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What is SEBI?

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What is SEBI? SEBI is the regulator for the security Market in India. 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 on April 12, 1992 the Securities and
Exchange Board Of India was constituted. It was constituted in accordance with
the provisions of the Securities and Exchange Board Of India Act 1992.

Preamble:

Preamble “…To protect the interests of investors in securities and to promote the
development of, and to regulate the securities market and for matters connected
therewith or incidental thereto” 3 SEBI GUIDELINES

Functions of SEBI:

Functions of SEBI The Board is responsible for the securing the interests of
investors in securities and to facilitate the growth of and to monitor the securities
market in an appropriate manner. To monitor and control the performance of stock
exchange and derivative markets. Listing and monitoring the functioning 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 and others associated with securities markets by any means.
Monitoring and Controlling the functioning of venture capital funds and mutual
funds. Forbid unjust and dishonest trade practices in the security markets and
forbid insider trading in the security market. Undertake periodic audits of stock
exchanges, mutual funds, individuals and self regulatory organizations associated
with the security market. 4 SEBI GUIDELINES

6 SEBI GUIDELINES Scams in Stock Market…! : Scams in Stock Market…! 7 SEBI GUIDELINES Some Leading Scams in India: Some Leading Scams in India Securities Scam – Harshad Mehta (1991-92) Floating Companies Scam – C R Bhansali (1992-96) UTI Scam – Unit 64 – Bailout Package of 3.000 Crores Home Trade – Sanjay Agarwal (2000) – Around 300 Crores Scam Securities Scam – Ketan Parekh – Rs 1. may not be fully aware of the precautions they should take while dealing with market intermediaries and dealing in different securities.Why Investor’s Protection is important…! : Why Investor’s Protection is important…! 5 SEBI GUIDELINES Background: Background Investors are the backbone of the securities market. They may not be familiar with the market mechanism and the practices as well as their rights and obligations. May not be aware of the complete risk-return profile of the different investment options.500 Crores Fake Stamp Fraud – Abdul Karim Telgi .500-4.Around 30.000 Crores DSQ Software – . Many investors may not possess adequate expertise/knowledge to take informed investment decisions. They determine the level of activity in the securities market and the level of activity in the economy.

Basis of issue .000 Crores. 8 SEBI GUIDELINES Steps taken by SEBI to make investors aware of their rights : Steps taken by SEBI to make investors aware of their rights 9 SEBI GUIDELINES Slide 10: Security Market Awareness Campaign (SMAC) was started with a motto “An educated investor is a Protected investor.in Cautionary message on television. Object of the issue.gov. Workshops Advertisements Educative material All India Radio – Information provided through AIR Programs frequently Dedicated Website – http://investor. Internet based response System… 10 SEBI GUIDELINES Slide 11: 11 SEBI GUIDELINES Source : www.sebi.Around 600 Crores IPO Scam – Karvy. Outstanding litigations and defaults. Risk factors pertaining to the issue.Dinesh Dalmiya (2001) .sebi. IPO Grading. Financials of the issuer. Indiabulls (2004-05) Satyam – Ramalinga Raju (2009) – Around 12.gov.in Issue of Securities: Issue of Securities Dos Read the Prospectus/ Abridged Prospectus and carefully note. if any.” “Invest with Knowledge” was the message spread by this campaign.

sebi. Business Overview. Go through details of Client-Trading Member Agreement. Check the viability of the project. regulations. 13 SEBI GUIDELINES Source : www. Check for the appraisal of the scheme and read the brief appraisal report. Check the credit rating of the scheme and tenure of the rating. Do not bank upon the price of the shares of the issuer company to go up in the short run.gov. Read the offer document of the scheme especially the risk factors carefully. Do not trade on any product without knowing the risk and rewards associated with it. Trade only through Trading Member (TM) registered with SEBI or authorized person of TM registered with the exchange. 12 SEBI GUIDELINES Source : www. Ensure that the Collective Investment Management Company has the necessary infrastructure to carry out the scheme. Read carefully the . ensure that the contract note has been issued by the TM of the authorized person only Know your rights and duties vis-à-vis those of Trading Member. Do not invest based on bull run of the market index/scripts of other companies in same industry/issuer company.sebi.in Investing in Derivatives: Investing in Derivatives Dos Go through all rules. bye-laws and disclosures made by the exchanges. Background of promoters Instructions before making application Don'ts Do not fall prey to market rumors Do not go by any implicit/explicit promise made by any one.price. Don'ts Do not start trading before reading and understanding the Risk Disclosure Documents.in Collective Investment Scheme: Collective Investment Scheme Dos Before investing ensure that the entity is registered with SEBI.gov. Check and verify the background/expertise of the promoters.

in Brokers and Sub-brokers: Brokers and Sub-brokers Dos Deal only with SEBI registered Brokers.gov. Familiarize yourself with the rules.gov. Keep track of your portfolio in your demat A/c on a regular basis.sebi. are distinctly shown on a contract note.gov. Stock Exchage/SEBI within a reasonable time. Insist on client registration form to be signed by intermediary before commencing any operations Read terms and conditions before entering into a agreement Make sure you sign all the pages of the agreement Insist on valid contract notes for trades done each day.sebi.in Brokers and Sub-brokers: Brokers and Sub-brokers Dos Contd… Insist on periodical statement of accounts. Do not get carried away by indicative returns. regulations and circulars issued by SEBI before carrying out any transaction. Contd… 15 SEBI GUIDELINES Source : www. Do not invest based on market rumours.. Give clear and unambiguous instructions to the broker / sub broker. State clearly who will place orders on your behalf. Keep record of all the instructions given to brokers / Sub brokers. Ensure that brokers have valid registration certificate Ensure that he is permitted to transact in the market. 14 SEBI GUIDELINES Source : www. 16 SEBI GUIDELINES Source : www.sebi. trade time and number etc.objects of the scheme. Insist on bill for every settlement Ensure that all the necessary details like broker’s name. Don'ts Do not invest in any CIS entity not having SEBI registration.in . Issue cheque/drafts in the name of intermediary only. file written complaint to intermediary. Ensure receipt of payment within 48 hours of payout In case of disputes.

Note that past performance of a scheme is not indicative of future performance. Insist for a copy of the offer document/key information memorandum before investing. Note that Net Asset Value of a scheme is subject to change depending upon market conditions. Invest in a scheme depending upon your investment objective and risk appetite. Do not get carried away by luring advertisements.in Investing in Mutual Funds: . Do not accept blank delivery instructions slip while meeting security pay-in obligations. 18 SEBI GUIDELINES Source : www.in Investing in Mutual Funds: Investing in Mutual Funds Dos Read the offer document carefully before investing. Do not accept contract note/confirmation memo signed by any unauthorised person. Do not pay more than approved brokerage to the intermediaries Do not undertake deals for others Do not neglect to set out in writing. Past performance of a scheme may or may not be sustained in future.sebi.sebi. orders for higher value given over phone. Do not accept unsigned/duplicate contract note/confirmation memo. if any. where you have invested. Mention your bank account number in the application form. Do not delay payment/deliveries of securities to broker/ sub- broker. 17 SEBI GUIDELINES Source : www. Do not be led by market rumours or get into shady transactions.Brokers and Sub-brokers: Brokers and Sub-brokers Don'ts Do not deal with unregistered intermediaries. Keep track of the Net Asset Value of a scheme.gov.gov. Note that investments in Mutual Funds may be risky. on a regular basis. Find out about the investment profile provided in portfolio disclosures which is available on half yearly basis.

in Dealing in Securities: Dealing in Securities Dos Transact only through Stock Exchanges. Ask for and sign “Know Your Client Agreement”. Deal only through SEBI registered intermediaries. gifts etc.sebi. Do not leave out KYC details in your application forms. Do not deal with any agent/broker dealer who is not registered with Association of Mutual Funds in India (AMFI).Investing in Mutual Funds Don'ts Do not invest in a scheme just because somebody is offering you a commission or other incentive. Client agreement forms etc). Do not fall prey to promises of unrealistic returns.gov. Read and properly understand the risks associated with investing in securities / derivatives before undertaking transactions. Ask all relevant questions and clear your doubts with your broker before transacting. Invest based on sound reasoning after taking into account all publicly available information and on fundamentals. Complete all the required formalities of opening an account properly (Client registration. Assess the risk – return profile of the investment as well as the liquidity and safety aspects before making your investment decision. Do not get carried away by the name of the scheme/Mutual Fund. Investors should be wary of concentrating their mutual fund portfolio in one particular asset class and not diversifying across various types of scheme profiles. That will make the forms liable for rejection. Do not forget to take note of risks involved in the investment. Do not rush into making investments that do not match your risk taking appetite and investment goals. 19 SEBI GUIDELINES Source : www. Give clear and unambiguous instructions to . Avoid herd mentality while buying / selling into mutual fund schemes. Do not hesitate to approach concerned persons and then the appropriate authorities for any problem.

20 SEBI GUIDELINES Source : www.in . Do not try to time the market. Be vigilant in your transactions. Do not fall prey to promises of unrealistic returns.sebi. Do not be influenced into buying into fundamentally unsound companies (penny stocks) based on sudden spurts in trading volumes or prices or non authentic favorable looking articles / stories. 21 SEBI GUIDELINES Source : www. Do not be misled by so called hot tips.gov. Do not forget to take note of risks involved in the investment. Do not invest on the basis of hearsay and rumors.it could turn against you. Do not hesitate to approach the proper authorities for redressal of your doubts / grievances.sebi.your broker / sub-broker / depository participant. Do not deal with unregistered intermediaries.gov.in Dealing in Securities: Dealing in Securities Don'ts Given the benefits of trading on stock exchange it is advisable to avoid off-market transactions. verify before investment. Do not follow the herd or play on momentum . Do not be misled by rumours circulating in the market.