Professional Documents
Culture Documents
CHAPTER I
INTRODUCTION
1.1 INTRODUCTION
The SEBI, that is, the Securities and the Exchange Board of India, is the national regulatory
body for the securities market, set up under the securities and Exchange Board of India act,
1992, to “protect the interest of investors in securities and to promote the development of,
and to regulate the securities market and for matters connected therewith and incidental too.”
SEBI has its head office in Mumbai and it has now set up regional offices in the metropolitan
cities of Kolkata, Delhi, and Chennai. The Board of SEBI comprises a Chairman, two
members from the central government representing the ministries of finance and law, one
member from the Reserve Bank of India and two other members appointed by the central
government. As per the SEBI act, 1992, the power and functions of the Board encompass the
regulation of Stock Exchanges and other securities markets; registration and regulation of the
working stock brokers, sub-brokers, bankers to an issue (a public offer of capital), trustees of
trust deeds, registrars to an issues, merchant bankers, under writers, portfolio managers,
investment advisors and such other intermediaries who may be associated with the stock
market in any way; registration and regulations of mutual funds; promotion and regulation of
self- regulatory organizations; prohibiting Fraudulent and unfair trade practices and insider
trading in securities markets; conducting necessary research for above purposes and
performing such other functions as may be prescribes from time to time.
SEBI as the watchdog of the industry has an important and crucial role in the market in
ensuring that the market participants perform their duties in accordance with the regulatory
norms. The Stock Exchange as a responsible Self Regulatory Organization (SRO) functions
to regulate the market and its prices as per the prevalent regulations. SEBI and the Exchange
play complimentary roles to enhance the investor protection and the overall quality of the
market.
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1. Issuers:
For issuers it provides a market place in which they can raise finance fairly and easily.
2. Investors:
For investors it provides protection and supply of accurate and correct information.
3. Intermediaries:
For intermediaries it provides a competitive professional market.
i. Protective functions
1. PROTECTIVE FUNCTIONS:
These functions are performed by SEBI to protect the interest of investor and provide safety
of investment.
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(iv) SEBI undertakes steps to educate investors so that they are able to evaluate the securities
of various companies and select the most profitable securities.
(v) SEBI promotes fair practices and code of conduct in security market by taking following
steps:
(a) SEBI has issued guidelines to protect the interest of debenture-holders wherein companies
cannot change terms in midterm.
(b) SEBI is empowered to investigate cases of insider trading and has provisions for stiff fine
and imprisonment.
(c) SEBI has stopped the practice of making preferential allotment of shares unrelated to
market prices.
2. DEVELOPMENTAL FUNCTIONS:
These functions are performed by the SEBI to promote and develop activities in stock
exchange and increase the business in stock exchange. Under developmental categories
following functions are performed by SEBI:
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(ii) SEBI tries to promote activities of stock exchange by adopting flexible and adoptable
approach in following way:
(a) SEBI has permitted internet trading through registered stock brokers.
(b) SEBI has made underwriting optional to reduce the cost of issue.
(c) Even initial public offer of primary market is permitted through stock exchange.
3. REGULATORY FUNCTIONS:
These functions are performed by SEBI to regulate the business in stock exchange. To
regulate the activities of stock exchange following functions are performed:
(i) SEBI has framed rules and regulations and a code of conduct to regulate the intermediaries
such as merchant bankers, brokers, underwriters, etc.
(ii) These intermediaries have been brought under the regulatory purview and private
placement has been made more restrictive.
(iii) SEBI registers and regulates the working of stock brokers, sub-brokers, share transfer
agents, trustees, merchant bankers and all those who are associated with stock exchange in
any manner.
(iv) SEBI registers and regulates the working of mutual funds etc.
REGULATORY FUNCTIONS
R e g u l a t i o n o f s t o c k e x c h a n g e , s e l f r e g u l a t o r y organizations and any other
securities market.
Registration and regulation of stock brokers, sub-brokers, Registrars to all
issues, merchant bankers, underwriters, portfolio managers etc.
Registration and regulation of the working of collective investment schemes
including mutual funds.
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A. Six subsidiaries of stock exchanges were inspected during the financial year 2002-03 viz
ASE Ca p i t a l Ma r k e t s Ltd ( ACML –Subsidiary of ASE), ISE Securities &
Services Ltd (ISS - Subsidiary of ISE), LSE Securities Ltd (LSESL - Subsidiary of LSE) ,
HSE Securities Ltd (HSESL - Subsidiary of HSE), SKSE Securities Ltd (SKSESL -
Subsidiary of Saurashtra Kutch Stock Exchange) and VSE Securities Ltd (VSL- Subsidiary
of Vadodara Stock Exchange). A special inspection of MPSE Securities Ltd (MPSESL –
Subsidiary of MPSE) was carried out. Follow up action included discussion with the parent
exchanges of the subsidiaries. Letters of displeasure were issued to the parent stock
exchanges of those subsidiaries for which findings were serious as well as those which failed
to comply with suggestions/observations of inspection reports.
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It had come to the notice of the SEBI that certain persons were engaging in trading in
securities outside the purview of the stock exchanges (‘illegal trading in securities’). Such
trading particularly in Gujarat has come to be known as ‘DABBA’ trading. There were also
reports in the media regarding illegal use of terminals provided to the brokers by the National
Stock Exchange in Kolkata and other places. Media had also reported Kerb trading in the
cities of Kanpur, Kolkata, Mathura, Ahmedabad, Rajkot and Mumbai. Since these activities
are illegal and pose a systemic risk besides luring common investors into the net the Board
tool immediate action by sending t e a m s t o some cities of Gujarat viz . Ahmedabad,
Vadodara and Rajkot to conduct surprise inspections. Since it is not possible to identify the
persons who carry on these activities the Chief Ministers of all the States were requested
through letters and reminders to use the local police force to check these illegal activities.
NSE, BSE and other Stock Exchanges were altered to verify involvement of their members
and take coercive action. The public were also cautioned through a notice issued in the
newspapers in English, Hindi and major regional languages about the illegal activities and
educating them about the perils of such illegal trades.
In terms of Regulations, an existing collective investment scheme which has (i) failed to
make an application for registration to the Board; or (ii) not been granted provisional
registration by the Board; or (iii) having obtained provisional registration fails to comply
with the provisions of Regulation 71; or (iv) is not desirous of obtaining provisional
registration; is required to wind up its existing schemes, make repayment to the investors and
thereafter submit “Winding up and Repayment Report ” to SEBI . SEBI has received
“Winding up and Repayment Report” from 57 CIS entities. Prosecution under Section 24 of
SEBI Act, 1992 has been filed by SEBI against 139 erring CIS entities. Other actions such as
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debarring the promoters/ directors/ managers/ persons in charge of the business of the scheme
from operating in the capital market; writing to the State Governments to register civil/
criminal cases against the erring entities for apparent offences of fraud, cheating criminal
breach of trust and misappropriation of public funds; writing to the Department of Company
Affairs to initiate the process of winding up of the erring 555 CIS entities has also been taken
up. Requests have been made to police authorities to file the First Information Reports
against 49 CIS entities for offences such as criminal breach of trust, cheating, etc. In CWP
No. 3352/98 in the matter of Shri. S. D Bhattacharya and others vs. SEBI, the Hon’ble High
Court, Delhi impleaded all the CIS entities. Earlier, the court had, inter-alia, restrained them
from selling, disposing of and /or alienating their immovable properties or parting with the
possession of the same. Their directors had also been interdicted from transferring their
immovable property in any manner whatsoever. The Hon’ble High Court also made it clear
that its order will not come in the way of companies intending to refund the money to their
investors. In an order dated January 22, 2002, the Hon’ble High Court h a s ordered to
freeze the bank accounts of 513 erring CIS entities and their directors/promoters till they
comply with the regulations / SEBI Directions regarding repayment to their investors.
II. Mutual Funds Registered with SEBI during the year, registration was granted to two new
mutual funds in the private sector viz HSBC Mutual Fund and Deutsche Mutual Fund. With
the enactment of the UTI (Repealment Ordinance), the UTI was divided into the UTI-I and
UTI-II. UTI-II known as UTI Mutual Fund was registered with SEBI on January 14, 2003.
During the year 2002-03, the certificate of registration granted to two mutual funds was
cancelled viz JF Mutual Fund (formerly known as Jardine Fleming Mutual Fund) and Pioneer
ITI Mutual Fund (formerly known as Kothari Pioneer Mutual Fund). In case of JF Mutual
Fund, the schemes were taken over by Sun F&C Mutual Fund whereas the schemes of
Pioneer ITI Mutual Fund were merged with Templeton Mutual Fund.
A. Domestic and Foreign Venture Capital Funds During the year, registration was granted to
nine new domestic venture capital funds (DCVFs). Registration was also granted to four
foreign Venture Capital Investors (FVCIs).
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a. Self regulation becomes the responsibility of market professionals and may result in greater
acceptance of rules by the members of SRO.
b. It also provides market players with greater flexibility to respond to securities market.
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DUTIESOF SEBI:
Regulation of Stock Exchanges and other securities markets;
Registration and regulation of the working stock brokers, sub-brokers, bankers to
an issue (a public offer of capital), trustees of trust deeds, registrars to an issues,
merchant bankers, under writers, portfolio managers, investment advisors and
such other intermediaries who may be associated with the stock market in any
way;
Registration and regulations of mutual funds;
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POWERS OF SEBI
For the discharge of its functions efficiently, SEBI has been invested with the necessary
powers which are:
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2. Its activities are divided into five departments. Each department is headed by an executive
director.
3. The head office of SEBI is in Mumbai and it has branch office in Kolkata, Chennai and
Delhi.
4. SEBI has formed two advisory committees to deal with primary and secondary markets.
5. These committees consist of market players, investors associations and eminent persons.
(The companies issuing securities offered through an offer document shall satisfy the
following at the time of filing the draft offer document with SEBI30 and also at the time of
filing the final offer document with th Registrar of Companies/ Designated Stock Exchange :)
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Provided further that where the Board has sought any clarification or additional
information from the Lead Manager/s to the Issue, the period within which the Board may
specify changes or issue observations, if any, on the draft Prospectus shall be 15 days from
the date of receipt of satisfactory reply from the Lead Manager/s to the Issue.
Provided further that where the Board has made any reference to or sought any clarification
or additional information from any regulator or such other agencies, the Board may specify
changes or issue observations, if any, on the draft Prospectus after receipt of comments or
reply from such regulator or other agencies.
Provided further that the Board may specify changes or issue observations, if any, on the
draft Prospectus only after receipt of copy of in-principle approval from all the stock
exchanges on which the issuer company intends to list the securities proposed to be offered
through the Prospectus.) (No listed issuer company shall make any rights issue of securities,
33(where the aggregate value of such securities, including premium, if any, exceeds Rs. 50
lacs,) unless a draft letter of offer has been filed with the Board, through a Merchant Banker,
at least 30 days prior to the filing of the letter of offer with the Designated Stock Exchange
(DSE).
Provided that if the Board specifies changes or issues observations on the draft Letter of
Offer (without being under any obligation to do so), the issuer company or the Lead Manager
to the Issue shall carry out such changes in the draft Letter of Offer or comply with the
observations issued by the Board before filing the Letter of Offer with DSE.
Provided further that the period within which the Board may specify changes or issue
observations, if any, on the draft Letter of Offer shall be 30 days from the date of receipt of
the draft Letter of Offer by the Board.
Provided further that where the Board has sought any clarification or additional
information from the Lead Manager/s to the Issue, the period within which the Board may
specify changes or issue observations, if any, on the draft Letter of Offer shall be 15 days
from the date of receipt of satisfactory reply from the Lead Manager/s to the Issue.
Provided further that where the Board has made any reference to or sought any clarification
or additional information from any regulator or such other agencies, the Board may specify
changes or issue observations, if any, on the draft Letter of Offer after receipt of comments or
reply from such regulator or other agencies .
Provided further that the Board may specify changes or issue observations, if any, on the
draft Letter of Offer only after receipt of copy of in-principle approval from all the stock
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exchanges on which the issuer company intends to list the securities proposed to be offered
through the Letter of Offer.)
Companies barred not to issue security
No company shall make an issue of securities if the company has been prohibited from
accessing the capital market under any order or direction passed by the Board.
Application for listing
No company shall make any public issue of securities unless it has made an application for
listing of those securities in the stock exchange
(s).35(Provided that in case of an unlisted company making an Initial Public Offer, the
company shall make an application for listing of those securities on at least one stock
exchange having nationwide trading terminals.)
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Provided further that extraordinary items shall not be considered for calculating
distributable profits in terms of Section 205 of Companies Act, 1956;
(c) The company has a net worth of at least Rs. 1 crore in each of the
preceding 3 full years (of 12 months each); (d) In case the company has changed its name
within the last one year, atleast 50% of the revenue for the preceding 1 full year is earned by
the company from the activity suggested by the new name; and
(e) The aggregate of the proposed issue and all previous issues made in the same financial
year in terms of size (i.e., offer through offer document + firm allotment + promoters’
contribution through the offer document), does not exceed five (5) times its pre-issue
networth as per the audited balance sheet of the last financial year.)
(An unlisted company not complying with any of the conditions specified in Clause 2.2.1
may make an initial public offering (IPO) of equity shares or any other security which may be
converted into or exchanged with equity shares at a later date, only if it meets both the
conditions (a) and (b) given below:
Management of SEBI:
As noted above, SEBI is statutory Board i.e. Board formedunder Statue. The Board shall be
headed by a chairman. In addition, there will be eightmembers:
(a) Two members from amongst the officials of the Ministries of the Central
Government dealing with Finance and Law;
(b) One member from amongst the officials of the Reserve bank of India;
(c) Five other members of who at least three shall be the whole time members. Thus, there
are nine members including chairman. Accordingly to section 4(2) of the Act, this Board
exercise general superintendence, direction and management of the affairs of the SEBI. The
Chairman of the Board can exercise all powers of the Board, except those specified in the
regulations framed under SEBI Act. The Chairman and the members are appointed by the
Central Government except that member from Reserve Bank of India is appointed by the
RBI. The Chairman and other members shall be persons of ability, integrity and standing who
have shown capacity in dealing with problems relating to securities market and have special
knowledge or experience of law, finance, economics, accountancy, administration etc.
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The SEBI had issued detailed guidelines for all companies — old as well as new — for
disclosure of information and protection of the interests of investors. The guidelines relate to
first issue of new companies, first issue by existing companies, issue of convertible
debentures, etc. The guidelines are in addition to other legal provisions in existence.
The purpose is to reduce the cost of issue. The purpose behind issuing these guidelines is to
give protection to small investors and avoid their exploitation due to misleading information.
The SEBI can take action against companies if these guidelines are not followed in the right
spirit. The SEBI may issue fresh guidelines from time-to-time. This suggests that SEBI has
now effective control on the new issue market. This is one achievement of SEBI.
Regulation of Portfolio Management Services:
The highly infringed portfolio management services (PMS) were placed under the regulation
of SEBI since January 11, 1993. The violations of the PMS scheme and similar schemes
offered by various banks and merchant banking subsidiaries had come to light during the
securities scam.
It is noticed that the role of RBI as supervisory head had been highly inefficient in regard to
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PMS. The same is the case with the Finance Ministry. SEBI has now been entrusted with the
job of policing the portfolio managers and provide adequate protection to the investors. This
is a good beginning on the part of SEBI and can be treated as one achievement of SEBI.
Regulation of Mutual Funds:
The Mutual Funds were placed under SEBI control on January 20, 1993. Next to portfolio
management services, it is the fifth financial activity to be brought under SEBI’s regulatory
framework. Mutual funds have been barred from indulging in option trading, short selling or
carrying forward transactions in securities. Permission has been granted to invest only in
transferable securities in the money/capital market.
SEBI has prosecuted many companies for delaying share transfers and for delay in refund of
public issue money. This step gives protection to investors and avoids their exploitation
through delayed payments.
SEBI has issued guidelines as regards takeovers and mergers. The purpose is to ensure
transparency in acquisition of shares, fair and truthful disclosure through public
announcement and avoidance of unfair practices in takeovers and mergers. The guidelines
issued by SEBI are for the protection of the interest of small investors.
SEBI has brought out number ofpublications for the education and guidance of investors and
other intermediaries. The publications include Investors’ Grievances – Rights and Remedies,
Merchant Bankers – Rules and Regulations, SEBI Act – 1992, SEBI Market Review and
SEBI News letter.
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SEBI has started the registration of foreign institutional investors. This is in pursuance of the
government guidelines for investments by foreign institutional investors issued in September,
1992. This is a step in the right direction for effective control on such investors who are likely
to invest on a massive scale in the near future.
Merchant banking has been statutorily brought under the regulatory framework of SEBI.
Merchant bankers are now to be authorized SEBI. They have to adopt the stipulated capital
adequacy norms, abide by the code of conduct which specifies a high degree of responsibility
towards investors in respect of pricing and premium fixation of issues and disclosures in the
prospectus.
SEBI acts as a developer and regulator of the capital market in India. SEBI has delegated
powers to two exchanges (Bombay Stock Exchange, National Stock Exchange) to ensure that
their members adhere to the SEBI regulations and instructions.
The total market capitalization as on March 31, 2011 of listed companies in India at Bombay
Stock Exchange is RS.68, 39,084 crores as per SEBI’s annual report for the year ending
March 31, 2011.
Some of the roles that the SEBI performs as a market regulator are:
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SEBI has set out corporate governance provisions that are intended to drive in a minimum
standard of corporate governance among listed companies in India. This is issued as a part of
the listing agreement that each listed company signs with the stock exchange under the title
‘clause 49’.clause 49 remains the most significant corporate governance reform and
established a new corporate governance regime.
Like Corporate Governance standards in the United States and United Kingdom, India’s
corporate governance reforms followed fiduciary and agency cost model of corporate
governance. These norms lay criterions for:
Issuer companies
Stock exchanges
Central securities depositors
Stock brokers
Mutual funds
Foreign institutional funds
Investment banks
Depository participants
Credit rating agencies
Venture funds
Registrars and underwriters
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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.
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.
This department is responsible for supervising the functioning and operations of derivatives
exchanges, and addresses investor complaints.
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 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 integrated Surveillance department is responsible for monitoring market activity through
market systems, data from other departments and analytical software.
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7. Investigations Department:
8. Enforcement Department:
It is responsible to provide legal counsel to the Board and to its other departments, and to
handle non-enforcement litigation.
Handles 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 office will support SEBI’s operations by handling investor complaints centrally and be
the focal point of SEBI’s investor education effort.
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
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1. SEBI guidelines were issued after the repeal of the CIC Act whereby the CCI
guidelines became out of date. New guidelines by SEBI were issued starting from the
month of June, 1992. Some CCI guidelines were still retained, as in the case of those
for premium fixation.
2. Guidelines for new issues made by new Companies : They have to be issued at par.
Free pricing is permitted only if the new company is promoted by the existing
company with not less than 50% of equity.
3. New issues made by Private Limited Companies and Closely held companies can be
made by free pricing, for listing purposes if such companies have had three years of
track record of consistent profitability out of last 5 years. Not less than 20% of equity
is to be offered to the public, in such cases. 4. Public issues by existing listed
companies can be made through free pricing, if they are further issues and if they are
disclosed in the prospectus. The NAV and the market price have to be considered for
the last 3 years. The companies with foreign holding wishing to enhance the limit
upto 51% will have to get the prices approved in the general body meeting by a
special resolution under Sec. 81 (A) of the Companies Act, and subject to RBI
approval.
4. Composite Issues : Issues to the public by existing company can be priced differently
as compared to the rights issued to shareholders.
5. Reservation in issues : The unreserved portion offered to public should not be less
than the minimum required for listing purposes. Preferential allotment can be mde to
promoters, Companies, shareholders of those companies. NRIs, Employees and
Associate Compaies of the same group. The allotment shall be subject to a lock in
period of three years, if it is made on firm basis, outside public issue.
6. Deployment of Issue Proceeds : Where the total proceeds exceed Rs. 250 cores, the
company will voluntarily disclose the arrangements made to utilise proceeds. When
the total issue proceeds exceed Rs. 500 crores, there is need for making compulsory
disclosure and for the financial institutions to monitor the deployment of funds, to the
stock exchanges.
7. Minimum interval between two issues : 12 months should elapse between the public
or rights issue and Bonus issue. The promoters should bring in their share of the
capital befor ethe public issue.
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Some important lines that are offered by the dedicated to the cause of investor’s
protection:
Provisions regarding this are enshrined in Chapter-II of the said guidelines. No company shall
make any issue of a public issue of securities, unless a draft prospectus has been filed with
the Board, through an eligible Merchant Banker, at least 21 days prior to the filing of
Prospectus with the Registrar of Companies (ROCs). Provided that if, within 21 days from
the date of submission of draft Prospectus, the Board specifies changes, if any, in the draft
Prospectus (without being under any obligation to do so), the issuer or the Lead Merchant
banker shall carry out such changes in the draft prospectus before filing the prospectus with
ROCs.
No listed company shall make any issue of security through a rights issue where the
aggregate value of securities, including premium, if any, exceeds Rs.50 lacs, unless the letter
of offer is filed with the Board, through an eligible Merchant Banker, at least 21 days prior to
the filing of the Letter of Offer with RSE. Provided that if, within 21 days from the date of
filing of draft letter of offer, the Board specifies changes, if any, in the draft letter of offer,
(without being under any obligation to do so), the issuer or the Lead Merchant banker shall
carry out such changes before filing the draft letter of offer. No company shall make an issue
of securities if the company has been prohibited from accessing the capital market under any
order or direction passed by the Board.
These provisions are being dealt in the Chapter-III of the guidelines. A listed company whose
equity shares are listed on a stock exchange, may freely price its equity shares and any
security convertible into equity at a later date, offered through a public or rights issue. An
unlisted company eligible to make a public issue and desirous of getting its securities listed
on a recognized stock exchange pursuant to a public issue, may freely price its equity shares
or any securities convertible at a later date into equity shares. An eligible company shall be
free to make public or rights issue of equity shares in any denomination determined by it in
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accordance with Sub-section (4) of Section 13 of the Companies Act, 1956 and in compliance
with the following and other norms as may be specified by SEBI from time to time:In case of
initial public offer by an unlisted company, if the issue price is Rs. 500/- or more, the issuer
company shall have a discretion to fix the face value below Rs. 10/- per share subject to the
condition that the face value shall in no case be less than Rs. 1 per share; and, if issue price is
less than Rs. 500 per share, the face value shall be Rs. 10/- per share; The disclosure about
the face value of shares (including the statement about the issue price being “X” times of the
face value) shall be made in the advertisement, offer documents and in application forms in
identical font size as that of issue price or price band.)
In addition to the disclosures specified in Schedule II of the Companies Act, 1956, the
prospectus shall also contain all material information which shall be true and adequate so as
to enable the investors to make informed decision on the investments in the issue. The
prospectus shall also contain the information and statements specified in this chapter and
shall as far as possible follow the order in which the requirements are listed in this chapter
and summarised in Schedule VIIA.
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SEBI being a premiere institution for dealing with the problems relating to securities has
advanced a long way towards protecting the investors from the hazards of the predators
existing in the market. As already stated before it has compiled a great bunch of guidelines
dedicated to this cause. But the real scenario which came as a consequence was that only the
big fishes could escape the net and the small ones were still striving to uphold their existence.
In this matter, according to a daily newspaper it has become clear that SEBI had already
received suggestion and advice regarding the need for a separate enactment concerning the
small investors. As far as it is concerned, the Government has thought of introducing an
independent legislation on investor protection to safeguard the interests of small investors. A
separate legislation had also been recommended in the report prepared by Mr. Mitra, who
was commissioned by the Finance Ministry to draw up the terms of reference for a new Bill.
A debate has been on over the need for a separate legislation for protecting the interests of
small investors, considering that there are multiple agencies involved in policing companies
that raise funds from the public be it public listed companies, or NBFCs (Non Banking
Financial Companies). These include the capital markets regulator, SEBI, the banking
regulator, RBI, and the Department of Company Affairs (DCA) which is responsible for
regulating unlisted companies. SEBI has been in favour of a separate regulatory agency for
the protection of small investors. The regulator had earlier submitted a proposal to the
Finance Ministry, outlining the need for a new Act.
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if the Board specifies changes or issues observations on the draft Prospectus (without being
under any obligation to do so), the issuer company or the Lead Manager to the Issue shall
carry out such changes in the draft Prospectus or comply with the observations issued by the
Board before filing the Prospectus with ROC.
Provided further that
the period within which the Board may specify changes or issue observations, if any, on the
draft Prospectus shall be30 days from the date of receipt of the draft Prospectus by the Board.
Provided further that
where the Board has sought any clarification or additional information from the Lead
Manager/s to the Issue, the period within which the Board may specify changes or issue
observations, if any, on the draft Prospectus shall be 15 days from the date of receipt of
satisfactory reply from the Lead Manager/s to the Issue.
Provided further that
where the Board has made any reference to or sought any clarification or additional
information from any regulator or such other agencies, the Board may specify changes or
issue observations, if any, on the draft Prospectus after receipt of comments or reply from
such regulator or other agencies.
Provided further that
the Board may specify changes or issue observations, if any, on the draft Prospectus only
after receipt of copy of in-principle approval from all the stock exchanges on which the issuer
company intends to list the securities proposed to be offered through the Prospectus.)
(No listed issuer company shall make any rights issue of securities,
(where the aggregate value of such securities, including premium, if any, exceeds Rs. 50
lacs,) unless a draft letter of offer has been filed with the Board, through a Merchant Banker,
at least 30 days prior to the filing of the letter of offer with the Designated Stock Exchange
(DSE).
Provided that
if the Board specifies changes or issues observation son the draft Letter of Offer (without
being under any obligation to do so), the issuer company or the Lead Manager to the Issue
shall carry out such changes in the draft Letter of Offer or comply with the observations
issued by the Board before filing the Letter of Offer with DSE.
Provided further that
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ROLE OF SEBI AND IMPACT OF FINANCIAL MARKET
the period within which the Board may specify changes or issue observations, if any, on the
draft Letter of Offer shall be 30 days from the date of receipt of the draft Letter of Offer by
the Board.
Provided further that
where the Board has sought any clarification or additional information from the Lead
Manager/s to the Issue, the period within which the Board may specify changes or issue
observations, if any, on the draft Letter of Offer shall be 15 days from the date of receipt of
satisfactory reply from the Lead Manager/s to the Issue.
Provided further that
where the Board has made any reference to or sought any clarification or additional
information from any regulator or such other agencies, the Board may specify changes
or issue observations, if any, on the draft Letter of Offer after receipt of comments or reply
from such regulator or other agencies .
Provided further that
the Board may specify changes or issue observations, if any, on the draft Letter of Offer only
after receipt of copy of in-principle approval from all the stock exchanges on which the issuer
company intends to list the securities proposed to be offered through the Letter of Offer.
SEBI OPERATIONS
Capital Market
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ROLE OF SEBI AND IMPACT OF FINANCIAL MARKET
The capital market is a place where the suppliers and users of capital meet to share one
another’s views, and where a balance is sought to be achieved among diverse market
participants. The securities decouple individual acts of saving and investment over time,
space and entities and thus allow savings to occur without concomitant investment.
Moreover, yield- bearing securities makes present consumption more expensive relative to
future consumption, inducing people to save. The composition of savings changes with less
of it being held in the form of idle money or unproductive assets, primarily because more
divisible and liquid assets are available.The capital market acts as a brake on channeling
savings to low- yielding enterprises and impels enterprises to focus on performance.
Thus, the capital market converts a given stock of investible resources into a larger flow of
goods and services and augments economic growth. In fact, the literature is full of theoretical
and empirical studies that have established causal robust (statistically significant) two-way
relation between the developments in the securities market and economic growth. The Indian
capital markets dates back to the 18th century when the securities of the East India Company
were traded in Mumbai and Kolkata. However, the orderly growth of the capital market
began with the setting up of The Stock Exchange, Bombay in July 1875 and Ahmedabad
Stock Exchange in 1894. Eventually, 22 other Exchanges in various cities sprang up. Given
the significance of capital market and the need for the economy to grow at the projected over
8 per cent per annum, the managers of the Indian economy have been assiduously promoting
the capital market as an engine of growth to provide an alternative yet efficient means of
resource mobilization and allocation.
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ROLE OF SEBI AND IMPACT OF FINANCIAL MARKET
The capital market serves a very useful purpose by pooling the capital resources of the
country and making them available to the enterprising investors well-developed capital
markets augment resources by attracting and lending funds on the global scale.
A developed capital market can solve this problem of paucity of funds. For an organized
capital market can mobilize and pool together even the small and scattered savings and
augment the availability of investible funds. While the rapid growth of capital markets, the
growth of joint stock business has in its turn encouraged the development of capital markets.
PRIMARY MARKET
1. Entry norms: -
a) Track record of dividend payment for minimum 3 yrs preceding the issue.
b) Already listed companies - when post-issue net worth becomes more than 5 times
the pre-issue net worth.
c) For Manufacturing company not having such track record – appraise project by a
public financial institution or a scheduled commercial bank.
d) For corporate body – 5 public shareholders for every Rs.1 lakh of the net capital
offer made to the public
e) Banks – 2 yrs of profitability for issues above par. Offer documents to companies.
2. Promoters’ contribution: -
a) Should not be less than 20% of the issued capital.
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The stock exchanges in India were following a system of account period settlement for cash
market transactions, except for transactions in a few active securities, which were settled
under T+3 rolling settlement. The stock exchanges were also offering deferral products to
provide leverage to members to postpone their settlement obligations. The transactions are
not settled immediately but after 2 days after the trade day. The members receive the
funds/securities in accordance with the pay-in/pay-out schedules notified by the respective
exchanges. Given the growing volume of trades and market volatility, the time gap between
trading and settlement gives rise to settlement risk. In recognition of this, the exchanges and
their clearing corporations employ risk management practices to ensure timely settlement of
trades. The regulators have also prescribed elaborate margining and capital adequacy
standards to secure market integrity and protect the interests of investors. The exchanges not
providing counter-party guarantee have been advised by SEBI to set up trade guarantee
funds, which would honor pay-in liabilities in the event of default by a member. Movement
of securities has become almost instantaneous in the dematerialised environment. Two
depositories viz., National Securities Depositories Ltd. (NSDL) and Central Depositories
Services Ltd. (CDSL) provide electronic transfer of securities and more than 99% of turnover
is settled in dematerialised form. All actively traded scrips are held, traded and settled in
demat form. The obligations of members are downloaded to members/custodians by the
clearing agency. Select banks have been empanelled by clearing agency for electronic
transfer of funds. The members are required to maintain accounts with any of these banks.
The members are informed electronically of their pay-in obligations of funds. The members
make available required funds in their accounts with clearing banks by the prescribed pay-in
day. The clearing agency forwards funds obligations file to clearing banks which, in turn,
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ROLE OF SEBI AND IMPACT OF FINANCIAL MARKET
debit the accounts of members and credit the account of the clearing agency. In some cases,
the clearing agency runs an electronic file to debit members' accounts with clearing banks and
credit its own account. As per the schedule of allocation of funds determined by the clearing
agency, the funds are transferred on the pay-out day by the clearing banks from the account
of the clearing agency to the accounts of members. In some cases, the clearing agency
directly credits the members' accounts with clearing banks and debits its own account. The
pay-in and pay-out of funds as well as securities take place 2 working days after the trade
date.
SETTLEMENT PROCESS:-
The National Securities Clearing Corporation Ltd. (NSCCL) determines the funds/securities
obligations of the trading members and ensures that trading members meet their obligations.
The clearing banks and depositories provide the necessary interface between the
custodians/clearing members (who clear for the trading members or their own transactions)
for settlement of funds/securities obligations of trading members.
a)Trade Recording:The key details about the trades are recorded to provide basis for
settlement. These details are automatically recorded in the electronic trading system
of the exchanges.
b) Trade Confirmation:The counterparties to trade agree upon the terms of trade like
security, quantity, price, and settlement date, but not the counterparty which is the
NSCCL. The electronic system automatically generates confirmation by direct
participants. The ultimate buyers/sellers of securities also affirm the terms, as the
funds/securities would flow from them, although the direct participants are
responsible for settlement of trade.
c) Determination of Obligation:The next step is determination of what counter-parties
owe, and what counter-parties are due to receive on the settlement date. The NSCCL
interposes itself as a central counterparty between the counterparties to trades and nets
the positions so that a member has security wise net obligation to receive or deliver a
security and has to either pay or receive funds.
d) Pay-in of Funds and Securities: The members bring in their funds/securities to the
NSCCL. They make available required securities in designated accounts with the
depositories by the prescribed pay-in time. The depositories move the securities
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By beginning of the new millennium in 2000 SEBI has strengthened and established itself as
an all powerful regulatory body for the capital market, all intermediaries in it, SROs, stock
Exchanges, listed companies, Venture Funds Mutual Funds including M.M.F.s, etc. Already
it has been regulating the FFIs and FIIs and other foreign bodies in respect of their operations
in the capital market A code of conduct has been laid down for each of the category of
players in the capital market.
Early in January 2000, the SEBI has come out with a series of measures to enhance
transparency and deepen the capital market. These measures include permission for e-
broking, share trading via net with orders to be routed through the websites of brokers,
acceptance of Kumar mangalan Birla Report on.
Corporate Governance and of K.B. Chandrasekhar Panel Report on Venture Funds. The SEBI
has given directives to the listed companies and to the top 150 companies in particular to
observe the code of corporate governance by March end 2001. The SEBI has relaxed the
entry norms for IPOs of Venture Funds, I.T. Companies and knowledge based companies for
listing purposes and entry and exit norms were relaxed for high net worth foreign individuals
and companies to operate in the capital market as in the case of FIIS and FFIs.
It is understood that, SEBI has set a creditable record of regulation for growht of capital
market on healthy lines during the quinquennium of 1995-2000. In the coming years the tasks
set for itself are the following in particular.
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SEBI
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.
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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”.
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ROLE OF SEBI AND IMPACT OF FINANCIAL MARKET
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.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.
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VENTURE CAPITAL
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.
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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.
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.
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STOCK EXCHANGES
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.
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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
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ROLE OF SEBI AND IMPACT OF FINANCIAL MARKET
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.
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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:
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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.
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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.
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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.
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action is a clear signal the market players to comply with the law and expected
standards of conduct in the market.
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CHAPTER II
Research Methodology
The research is exploratory research. The data is collected from various sources like Internet,
News paper, Magazines, Personals
2.2 DataCollection
Primary sources - Surveys to various broking firms and analysis on the same
2.3 Limitations
The study is not proposed to be an expert study as it was done by a student for the purpose of
a partial fulfillment of the course in the Finance training, which is an integral part, in
completion and reward . The study was conducted in shortspan of eighteen weeks, so the
findings cannot be generalized for all times. Some of the information’s being confidential
was not included in the study. During my project I would not be able to track performance of
IPO already listed of everysector. The scope of the study, by and large is very vast. It is very
difficult to satisfy all the areas. Therefore an attempt is made to cover as much as possible
included in the study
The processing, categorization, tabulation, psychoanalysis and understanding of data are done
with the help of Frequency distribution Analysis and Pie diagram. The following statistical
tools and mathematical techniques have been applied on the data collected from the
respondents.
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Pie Charts; A Pie chart (or a circle chart) is a circular statistical graphic, which illustrate
numerical proportion. In a pie chart, the arc length of each slice (and consequently its central
angle and area), is proportional to the quantity it represents. While it is named for its
resemblance to a pie which has been sliced, there are variations on the way it can be
presented.
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CHAPTER III
REVIEW OF LITERATURE
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ofperformance based upon the Capital Asset Pricing Model and reported
that mutual funds did not appear to achieve abnormal performance when
transaction costs were taken into account.
Carlsen (1970) evaluated the risk-adjusted performance andemphasized
that the conclusions drawn from calculations of return depend on the
time period, type of fund and the choice of benchmark. Carlsen
essentially recalculated the Jensen and Shape results using annual data
for 82 common stock funds over the 1948-67 periods. The results
contradicted both Sharpe and Jensen measures.
Fama (1972) developed a methodology for evaluating
investmentperformance of managed portfolios and suggested that the
overall performance could be broken down into several components.
John McDonald (1974) examined the relationship between the
statedfund objectives and their risks and return attributes. The study
concludes that, on an average the fund managers appeared to keep their
portfolios within the stated risk. Some funds in the lower risk group
possessed higher risk than funds in the most risky group.
James R.F. Guy (1978) evaluated the risk-adjusted performance ofUK
investment trusts through the application of Sharpe and Jensen measures.
The study concludes that no trust had exhibited superior performance
compared to the London Stock Exchange Index.
Henriksson (1984) reported that mutual fund managers were not ableto
follow an investment strategy that successfully times the return on the
market portfolio. Again Henriksson (1984) conclude there is strong
evidence that the funds market risk exposures change in response to the
market indicated. But the fund managers were not successful in timing
the market.
Grinblatt and Titman (1989) concludes that some mutual
fundsconsistently realize abnormal returns by systematically picking
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CHAPTER IV
Findings& Analysis
Area Belongs
40% Rural
Urban
60%
Explanation:-
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Q2) Occupation..?
o Businessman
o Engineer
o Builder
o Consultant
Occupation
20%
10%
Businessman
10% Engineer
Builder
Consultant
60%
Explanation:-
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40%
0-2 Years
2-5 Years
5-10 Years
10 & above
20%
20%
Explanation:-
40% of Respondent doing trading in stock and IPO from 0-2 years.
20% of Respondent doing trading in stock and IPO from 2-5 years
20% of Respondent doing trading in stock and IPO from 5-10 years
20% of Respondent doing trading in stock and IPO from 10 & above years
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40% Yes
No
60%
Explanation:-
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20% 20%
20%
40%
Explanation:-
20% of Respondent investing in IPO from less than 10% of their financial investment.
40% of Respondent investing in IPO from 10% - 15% of their financial investment.
20% of Respondent investing in IPO from 15% - 20% of their financial investment.
20% of Respondent investing in IPO from 20% - 25% of their financial investment.
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Investing in IPO
20% 20%
Promoter Background
Sector Performance
Performace of Existing Company
Premium amount
20%
40%
Explanation:-
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Returns
25% 25%
4% - 8%
9%-12%
13%-15%
16%-20%
25% 25%
Explanation:-
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ROLE OF SEBI AND IMPACT OF FINANCIAL MARKET
Procedure of IPO
20%
40%
Easy
Lengthy
Difficult
40%
Explanation:-
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Q9) Is it better to invest in IPO or pick the same stock from Listings?
o Invest in IPO’s
o Pick the same stock on Listings
o Partly invest in IPO’s & pick the stock on listing
o Wait sometime after listing
20% 20%
Invest in IPO's
Same Stock
Partly Invest
Wait sometimes
20%
40%
Explanation:-
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ROLE OF SEBI AND IMPACT OF FINANCIAL MARKET
Q10) how do you come to know about the new IPO listing?
o Through Broker
o Through Friend
o Through TV
o Through Newspaper
Know of IPO
20% 20%
Through Broker
Through Friend
Through TV
Through Newspaper
20%
40%
Explanation:-
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ROLE OF SEBI AND IMPACT OF FINANCIAL MARKET
Purpose of Investing
20%
Listing Gain
Longterm gain
80%
Explanation:-
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ROLE OF SEBI AND IMPACT OF FINANCIAL MARKET
The investment in IPO can prove too risky because the investor does not know
anything about the company because it is listed first time in the market so its
performance cannot be measure.
On the other hand it can be said that the higher the risk higher the returns
earned. So we can say that the though risky if investment is done then it can
give higher returns as well.
Primary market is more volatile than the secondary market because all the
companies are listed for the first time in the market so nothing can be said
about its performance.
If higher risk is taken, it is always rewarded with the higher returns. So higher
the risk the more the returns rewarded for it.
“We can fairly predict the future, but can’t make it happen as it is.”
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Conclusion
The Capital Market Regulator, SEBI has carefully developed good stability mechanisms to
keep the Market functioning with stability and sustainability. There are difficulties, but the
Capital Market Regulator devises careful working strategies to overcome them. Such
strategies come in the form of rules, regulations and innovative market reforms. SEBI has
been granted powers by the Law Courts and the Government of India which helps its
machinery to function as expected. SEBI is very much engaged in the education of investors
and the careful training of all Capital Market participants. This is the source of stability and
sustainability in the Indian Capital Market. The situation of the Indian Capital Market is
evidence of the fact that investors’ interest is well protected. They should have confidence in
the market and invest without fear of abnormal or excess losses. The evidence in the
corporate management environment indicates that the Securities and Exchange Board of
India (SEBI) can make Rules and Regulations on good Corporate Governance for
companies, but it is very difficult to force them to implement such Rules and Regulations.
Some directors deliberately abuse Corporate Governance Rules and Regulations, while
others inadvertently Act on the spur of the moment and take unnecessary risks, motivated by
high interest benefits. It is only discovered that there exist an abuse of Corporate
Governance in a any corporate body, when risk taking goes wrong. This means that
corporate bodies abuse Corporate Governance Rules and Regulations more often, because of
the advantage of very high benefits. This is typically a practice that prevails in the banking
environment. It is a bad practice, but very difficult to stamp out. Abuse of Corporate
Governance Rules and Regulations by corporations is difficult to detect, since it is always
done off the company’s records. SEBI cannot be held responsible for the bad Corporate
Governancepracticesinitiatedbydirectorsofcompanies.SEBIisanadvisorybodycharged with
the formulation of good Corporate Governance Rules and Regulations, which should be
implemented and followed by all corporations. A number of significant first-generation
Capital Market reforms have been implemented in the India Capital Market. For instance,
spot prices for index (e.g. Sensex) stocks are usually "market" determined, the volumes in
the derivative markets have grown beyond those in the spot markets, and the market
mechanisms (e.g. the speed of settlement and dematerialisation) are comparable to
international best practices. This has made the NSE and BSE to attain a relatively high
degree of sophistication. However, the BSE is not yet corporatised and the NSE could do
with more competition.
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BIBLOGRAPHY
BOOKS
1. Berenson Mark and Levine David (2000), “Basic Business Statistics, Concepts and
Applications”, Prentice Hall.
3. Grinblatt Mark, Titman Sheridan (2008), “Financial markets and Corporate Strategy”,
McGraw-Hill.
4. Shapiro Carl and Varian Hal R. (2009), “Information Rules: A Strategy Guide to the
Network Economy”, Harvard Business School Press.
5. Udayan Gupta (2006), “Done Deals: Venture capitalists tell their stories”, Harvard
Business School Press.
Webliography
www.ipohome.com/hie-gerieooie/htm
www.essortment.com/gteorerui-100%dkfjdkei.pdf
www.investopedia.com/reserchpaper.froee-heofdvl%fkldks/
www.ipoavenue.com/ariownnipo-progress&arojsrei/5%akd2e32/
www.moneycontrol.com/reliance/ipo/areoi/rechares=kadkf=akdfd&
www.wikipedia.com/ipo$alfjdkfjd5wieirnaZ?oadjfe=jjfjf.jpg
www.moneycentral.hoovers.com
www.bullishindian.com
www.rupya.com
www.investorguide.com
www.hdil.in/
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Questionnaire
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ROLE OF SEBI AND IMPACT OF FINANCIAL MARKET
o 13% - 15%
o 16% - 20%
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