. It has a board of directors with a governor. RBI is the sole body in the country to issue currency notes. It maintains minimum reserves of gold and foreign currency amounting 200 crores. RBI performs all transactions of the government as it receives and makes payments on behalf of the government. Every bank in the country is required to keep a minimum cash reserve with the RBI to meet its liabilities. RBI issues licenses to all banks to carry on banking operations and has the right to cancel this licence if it deems fit. RBI also sets the lending rates for all banks which is the rate at which banks are required to distribute loans to consumers both in industry and agriculture sector.

*SEBI SEBI** The basic motive of the government behind setting up of an autonomous body called SEBI in 1992 was to protect the interests of investors in securities, to help in growth of securities market and to regulate it efficiently so as to attract foreign investors. SEBI has been performing these duties with zeal and efficiency. It has introduced extensive regulatory methods, stringent code of obligation, registration norms, and eligibility criteria that has helped Indian securities market tremendously. All affairs of SEBI are managed by an appointed board that comprises a chairman and 5 other members. Companies that wish to bring a public offer of more than rupees 50 lakhs are required get approval from SEBI. Of late there is news of a tug of war between tthese hese two watchdogs of Indian economy as SEBI wishes to amend the the definition of securities securities to bring into its fold all marketable marketable instruments instruments.. This has meant alarm bells for RBI as then currency derivatives would come within purview of SEBI bypassing RBI. SEBI has proposed to keep FD’s and insurance policies out of the amendment but it could include many more instruments currently falling under the jurisdiction of RBI. Negotiations are on between RBI and SEBI and soon a formula formula may be worked out to settle the issue.

*RBI vs SEBI* SEBI*







*Policies And Programmes* Programmes * This Annual Report of the Securities and Exchange Board of India (SEBI) reviews the policies and programmes of SEBI and its working and operations for the fiscal y ear 1996-97. It describes the manner in which SEBI has been carrying out its functions and exercising its powers in terms of the Securities and Exchange Board of India Act, 1992; the Securities Contracts (Regulation) Act, 1956; the Companies Act, 1956 and the Depositories Act, 1996. The Report also gives details of developments in Indian securities markets in 1996-97, and their bearing on and relation to to the work of SEBI. The The Report has been prepared prepared in accordance with the format prescribed in the Securities and Exchange Board of India (Annual Report) Rules, 1994, notified in the Official Gazette on April 7, 1994. During 1996-97 SEBI continued its operations and initiatives in regulating and developing d eveloping the Indian securities markets in fulfilment of the twin objectives of investor protection and market development set forth in the SEBI Act, 1992. Throughout its five year existence as a st atutory body, SEBI has sought sought to balance the two objectives by constantly reviewing and reappraising its existing policies and programmes, formulating new policies and crafting new regulations in areas hitherto unregulated to foster development in these areas and implementing them to ensure growth of the markets with efficiency, integrity and protection of investors' interest. The developments and reforms in Indian securities markets since January 1992, when SEBI was given statutory powers powers are given in the the box below.









*Securities Markets Reforms And Development January 1992 To March 1996* 1996* 1. The Securities and Exchange Board of India, set up in 1988 under an administrative arrangement, given statutory powers with the enactment of the SEBI Act, 1992 2. Capital Issues(Control) Act, 1947 repealed and the Office of Controller of Capital Issues abolished; control over price and premium of shares removed. Companies now free to raise funds from securities markets after filing letter of offer with SEBI 3. SEBI introduces regulations for primary and secondary market intermediaries, bringing them within the regulatory framework 4. New reforms by SEBI in the primary market include improved disclosure standards, introduction of prudential norms and simplification of issue procedures. Companies required to disclose all material facts and specific risk factors associated with their projects while making public issues. 5. Disclosure norms further strengthened by introducing cash flow statements 6. Listing agreements of stock exchanges amended to require listed companies to furnish annual statement to the stock exchanges showing variations between financial projections and projected utilisation of funds in the offer document and at actuals, to enable shareholders to make comparisons between performance and promises 7. New issue procedures introduced - partial book building for institutional investors aimed at reducing costs of issue 8. SEBI introduces a code of advertisement for public issues for ensuring fair and truthful disclosures 9. The power to regulate stock exchanges delegated to SEBI by the government 10. SEBI reconstitutes the governing boards of the stock exchanges, introduces capital adequacy norms for brokers and issues rules for making the client/broker relationship more transparent, in particular, segregating client and broker accounts 11. Over the Counter Exchange of India (OTC) set up with computerised on line screen based nation-wide electronic electronic trading and rolling settlement settlement







*Role Of Sebi In A Public Issue* Issue * Any company making a public issue or a rights issue of securities of value more than Rs 50 lakhs is required to file a draft offer document with SEBI for its observations. The validity period of SEBI’s observation letter is three months only i.e. the company has to open its issue within the period of three month starting from the date of issuing the observation letter. There is no requirement of filing any offer document / notice to SEBI in case of preferential allotment and Qualified Institution Placement (QIP). In QIP, Merchant Banker handling the issue has to file the placement document with Stock Exchanges for making the same available on their websites.

Given Below Are Few Clarifications Regarding The Role Played By SEBI (a) Till the early nineties, Controller of Capital Issues used to decide about entry of company in the market and also about the price at which securities should be offered to public. However, following the introduction of disclosure based regime under the aegis of SEBI, companies can now determine issue price of securities freely without any regulatory interference, with the flexibility to take advantage of market forces. (b) The primary issuances are governed by SEBI in terms of SEBI (Disclosures and Investor protection) guidelines. SEBI framed its DIP guidelines in 1992. The SEBI DIP Guidelines over the years have gone through many amendments in keeping pace with the dynamic market scenario. It provides a comprehensive framework for issuing of securities by the companies. (c) Before a company approaches the primary market to raise money by the fresh issuance of securities it has to make sure that it is in compliance with all the requirements of SEBI (DIP)







* Role Of Sebi In Primary & Secondary Secondary Market Market** The SEBI is the regulatory authority established under Section 3 of SEBI Act 1992 to protect the interests of the investors in securities and to promote the development of, and to regulate, the securities market and for matters connected therewith and incidental thereto.

Primary Market The primary market is that part of the capital markets that deals with the issuance of new securities. Companies, governments or public sector institutions can obtain funding through the sale of a new stock or bond issue. This is typically done through a syndicate of securities dealers. The process of selling new issues to investors is called underwriting. In the case of a new stock issue, this sale is an initial public offering (IPO). Dealers earn a commission that is built into the price price of the security offering, though though it can be found in the prospectus. prospectus. Features of primary markets are: This is the market for new long term equity capital. The primary market is the market where the securities are sold for the first time. Therefore it is also called the new issue market (NIM). In a primary issue, the securities are issued by the company directly to investors.

Secondary Market Secondary Market refers to a market where securities are traded after being initially offered to the public in the primary market and/or listed on the Stock Exchange. Majority of the trading is done in the secondary market. Secondary market comprises of equity markets and the debt markets. For the general investor, the secondary market provides an efficient platform for trading of his







through mostly offline trades, the National Stock Exchange or NSE is a completely online stock exchange and the first of its kind in the country. The trading is carried out at the National Stock Exchange through the electronic limit order book or the LOB. With the immense popularity of the process and online trading facility other exchanges started to take up the online route including the BSE where you can trade online as well. But the BSE is still having the offline trading facility that is carried out at the trading floor of the exchange at its Dalal Street facility. Apart from these classifications there are also different types of stock market in India and the classification is made on the type of instrument that is being traded at the market. Both the Bombay Stock Exchange and the National Stock Exchange have these types of stock markets

What Are The Various Departments Of SEBI Regulating Trading In The Secondary Market? The following departments of SEBI take care of the activities in the secondary market. Sr.No. Name of the Department 1. Market Intermediaries Registration and Supervision department (MIRSD)

2.

Major Activities

Registration, supervision, compliance monitoring and inspections of all market intermediaries in respect of all segments of the markets viz. equity, equity derivatives, debt and debt related derivatives. Market Regulation Formulating new policies and Department (MRD) supervising the functioning and operations (except relating to

project on sebi

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