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10/21/2010

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The Role of SEBI in India

The Watchdog of Indian Market

Group No. 22

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The Great Indian Bazaar
Securities Market in India

Resource Mobilization in Primary Market

9 Indian Share Market is the oldest Asian stock market

9 Incorporated way back in 1875, BSE. 1994 Æ NSE

9 BSE Market Cap (Sep 2010) Æ $ 1.58 Trillion

9 NSE Market Cap (Sep 2010) Æ $ 1.54 Trillion

Source: RBI Website

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the existing legal framework just not enough 4 The Genesis Securities & Exchange Board of India 9 Constituted by the Government of India in 1922 with SEBI Act 9 Similar to the Securities Exchange Commission in the US 9 Chaired by Shri C. Bhave 9 Bound by the Central Govt.globally.in 2 . 10/21/2010 3 Why a Watchdog? The Need of a Regulatory Body in India 9 Absence of conditions of perfect competition in the securities market 9 Th The rise i iin no. off iinvestors t Æ iincrease iin malpractices l ti 9 Erosion of Investor Confidence 9 The Government and the stock exchanges were helpless. B. which directs policies 9 Vision: “To be the most dynamic and respected regulator .gov.“ sebi.

Departments SEBI Market Intermediaries Market Derivatives & Corporation Investment Regulation & Regulation New Products Finance Management Supervision SEBI Integrated Enquiries & Investigations Enforcement Legal Affairs Surveillance Adjudication SEBI Office of Department of Investor General Economic & Office of the Regional Assistance & Services Policy Chairman Offices Education Analysis 6 Scope & Objectives Securities & Exchange Board of India Primary Market Corporate Secondary y Debt Market Market Demat & Venture Derivatives SEBI Capital Foreign Mutual Institution Funds Investors Takeovers & Legal Affairs 3 . 10/21/2010 5 The Genesis SEBI .

intermediaries and other self-regulatory organizations in the securities market 4 . 10/21/2010 7 Scope & Objectives Securities & Exchange Board of India 9 To protect the interests of investors in securities 9 To promote the development of Securities Market Ensuring steady flow of savings into the market 9 To regulate the Securities Market Easy Availability of funds at low costs 9 To develop a code of conduct and fair practices by the intermediaries involved in the capital markets 9For matters connected therewith or incidental thereto 8 Functions Securities & Exchange Board of India Regulating the business in stock exchanges Regulating the working of •Stock brokers. merchant bankers. portfolio managers •Depositories custodians of securities. foreign institutional investors. credit rating agencies •Venture capital funds and collective investment schemes including mutual funds Maintaining fair trade practices relating to stock markets Regulation of acquisition of shares and take-over of companies Inspection. underwriters. Inquiries and Audits of the stock exchanges. Share transfer agents.

 a draft to be filed  with SEBI How can SEBI  • SEBI’s DIP guidelines (1992) to be followed help? • SEBI examines at various levels the compliance with  g its DIP guidelines • Minimum Net Tangible Assets – 3 crores for 3 years • Issues Size – Not Exceeding 5 times the pre‐issue  net worth Constraints • Minimum Net Worth – 1 crore in 3 years • Issue to be opened within three months from the  date of SEBI's observation letter 5 . Can it do so? • If Value > Rs 50 lacs. 10/21/2010 9 Powers Securities & Exchange Board of India 9 Undertake inspection of any book. or other document or record of any listed public company 9 Suspend the trading of any security in a recognized stock exchange 9 Restrain persons from accessing/buying/selling the securities market 9 Suspend any office-bearer of any stock exchange or self-regulatory organization 9 Impound and retain the proceeds or securities in respect of any transaction which is under investigation 10 My Company wants to get listed ‘Understanding SEBI’ Series Stakeholder/Party • Dalal Sons Private Limited • Dalal Sons wishes to make a public offer of Rs.  Objective 80 Lakhs. or register.

(US) wants to invest their Objective proprietary funds in Indian stock market • Form A to be filed by the company under SEBI’s How can SEBI  Regulation 1995 help? • SEBI validates the relevant documents and finally issues the registration certificate • Registration fee of US $ 5. • Maze Inc. DDT wishes to invest in Mutual Funds. Will  Objective it be a Safe bet? • SEBI approved Asset Management Company (AMC) How can SEBI  manages the funds by making investments in various types of securities help? • All mutual funds are required to be registered with SEBI before theyy launch any y scheme • Two thirds of the directors of trustee company or board of trustees must be independent Constraints • 50% of the directors of AMC must be independent 12 We want to invest in India ‘Understanding SEBI’ Series Stakeholder/Party • Maze International Co. 10/21/2010 11 I want to invest in Mutual Funds ‘Understanding SEBI’ Series Stakeholder/Party • Mr.000 • The applicant has to take permission from RBI Constraints under the provisions of FEMA 1999 • Appoint a designated bank to route its transactions 6 . Deen Dayal Trivedi • Mr.

should have the certificate from SEBI • The VCF cannot accept investment < 5 Lacs Constraints • VCF should have firm commitment of at least 5 Cr. 1996 help? • Company planning to carry out activity of a VCF should obtain a grant of certificate by SEBI. Can she do so? How can SEBI  • SEBI (Depositories and Participants) Regulations. Sheetal Anand • Sheetal wants to trade online and hence Objective dematerialize her shares of Reliance. 10/21/2010 13 I wish to go Online! ‘Understanding SEBI’ Series Stakeholder/Party • Ms. from the Investors • VCF cannot invest 25% of the funds in one Venture Capital Undertaking 7 . 1992 and SEBI (Venture Capital Fund) How can SEBI  Regulations. • The VCF should be set up under the Central or State legislations. • SEBI Act. 1996 determine whether they will help? be eligible or not • She needs a depository account Constraints • Securities will be in the name of the account holders and owned by her 14 We want to Invest Venture Capital ‘Understanding SEBI’ Series Stakeholder/Party • Robin Venture Asset Management • Invest in the innovative online travel Objective business to be started by Anil Bros.

FIIs 7 days Fresh registration .Credit Rating 30 days Agencies Fresh registration .Brokers 30 days Cancellation/surrender of broker /sub 30 days brokers Approval for Trustees of Mutual Funds 7days Applications for foreign securities / 7days ADRs/GDRs Investor Complaints Investor complaints within the jurisdiction of SEBI within 7 days 8 . which will be distributed to the various help? stakeholders in case the Acquirer fails to make the subsequent payment • Ensuring that the regulation constraints are met • Target company should be a listed company • Public Announcement is to be made for an open offer Constraints • Minimum Offer of 20% shares to be made (Exceptions possible) • Periodic disclosures have to be made on acquiring shares above threshold values 16 Time-line Benchmarks For Activities Involving Public Interface Activity Benchmark Time line Fresh registration . • Batra & Co. 10/21/2010 15 We believe in Inorganic Growth ‘Understanding SEBI’ Series Stakeholder/Party • Batra & Co. wants to acquire Noveltec Objective Corporation • Protect Shareholder’s interest Æ Acquirer company to open an escrow account before making a Public How can SEBI  Announcement.

The robbery takes place right under its nose but it barks only the next morning when its owner (the Ministry of Finance) asks it to do so.Sujay Marathi.com 9 . mouthshut. so. 10/21/2010 17 SEBI -The Darker Side Malpractices & Failures Manipulation of The Osian Art Satyam Fraud Price Rigging security prices Fund Case Delay in Harshad Mehta Ketan Parekh Insider Trading Settlement Case Incident Delay in listing and MS Shoes rigged commencement of prices of company trading in shares shares (1995) 18 SEBI -The Darker Side Malpractices & Failures “Harshad Mehta in 1992 had caught the SEBI napping.” -A Journalist “SEBI has become like a programmed watchdog.” . Journalist.

com 20 Your securities & interest are being guarded… Go ahead.in gov in 9 ‘Principles of Corporate Finance’ by Brealey.icmrindia. 10/21/2010 19 References 9 SEBI Website Æ sebi sebi. Allen & Mohanty. Myers.gov. 22 10 . India Edition 9Legal Service India.org/casestudies 9finance. Seal a Deal… Today! Presented by:  Group No.indiamart. a premier and leading Indian Legal portal focused on law and government 9www.

Sh (PGP 10 122) Mayank Garg (PGP‐10‐132). 22 A Aarooshi hi Rai R i Kumar (PGP‐10‐094). Arpan K (PGP 10 094) A A Anand d (PGP‐10‐106). Priya Badri (PGP‐10‐151) PGDM 2010‐12 SP Jain Institute of Management & Research Mumbai SP Jain Institute of Management & Research. Prarthana Bagrodia (PGP‐10‐146). Himanshu (PGP 10 106) Hi h Sharma (PGP‐10‐122). Mumbai 11 . 10/21/2010 Group No.