Introduction to


History : 
The Securities and Exchange Board of India was

established by the government of India on 12 April 1988 as an interim administrative body to promote orderly and healthy growth of the securities market and for investor protection.  It was to function under the overall administrative control of the Ministry of Finance of the GOI.

.History :  The SEBI was given a statutory status on 30 Jan 1992 through an ordinance.  The ordinance was later replaced by an Act of Parliament known as the Securities and Exchange Board of India Act 1992.

. merchant bankers.  This ever expanding investor population and market capitalization led to a variety of malpractices on the part of companies.Reasons for the establishment of SEBI  The capital market had witnessed a tremendous growth during the 1980·s characterized by the increasing participation of the public. brokers. investment consultants and others involved in the securities market.

violation of rules and regulations of stock exchanges and listing requirements. non adherence of provisions of The Companies Act . rigging of prices. unofficial private placements.Continued«  The glaring examples of these malpractices include existence of self styled merchant bankers. delay in delivering shares etc. unofficial premium on new issues.  These malpractices and unfair trade practices have eroded investor confidence and multiplied investor grievances .

Continued«  The government and the stock exchanges were rather helpless in redressing the investors problems because of lack of proper penal provisions in the existing legislation.  Therefore the GOI decided to set up SEBI a separate regulatory body .

 To the investors it provides protection of their rights and interests through adequate accurate and authentic information and disclosure of information on a continuous basis. .PURPOSE & ROLE OF SEBI :  To the issuers it aims to provide a market place in which they can confidently look forward to raising finances they need in an easy fair and efficient manner.

. professionalized and expanding market with adequate and efficient infrastructure so as to render better service to investors and issuers.Continued«  To the intermediaries it offers a competitive .

educate and protect the rights and interests of individual investors.  To guide . .  To prevent trading malpractices and achieve a balance between self regulation by the securities industry and its statutory regulation.Objectives:  To regulate stock exchanges and the securities industry and to promote their orderly functioning.

.Continued«  To regulate and develop a code of conduct and fair practices by brokers . merchant bankers with a view to make them competitive and proffesional.

Functions of SEBI :  REGULATORY FUNCTIONS  Registration of brokers and sub brokers and other players in the market  Registration of collective investment schemes and Mutual Funds .

Regulatory functions :  Prohibition of fraudulent and unfair trade practices  Controlling insider trading and takeover bids and imposing penalties for such practices .

Development functions :  Investor education  Training of intermediaries  Promotion of fair practices and code of conduct of all SROs  Conducting research and publishing information useful to all market participants .

Delhi to attend to investor complaints and liaise with the issuers. intermediaries and stock exchanges in the concerned region . Chennai.  Each department is headed by an Executive Director  apart from its head office at Mumbai SEBI has regional offices in Kolkata.Organization structure  The activities of SEBI have been divided into 5 operational departments.

These committees are a part of SEBIs constant endeavour to obtain feedback from the market playerson issues relating to the regulations and development of the market .Continued«  SEBI has formed 2 advisory committees ²  Primary market advisory committee  Secondary market advisory committee  These committees are non statutory in nature and SEBI is not bound by the advice of the committees.

SEBI has the power to restrict and allow trading in a given scrip without any external (i. .e. said the Securities and Exchange Board of India.Power :  SEBI has the right to search and seizure where just cause can be given.  Mutual funds cannot invest more than 10 per cent of the total net assets of a scheme in the short-term deposits of a single bank. In matters of security trading. judicial or executive) intervention.

‡ The SEBI has also defined 'short term' for funds' investment purposes as a period not exceeding 91 days. the regulator said that investment cap would also take into account the deposit schemes of the bank's subsidiaries.‡ Announcing guidelines for parking of funds in short-term deposits of scheduled commercial banks (SCBs) by mutual funds. .


. The impact of which will be felt on the investor in more ways than one.The Security Exchange Board Of India ( SEBI) has brought in sweeping changes for the mutual fund industry.

NEW FUND OFFERS :  They will only be open for 15 days. why keep NFO period long? . The motivation behind the rule seems to be simple ² if you can invest anytime. (ELSS funds though will continue to stay open for up to 90 days) It will save investors from a prolonged NFO period and being harangued by advisors and advertisements.

and the minute they received their first cheque. . Mutual funds would keep an NFO open for 30 days. creating a skewed accounting for those that entered later since they get a fixed NFO price.NFOs can only be invested at the close of the NFO period :  Earlier. The market regulator has corrected this by extending Application Supported by Blocked Amount (ASBA) to mutual funds. the money would be directly invested in the market.

By the ASBA process one can continue to earn interest in the bank account until the NFO closes (remember there is usually no rejection or ´oversubscriptionµ in a mutual fund NFO) which means that the cheque goes for clearing after the NFO has closed irrespective of when it was sent. . The fund manager will be able to invest once the NFO closes.

. and the measures used by MFs to garner investor money using dividend as a carrot to entice new investors.Dividends can now only be paid out of actually realized gains :  It will reduce both the quantum of dividends announced.

Equity Mutual Funds play a more active role in corporate governance  This will help mutual funds become more active and not just that. they must reveal. appointment and removal of directors. in their annual reports from next year. . what they did in each ´voteµ. corporate governance issues.  SEBI has now made it mandatory for funds to disclose whether they voted for or against moves (suggested by companies in which they have invested) such as mergers. MFs have to disclose it on their website as well as annual reports. demergers.

1% Management fees removed  Equity Funds were allowed to charge 1% more as management fees if the funds were ´no-loadµ. but since SEBI has banned entry loads. . this extra 1% has also been removed.

AMCs shall not enter into any revenue sharing arrangement with the underlying funds in any manner and shall not receive any revenue by whatever means from the underlying fund. .  These guidelines set by the SEBI will lead to greater transparency for the common investor.Regarding the Fund-of-Fund  The market regulator states that information documents that Asset Management Companies (AMCs) have been entering into revenue sharing arrangements with offshore funds in respect of investments made on behalf of Fund of Fund schemes create conflict of interest. Henceforth.

the exposure limit regarding securities lending both for the scheme as well as for a single intermediary and the risks associated with stock-lending transactions. .Securities lending by Mutual Funds  Mutual funds were allowed to participate in securities lending subject to certain disclosures and reporting requirements. The guidelines issued lay down the disclosure requirements in the offer documents which include intention to lend the securities belonging to the scheme.

To ensure adequate checks and balances regarding the securities lending transactions.‡The specifications regarding the valuation of the collateral have been prescribed in the guidelines to minimize the risk involved in securities lending transactions. the requirement of reporting to trustees and SEBI have been stipulated. .

Thank You« .

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