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The role of securities market increased globally

Securities market offer an alternative source of intermediation

Securities markets reduce cost of capital, increase savings and
Investor confidence is the key in securities market

Securities Regulation address this through regulation of issuer
disclosure and accounting and audit standards

Thus the rising importance of securities market and in order to
increase the faith of the investors REGULATION of this market
is essential

WHAT IS REGULATION? Regulation is “ controlling human or societal behavior by rules or restrictions.  Social regulations  Co-regulation  Market regulation .” Regulation can take many forms:  Legal restrictions promulgated by government  Self-regulation by an industry such as through a trade association .

bond markets. foreign exchange markets. and various other segments of financial markets. which is conducive for economic growth. Some of the examples of financial regulatory bodies are the Federal Reserve Bank (US). RBI. the Financial Services Authority (FSA) in UK. the Securities and Exchange Commission (SEC) in the US and many others . The financial regulations are laid out for the purpose of creating a fair and customer-friendly environment in the financial market of a particular country.REGULATING FINANCIAL MARKETS    The financial regulatory bodies control the stock markets. SEBI.

Public awareness: Encouraging public awareness about the financial markets through imparting educational programs. Consumer protection: Ensuring the most suitable level of consumer protection. 3. Market confidence: Sustaining confidence in the financial markets is one of the most important objectives of the Financial regulatory bodies. . 4. Eliminating financial crime: The financial regulations are designed for the purpose of reducing financial crimes and frauds.NEED AND OBJECTIVES OF REGULATION 1. 2.

or public good c) Inadequate information d) Unseen externalizations .BENEFITS OF REGULATION Regulations. Intervention due to a classical economics argument to market failure.  Markets failures: Regulation due to inefficiency. Efficient regulations are defined as those where the total benefits to some people exceed the total costs to others. have costs for some and benefits for others. like any other form of coercive action. a) Risk of monopoly b) Collective actions.

 Collective desires: Regulation about collective desires or considered judgments on the part of a significant segments of society  Diverse experiences: Regulation with a with a view of eliminating or enhancing opportunities for the formation of diverse preferences and beliefs  Social subordination: Regulation aimed to increase or reduce social subordination of various social groups .

.  Interest group transfers : Regulation that results from efforts by self-interest groups redistribute wealth in their favor. Endogenous preferences: Regulation’s purpose is to affect the development of certain preferences on an aggregate level  Irreversibility : Regulation that deals with the problem of irreversibility the problem which is a certain type of conduct from current generations results in outcomes from which the future generations may not recover from at all. which may disguise itself as one or more of the justifications above.

the government regulatory agency may legislate regulations that privilege special interests. such as insider trading To license providers of financial services To protect clients. AIMS of Regulation: The aims of financial regulators are usually:      To enforce applicable laws To prosecute cases of market misconduct. . and investigate complaints To maintain confidence in the financial system. In a regulatory market. known as regulatory capture.REGULATED (CONTROLLED) MARKETS A regulated market or controlled market is the provision of goods or services that is regulated by a government appointed body.

.CONCLUSION The above slides thus highlight the need for regulation not only in the markets but also the aims and objectives of the regulatory bodies regulating these markets.


I. pension or university endowments. With 60%-80% of the capital of the companies are in the hands of few hundreds. IV. We often hear the terms ‘retail investor’ and ‘institutional investor’ in the global stock markets. II. III. it is not difficult to understand why the majority of the PR effort is directed towards this group. A retail investor is an individual who purchases securities for his or her own personal account rather than for an organization. Retail investors typically trade in much smaller amounts than institutional investors such as mutual funds. .

Cumbersome procedures Malpractices by brokers Unrealistic and hyped presentations by investment firms Lack of investor protection measures Lack of adequate regulations Lack of market awareness .

III. “India has 8% retail participation in market investments as against 20-33% in South Korea and China. Due to lack of proper investor protection. We have huge work to do to increase retail participation.” Presently only 2.6% of India’s total savings come to capital market.I. and 85% of total trading is from only 5 cities. Retail investors are the back-bone of the Indian Capital market and yet a systematic study of their concerns and attempts to protect them has been of relatively of recent origin. II. . IV. the capital market in the country has experienced a stream of market irregularities and scandals in 1990’s.

Despite a long history and maturity of Indian stock markets. . There is a need to spread the ownership of equity.I. A well informed investor is a well protected investor. III. IV. The nature of Indian markets is unique with a large retail investor population that saves money worth over $300 billion but allocates less than 5% to financial market instruments other than bank deposits. the penetration level remains very low. II.

India is experiencing rapid econoic growth. If we want to share this prosperity with a cross-section of our society. IV.I. II. we must ensure that the ownership of equity is spread as widely as possible” Higher costs per trade . III. Low retail equity ownership. Today. Low depth in equity markets.


did not file return either with the RoC or SEBI and did not exist on the registered premises was termed as vanishing. Any listed company. stopped operations. which raised money through IPO but. .

Liberalize the market Companies misused funds No supervision of DCA or SEBI Controller of capital issue Investors allege SEBI and DCA Raised money at fancy premium SEBI IPO Promoters took advantage .

Many companies had raised money from the market during the capital boom period.Around 238 companies vanished. Over 7983 plantation companies were vanished.    1992-2001. Most of them were located in Maharashtra and West Bengal. .

Mis-statement and fraudulent prospectus and Balance sheet . None of its directors are traceable.     Failed to file return with RoC for a period of 2years. Failed to file returns with Stock Exchange for a period of 2years Not maintaining company’s registered office at notified address.

. FIR’s have been filed in 112 cases under the Indian Penal Code. (IPC) SEBI has debarred 100 companies and 378 directors u/s 11B of the SEBI ACT from entering capital market for a period of five years.1956.   Prosecutions have been filed in 110 case for violation of various provision of the companies act.

. Lead manager’s – Pre Issue Role. Lead manager – Price Fixing. Part-2 Investor – Bidding for the public issue. Registrar – Processing IPO Application. Part-1 SEBI – Prospectus Review.        Issuer company – IPO Process Initialization. Lead manager – Pre issue role. Lead manager – Stock Listing.

Efcon securities Ltd. Front Line Financial Services Ltd. Vipul Securities Ltd. Kalyani Finance Ltd. Hitesh Textiles Mills Ltd. Arrow Securities Ltd. .       Alps Motor Finance Ltd.