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as a non-statutory body for regulating the securities market. It became an autonomous body in 1992 and more powers were given through an ordinance. Since then it regulates the market through its independent powers. The SEBI is a body of 6 members- The Chairman, Two members from Central Government, Two members who are professionals and one member from the RBI.
Objectives of SEBI:
As an important entity in the market it works with following objectives: To protect the interest of Investors To regulate the Securities Market & ensure fair practices To promote efficient services To facilitate an efficient mobilization & allocation of resources
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SEBI in India's Capital Market:
SEBI from time to time have adopted many rules and regulations for enhancing the Indian capital market. The recent initiatives undertaken are as follows: SEBI¶s Principal Tasks To regulate the business in Stock Exchange & other Securities Market To register & regulate the working of Capital market intermediaries To register & regulate the working of Mutual Funds To promote & regulate Self-regulatory Organization To prohibit fraudulent unfair trade practices in Security Market To promote investors education & training to intermediaries of Capital Market
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whether or not there is any wrongful gain or avoidance of any loss. SEBI can conduct investigation upon information received by it. The term ³fraud´ has been defined by Regulation 2(1)(c). Fraud includes any act. Regulating substantial acquisition of shares and takeover of companies. expression. misleading statements to induce sale or purchase of securities. The regulations specifically prohibit market manipulation. The SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to the Securities Market) Regulations. Based on the report of the investigating officer. SEBI can initiate action for suspension or cancellation of registration of an intermediary. and shall also include y y A knowing misrepresentation of the truth or concealment of material fact in order that another person may act to his detriment The suggestion as to a fact which is not true by one who does not believe it to be true . y y y y y Promoting and regulating the self-regulatery organizations. by an investigating officer in respect of conduct and affairs of any person dealing. y Registering and regulating the working of collective investment schemes including mutual funds. omission or concealment committed whether in a deceitful manner or not by a person or by any other person or his agent while dealing in securities in order to induce another person with his connivance or his agent to deal in securities. 2003 It enables SEBI to investigate into cases of market manipulation and fraudulent and unfair trade practices. Prohibiting insider trading in securities. Promoting investors¶ education and training of intermediaries of securities market. Prohibiting fraudulent and unfair trade practices relating to securities market.y y Prohibit insider training in Securities Regulate acquisition of shares & takeover of companies Purpose and Aims of SEBI y y Regulating the business in the stock market and other securities market. unfair trade practices relating to securities. buying/selling/dealing in securities. Registering and regulating the working of stock brokers and other intermediaries associated with the securities market.
Employ any device. in connection with issue. course of business which operates or would operate as fraud or deceit upon any person in connection with any dealing in or issue of securities which are listed or proposed to be listed on a recognised stock exchange in contravention of the act. rules and regulations.y y y y y y y An active concealment of a fact by one having knowledge or belief of the fact A promise made without any intention of performing it A representation made in a reckless and careless manner whether it be true or false Any such act or omission as any other law specifically declares to be fraudulent Deceptive behaviour by a person depriving another of informed consent or full participation A false statement made without reasonable ground for believing to be true The act of an issuer of securities giving out misinformation that affects the market price of the security. fraudulent and unfair trade practices Regulation 4 provides that no person shall indulge in a fraudulent or an unfair trade practice in securities. sell or otherwise deal in securities in a fraudulent manner Use or employ. (Regulation 3). Further any dealing in securities shall be deemed to be fraudulent or an unfair trade practice if it involves fraud and may include all or any of the following :y Indulging in an act which creates false or misleading appearance of trading in the securities market. scheme or artifice to degrade in connection with dealing in or issue of securities which are listed or proposed to be listed on a recognised stock exchange. Engage in any act. resulting in investors being effectively misled even though they did not rely on the statement itself or anything derived from it other than the market price The regulation prohibits: y y y y dealings in securities in a fraudulent manner. y y Prohibition against Manipulative. misleading statements to induce sale or purchase of securities. purchase or sale of any security listed or proposed to be listed in a recognised stock exchange. any manipulative or deceptive device or contrivance in contravention of the provisions of the Act or the rules or the regulations made there under. and unfair trade practice relating to securities Prohibition of certain dealings in securities ³No person shall directly or indirectly´ y y Buy. market manipulation. practice. .
planting false or misleading news which may induce sale or purchase of securities . depress or cause fluctuations in the price of such security for wrongful gain or avoidance of loss. dealing or pledging of stolen or counterfeit security whether in physical or dematerialized form. An intermediary providing his clients with such information relating to a security as cannot be verified by the clients before their dealing in such security. publishing or causing to publish or reporting or causing to report by a person dealing in securities any information which is not true or which he does not believe to be true prior to or in the course of dealing in securities. An intermediary buying or selling securities in advance of a substantial client order or whereby a futures or option position is taken about an impending transaction in the same or related futures or options contract. Any act or omission amounting to manipulation of the price of a security.y y y y y y y y y y y y y y y y y Dealing in a security not intended to effect transfer of beneficial ownership but intended to operate only as a device to inflate. An intermediary not disclosing to his client transactions entered into on his behalf including taking an option position. directly or indirectly. An intermediary promising a certain price in respect of buying or selling of a security to a client and waiting till a discrepancy arises in the price of such security and retaining the difference in prices as profit for himself. Selling. An advertisement that is misleading or that contains information in a distorted manner and which may influence the decision of the investors. An intermediary reporting trading transactions to his clients entered into on their behalf in an inflated manner in order to increase his commission and brokerage. Entering into a transaction in securities without intention of performing it or without intention of change in ownership of such security. Circular transactions in respect of a security entered into between intermediaries in order to increase commission to provide a false appearance of trading in such security or to inflate. to any person any money or money¶s worth for inducing such person for dealing in any security with the object of inflating. An intermediary predating or otherwise falsifying records such as contract notes. Advancing or agreeing to advance any money to any person thereby inducing any other person to offer to buy any security in any issue only with the intention of securing the minimum subscription to such issue. maintaining or causing fluctuation in the price of such security. Encouraging the clients by an intermediary to deal in securities solely with the object of enhancing his brokerage or commission. paying. depress or cause fluctuations in the price of such security. offering or agreeing to pay or offer. depressing.
SEBI regulates Primary Market Secondary Market Mutual Funds Foreign Institutional Investment .
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