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KES SHROFF COLLEGE OF ARTS AND COMMERCE
NAAC Accredited ‘A’ Grade (CGPA 3.16) and ISO 9001:2008 Certified
PROJECT REPORT ON
COMPARISION BETWEEN ECURITY EXCHANGE BOARD OF INDIA (SEBI)
AND US SECURITIES EXCHANGE COMMISSION (SEC)
SUBMITTED BY
YOGITA B. ADROJA
T.Y.B.Com.
FINANCIAL MARKET
(SEMESTER V)
SUBMITTED TO
UNIVERSITY OF MUMBAI
PROJECT GUIDE
MR. VAIBHAV ASHAR
ACADEMIC YEAR
2012 – 2013
K.E.S SHROFF COLLEGE Page 1

KANDIVLI EDUCATION SOCIETY’S
B.K. Shroff College of Arts &
M.H. Shroff College of Commerce
Bhulabhai Desai Road, Kandivli (West), Mumbai – 400067
NAAC Accredited ‘A’ Grade(CGPA 3.16) and ISO 9001:2008 Certified
PROJECT REPOET
COMPARISION BETWEEN ECURITY EXCHANGE BOARD OF INDIA (SEBI)

AND US SECURITIES EXCHANGE COMMISSION (SEC)
SUBMITTED BY
YOGITA B. ADROJA
T.Y.BACHELOR OF COMMERCE IN FINANCIAL MARKETS
(SEMESTER V th)
SUBMITTED TO
UNIVERSITY OF MUMBAI
PROJECT GUIDE
NAME OF THE GUIDE
Mr. VAIBHAV R. ASHAR
ACADEMIC YEAR
2012 – 2013

KANDIVLI EDUCATION SOCIETY’S
B.K. Shroff College of Arts &
M.H. Shroff College of Commerce
Bhulabhai Desai Road, Kandivli (West), Mumbai – 400067
NAAC Accredited ‘A’ Grade(CGPA 3.16) and ISO 9001:2008 Certified
CERTIFICATE
This is to certify that YOGITA B. ADROJA of T.Y.B.Com. (FINANCIAL

MARKET) has successfully completed a project on COMPARISION BETWEEN
ECURITY EXCHANGE BOARD OF INDIA (SEBI) AND US SECURITIES
EXCHANGE COMMISSION (SEC) for the Semester – V under the guidance of
MR. VAIBHAV R. ASHAR during the academic year 2012-13.
Co-ordinator Project Guide Principal
Internal Examiner External Examiner
College Seal

DECLARATION
I MS. YOGITA B. ADROJA of K.E.S. SHROFF COLLEGE OF ARTS &

COMMERCE, student of T.Y.BCOM (Bachelor Of Financial Market),
Semester Vth, hereby declare that I have completed my project title
COMPARISION BETWEEN ECURITY EXCHANGE BOARD OF
INDIA (SEBI) AND US SECURITIES EXCHANGE COMMISSION
(SEC)
I also declare that this project which has been the partial fulfillment of the
requirement of the degree of T.Y.B.COM (Bachelor of Financial Market )
of the “Mumbai University” has been the result of my efforts.
Signature of Student
_________________

ACKNOWLEDGEMENT
I have sincerely done my project alloted to me. I would like to thank MR.
VAIBHAV R. ASHAR the guide for giving her valuable suggestion and guidance.
I would also like to thank our Principal Dr. LILY BHUSHAN and our vice
Principal Mr. V.S.Kannan.
It gives me immense pleasure to present this project in the course of Financial

Market, and I also would like to share the credit with Mrs. ALKA WADHWANA
for her valuable, helps in this project. I would like to thank all those people who
gave me their opinion without their help this project would not be possible to
submit in time.

INDEX
Sr no. Topic Pg no.
Chapter: 1 History 7
Chapter:2 Introduction 8
Chapter:3 Establishment of SEBI 10
Chapter:4 Organization structure 13
Chapter:5 Powers and function 15
Chapter:6 Objective 20
Chapter:7 Administration 22
Chapter:8 Department of SEBI and its functions 23
Chapter:9 Penalties and adjudication 31
Chapter:10 Under SEBI formation 35
Chapter:11 Registration certificate 47
Chapter:12 Investigation, enforcement and surveillance 49
Chapter:13 Recently SEBI to take up further market reforms 55
Chapter:14 Case study 57
Chapter:15 Conclusion 59
Chapter:16 Bibliography 60

CHAPTER:1
HISTORY
Before 1992, the three principal Acts governing the securities markets were: (a) the Capital
issues (Control) Act, 1947, which restricted issuer‟s access to the securities market and controlled
the pricing of issues; (b) the Companies Act, 1956, which sets out the code of conduct for the
corporate sector in relation to issue, allotment and transfer of securities, and disclosures to be
made in public issues; and (c) the Securities Contract (Regulation) Act, 1956, which provides for
regulation of transactions in securities through control over stock exchanges. The capital issues
(Control) Act, 1947 had its origin during the war in 1943 when the objective was to channel
resources to support the war effort. The Act was retained with some modifications as a means of
controlling the raising of capital by companies and to ensure that national resources were
channeled into proper lines, i.e, for desirable purpose to serve goals and priorities of the
government, and to protect the interests of investors. Under the Act, any firm wishing to issue
securities had to obtain approval from the Central Government, which also determined the
amount, type and price of the issue.
Major part of the liberalization process was the repeal of the capital issues (Control) Act, 1947 in
May 1992. With this, Government‟s control over issue of capital, pricing of the issues, fixing of
premia and rates of interest on debentures etc. ceased. The office which administered the Act was
abolished and the market was allowed to allocate resources to competing uses. However to ensure
effective regulation of the market, SEBI Act, 1992 was enacted to empower SEBI with statutory
powers for (a) protecting the interests of investors in securities, (b) promoting the development of
the securities market, and (c) regulating the securities market. Its regulatory jurisdiction extend
over corporate in the issuance of capital and transfer the securities in addition to all intermediaries
and persons associated with securities market. SEBI can specify the matters to be disclosed and
the standards of disclosure required for the protection of investors in respect of issues; can issue
directions to all intermediaries and other persons associated with the securities market in the
interest of investors or of orderly development for securities market; and can conduct enquiries,
audits and inspection of all concerned and adjudicate offences under the Act. In short, it has been
given necessary autonmy and authority to regulate and develop an orderly securities market.

CHAPTER:2
INTRODUCTION
Securities and Exchange Board of India

The capital market has witnessed tremendous growth
in recent times characterized particularly by the
increasing participation of public. Investors औ
confidence in the capital market can be sustained
largely by ensuring investor protection. With this end
in view, the government decided to vest SEBI
immediately with statutory powers required to do
effectively with all matters relating to capital market.
It was felt by the government that by transferring the
powers of the controller of capital issues to an
independent body it would enable it to effectively
regulate, promote and monitor the working of stock
exchange in the country.
Earlier, the regulation of the securities market was
being done through the office of controller of capital
issues under the capital issues (control) Act, 1947
which has been since reapled.
Accordingly, SEBI has been set up under the SEBI
Act, 1992. The CCI Act has now ceased to have any
application and stand withdrawn from the law w.e.f
246.5.1992. The Securities Exchange Board Of India
Act was passed by the parliament as Act No.15 of
SEBI Bhavan, Mumbai headquarters
1992 and received the assent of the President on 4th
April, 1992.
Agency overview
The Securities and Exchange Board of India Act,
1992 (the SEBI Act) was amended in the years 1995, Formed 12 April 1992[1]
1999 and 2002 to meet the requirements of changing
needs of the securities market and responding to the Jurisdiction Government of India
development in the securities market.
Headquarters Mumbai, Maharashtra
Based on the Report of Joint Parliamentary
Committee (JPC) dated December 2, 2002, the SEBI
Employees 525 (2009)[2]
Act was amended to address certain shortcomings in
its provisions. The mission of SEBI is to make India
Agency executive U. K. Sinha, Chairman
as one of the best securities market of the world and
SEBI as one of the most respected regulator in the
Website
world. SEBI also endeavors to achieve the standards
of IOSCO/FSAP.
www.sebi.gov.in
In this background, the internal group constituted by
SEBI consisting of its senior officers had proposed
certain amendments to the SEBI Act. The SEBI Board had constituted an Expert Group under the

Chairmanship of Mr Justice M. H .Kania (Former Chief Justice of India) to consider the
proposals. The report of the Expert Group is placed for eliciting public comments on the
recommendations. It may be noted that the Report does not necessarily reflect the views of SEBI
on the various proposals and recommendations. SEBI would consider the comments received
from various sources before taking any final view on the recommendations.

CHAPTER:3
ESTABLISHMENT OF THE
SECURITIES AND EXCHANGE BOARD OF INDIA
 Establishment and incorporation of Board:-
 With effect from such date as the Central Government may, by notification, appoint, there
shall be established, for the purposes of this Act, a Board by the name of the Securities and
Exchange Board of India.
 The Board shall be a body corporate by the name aforesaid, having perpetual succession and a
common seal, with power subject to the provisions of this Act, to acquire, hold and dispose of
property, both movable and immovable, and to contract, and shall, by the said name, sue or be
sued.
 The head office of the Board shall be at Bombay.
 The Board may establish offices at other places in India.
 Management of the Board:-

 The Board shall consist of the following members, namely:-
 a Chairman;
 two members from amongst the officials of the [Ministry] of the Central Government
dealing with Finance [and administration of the Companies Act, 1956(1 of 1956)];
 one member from amongst the officials of [the Reserve Bank];
 five other members of whom at least three shall be the whole-time members] to be
appointed by the central Government.
 The general superintendence, direction and management of the affairs of the Board shall vest
in a Board of members, which may exercise all powers and do all acts and things which may
be exercised or done by the Board.
 Save as otherwise determined by regulations, the Chairman shall also have powers of general
superintendence and direction of the affairs of the Board and may also exercise all powers and
do all acts and things which may be exercised or done by that Board.
 The Chairman and members referred to in clauses (a) and (d) of sub-section (1) shall be
appointed by the Central Government and the members referred to in clauses (b) and (c) of
that sub-section shall be nominated by the Central Government and the [Reserve Bank]
respectively.
 The Chairman and the other members referred to in clauses (a) and (d) of sub-section (1) shall
be persons of ability, integrity and standing who have shown capacity in dealing with
problems relating to securities market or have special knowledge or experience of law,
finance, economics, accountancy, administration or in any other discipline which, in the
opinion of the Central Government, shall be useful to the Board.

 Term of office and conditions of service of Chairman and members of the
Board:-
 The term of office and other conditions of service of the Chairman and the members referred
to in clause (d) of sub- section (1) of section 4 shall be such as may be prescribed.
 Notwithstanding anything contained in sub-section (1), the Central Government shall have the
right to terminate the services of the Chairman or a member appointed under clause (d) of
sub-section (1) of section 4, at any time before the expiry of the period prescribed under sub-
section (1), by giving him notice of not less than three months in writing or three months‟
salary and allowances in lieu thereof, and the Chairman or a member, as the case may be, shall
also have the right to relinquish his office, at any time before the expiry of the period
prescribed under sub-section (1), by giving to the Central Government notice of not less than
three months in writing.
 Removal of member from office:-

The Central Government shall remove a member from office if he –
 is, or at any time has been, adjudicated as insolvent;
 is of unsound mind and stands so declared by a competent court;
 has been convicted of an offence which, in the opinion of the Central Government, involves a
moral turpitude;
 has, in the opinion of the Central Government, so abused his position as to render his
continuation in office detrimental to the public interest:
Provided that no member shall be removed under this clause unless he has been
given a reasonable opportunity of being heard in the matter.
 Meetings:-
 The Board shall meet at such times and places, and shall observe such rules of procedure in
regard to the transaction of business at its meetings (including quorum at such meetings) as
may be provided by regulations.
 The Chairman or, if for any reason, he is unable to attend a meeting of the Board, any other
member chosen by the members present from amongst themselves at the meeting shall preside
at the meeting.
 All questions which come up before any meeting of the Board shall be decided by a majority
votes of the members present and voting, and, in the event of an equality of votes, the
Chairman, or in his absence, the person presiding, shall have a second or casting vote.
 Member not to participate in meetings in certain cases:-

Any member, who is a director of a company and who as such director has any direct
or indirect pecuniary interest in any matter coming up for consideration at a meeting of the Board,
shall, as soon as possible after relevant circumstances have come to his knowledge, disclose the
nature of his interest at such meeting and such disclosure shall be recorded in the proceedings of
the Board, and the member shall not take any part in any deliberation or decision of the Board with
respect to that matter”.

 Vacancies etc., not to invalidate proceedings of Board:-
No act or proceeding of the Board shall be invalid merely by reason of –
 any vacancy in, or any defect in the constitution of, the Board; or
 any defect in the appointment of a person acting as a member of the Board; or
 any irregularity in the procedure of the Board not affecting the merits of the case.
 Officers and employees of the Board:-

 The Board may appoint such other officers and employees as it considers necessary for the
efficient discharge of its functions under this Act.
 The term and other conditions of service of officers and employees of the Board
appointed under sub- section (1) shall be such as may be determined by regulations.

CHAPTER:4
ORGANIZATION STRUCTURE
THE BOARD COMPRISES
Name Designation
Upendra Kumar Sinha Chairman
Prashant Saran Whole Time Member
Rajeev Kumar Agarwal Whole Time Member
Dr. Thomas Mathew Joint Secretary, Ministry of Finance
V. K. Jairath magya Member Appointed
Anand Sinha Deputy Governor, Reserve Bank of India
Naved Masood Secretary,Ministry of Corporate Affairs

LIST OF FORMER CHAIRMEN
Name From To
C. B. Bhave 18 February 2008 18 February 2011
M. Damodaran 18 February 2005 18 February 2008
G. N. Bajpai 20 February 2002 18 February 2005
D. R. Mehta 21 February 1995 20 February 2002
S. S. Nadkarni 17 January 1994 31 January 1995
G. V. Ramakrishna 24 August 1990 17 January 1994
Dr. S. A. Dave 12 April 1988 23 August 1990

CHAPTER:5
POWERS AND FUNCTIONS OF SEBI
 Functions of Board:-
 Subject to the provisions of this Act, it shall be the duty of the Board to protect the interests of
investors in securities and to promote the development of, and to regulate the securities market, by
such measures as it thinks fit.
 Without prejudice to the generality of the foregoing provisions, the measures referred to therein may
provide for -
 regulating the business in stock exchanges and any other securities markets;
 registering and regulating the working of stock brokers, sub-brokers, share transfer agents,
bankers an issue, trustees of trust deeds, registrars to an issue, merchant bankers, underwriters,
portfolio managers, investment advisers and such other intermediaries who may be associated with
securities markets in any manner;
 registering and regulating the working of the depositories, [participants,] custodians of securities,
foreign institutional investors, credit rating agencies and such other intermediaries as the Board
may, by notification, specify in this behalf;
 registering and regulating the working of [venture capital funds and collective investment
schemes],including mutual funds;
 promoting and regulating self-regulatory organisations;
 prohibiting fraudulent and unfair trade practices relating to securities markets;
 promoting investors' education and training of intermediaries of securities markets; prohibiting
insider trading in securities;
 regulating substantial acquisition of shares and take-over of companies;
 calling for information from, undertaking inspection, conducting inquiries and audits of the [ stock
exchanges, mutual funds, other persons associated with the securities market] intermediaries and
self- regulatory organizations in the securities market;
 calling for information and record from any bank or any other authority or board or corporation
established or constituted by or under any Central, State or Provincial Act in respect of any
transaction in securities which is under investigation or inquiry by the Board;”
 performing such functions and exercising such powers under the provisions of the Securities
Contracts (Regulation) Act, 1956(42 of 1956), as may be delegated to it by the Central
Government;
 levying fees or other charges for carrying out the purposes of this section;
 conducting research for the above purposes;
 calling from or furnishing to any such agencies, as may be specified by the Board, such
information as may be considered necessary by it for the efficient discharge of its functions;”
 performing such other functions as may be prescribed.
Without prejudice to the provisions contained in sub-section (2), the Board may take
measures to undertake inspection of any book, or register, or other document or record of any
listed public company or a public company (not being intermediaries referred to in section 12)
which intends to get its securities listed on any recognised stock exchange where the Board has
reasonable grounds to believe that such company has been indulging in insider trading or
fraudulent and unfair trade practices relating to securities market.”
 Notwithstanding anything contained in any other law for the time being in force while exercising the
powers under [clause (i) or clause (ia) of sub-section (2) or subsection (2A)], the Board shall have the
same powers as are vested in a civil court under the Code of Civil Procedure, 1908 (5 of 1908),while
trying a suit, in respect of the following matters, namely :
 the discovery and production of books of account and other documents, at such place and such
time as may be specified by the Board;

 summoning and enforcing the attendance of persons and examining them on oath;
 inspection of any books, registers and other documents of any person referred to in section 12, at
any place;
 inspection of any book, or register, or other document or record of the company referred to in sub-
section (2A);
 issuing commissions for the examination of witnesses or documents.
 Without prejudice to the provisions contained in sub-sections (1), (2), (2A) and (3) and section 11B,
the Board may, by an order, for reasons to be recorded in writing, in the interests of investors or
securities market, take any of the following measures, either pending investigation or inquiry or on
completion of such investigation or inquiry, namely:-
 suspend the trading of any security in a recognized stock exchange;
 restrain persons from accessing the securities market and prohibit any person associated with
securities market to buy, sell or deal in securities;
 suspend any office-bearer of any stock exchange or self- regulatory organisation from holding
such position;
 impound and retain the proceeds or securities in respect of any transaction which is under
investigation;
 attach, after passing of an order on an application made for approval by the Judicial Magistrate of
the first class having jurisdiction, for a period not exceeding one month, one or more bank account
or accounts of any intermediary or any person associated with the securities market in any manner
involved in violation of any of the provisions of this Act, or the rules or the regulations made
there under: Provided that only the bank account or accounts or any transaction entered therein, so
far as it relates to the proceeds actually involved in violation of any of the provisions of this Act,
or the rules or the regulations made there under shall be allowed to be attached;
 direct any intermediary or any person associated with the securities market in any manner not to
dispose of or alienate an asset forming part of any transaction which is under investigation:
Provided that the Board may, without prejudice to the provisions contained in subsection (2) or
sub-section (2A), take any of the measures specified in clause (d) or clause (e) or clause (f), in
respect of any listed public company or a public company (not being intermediaries referred to in
section 12) which intends to get its securities listed on any recognized stock exchange where the
Board has reasonable grounds to believe that such company has been indulging in insider trading
or fraudulent and unfair trade practices relating to securities market: Provided further that the
Board shall, either before or after passing such orders, give an opportunity of hearing to such
intermediaries or persons concerned.
 Board to regulate or prohibit issue of prospectus, offer document or

advertisement soliciting money for issue of securities:-
 Without prejudice to the provisions of the Companies Act, 1956(1 of 1956), the Board may, for the
protection of investors, -
 specify, by regulations –
o the matters relating to issue of capital, transfer of securities and other matters incidental thereto;
and
o the manner in which such matters shall be disclosed by the companies;
 by general or special orders –
o prohibit any company from issuing prospectus, any offer document, or advertisement soliciting
money from the public for the issue of securities;
o specify the conditions subject to which the prospectus, such offer document or advertisement, if
not prohibited, may be issued.
 Without prejudice to the provisions of section 21 of the Securities Contracts (Regulation) Act, 1956(42
of 1956), the Board may specify the requirements for listing and transfer of securities and other
matters incidental thereto."

 Collective Investment Scheme:-
 Any scheme or arrangement which satisfies the conditions referred to in subsection (2) shall be a
collective investment scheme.
 Any scheme or arrangement made or offered by any company under which,

 the contributions, or payments made by the investors, by whatever name called, are pooled and
utilized solely for the purposes of the scheme or arrangement;
 the contributions or payments are made to such scheme or arrangement by the investors with a
view to receive profits, income, produce or property, whether movable or immovable from such
scheme or arrangement;
 the property, contribution or investment forming part of scheme or arrangement, whether
identifiable or not, is managed on behalf of the investors;
 the investors do not have day to day control over the management and operation of the scheme or
arrangement.
 Notwithstanding anything contained in sub-section (2), any scheme or arrangement

 made or offered by a co-operative society registered under the cooperative societies Act,1912(2 of
1912) or a society being a society registered or deemed to be registered under any law relating to
cooperative societies for the time being in force in any state;
 under which deposits are accepted by non-banking financial companies as idefined in clause (f) of
section 45-I of the Reserve Bank of India Act, 1934(2 of 1934);
 being a contract of insurance to which the Insurance Act,1938(4 of 1938), applies;
 providing for any scheme, Pension Scheme or the Insurance Scheme framed under the Employees
Provident Fund and Miscellaneous Provisions Act, 1952(19 of 1952);
 under which deposits are accepted under section 58A of the Companies Act, 1956(1 of 1956);
 under which deposits are accepted by a company declared as a Nidhi or a mutual benefit society
under section 620A of the Companies Act, 1956(1 of 1956);
 falling within the meaning of Chit business as defined in clause (d) of section 2 of the Chit Fund
Act, 1982(40 of 1982);
 under which contributions made are in the nature of subscription to a mutual fund; shall not be a
collective investment scheme.
 Power to issue directions.

Save as otherwise provided in section 11, if after making or causing to be made an enquiry, the Board is
satisfied that it is necessary,-
 in the interest of investors, or orderly development of securities market; or
 to prevent the affairs of any intermediary or other persons referred to in section 12 being conducted in
a manner detrimental to the interest of investors or securities market; or
 to secure the proper management of any such intermediary or person, it may

issue such directions,-
 to any person or class of persons referred to in section 12, or associated with the securities
market; or
 to any company in respect of matters specified in section 11A, as may be appropriate in the
interests of investors in securities and the securities market.
 Investigation.
 Where the Board has reasonable ground to believe that –
 the transactions in securities are being dealt with in a manner detrimental to the investors or the
securities market; or

 any intermediary or any person associated with the securities market has violated any of the
provisions of this Act or the rules or the regulations made or directions issued by the Board there
under, It may, at any time by order in writing, direct any person (hereafter in this section referred
to as the Investigating Authority) specified in the order to investigate the affairs of such
intermediary or persons associated with the securities market and to report thereon to the Board.
 Without prejudice to the provisions of sections 235 to 241 of the Companies Act, 1956(1 of 1956), it
shall be the duty of every manager, managing director, officer and other employee of the company
and every intermediary referred to in section 12 or every person associated with the securities market
to preserve and to produce to the Investigating Authority or any person authorised by it in this behalf,
all the books, registers, other documents and record of, or relating to, the company or, as the case may
be, of or relating to, the intermediary or such person, which are in their custody or power.
 The Investigating Authority may require any intermediary or any person associated with securities
market in any manner to furnish such information to, or produce such books, or registers, or other
documents, or record before it or any person authorised by it in this behalf as it may consider
necessary if the furnishing of such information or the production of such books, or registers, or other
documents, or record is relevant or necessary for the purposes of its investigation.
 The Investigating Authority may keep in its custody any books, registers, other documents and record
produced under sub-section (2) or sub-section (3) for six months and thereafter shall return the same to
any intermediary or any person associated with securities market by whom or on whose behalf the
books, registers, other documents and record are produced: Provided that the Investigating Authority
may call for any book, register, other document and record if they are needed again: Provided further
that if the person on whose behalf the books, registers, other documents and record are produced
requires certified copies of the books, registers, other documents and record produced before the
Investigating Authority, it shall give certified copies of such books, registers, other documents and
record to such person or on whose behalf the books, registers, other documents and record were
produced.
 Any person, directed to make an investigation under sub-section (1), may examine on oath, any
manager, managing director, officer and other employee of any intermediary or any person associated
with securities market in any manner, in relation to the affairs of his business and may administer an
oath accordingly and for that purpose may require any of those persons to appear before it personally.
 If any person fails without reasonable cause or refuses –

 to produce to the Investigating Authority or any person authorised by it in this behalf any book,
register, other document and record which is his duty under sub-section (2) or sub-section (3) to
produce; or
 to furnish any information which is his duty under sub-section (3) to furnish; or
 to appear before the Investigating Authority personally when required to do so under sub-section
(5) or to answer any question which is put to him by the Investigating Authority in pursuance of
that sub-section; or
 to sign the notes of any examination referred to in sub-section (7), he shall be punishable with
imprisonment for a term which may extend to one year, or with fine, which may extend to one
crore rupees, or with both, and also with a further fine which may extend to five lakh rupees for
every day after the first during which the failure or refusal continues.
 Notes of any examination under sub-section (5) shall be taken down in writing and shall be read over
to, or by, and signed by, the person examined, and may thereafter be used in evidence against him.
 Where in the course of investigation, the Investigating Authority has reasonable ground to believe that
the books, registers, other documents and record of, or relating to, any intermediary or any person
associated with securities market in any manner, may be destroyed, mutilated, altered, falsified or
secreted, the Investigating Authority may make an application to the Judicial Magistrate of the first

class having jurisdiction for an order for the seizure of such books, registers, other documents and
record.
 After considering the application and hearing the Investigating Authority, if necessary, the Magistrate
may, by order, authorise the Investigating Authority –
 to enter, with such assistance, as may be required, the place or places where such books, registers,
other documents and record are kept;
 to search that place or those places in the manner specified in the order; and
 to seize books, registers, other documents and record, it considers necessary for the purposes of
the investigation
Provided that the Magistrate shall not authorise seizure of books, registers, other documents and
record, of any listed public company or a public company (not being the intermediaries specified
under section 12) which intends to get its securities listed on any recognised stock exchange unless
such company indulges in insider trading or market manipulation.
 The Investigating Authority shall keep in its custody the books, registers, other documents and record
seized under this section for such period not later than the conclusion of the investigation as it
considers necessary and thereafter shall return the same to the company or the other body corporate,
or, as the case may be, to the managing director or the manager or any other person, from whose
custody or power they were seized and inform the Magistrate of such return: Provided that the
Investigating Authority may, before returning such books, registers, other documents and record as
aforesaid, place identification marks on them or any part thereof.
 Save as otherwise provided in this section, every search or seizure made under this section shall be
carried out in accordance with the provisions of the Code of Criminal Procedure, 1973(2 of 1974),
relating to searches or seizures made under that Code.
 Cease and desist proceedings:-

If the Board finds, after causing an inquiry to be made, that any person has violated, or is
likely to violate, any provisions of this Act, or any rules or regulations made there under, it may pass an
order requiring such person to cease and desist from committing or causing such violation: Provided that
the Board shall not pass such order in respect of any listed public company or a public company (other
than the intermediaries specified under section 12) which intends to get its securities listed on any
recognised stock exchange unless the Board has reasonable grounds to believe that such company has
indulged in insider trading or market manipulation.

CHAPTER:6
OBJECTIVE SEBI
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.
The basic objectives of the Board were identified as:
 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 there to.
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 investor.
Another significant event is the approval of trading in stock indices (like S&P CNX Nifty &
Sensex) in 2000. A market Index is a convenient and effective product because of the following
reasons:
 It acts as a barometer for market behavior;

 It is used to benchmark portfolio performance;
 It is used in derivative instruments like index futures and index options;
 It can be used for passive fund management as in case of Index Funds.
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.
Thereafter SEBI formulated the necessary regulations/bye-laws and intimated the Stock
Exchanges in the year 2000. The derivative trading started in India at NSE in 2000 and BSE
started trading in the year 2001.

CHAPTER:7
SEBI - SEBI 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 of the Securities and Exchange Board of India (SEBI) was constituted under
the SEBI Act to administer 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 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, share transfer agents, bankers to an 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 to submit a
report to the Central Government each year, giving true and full account of its activities, policies
and programmers. Any one of the aggrieved by the Board's decision is entitled to appeal to the
Central Government.

CHAPTER:8
DEPARTMENT OF SEBI AND ITS FUNCTIONS

 MARKET INTERMEDIARIES REGULATION AND SUPERVISION DEPARTMENT
(MIRSD):-
The Market Intermediaries Regulation and Supervision Department is responsible for the
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. The Department also handles the work related to action against the intermediaries
for regulatory violations (As regards action it is clarified that the current practice of issuing show
cause notices, appointment of Enquiry/Adjudication officers and consequential action up to
serving of Chairman‟s order and maintenance of database will be with the respective Divisions).
The following divisions will perform the functions of the department.
 MIRSD-1 (A-M)
This division would look after work relating to registration, monitoring, supervision,
inspection, investor grievances and policy related issues of Stock Brokers and Fees related
matters including coordination of summary proceedings.
 MIRSD-2 (N-Z)
This division would look after the work relating to Registration, monitoring,
supervision, inspection, investor grievances and policy related issues of Stock Brokers and
Sub-Brokers.
 MIRSD-3
supervision, inspection, investor grievances and policy related issues of the following Primary
market related intermediaries:
 Merchant Bankers
 Registrars to Issue
 Bankers to Issue
 Underwriters.
 MIRSD-4
supervision, inspection, investor grievances and policy related issues of the following
intermediaries:
 Debenture Trustees,
 Credit Rating Agencies
 Depository Participants
 MIRSD-5
This division looks into the matters relating to the following intermediaries:
 Sub-brokers
 Debenture Trustees
 Bankers to Issue
 MARKET REGULATION DEPARTMENT (MRD):-

The Market Regulation Department is responsible for supervising the functioning and operations
(except relating to derivatives) of securities exchanges, their subsidiaries, and market institutions
such as Clearing and settlement organizations and Depositories. („hereinafter collectively
referred to as „Market SROs) The following Divisions will perform the functions of the
Department:
 Division of Policy
The Division will handle the work related to policy and practice relating to
MarketSROs i.e., securities exchanges, clearing and settlement organizations and depositories;
market policy, trading, clearance, settlement issues, risk management, and related areas;
Reviewing rules and rule-change proposals of these Market SROs relating to market policy
issues (except for listing matters standards in purview of Corporation Finance Department);
Procedures for suspending trading of securities.
 Division of SRO Administration

The Division will handle the work related to Registration and recognition of the
Market SROs; administration of these Market SROs; Demutualization or Corporatization of
exchanges; reviewing rule change proposals relating to non-market policy issues; supervision
of the market SROs to the extent of compliance with regulatory provisions through periodical
reports and regulatory action. (As regards action it is clarified that the current practice of
issuing show cause notices, appointment of Enquiry/Adjudication officers and consequential
action up to serving of Chairman‟s order and maintenance of databse will be with the
Division).
 Division of Market supervision

The Division will hand the work related to conducting compliance, examinations and
inspections of Market SROs.
 Investor Complaints Cell

The cell would receive complaints relating to the market SROs from the Office of
Investor Assistance and Education (OIAE) and take follow up action and report back to the
OIAE. If regulatory action is required, the Cell shall inform the Division of SRO
Administration besides reporting to OIAE.
 DERIVATIVES AND NEW PRODUCTS DEPARTMENT (DNPD):-

 Division of Policy and Supervision
The Division is responsible for supervising the functioning and operations of
derivatives exchanges and related market organizations. In order to accomplish its tasks, this
division would be responsible for the following:
 Derivatives market policy issues.
 Approval of new derivative products
 Monitoring the functioning of derivatives exchanges including conducting inspections
and compliance exams.
 Prescribing and Monitoring risk management and settlement practices in derivatives
exchanges
 Developing the trading and settlement framework for new products.
 Regulatory action were required. As regards action it is clarified that the current practice
of issuing show cause notices, appointment of
 Enquiry/Adjudication officers and consequential action up to serving of Chairman‟s
order and maintenance of database will be with the Division.

 Investors Complaint Cell
The cell would receive complaints relating to the derivatives exchanges and related
organizations from the Office of Investor Assistance and Education (OIAE) and take follow
up action and report back to the OIAE. If regulatory action is required, the Cell shall inform
the Division of Policy and supervision besides reporting to OIAE.
 CORPORATION FINANCE DEPARTMENT (CFD):-

The Corporation Finance Department deals with matters relating to (i) Issuance and listing of
securities, including initial and continuous listing requirements (ii) corporate governance and
accounting/auditing standards (iii) corporate restructuring through Takeovers / buy backs (iv)
Delisting etc.The following divisions form part of this Corporation Finance Department:-
 Division of Issues and Listing (DIL)
 Policy pertaining to (i) primary market (ii) disclosures (initial as well as continuous) (iii)
listing (iv) corporate governance (v) Employee Stock Option (vi) Preferential issues (vii)
Qualified Institutional Placement (QIP) (viii) common electronic filing platforms viz.
EDIFAR & CFDs (ix) listing conditions and (x) vanishing companies in consultation
with Ministry of Corporate Affairs (MCA) through the framework of Coordination and
Monitoring Committee (CMC), set up by Government of India.
 Issue of observations on the draft offer documents of public and rights issues.
 Operational matters pertaining to accounting standards, compliance with corporate
governance, guidance to Stock Exchanges on listing matters, vanishing companies in
consultation with respective Registrar of Companies, allegations of non-compliance with
listing agreement etc.
 The following Committees of SEBI:-
o Primary Market Advisory Committee (PMAC)- to advise SEBI on policy issues
pertaining to Primary Market.
o SEBI Committee of Disclosures and Accounting (SCODA) - to advise SEBI on
disclosures and accounting related issues.
 Regulatory action where required(As regards action it is clarified that the current
practice of issuing show cause notices, appointment of Enquiry/Adjudication officers
and consequential action upto serving of Chairman‟s order and maintenance of database
will be with the Division).”
 Division of Corporate Restructuring:

The Division will handle the work relating to:
 Policy related to corporate restructuring
 Substantial Acquisition and Takeovers
 Buy back of securities
 Delisting of Securities
 Coordinating with the Takeover Panel
 Regulatory action where required. (As regards action it is clarified that the current practice
of issuing show cause notices, appointment of Enquiry/Adjudication officers and
consequential action up to serving of Chairman‟s order and maintenance of database will
be with the Division).
 Investor complaints relating to corporate restructuring.
 INVESTMENT MANAGEMENT DEPARTMENT (IMD):-

The Investment Management department is responsible for registering and regulating mutual
funds, venture capital funds, foreign venture capital investors, collective investment schemes,

including plantation schemes, Foreign Institutional Investors, Portfolio Managers and
Custodians. The following Divisions will perform the functions of the Department;
 Division of Funds 1((Portfolio Managers, Venture Capital, Corporate Bonds, etc.) 2 (Mutual
Funds) and 3 (Inspection of Mutual Funds):
The Divisions handle the following works related to their respective entities:
 Registrations
 Policy related issues
 Inspections
 Investor Complaints
 Regulatory actions.
Investor Complaints Cell: The cell would receive complaints relating to their
respective entities from the OIAE and take follow up action and report back to OIAE. If
regulatory action is required, the Cell shall keep the OIAE informed.
 Division of Foreign Institutional Investors and Custodian

The Division will handle all work related to:
 FIIs
 Custodians
 Regulatory action wherever required.
Investor Complaints Cell: The cell would receive complaints relating to FIIs and custodians
from the OIAE and take follow up action and report back to OIAE. If regulatory action is
required, the cell shall keep the OIAE informed.
 Division of Collective Investment Schemes:

This Division administers the SEBI (Collective Investment Schemes) Regulations 1999. It
includes work relating to the following :
 Existing CIS entities
 Investigating complaints of purported CIS entities
 Grant of provisional registration to existing CIS entities in terms of regulation 73
of the Regulation
 Taking action against the entities for non compliance with the regulations like,
prohibitory orders and launching prosecutions against errant entities and their
promoters/ directors and key management personnel.
 Providing evidences in courts pertaining to prosecution proceedings.
 Registration of Collective Investment Management Companies - CIMC
The above activities are also conducted at the regional offices of SEBI, wherever the address
of the CIS entity is located.
Investor Complaints Cell: The cell shall address the complaints of investors relating to CIS or
alleged CIS entities from the OIAE. The Division shall take action and report back to OIAE
about the same. The Regional Offices of SEBI report the status of complaints to Head Office
Division of CIS. In case of regulatory actions, the OIAE shall be informed about the same.
 INTEGRATED SURVEILLANCE DEPARTMENT (ISD):-

 The integrated Surveillance department is responsible for monitoring market activity through
market systems, data from other departments and analytical software. The department would
be responsible for
 Developing, maintaining and operating an integrated market surveillance system including

monitoring of all segments of the markets.

 Methodologies for capturing information from media review, public complaints and tips,
other agencies, exchanges, and direct solicitations; assignment of staff to handle functions;
method of logging and cataloguing information; criteria for evaluating and distributing
information; input into tracking and other systems.
 Recognizing potentially illegal activities and referrals to Investigations, Enforcement or other

departments
 INVESTIGATIONS DEPARTMENT (IVD):-

The Investigations department is responsible for:
 Conducting investigations on potentially illegal market activities
.
 Providing referrals to the enforcement department.
 Assisting the enforcement department in enforcing SEBI action against violators.
 (As regards action, the current practice of issuing show cause notices, appointment of
Enquiry/Adjudication officers and consequential action up to serving of Chairman‟s order
and maintenance of database will be with the Department).
 ENFORCEMENT OF DEPARTMENT (EFD):-

Enforcement Department is responsible for proceedings related to regulatory action
and obtaining redress for violations of securities laws and regulations against all market
participants, issuers and individuals and other entities that breach securities laws and
regulations. The following Divisions will perform the functions of the Department;
 Division of Regulatory Action
The division shall enforce action against market misdemeanors through SEBI administrative
proceedings. The role of the Division shall commence from the time the hearing before
Chairman/Board is proposed. The Division will assist the Chairman/Board in its proceedings,
prepare the orders, handle all matters relating to SAT, appeals against SAT orders and Court
cases relating to regulatory action. The Division will also frame the procedures relating to the
above matters.
 Division of Prosecutions
The division shall handle work related to filing prosecution proceedings through the courts
and follow up to obtain conviction. The Division will also frame procedures for cooperation
with public prosecutors, other agencies and for making referrals to prosecutors and other
government agencies
 LEGAL AFFAIRS DEPARTMENT (LAD):-

The Department of Legal Affairs would be responsible to provide legal counsel to the Board and
to its other departments, and to handle non-enforcement litigation. The following Divisions will
handle the functions of the Department.
 Division of Policy:
The division would work to formulate SEBI‟s legislative initiatives and review and comment
upon proposed legislation that would affect the securities industry or SEBI‟s authority or
operation. It would handle testimony and statutory drafting assistance. The division would
also be responsible for establishing a clear legal framework and basis for the various
categories of SEBI pronouncements (e., regulations, guidelines, circulars, instructions, etc.,);

the hierarchy of their force and effect; the procedure for their promulgation, amendment or
repeal.
 Division of Regulatory Assistance

The division would support other SEBI departments in meeting their objectives by providing
assistance and guidance wherever necessary in developing market rules and interpretations.
 ENQUIRIES AND ADJUDICATION DEPARTMENT (EAD)

The Enquiries and Adjudication Department would handle quasi judicial matters
and provide timely hearings and initiate adjudication brought by the other Departments against
alleged violators who are within SEBI‟s disciplinary jurisdiction. The department would directly
report to Chairman.
 OFFICE OF INVESTOR ASSISTANCE AND EDUCATION (OIAE)
The Office will support SEBI‟s operations by handling investor complaints centrally and be
the focal point of SEBI‟s investor education effort. The Office would be the single point
interface with investors and would receive complaints relating to all departments, forward to
the concerned departments, follow up and respond to investors. The office shall set up
necessary systems and procedures to handle his function.
The Office will also receive complaints relating to issues, transfer of shares, dividends,
compliance with listing conditions, corporate governance issues under the purview of the
Corporation Finance department (Division of Issues and Listing) and take follow up action.
 GENERAL SERVICES DEPARTMENT (GSD)

This department would support all of the internal operations of SEBI. The
Department will have the following divisions.
 Treasury and Accounts Division
The Division will handle work related to:
 Development of SEBI‟s internal budget and accounting systems
 Presentation of reports and budgets to the SEBI Board
 Maintaining internal accounting records, developing internal control systems for
collections and disbursements and other financial controls
 Managing SEBI‟s investments
 Facilities Management Division

The division will be responsible for the establishment and maintenance of the physical
facility housing the regulator and related needs.
 Official Language Division

The Division will handle the work related to compliance with Government‟s official
language policy and Translation of certain documents into the official language.
 Office of the Secretary to the Board

The Office of the Secretary shall coordinate Board meetings, record and maintain Board
decisions.
 Protocol and Security Division

The division will handle work related to:
 Protocol duties for visits/ meetings of senior officials of SEBI and co-coordinating visits
of dignitaries to SEBI,
 Security and Fire fighting duties in the office and residential premises of SEBI,

 Functioning of mailing desk and reception,
 General upkeep of the office premises and maintenance of SEBI buildings,
 Verification of dead stock inventory for SEBI's offices and residential premises
 DEPARTMENT OF ECONOMIC AND POLICY ANALYSIS (DEPA):-

The Department will handle its functions through the following Divisions:
 Division of Policy Analysis (DPA)
This division would look after the following:
 Partnering/vetting of policy/concept papers.
 Need based research
 Regulatory Impact Assessment (RIA) and benchmarking of regulations.
 Research Support to Committees and Working Groups set up by SEBI.
 Development of Strategic Action Plan/Vision Statement.
 Any other tasks that may be assigned.
 Division of Economic Analysis (DEA)

This division would look after the following:
 Tracking and analysis of market developments.
 Tracking and analysis of other economic developments.
 Repository of data (and data analysis)
 Preparation and publication of Annual Report.
 Preparation and publication of SEBI Bulletin and Handbook of Statistics.
 Conducting periodic Investor Survey.
 History of Securities Market Project.
 Any other tasks that may be assigned.
 OFFICE OF THE CHAIRMAN (OCH)

 Office of the Executive Assistant to Chairman
The office will be responsible to provide such administrative and other support as the
Chairman may require. The functions would include strategic planning and managing new
initiatives.
 Office of International Affairs

The office would perform the following:
 Implement information-sharing initiatives with international regulators
 Participate in international regulatory organizations
 Handle all matters related to Foreign assisted projects
 Establish guidelines for interaction with foreign Government agencies and foreign
jurisdictions, including providing technical assistance.
 Communications Division
The division would be responsible for all communications of SEBI. These include:
 Media releases and other forms of communication including the publication of SEBI
materials.
 News conferences and responding to inquiries from the press
 Human Resources Division

The Human Resources Division will perform all the functions in its role as the principal
personnel and human resources authority in SEBI.

 INFORMATION TECHNOLOGY DEPARTMENT:-
This department would perform its role as the technical support group for SEBI.
 THE REGIONAL OFFICES (RO's):-

The Regional Office will handle work as per existing delegation and shall continue to report to
functional heads for specific departmental functions while reporting administratively to SEBI
Executive Directors.

CHAPTER:9
PENALTIES AND ADJUDICATION
 Penalty for failure to furnish information, return, etc:-

If any person, who is required under this Act or any rules or regulations made there under,-
 to furnish any document, return or report to the Board, fails to furnish the same, he shall
be liable to a penalty of one lakh rupees for each day during which such failure continues
or one crore rupees, whichever is less
 to file any return or furnish any information, books or other documents within the time
specified there for in the regulations, fails to file return or furnish the same within the
time specified there for in the regulations, he shall be liable to a penalty of one lakh
rupees for each day during which such failure continues or one crore rupees, whichever is
less.
 to maintain books of accounts or records, fails to maintain the same, he shall be liable to a
penalty of one lakh rupees for each day during which such failure continues or one crore
rupees, whichever is less.
 Penalty for failure by any person to enter into agreement with clients:-
If any person, who is registered as an intermediary and is required under this Act or any rules
or regulations made there under to enter into an agreement with his client, fails to enter into
such agreement, he shall be liable to a penalty of one lakh rupees for each day during which
such failure continues or one crore rupees, whichever is less.
 Penalty for failure to redress investors' grievances:-

If any listed company or any person who is registered as an intermediary, after having been
called upon by the Board in writing, to redress the grievances of investors, fails to redress
such grievances within the time specified by the Board, such company or intermediary shall
be liable to a penalty of one lakh rupees for each day during which such failure continues or
one crore rupees, whichever is less.
 Penalty for certain defaults in case of mutual funds:-

If any person, who is –
 required under this Act or any rules or regulations made there under to obtain a certificate
of registration from the Board for sponsoring or carrying on any collective investment
scheme, including mutual funds, sponsors or carries on any collective investment scheme,
including mutual funds, without obtaining such certificate of registration, he shall be liable
to a penalty of one lakh rupees for each day during which he sponsors or carries on any
such collective investment scheme including mutual funds, or one crore rupees,
whichever is less.
 registered with the Board as a collective investment scheme, including mutual funds, for
sponsoring or carrying on any investment scheme, fails to comply with the terms and
conditions of certificate of registration, he shall be liable to a penalty of one lakh rupees
for each day during which such failure continues or one crore rupees, whichever is less.

 registered with the Board as a collective investment scheme, including mutual funds, fails
to make an application for listing of its schemes as provided for in the regulations
governing such listing, he shall be liable to a penalty of one lakh rupees for each day
during which such failure continues or one crore rupees , whichever is less.
 registered as a collective investment scheme including mutual funds fails to despatch unit
certificates of any scheme in the manner provided in the regulation governing such
despatch, he shall be liable to a penalty of one lakh rupees for each day during which such
failure continues or one crore rupees, whichever is less.
 registered as a collective investment scheme, including mutual funds, fails to refund the
application monies paid by the investors within the period specified in the regulations, he
shall be liable to pay a penalty of one lakh rupees for each day during which such failure
continues or one crore rupees, whichever is less.
 registered as a collective investment scheme, including mutual funds, fails to invest

money collected by such collective investment schemes in the manner or within the period
specified in the regulations, he shall be liable to a penalty of one lakh rupees for each day
during which such failure continues or one crore rupees, whichever is less.
 Penalty for failure to observe rules and regulations by an asset management

company:-
Where any asset management company of a mutual fund registered under this Act, fails to
comply with any of the regulations providing for restrictions on the activities of the asset
management companies, such asset management company shall be liable to a penalty of one
lakh rupees for each day during which such failure continues or one crore rupees, whichever
is less.
 Penalty for failure in case of stock brokers:-

If any person, who is registered as a stock broker under this Act, -
 fails to issue contract notes in the form and in the manner specified by the stock exchange
of which such broker is a member, he shall be liable to a penalty not exceeding five times
the amount for which the contract note was required to be issued by that broker;
 fails to deliver any security or fails to make payment of the amount due to the investor in
the manner within the period specified in the regulations, he shall be liable to a penalty of
one lakh rupees for each day during which such failure continues or one crore rupees,
whichever is less.
 charges an amount of brokerage which is in excess of the brokerage specified in the

regulations, he shall be liable to a penalty of one lakh rupees] or five times the amount of
brokerage charged in excess of the specified brokerage, whichever is higher.
 Penalty for insider trading:-

If any insider who,-
 either on his own behalf or on behalf of any other person, deals in securities of a body
corporate listed on any stock exchange on the basis of any unpublished price sensitive
information; or

 communicates any unpublished price- sensitive information to any person, with or without
his request for such information except as required in the ordinary course of business or
under any law; or counsels, or procures for any other person to deal in any securities of
any body corporate on the basis of unpublished price-sensitive information, shall be liable
to a penalty of twenty-five crore rupees or three times the amount of profits made out of
insider trading, whichever is higher.
 Penalty for non-disclosure of acquisition of shares and take-overs:-

If any person, who is required under this Act or any rules or regulations made there under,
fails to,-
 disclose the aggregate of his shareholding in the body corporate before he acquires any
shares of that body corporate; or
 make a public announcement to acquire shares at a minimum price;
 make a public offer by sending letter of offer to the shareholders of the concerned
company; or
 make payment of consideration to the shareholders who sold their shares pursuant to letter
of offer. he shall be liable to a penalty twenty-five crore rupees or three times the amount
of profits made out of such failure, whichever is higher.
 Penalty for fraudulent and unfair trade practices.-

If any person indulges in fraudulent and unfair trade practices relating to securities, he shall
be liable to a penalty of twenty-five crore rupees or three times the amount of profits made
out of such practices, whichever is higher.
 Penalty for contravention where no separate penalty has been provided.-

Whoever fails to comply with any provision of this Act, the rules or the regulations made or
directions issued by the Board there under for which no separate penalty has been provided,
shall be liable to a penalty which may extend to one crore rupees.
 Power to adjudicate.-
 For the purpose of adjudging under sections 15A, 15B, 15C, 15D, 15E, 15F, 15G, 54
[15H, 15HA and 15HB] ,the Board shall appoint any of its officers not below the rank of a
Division Chief to be an adjudicating officer for holding an inquiry in the prescribed
manner after giving any person concerned a reasonable opportunity of being heard for the
purpose of imposing any penalty.
 While holding an inquiry, the adjudicating officer shall have power to summon and
enforce the attendance of any person acquainted with the facts and circumstances of the
case to give evidence or to produce any document which in the opinion of the adjudicating
officer, may be useful for or relevant to the subject matter of the inquiry and if, on such
inquiry, he is satisfied that the person has failed to comply with the provisions of any of
the sections specified in sub-section (1), he may impose such penalty as he thinks fit in
accordance with the provisions of any of those sections.
 Factors to be taken into account by the adjudicating officer:-

While adjudging quantum of penalty under section 15 I, the adjudicating officer shall have
due regard to the following factors, namely:
 the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a
result of the default;
 the amount of loss caused to an investor or group of investors as a result of the default;
 the repetitive nature of the default.
 .Crediting sums realized by way of penalties to Consolidated Fund of India.-

All sums realised by way of penalties under this Act shall be credited to the Consolidated
Fund of India.]

CHAPTER:10
UNDER SEBI FORMATION
MUTUAL FUND
An investment vehicle that is made up of a pool of funds collected from many investors for the
purpose of investing in securities such as stocks, bonds, money market instruments and similar
assets. Mutual funds are operated by money managers, who invest the fund's capital and attempt
to produce capital gains and income for the fund's investors. A mutual fund's portfolio is
structured and maintained to match the investment objectives stated in its prospectus.
SECURITIES AND EXCHANGE BOARD OF INDIA (MUTUAL FUNDS)
(SECOND AMENDMENT) REGULATIONS, 2012.
No. LAD-NRO/GN/2012-13/17/21502 - In exercise of the powers conferred under section 30 of

the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Board hereby makes the
following regulations to amend the Securities and Exchange Board of India (Mutual Funds)
Regulations, 1996, namely:-

 These regulations may be called the Securities and Exchange Board of India (Mutual Funds)
(Second Amendment) Regulations, 2012.
 These regulations shall come into force on the first day of October, 2012.
 In the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996-
 in regulation 48, sub-regulation (2) and the proviso shall be substituted with the
following, namely -"(2) The Net Asset Value of the scheme shall be calculated on daily
basis and published in at least two daily newspapers having circulation all over India.".
 after regulation 51, the following new regulation shall be inserted, namely- “Credit of
exit load to scheme.
51A. The exit load charged, if any, after the commencement of the SEBI (Mutual Funds)
(Second Amendment) Regulations, 2012, shall be credited to the scheme.”
 in regulation 52,-
o sub- regulation (2) shall be substituted with the following, namely- “(2) The asset
management company may charge the scheme with investment and advisory fees
which shall be fully disclosed in the offer document.”.
o in sub-regulation (4), the words “mutual fund” shall be substituted with the word
“scheme”.
o in sub-regulation (6),-
 for clause (a), the following shall be substituted, namely- “(a) in case of a fund of
funds scheme, the total expenses of the scheme including weighted average of
charges levied by the underlying schemes shall not exceed 2.50 per cent of the
daily net assets of the scheme.”.
 in clause (b), the words “weekly average” shall be substituted with the words
“daily”.
 in clause (c), the words "or average weekly" and “or weekly average” wherever
appearing shall be omitted.
o after sub-regulation (6), the following new sub-regulation shall be inserted, namely-
"(6A) In addition to the limits specified in sub-regulation (6), the following costs or
expenses may be charged to the scheme, namely-
 brokerage and transaction costs which are incurred for the purpose of execution of
trade and is included in the cost of investment, not exceeding 0.12 per cent in
case of cash market transactions and 0.05 per cent in case of derivatives
transactions;
 expenses not exceeding of 0.30 per cent of daily net assets, if the new inflows
from such cities as specified by the Board from time to time are at least –
(i) 30 per cent of gross new inflows in the scheme, or;
(ii) 15 per cent of the average assets under management (year to date) of the
scheme, whichever is higher:
Provided that if inflows from such cities is less than the higher of sub-
clause (i) or sub- clause (ii), such expenses on daily net assets of the
scheme shall be charged on proportionate basis: Provided further that
expenses charged under this clause shall be utilised for distribution
expenses incurred for bringing inflows from such cities:
Provided further that amount incurred as expense on account of inflows
from such cities shall be credited back to the scheme in case the said
inflows are redeemed within a period of one year from the date of
investment;

 additional expenses, incurred towards different heads mentioned under sub-
regulations (2) and (4), not exceeding 0.20 per cent of daily net assets of the
scheme.”.
 in sub-regulation (7), the words, symbols and number "sub-regulation (6)" shall
be substituted with the words, symbols and numbers "subregulations (6) and
(6A)".
 for regulation 59, the following shall be substituted, namely-“Half-yearly Disclosures.
o A mutual fund and asset management company shall within one month from the
close of each half year, that is on 31stMarch and on 30thSeptember, host a soft copy
of its unaudited financial results on their website:
Provided that the half-yearly unaudited report referred to in this subregulation shall
contain details as specified in Twelfth Schedule and such other details as are
necessary for the purpose of providing a true and fair view of the operations of the
mutual fund.
o A mutual fund and asset management company, shall publish an advertisement
disclosing the hosting of such financial results on their website, in atleast one English
daily newspaper having nationwide circulation and in a newspaper having wide
circulation published in the language of the region where the Head Office of the
mutual fund is situated.”.
 In Twelfth Schedule, in serial number 6.5, the words and symbols "daily/weekly average"
wherever appearing shall be substituted with the word "daily".

CAPITAL MARKET
ROLE OF SEBI IN INDIAN CAPITAL MARKET
SEBI is regulator to control Indian capital market. Since its establishment in 1992, it is doing hard
work for protecting the interests of Indian investors. SEBI gets education from past cheating with
naive investors of India. Now, SEBI is more strict with those who commit frauds in capital
market.The role of security exchange board of India (SEBI) in regulating Indian capital market is
very important because government of India can only open or take decision to open new stock
exchange in India after getting advice from SEBI. If SEBI thinks that it will be against its rules
and regulations, SEBI can ban on any stock exchange to trade in shares and stocks.Now, we
explain role of SEBI in regulating Indian Capital Market more deeply with following points:
 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.
 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 is ULIPs case. SEBI said, " It is just like mutual fundsand all
banks and financial and insurance companies who want to issue it, must take permission
from SEBI."
 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 trade
practices relating to stock market.
 It can impose the penalties on capital market intermediaries if they involve in insider
trading.
 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. SEBI sees whether this merge or acquisition is
for development of business or to harm capital market.
 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.
 To make new rules on carry - forward transactions :

 Share trading transactions carry forward can not exceed 25% of broker's total
transactions.
 90 day limit for carry forward.
 To create relationship with ICAI:-

ICAI is the authority for making new auditors of companies. SEBI creates good relationship
with ICAI for bringing more transparency in the auditing work of company accounts because
audited financial statements are mirror to see the real face of company and after this investors
can decide to invest or not to invest. Moreover, investors of India can easily trust on audited

financial reports. After Satyam Scam, SEBI is investigating with ICAI, whether CAs are
doing their duty by ethical way or not.
 Introduction of derivative contracts on Volatility Index:-
 For reducing the risk of investors, SEBI has now been decided to permit Stock
Exchanges to introduce derivative contracts on Volatility Index, subject to the condition
that;
 The 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.
 Before introduction of such contracts, the Stock Exchanges shall submit the following:
 Contract specifications
 Position and Exercise Limits
 Margins
 The economic purpose it is intended to serve
 Likely contribution to market development
 The safeguards and the risk protection mechanism adopted by the exchange to
ensure market integrity, protection of investors and smooth and orderly trading.
 The infrastructure of the exchange and the surveillance system to effectively monitor
trading in such contracts, and
 Details of settlement procedures & systems
 Details of back testing of the margin calculation for a period of one year considering
a call and a put option on the underlying with a delta of 0.25 & -0.25 respectively
and actual value of the underlying.
 To Require report of Portfolio Management Activities:-

SEBI has also power to require report of portfolio management to check the capital market
performance. Recently, SEBI sent the letter to all Registered Portfolio Managers of India for
demanding report.
 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.

VENTURE CAPITAL
APPLICATION FOR GRANT OF CERTIFICATE OF REGISTRATION AS
VENTURE CAPITAL FUND SECURITIES AND EXCHANGE BOARD OF INDIA
INSTRUCTIONS
 This form is meant for use by the company or trust (hereinafter referred to as the applicant)
for application for grant of certificate of registration as venture capital fund.
 The applicant should complete this form, and submit it, along with all supporting documents
to the Board at its head office at Mumbai.
 This application form should be filled in accordance with these regulations.
 The application shall be considered by the Board provided it is complete in all respects.\
 All answers must be legible.
 Information which needs to be supplied in more detail may be given on separate sheets which
should be attached to the application form.
 The application must be signed and all signatures must be original.
 The application must be accompanied by an application fee as specified in the Second
Schedule to these regulations.
 Name, address of the registered office, address for correspondence, telephone number(s),
fax number(s), telex number(s) of the applicant and the name of the contact person.
 Please indicate to which of the following categories the applicant belongs.
 a company established under the Companies Act, 1956 (1 of 1956)
 a trust set up under the Indian Trusts Act, 1882 (2 of 1882).
 Date and place of incorporation or establishment and date of commencement of business
(enclose certificate of incorporation, memorandum and articles of association or trust
deed in terms of which incorporated or established).
 Details of members of the Board of Trustees or directors of the trustee company, as the
case may be, in case the applicant has been set up as a trust. Details of members of the
Board of Directors of the venture capital fund in case the applicant has been set up as a
company.
 Please state whether the applicant, his partner, director or principal officer is involved in
any litigation connected with the securities market which has an adverse bearing on the
business of the applicant; or has at any time been convicted for any moral turpitude or at
any time has been found guilty of any economic offence. In case the applicant is a trust,
the above information should be provided for the members of the Board of Trustees or of
the abovementioned persons connected with the trustee company. If yes, the details
thereof.
 Please also state whether there has been any instance of violation or non adherence to the
securities laws, code of ethics/conduct, code of business rules, for which the applicant, or
its parent or holding company or affiliate may have been subject to economic, or
criminal, liability, or suspended from carrying out its operations, or the registration
revoked temporarily.
 Details of asset management company, if any (enclose copy of agreement with the asset
management company).
 Declaration statement (to be given as below).We hereby agree and declare that the
information supplied in the application, including the attachment sheets, is complete and
true. AND we further agree that, we shall notify the Securities and Exchange Board of
India immediately any change in the information provided in the application. We further
agree that we shall comply with, and be bound by the Securities and Exchange Board of
India Act, 1992, and the Securities and Exchange Board of India (Venture Capital Funds)

Regulations, 1996, and Government of India guidelines/instructions as may be announced
by the Securities and Exchange Board of India from time to time. We further agree that
as a condition of registration, we shall abide by such operational instructions/directives as
may be issued by the Securities and Exchange Board of India from time to time.

PRIMARY MARKET’
Review of certain policies in the primary market - Amendments to SEBI (Issue
of Capital and Disclosure Requirements) Regulations, 2009 / Equity Listing
Agreement.
The Board considered the Memorandum and decided as under:
 Public Announcement by Companies proposing to access the capital

market:-
While filing Draft Offer Document (DoD) with SEBI, the issuer company shall make a
public announcement about the filing, simultaneously but not later than one day from the
date of filing the (DoD) with SEBI.
 Preferential issue of equity shares or convertible securities or warrants to

promoters and promoter group:-
In case of preferential issues, where any promoter or any member of the promoter group has
previously subscribed to the warrants of the company but failed to exercise the warrants, the
promoters and promoter group shall be ineligible for issue of equity shares or convertible
securities or warrants for a period of one year from the date of expiry of the currency
/cancellation of the warrants. Further, if any member of the promoters/ promoter group has
sold shares in the previous six months, then the promoters/ promoter group would be
ineligible for allotment on preferential basis.
 News reports appearing in the media after filing of Draft Offer Document
(DOD) with SEBI :-
The merchant bankers shall submit a compliance certificate as to whether the contents of the
news reports/ articles that appear after filing of DOD are supported by disclosures in the offer
document or not. This would apply in respect of news reports/ articles appearing in
newspapers stipulated in ICDR for issue advertisements, major business magazines and also
in the print and electronic media controlled by a media group where the media group has a
private treaty/ shareholders‟ agreement with the issuer company/ promoters of the issuer
company.
 Uniform/ single payment option in rights issues:-

Only one payment option shall be given by the issuer to all the shareholders, i.e.,either (i)
part payment on application with balance money to be paid on calls, or (ii) full payment on
application. Where the issuer opts for part payment, it shall be incumbent on the issuer to
obtain approvals, if any, as may be necessary for the purpose.
 Minimum Promoters’ contribution in Further Public Offers (FPOs):-

The requirement of promoters‟ contribution shall not be applicable to FPOs where equity
shares of the issuer are not infrequently traded in a recognised stock exchange for three years
and the issuer has a track record of dividend payment for three years.

 Allocation in public issues:-
Pursuant to recent amendments to SCRR, consequential amendments shall be made in ICDR
Regulations by deleting the second proviso to clause (c) of subregulation (2) of Regulation
43.
 Extension of applicability of clause 5A of Equity Listing Agreement for

unclaimed equity shares in physical form:-
Clause 5A of the Equity Listing Agreement shall be amended to provide that the unclaimed
shares issued in physical form shall be dealt in the manner similar to the unclaimed shares
issued in demat form.

SECONDARY MARKET
SEBI AND ITS ROLE IN THE SECONDARY MARKET
The SEBI is the regulatory authority established under Section 3 of SEBI Act 1992 toprotect the
interests of the investors in securities and to promote the development of,and to regulate,
the securities market and for matters connected therewith andincidental thereto.Securities and
Exchange Board of India constituted under the Resolution of theGovernment of India in the
Department of Economic Affairs No.1 (44)SE/86, dated the12th day of April, 1988;The Board
shall consist of the following members, namely:-1. A Chairman2. Two members from amongst
the officials of the Ministry of the CentralGovernment dealing with Finance (and administration
of the Companies Act,1956;) 2 of 19343. One member from amongst the officials of [the Reserve
Bank 4. Five other members of whom at least three shall be the whole-time members
Departments of SEBI regulating trading in the secondary market
 Market Intermediaries Registration and Supervision department (MIRSD):-
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 Department (MRD):-

Formulating new policies and supervising the functioning and operations (except relating to
derivatives) of securities exchanges, their subsidiaries, and market institutions such as
Clearing and settlement organizations and Depositories(Collectively referred to as µMarket
SROs.
 Derivatives and New Products Departments (DNPD):-

Supervising trading at derivatives segments of stock exchanges, introducing new products to
be traded, and consequent policy changes.

STOCK EXCHANGES
Powers of sebi in stock exchanges
 Power to call for information:-
The Board may from time to time call for any information, documents or records from the
recognised stock exchange or the recognised clearing corporation, or their governing board or
any shareholder thereof.
 Power of inspection:-
 The Board may at any time undertake inspection, conduct inquiries and audit of any
recognised stock exchange or recognised clearing corporation, any associate of such
exchange or clearing corporation, any shareholder of such stock exchange or clearing
corporation or any associate and agent of such shareholder.
 Where an inspection under sub-regulation (1) is undertaken by the Board, such
recognised stock exchange or recognised clearing corporation or shareholder or associate
and every manager, director, managing director, chairperson or officer and other employee
of such recognised stock exchange, recognised clearing corporation, shareholder or
associate shall co-operate with the Board.
 Directions by the Board:-

Without prejudice to exercise of its powers under the provisions of the Act or the Securities
and Exchange Board of India Act, 1992 and rules and regulations made there under, the Board
may, either suo motu or on receipt of any information or during pendency of any inspection,
inquiry or investigation or on completion thereof, in the interest of public or trade or investors
or the securities market, issue such directions as it deems fit, including but not limited to any
or all of the following:
 directing a person holding equity shares or rights over equity shares in a recognised stock
exchange or recognised clearing corporation in contravention of these regulations to
divest his holding, in such manner as may be specified in the direction;
 directing transfer of any proceeds or securities to the Investor Protection Fund of a

recognised stock exchange or Settlement Guarantee Fund of a recognised clearing
corporation;
 debarring any recognised stock exchange or recognised clearing corporation, any

shareholder of such recognised stock exchange or recognised clearing corporation, or any
associate and agent of such shareholder, or any transferee of shares from such shareholder,
directors and key management personnel of recognised stock exchange and recognised
clearing corporation from accessing the securities market or dealing in securities for such
period as may be determined by the Board.
 Power to remove difficulties:-

In order to remove any difficulties in the interpretation or application of the provisions of
these regulations, the Board shall have the power to issue directions through guidance notes or
circulars.

 Power to specify procedures, etc. and issue clarifications.
For the purposes of implementation of these regulations and matters incidental thereto, the
Board may specify norms, procedures, processes, manners or guidelines as specified in 21
these regulations, by way of circulars to recognised stock exchange(s) and recognised
clearing corporation(s).
 Repeal and savings.:-

 On and from the commencement of these regulations, the Securities Contracts
(Regulation) (Manner of Increasing and Maintaining Public Shareholding in Recognized
Stock Exchanges) Regulations, 2006, shall stand repealed.
 Notwithstanding such repeal, anything done or any action taken or purported to have been
taken or contemplated under the repealed regulations before the commencement of these
regulations shall be deemed to have been done or taken or commenced or contemplated
under the corresponding provisions of these regulations.
 After the repeal of the regulations referred to in sub-regulation (1), any reference thereto
in any regulation, guideline, circular or direction issued by the Board shall be deemed to
be a reference to the relevant provisions of these regulations.

CHAPTER:11
REGISTRATION CERTIFICATE
 Registration of stock brokers, sub-brokers, share transfer agents, etc.

 No stock-broker, sub- broker, share transfer agent, banker to an issue, trustee of trust
deed, registrar to an issue, merchant banker, underwriter, portfolio manager, investment
adviser and such other intermediary who may be associated with securities market shall
buy, sell or deal in securities except under, and in accordance with, the conditions of
certificate of registration obtained from the Board in accordance with the
[regulations] made under this Act:
Provided that a person buying or selling securities or otherwise dealing with the securities
market as a stock- broker, sub-broker, share transfer agent, banker to an issue, trustee of
trust deed, registrar to an issue, merchant banker, underwriter, portfolio manager,
investment adviser and such other intermediary who may be associated with securities
market immediately before the establishment of the Board for which no registration
certificate was necessary prior to such establishment, may continue to do so for a period
of three months from such establishment or, if he has made an application for such
registration within the said period of three months, till the disposal of such application.
Provided further that any certificate of registration, obtained immediately before the
commencement of the Securities Laws (Amendment) Act, 1995, shall be deemed to have
been obtained from the Board in accordance with the regulations providing for such
registration.
 No depository, [participant,] custodian of securities, foreign institutional investor,
credit rating agency or any other intermediary associated with the securities market
as the Board may by notification in this behalf specify, shall buy or sell or deal in
securities except under and in accordance with the conditions of a certificate of
registration obtained from the Board in accordance with the regulations made
under this Act:
Provided that a person buying or selling securities or otherwise dealing with the
securities market as a depository, [participant,] custodian of securities, foreign
institutional investor or credit rating agency immediately before the
commencement of the Securities Laws (Amendment) Act, 1995, for which no
certificate of registration was required prior to such commencement, may continue
to buy or sell securities or otherwise deal with the securities market until such time
regulations are made under clause (d) of sub-section (2) of section 30.
 No person shall sponsor or cause to be sponsored or carry on or cause to be carried
on any venture capital funds or collective investment schemes including mutual
funds, unless he obtains a certificate of registration from the Board in accordance
with the regulations:
Provided that any person sponsoring or causing to be sponsored, carrying on or
causing to be carried on any venture capital funds or collective investment
schemes operating in the securities market immediately before the commencement
of the Securities Laws (Amendment) Act, 1995, for which no certificate of
registration was required prior to such commencement, may continue to operate till
such time regulations are made under clause (d) of sub-section (2) of section 30.
 Every application for registration shall be in such manner and on payment of such fees as
may be determined by regulations.

 The Board may, by order, suspend or cancel a certificate of registration in such manner as
may be determined by regulations. Provided that no order under this sub-section shall be
made unless the person concerned has been given a reasonable opportunity of being heard.

CHAPTER:12
INVESTIGATION, ENFORCEMENT AND SURVEILLANCE

A well-regulated market fosters investors‟ confidence in its fairness and integrity by ensuring true
and fair price discovery, prompt detection of market manipulations and safety of the markets
through risk containment measures and effective enforcement. With a view to achieve these
objectives, the SEBI took several initiatives both at macro and micro level, which are briefly
discussed below.
 Market surveillance:-
The Investigation, Enforcement and Surveillance Department since its inception organised
itself to carry out its responsibility of protecting the investors and ensuring a healthy
development of the securities markets. Market Surveillance Division was set up in the SEBI in
July 1995, with a view to effectively monitor abnormal market movements and detect market
manipulations. It was involved in monitoring the market movements, identifying price
volatility, analysing its causes and overseeing the surveillance activities of the stock
exchanges. The main source of information for the Market Surveillance Division is the trading
data obtained from the stock exchanges, newspaper reports, investor complaints, market
intelligence, etc. It also analyses major market movements in the wake of significant market
sensitive information. Some of the surveillance systems and risk containment measures that
were put in place during 1997-98 are:
 market monitoring by independent surveillance cells of stock exchanges;

 stock exchanges reporting to SEBI through settlement reports and pre-issue monitoring
reports;
 risk containment measures in the form of elaborate margining system comprising of daily,
special, penal and mark to market margins;
 circuit filters, daily price bands and weekly price caps to curb abnormal price behaviour
and volatility;
 intra-day trading and gross exposure limits for stock brokers linked with capital adequacy;
 suspension of trading in scrips to prevent market manipulation;
 inspection of intermediaries;
 enhancement of SRO capabilities of stock exchanges;
 interactive and pro-active oversight by the SEBI;
 formation of Inter Exchange Market Surveillance Group for prompt and effective co-
ordination between stock exchanges.
 Strengthening of surveillance and monitoring mechanisms:-

During 1997-98, further steps were taken at the level of the SEBI and the stock exchanges
under the oversight of the SEBI to improve and strengthen their surveillance capabilities.
Some of the developments in this regard are briefly given below.
 Meetings of the Inter Exchange Market Surveillance Group:-

During 1997-98, SEBI convened two meetings of the Inter Exchange Market Surveillance
Group. The first meeting was held on July 14, 1997 and the second meeting was held on
December 17, 1997. The Group discussed market trends, various risk containment measures
that needed to be revised and new measures to be implemented. It also discussed issues
relating to dissemination of price sensitive information to the public, dealing with market

rumours and co-ordination between stock exchanges. The Group was reconstituted with
representatives from the Stock Exchange, Mumbai, NSElL, Delhi, Calcutta, Ahmedabad,
Ludhiana and Bangalore stock exchanges. The further initiatives taken by the SEBI during the
year are given in the following paragraphs.
 Uniform intra-day price band of 10 per cent:-
Presently, there is a price variation cap of 25 per cent during a settlement which was
uniformally implemented by all the stock exchanges. The intra-day price variation was
flexible in range upto 10 per cent subject to the settlement variation cap of 25 per cent. Now,
it is implemented uniformly at 10 per cent intra-day variation by all the stock exchanges.
 Price bands in respect of infrequently traded scrips:-

There was a need to have a uniform guideline in respect of price bands on infrequently traded
scrips. A small group was formed comprising of representatives of Mumbai, NSEIL and Delhi
stock exchanges to frame guidelines and a basis on which such price bands could be fixed.
The group has already given some deliberation on this issue and their final report is expected
shortly.
 Public disclosure of information relating to actions taken against

stockbrokers:-
As the action taken against the member brokers of the stock exchanges including penal
actions were not disclosed to other market participants by all the stock exchanges, it was felt
that such actions need to be disclosed in the larger interest of the investors and market
participants. The stock exchanges were therefore asked to make public the actions taken by
the Disciplinary Action Committee of the stock exchanges against their member brokers. The
stock exchanges were also asked to issue press releases when such actions are of serious
nature.
 Dissemination of price sensitive information to public:-

There was a need to have proper method for dissemination of price sensitive and other
important information relating to corporate and market to the public so that they can make
informed investment decisions. The stock exchanges were asked to display such information
on their terminals in the quickest possible manner
.
 Dealing with market rumours:-
Market rumours can do considerable damage to the normal functioning and behaviour of the
market. It is therefore essential to have quick verification of such rumours from the corporates
as well as from other entities whenever it is so necessary. Therefore, it was decided that all
stock exchanges should verify such rumours in the quickest possible manner and inform
investors and other market participants, if possible through their terminals. The SEBI had
asked around 150 companies to designate compliance officers who could be contacted by the
stock exchanges whenever such verification is needed. As much as 115 of such companies
have already designated compliance officers and have informed SEBI. The SEBI
subsequently has circulated the names of the companies and details about their compliance
officers to all the stock exchanges.
 Co-ordination between stock exchanges:-

To facilitate better and quicker co-ordination among the stock exchanges, all stock exchanges
were asked to designate a co-ordination officer who could be contacted by other stock
exchanges for immediate exchange of information.
 Joint inspection and investigation in case of stock brokers having multiple
membership:-
It was decided that in some suitable cases the stock exchanges would co-ordinate and carry
out joint inspection of member brokers having multiple membership. Besides there should be
sharing of information in such cases between the stock exchanges.
 Inspection of surveillance cells of stock exchanges:-

The surveillance cells of stock exchanges have been strengthened in terms of manpower and
systems at the behest of the SEBI. Since December 1996, the inspections of the surveillance
cells are being taken up on a regular basis for the purpose of assessing the quantum and
quality of surveillance done and suggesting improvements in the proactive surveillance
capability of the stock exchanges. During 1997-98, the SEBI inspected surveillance cells of 10
stock exchanges and the shortcomings and suggestions have been communicated to them for
improvement of the functioning of the surveillance cells.
 Development and implementation of Stock Watch System:-

While the existing risk containment measures have served well their intended purpose of
imparting safety, fairness and transparency to the Indian securities markets, the challenge lies
in enmeshing the surveillance measures with the development of the market. Trading in the
Indian securities markets now being on-line has become more sophisticated, which calls for
further sophistication in surveillance and regulatory oversight. A system of market monitoring
and surveillance was initiated and the stock exchanges are reporting abnormal price and
volume movements to SEBI in prescribed formats. In this direction, to have more effective
system of market surveillance keeping in line with the international standards, it was been
decided to develop a Stock Watch System at the level of the stock exchanges under the
initiative and oversight of the SEBI. The objectives of the Stock Watch System is to give
suitable indicators or alerts for the detection of potential illegal or improper activity to protect
the integrity of the securities markets and its participants. The Stock Watch System would
consist of various databases of issuers, securities, trading and members with the stock
exchanges that would help in generating various alerts. These alerts would assist the stock
exchanges in keeping effective surveillance on the market to bring an era of transparency and
fairness in the dealings.
The Core Group, which was formed during 1996-97 consisting of representatives from the
major stock exchanges of the country, to help in the process of implementation of the Stock
Watch System, held several meetings. A workshop on the Stock Watch System was also
organised by the SEBI and conducted by the NASDAQ staff in which the Core Group and the
staff of surveillance cells of the stock exchanges participated.
With the help of the Core Group, the SEBI has finalised the basic parameters for various
databases and generation of alerts for Phase I of the Stock Watch System. The same has been
communicated to stock exchanges and they are in the process of implementation of the same.
 Interaction and co-ordination with stock exchanges:-

There is frequent informal exchange of information and ideas to create purposeful market
monitoring and surveillance between the SEBI and stock exchanges. During exceptional
market conditions, the SEBI calls for information and feedback on market conditions from the

stock exchanges and steps taken by them. This, in turn results in timely and effective
surveillance by the SEBI.
 Surveillance Measures:-
SEBI conducts meetings at regular intervals with stock exchanges and depositories to monitor
their surveillance activities and market movements. In consultation with the stock exchanges
and depositories, the following surveillance measures have been taken:
 SEBI has mandated that when market value of a stock is quoting less than the face value
of that stock, then there shall be no stock split in those shares. Also, it was decided that
subsequent to any split consolidation, a cooling off period of three years is mandatory
before any further split/consolidation can be undertaken.
 SEBI has stipulated that when there is substantial change in shareholding of an entity
which would require disclosures under the various provisions of SEBI Act and
Regulations, the depositories would provide such information to the stock exchanges. The
stock exchanges would then verify whether disclosures as required have been made and in
the event of any irregularities, report the same to SEBI. It has also been decided that
depositories shall display ISIN-wise information pertaining to pledged shares on their
websites. SEBI has advised the exchanges that a list of companies which are non-
compliant with the Listing Agreement be displayed on the websites of BSE and NSE after
notice has been sent to the companies for non-compliance of Listing Agreement.
SEBI has decided that trading shall be suspended in partly paid shares of companies whose
issue size is less than `500 crore and wherein the partly paid shares have been in existence
for more than 12 months. The companies having issue size greater than`500 crore shall be
required to include the information about partly paid shares and fully paid shares in their
secretarial audit report that is submitted to stock exchanges. Failure to do so shall attract
appropriate action by the stock exchanges. In addition to the above, all instruments issued by
a company other than debentures and which are linked to equity shares of the company or
have equity like features (warrants, etc), shall attract uniform surveillance action. For
exchange traded funds, SEBI has advised the stock exchanges to apply price bands on the
NAV of two days before trading day of exchange traded funds.
 INVESTIGATION
Timely completion of investigation cases and effective, proportionate and dissuasive action in
case of violations of established securities laws is important for protection of investors‟
interest and ensuring fair, transparent and orderly functioning of the market. It is also vital for
improving the confidence in the integrity of the securities market. SEBI is therefore constantly
striving to upgrade its investigative skills by making use of Information Technology.
Importance of effective and credible use of investigation has also been underscored by
IOSCO in its “Principles for the Enforcement of Securities Regulation”.Keeping the above
objectives and principles of securities regulations in view, SEBI initiates investigation to
examine alleged or suspected violations of laws and obligations relating to securities market.
The possible violations may include price manipulation, creation of artificial market, insider
trading, capital issue related irregularities, takeover related violations, non-compliance of
disclosure requirements and any other misconduct in the securities markets.
 Initiation of Investigation There are various sources of information for initiation of
investigation. SEBI initiates investigation based on reference received from sources such
as stock exchanges, internal surveillance department, other government departments,
information submitted by market participants and complainants. In appropriate cases,
investigation may also be initiated suo moto, where there are reasonable grounds to

believe that investors‟ interests are being adversely affected or there is a suspected
violation of the provisions of the securities laws.
 Process of Investigation The steps involved during investigation process include an

analysis of market data (order and trade log, transaction statements etc.) and static data
(KYC documents obtained from brokers, depository participants etc., bank records,
financial results, events around major corporate developments etc.) The purpose of such
investigation is to gather evidence and to identify persons/ entities behind irregularities
and violations so that appropriate and suitable regulatory action can be taken, wherever
required. Outcome of investigation in the form of enforcement action is a clear signal the
market players to comply with the law and expected standards of conduct in the market.
 Trends in Investigation Cases Since 1992-93, SEBI has undertaken 1,617

investigation cases. In 1,420 cases investigations have been completed. Apart from
enforcement action, an important attendant benefit resulting from such investigations is
contribution to the policy changes with a view to further strengthen the regulatory and
enforcement environment. During 2011-12, 154 new cases were taken up for investigation
and 74 cases were completed (Table 3.20 and Chart 3.3).
Investigations by SEBI
Year Cases Taken up for Cases Completed

Investigation
1992-93 2 2
1993-94 3 3
1994-95 2 2
1995-96 60 18
1996-97 122 55
1997-98 53 46
1998-99 55 60
1999-00 56 57
2000-01 68 46
2001-02 111 29
2002-03 125 106
2003-04 121 152
2004-05 130 179
2005-06 159 81
2006-07 120 102
2007-08 25 169
2008-09 76 83
2009-10 71 74
2010-11 104 82
2011-12 154 74
total 1617 1420

Investigation cases

CHAPTER:13
RECENTLY SEBI TO TAKE UP FURTHER MARKET
REFORMS
finance Minister P Chidambaram on Friday said regulator SEBI is expected to announce fresh
market reform measures next month, even as he favored encouraging more people to invest in
financial instruments rather than in gold.
Expressing satisfaction over wide-ranging reforms announced by
Securities and Exchange Board of India (SEBI) yesterday for
mutual funds and other segments, Chidambaram said he has
requested SEBI Chairman U K Sinha to look into a number of
other suggestions for the benefit of investors.
"The examination by the Government and SEBI is likely to be
completed in the next two weeks. I have requested SEBI Chairman
to schedule another meeting of the (SEBI) Board in early
September when some more decisions can be taken on the
suggestions that are under examination," he said.
The Finance Minister said the measures announced by SEBI yesterday "will stimulate financial
savings among households as well as give a fillip to the mutual fund industry. More and more
households should be encouraged to save in financial instruments rather than in gold".
In a statement, Chidambaram also said he expects the government to take a decision shortly on
SEBI's recommendation for providing tax benefits to equity mutual fund investors under the
proposed Rajiv Gandhi Equity Savings Scheme (RGESS).In the longest list of decisions taken at a
single board meeting in many years on Thursday, SEBI announced steps for expanding the reach
of IPOs and MFs across the country through measures like electronic public offers (e-IPOs).
Chidambaram said the government has taken note of the SEBI recommendation on RGESS and
he has asked the Department of Economic Affairs, Capital Markets division, to examine the
recommendation of SEBI. "I expect that it would be possible to take a decision shortly," he added.
"Government has noted with satisfaction that the measures announced by SEBI yesterday have
been widely welcomed by all the stakeholders," the minister said.
Chidambaram recalled that in a statement on August 6 he had said that: "In the next few weeks,
we will announce a number of decisions to attract more people to invest in mutual funds,
insurance policies and other well-designed instruments".
"In the context of that statement (of August 6), Government welcomes the decisions taken by
Sebi," he said.
In wide-ranging changes to its various regulations, SEBI made it easier and more cost effective to
invest and raise funds through IPOs, while allowing the Mutual Funds (MFs) flexibility in using
their fund expense charges and proposing a national mutual fund policy.
Besides, SEBI has also made provisions for retail investors getting an assured minimum lot of
shares in IPOs (Initial Public Offers) and asked the companies to announce their price band at
least five days in advance of the issue.

The market regulator also made it mandatory for all the investment advisers providing their
services for a fee to get themselves registered, while putting checks and balances against possible
misuse of funds garnered from investors through IPOs and MFs.

CHAPTER:14
CASE STUDY
Sebi suspects growing insider trading trend; ups vigil
Press Trust of India / New Delhi Nov 14, 2010, 13:21 IST
Suspecting an uptick in the insider trading activities in the recent market rally, SEBI has enhanced its
surveillance for possible violations of rules prohibiting trading based on prior and inside information.
The market watchdog has come across over two dozen instances of major suspected violations of
insider trading norms during the recent rally to new record levels above 21,000 level and the
subsequent correction last week, a senior official said.
While the suspicious trading activities have been noticed in the SEBI's routine surveillance of
market activities, the regulator has decided to probe further into these cases and enhance its
oversight for such matters going ahead, he added.
Major violations have been suspected in trading of 25-30 stocks over the past few weeks, the
official said, adding that suspicious activities have been noticed in many other shares also but
those are minor in terms of trade value and nature.
Insider trading relates to purchase or sale of shares by people having prior and privileged
information about an upcoming development by virtue of they themselves or those related to
them having holding a position in the company.
As per the SEBI's Prohibition of Insider Trading Regulations, an 'insider' is defined as any
person "who is or was connected with the company or is deemed to have been connected with
the company, and who is reasonably expected to have access to unpublished price sensitive
information in respect of securities of a company, or who has received or has had access to such
unpublished price sensitive information."
The stock market benchmark SENSEX recently crossed 21,000 level to record its highest closing
level at 21,004.96 points on November 5, after a sharp rally over the past few weeks, but has
corrected about 900 points since then. The sentiments have been upbeat on the bourses, as also
reflected in robust response to recent IPOs like Coal India.
Insider trading activities increase during market rally and an environment of improved investor
sentiments makes it easier for insiders to make money on the bourses, experts said.
SEBI has systems in place to monitor unusual stock trends and suspicious activities are probed
further for violations of norms including those regulating insider trading.
Recently, SEBI slapped a penalty of Rs 2 crore on Gujarat NRE Coke promoters A K

Jagatramka and G L Jagatramka and their companies for indulging in insider trading. This is said
to be the largest fine imposed this year for violations of insider trading norms. Later, the
company said it would challenge the order.
"Many cases of insider trading do go undetected. Only a very small percentage of the total
number of insider trading cases comes under regulatory scrutiny," said Sudip Bandyopadhyay,
MD & CEO, Convexity Solutions and former CEO and MD of Anil Ambani group firm

Reliance Money.
"It is difficult to specify the exact extent or percentage of insider trading. However, it does
happen," he added. Bandyopadhyay said that the regulations are in well in place, but the
difficulty lies in implementing them and detecting the offence. He advocated enhancement of
powers of Sebi for seeking cooperation of other relevant regulatory authorities in matters of
insider trading.
Another market observer Arun Kejriwal, director of KRIS, said that Sebi should keep a watch on
dealing rooms of brokers and fund managers as also the companies' board meetings.
"Insider trading is rampant... It appears that almost all spiked movement in Indian markets can
be linked to insider trading," he added.

CHAPTER:15
CONCLUSION
The enactment of the SEBI Act within the context of other statutes such as the Companies Act
and Depositories Act has provided a strong regulatory framework for the Indian market.
Subsequently much of the growth of the Indian market can be attributed to the robust processes
for issuance, pricing, allotment and listing of securities enabled by SEBI. Strengthening SEBI's
power in the investigative, administrative and legal aspects of enforcement would enable it to
speedily address legal challenges such as those faced during dematerialization or disclosure
requirements. In the future, SEBI should adopt more transparency to gain higher public
confidence.

CHAPTER:16
BIBLOGRAPHY
www.google.com
www.wikipedia.com
www.sebi.gov.in
www.slideshare.com
www.scribd.com

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KES SHROFF COLLEGE OF ARTS AND COMMERCE

MR. VAIBHAV ASHAR

K.E.S SHROFF COLLEGE Page 1

COMPARISION BETWEEN ECURITY EXCHANGE BOARD OF INDIA (SEBI)

K.E.S SHROFF COLLEGE Page 2

This is to certify that YOGITA B. ADROJA of T.Y.B.Com. (FINANCIAL

Co-ordinator Project Guide Principal

Internal Examiner External Examiner

K.E.S SHROFF COLLEGE Page 3

I MS. YOGITA B. ADROJA of K.E.S. SHROFF COLLEGE OF ARTS &

K.E.S SHROFF COLLEGE Page 4

It gives me immense pleasure to present this project in the course of Financial

K.E.S SHROFF COLLEGE Page 5

K.E.S SHROFF COLLEGE Page 6

K.E.S SHROFF COLLEGE Page 7

Securities and Exchange Board of India

K.E.S SHROFF COLLEGE Page 8

K.E.S SHROFF COLLEGE Page 9

 The head office of the Board shall be at Bombay.

 The Board may establish offices at other places in India.

 Management of the Board:-

K.E.S SHROFF COLLEGE Page 10

 Removal of member from office:-

 is of unsound mind and stands so declared by a competent court;

 Member not to participate in meetings in certain cases:-

K.E.S SHROFF COLLEGE Page 11

 any defect in the appointment of a person acting as a member of the Board; or

 Officers and employees of the Board:-

K.E.S SHROFF COLLEGE Page 12

Upendra Kumar Sinha Chairman

Prashant Saran Whole Time Member

Rajeev Kumar Agarwal Whole Time Member

Dr. Thomas Mathew Joint Secretary, Ministry of Finance

V. K. Jairath magya Member Appointed

Anand Sinha Deputy Governor, Reserve Bank of India

Naved Masood Secretary,Ministry of Corporate Affairs

K.E.S SHROFF COLLEGE Page 13

C. B. Bhave 18 February 2008 18 February 2011

M. Damodaran 18 February 2005 18 February 2008

G. N. Bajpai 20 February 2002 18 February 2005

D. R. Mehta 21 February 1995 20 February 2002

S. S. Nadkarni 17 January 1994 31 January 1995

G. V. Ramakrishna 24 August 1990 17 January 1994

Dr. S. A. Dave 12 April 1988 23 August 1990

K.E.S SHROFF COLLEGE Page 14

K.E.S SHROFF COLLEGE Page 15

 Board to regulate or prohibit issue of prospectus, offer document or

K.E.S SHROFF COLLEGE Page 16

 Any scheme or arrangement made or offered by any company under which,

 Notwithstanding anything contained in sub-section (2), any scheme or arrangement

 Power to issue directions.

 to secure the proper management of any such intermediary or person, it may

K.E.S SHROFF COLLEGE Page 17

 If any person fails without reasonable cause or refuses –

K.E.S SHROFF COLLEGE Page 18

 Cease and desist proceedings:-

K.E.S SHROFF COLLEGE Page 19

The basic objectives of the Board were identified as:

 To protect the interests of investors in securities;

 It acts as a barometer for market behavior;

K.E.S SHROFF COLLEGE Page 20

K.E.S SHROFF COLLEGE Page 21

SEBI - SEBI ADMINISTRATION