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SECURITIES EXCHANGE BOARD

History
Controller of capital Issue Growth of companies with sound capital To avoid overcrowding of public issue To develop capital market To approve the kind of issue,size,timing,etc Securities contract regulation, Act it included provisions relating to prospectus, disclosure and accounting but several malpractices came like: Manipulation of security prices Price-rigging Inside Trading Delay in settlements, listing and commencement of trading in shares

Deficiencies in the market

Lack of variety in financial instruments. Preference shares, right issue etc are not issued Information given was misleading and deceptive Poor liquidity No control over brokers

Objectives of Act
Protection of investors so that savings mobilize Fair practice by issuer so that can raise money at minimum cost Promotion of efficient services by brokers, merchant bankers, other intermediaries etc Transparency in work

Functions of SEBI
REGULATORY FUNCTION Regulation of Stock Exchange Regulation of Stock brokers,sub-brokers,registar to the issue,underwriters,etc Registration and regulation of mutual funds Prohibition of fraudulent and unfair trade practice Prohibits insider trading

Developmental Function
Promotes investors education Training of intermediaries Conducting research and publish information Useful to market participants

Power of SEBI
To call Periodic returns from stock exchange To call any information or explanation recognized stock exchange To direct enquires of stock exchange To grant approval, amend or make to bye-laws of stock exchange To compel listing of securities To grant registration to market intermediaries To levy fees or other charges and grant licenses

Organization of SEBI
SEBI has divided its activities into four departments; Primary Market Department `Issue Management And Intermediaries Department Secondary Market Department Institutional Investment Department

SEBI and CENTRAL GOVT.


The central govt. can direct SEBI to supersede the board The central govt. has power to give guidelines or make regulations and rules for SEBI and its operations The activities of SEBI are financed by govt.

Guidelines for Primary Market


New Company:-(a)which has not completed 12 months and has no audited results (b)promoters do not have track record such cos have to issue shares at par NEW COMPANY SET UP BY EXISTING COMPANY:-co. having a track record of 5 years Can issue shares at premium EXISTING LISTED COMPANIES:-freely expand their capital by promoters contribution

Cos management, past history, present business, reason for premium Underwriting is made mandatory Subscription list should be open for3 days and maximum of 10 working days The collection centers should be at least 30 Agents not to collect money in cash Reports submitted to sebi with in 45 days

MERCHANT BANKERS
They should get authorization from sebi to operate All fees like annual fees authorization fees revenue fee to be collected by sebi All merchant bankers have to submit half yearly unaudited reports to sebi They are required to follow the codes of conduct as prescribed Merchant bankers are of four types depending upon the amount of responsibility

GUIDELINES FOR SECONDARY MARKET


STOCK EXCHANGE:-Board of Directors should include 50% non members, government representatives Working hours should be fixed uniformly All stock exchanges to inform SEBI within 24 hrs BROKERS:-Registration is compulsory Compulsory audit of accounts of broker and filing of reports Discloser of price and brokerage separately

UNDERWRITING
No person can underwrite unless he holds a certificate of registration granted by sebi It is valid for 3 years Underwriting should be done within 30 days The books of accounts should be maintained for a period of 5 years Remuneration should be only underwriting commission and is fixed as per sebi norms

RIGHTS ISSUE
In case of composite issue the price can be different i.e. right issue and public issue If the size of right issue is less than 50 lakhs than appointment of merchant bankers is not mandatory If 90%of minimum subscription is not received with in 120 days then entire money is to be refunded Underwriting is not mandatory but right issue can be under written The company is not allowed to retain oversubscription Right issue should be advertized in newspaper

Bonus Issue
There should be a provision in the Articles to issue bonus shares. If not a resolution should be passed It is out of free reserves arising out of genuine profits or share premium Declaration of bonus in lieu of dividend is not permitted No bonus is made within 12 months of any public issue After getting approval from board issue should be made within 6 months If the paid up capital exceeds the authorized capital, a resolution should be passed to increase the capital NO bonus is allowed if co. has defaulted in payment of PF,Grauity etc to employees

Foreign Institutional Investors


Foreign investors are allowed to participate in primary and secondary market No restriction as to volume of investment Disinvestment is allowed only through stock exchanges The holding of single FII in a company will not exceed 5% of equity capital FIIs have to pay an concessional tax rate of 10% on capital gains(more than 1year) and 30% on short term and 20%on dividend and interest

Allotment of Shares
When an application is accepted it amounts to allotment 1. No restriction upon the right of a private company on allotment of shares Public company is subject to certain restrictions ,they are; Prospectus must be filed with the registrar At least 5%of shares must have been received as application money Incase the issue size is more than500crores application money can not be more than 25%of the issue 1. Minimum subscription should be 90%of the issued capital Statement in lieu of prospectus for registration at least 3 days before allotment No allotment can be made Until the beginning of 5thday from the date of issue of prospectus

Transfer And Transmission Of Securities


TRANSFER

Deliberate act of the holder so it is voluntary act Stamp duty is payable Transfer is process of selling of securities

TRANSMISSION It is of operation of law so it is done under compulsion No stamp duty is required Transmission is a process of ownership transfer. It takes Place on the death, lunacy or insolvency

Guidelines for transfer and transmission of shares


Instrument of transfer must be in the prescribed form, duly stamped and complete in all respect Where a shareholder wishes to transfer a part of his shareholding ,he must submit the share certificate with the company. This is certification of shares Transfer becomes complete when the transfer is registered in the companys register In case of transmission succession certificate is requried

Prospectus
An index of the contents of prospectus Details of actual expenditure and means of financing such expenditure Details of any bridge loan undertaken for the project Incase the company undertakes major expansion project then details of technology Competition, market . Details of promoters share holdings, aggregate number of shares purchased and sold during a period of 6mths . The maximum and minimum price at which such shares were bought and sold . No projections of future profits except by a new company or by an exiting company when it wants to expand its activities beyond 100% .

Investor ptotection
Major responsibility of SEBI is protection of investors. For any new issue the following guidelines are provided: The issuing company should provide fair and correct information Allotment process should be transparent and not bias The prospectus should disclosure full and fair information No delay in refund or dispatch of share certificates All risk factors should be clearly stated Listing should be proper and timely The investor protection is to be ensured not only by company but also merchant bankers ,registrars ,collecting bankers SEBI has appointed representatives to supervise allotment so that no malpractice takes place

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