INTRODUCTION

“Project Report on Working of Stock Exchange & Depositary Services”

STOCK EXCHANGE :
The stock exchange is the important segment of its capital market. If the stock exchange is well-
regulated function smoothly, then it is an indicator of healthy capital market. If the state of the
stock exchange is good, the overall capital market will grow and otherwise it can suffer a great
set back which is not good for the country. The government at various stages controls the stock
market and the capitals market.

A capital market deals in financial assets, excluding coin and currency. Banking accounts
compromises the majority of financial assets. Pension and provident funds insurance policies
shares and securities.

Project Report Financial market:

Financial assets are claim of holders over issuer (business firms and governments). They enter
low different segment of financial market.

Those having short maturities that are non transferable like bank savings and current accounts set
the identification of the monetary financial assets. This market is known as money market,
Equity, Preferential shares and bonds and debentures issued by companies and securities issued
by the government constitute the financial assets, which are traded in the capital market.

Project Report “Money Market and Capital Market”

Both money market and capital market constitute the financial market. Capital market generally
known as stock exchange. This is a institution around which every activity of national capital
market revolves. Through the medium stock exchange the investor gets on impetus and
motivations to invest in securities without which they would not be able to liquidate the
securities. If there would have been no stock exchange many of the savers would have hold their
saving either in cash i.e. idle or in bank with low interest rate or low returns. The stock  exchange

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provides the opportunity to investors for the continuous trading in securities. It is continuously
engaged in the capital mobilization process.

Another consequence of non-existence of stock exchange would have been low saving of the
community, which means low investment and lower development of the country.

S          -           Securities provide for investor.

T          -           Tax Benefits planning and exemption.
O         -           Optimum return on investment.
C         -           Cautious Approach.
K         -           Knowledge of Market.
Ex        -           Exchange of Securities Transacted.
C         -           Cyclopedia of Listed Companies.
H         -           High Yield.
A         -           Authentic Information
N         -           New Entrepreneur encouraged.
G         -           Guidance of Investor & Company.
E          -           Equity

HISTORY OF STOCK EXCHANGE

     The first stock exchange was established in London in the year 1773. Just after
establishment of London stock exchange various countries like France, Germany and USA also
established their own stock exchange markets. In India, the first exchange established in Bombay
in the year 1875. Later, in year 1908, Calcutta stock exchange was established which was
recognized in the company in 1923. Mean which in 1920 the madras stock exchange limited in
1973. So far the government of India has recognized 22 stock exchange , which was located at
major business centers in different parts of country.

Till the mid fifties the stock exchange was governed by their own bye laws and regulations with
very little interface by the government. In the year 1925, the government of Bombay promulgated
an act “securities contracts and control act, 1625 for regulation and the stock exchange. During
the world was second trading outside the stock exchange flourished with adverse effect on
investor’s confidence due to base-less issues and higher rate of liquidation of companies. In 1956,

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the center government passed contracts (regulation) act 1956, which came into force through out
the country on 20th Feb. 1957.

SEBI Act:
The government of India has enacted an act (SEBI Act 1952), which provides for the
establishment of a board to protect the interest of investor in securities. The SEBI has emerged as
a monitoring institution of the country fir the development and regulation of stock market, SEBI
has issued from time to time guideline to insider trading listing of securities, registration of
intermediaries mutual funds etc.

Project Report Management of Stock Exchange 

Management of stock exchange is done an elected body of members. These bodies are known by
different names in different stock exchange for example, the BOMBAY, INDORE and
AHEMDABAD stock exchange are managed by a ‘governing board’.  ‘Council of management’
governs the MADRAS stock exchange. A committee manages the CALCUTTA stock exchange.
While the  ‘ board of director’ manages stock exchange. 

These governing bodies are powerful bodies enjoying extensive administrative power of
management and control over their respective stock exchange the day-to-day function of the
stock exchanges are executed by the sub-committee like the ‘defaulters committee’ ‘listing
committee’, ‘settlement committee’ etc.

STOCK BROKERS
SEBI registered stock – brokers interested in providing Internet based trading services will be
required to apply to the respective stock exchange for a formal permission. The stock exchange
should grant approval or reject the application as the case may be, and communicate its decision
to the member within thirty calendar days of the date of completed application submitted to the
exchange.

The Exchange closely monitors outstanding position of top buying member-brokers and top
selling member-brokers on a daily basis. For this purpose, it has developed various market
monitoring reports based on certain pre-set parameters. These reports are scrutinized by officials
of the Surveillance Dept. to ascertain whether a member-broker has built up excessive purchase
or sale position compared to his normal level of business. Further, it is examined whether
purchases or sales are concentrated in one or more scrips, whether the margin cover is adequate,
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whether transactions have been entered into on behalf of institutional clients and even the quality
of scrips, i.e., liquid or illiquid is looked into in order to assess the quality of exposure. The
Exchange also scrutinizes the pay-in position of the member-brokers and the member-brokers
having larger funds pay-in positions are at times, at the discretion of the Exchange, required to
make advance pay-in on T+1 day instead of on T+2 day. 

BASIC REQUIREMENTS FOR STOCK BROKERS

Trading will be on existing stock exchanges through order routing system for execution of trades.
Therefore, stockbrokers are to comply with the following before the start of trade on Internet. 

The broker must have a net worth of Rs. 50lakh if he wants to avail the facility of Internet for his
own.
Provision for maintenance of adequate backup system.

The software system to be used by him should be secured and reliable.

To employ the qualified staff for this purpose.

To send order/trade confirmation to the client also through e-mail.

The contract notes must be issued to the clients as per existing regulation within 24 hours of the
execution of trades.

The broker and his client should use authentication technologies.

The above are some of the important pre-requisites for the stockbroker should intend to take
benefits of trading on Internet. However, detailed guidelines issued by the SEBI for the stock
exchange

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KIND OF STOCK BROKERS
Commission Broker

Near about all the brokers buy and sell securities for earning a commission for investor point of
view he is the most important person and responsibility is to buy and sell stoke for his customer.
It means that he acts as an agent of investor and earns commission for his services rendered. The
broker is also an independent dealer in securities. He purchase and sell securities in his own name
but he is not allowed to deal with non-member.

Jobber 
He is an professional speculator who works for a profit called ‘turn’ he makes a continuous
auction in the market in the stoke in which he specialized. He trades in the market evens for small
difference in the prices and helps to maintain liquidity in the stoke exchange.

Floor Broker
The floor broker purchases and sell shares for the other broker on the floor of the exchange. He is
an individual member owns his seat and receives his own commission on the orders he execute.
He helps other brokers when they are buy and as compensation receives a portion the broker. 

Odd lit dealer 

For trading in stock exchange there a certain number of share a fixed to be transacted in a lot, this
is known as round lat which is usually a, 100 share a anything less than the round lot are add lot.
If a person is in possession of add lot of share i.e. 10, 20, 30, 40 etc. They he will has to look for
the add lot dealer.

Arbitrageur 
A person who is specialist in dealing with securities in different stoke exchange centers at the
same time. He makes a profit by the difference in the piece prevailing in different centers of the
market activity. For example the rte of a certain scrip is higher in some stoke exchange than other
on. In this case the broker will buy the scrip from the marked lower price and will sell the scrip in
the market at higher price. The profit of the arbitrageur depends on the ability to get the prices
from different centers before trading in other stoke exchanges.

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STOCK TRADING OVERVIEW

The marketing of the securities on the stock exchange can be done through member of the stock
exchange.These member can be either individuals or corporate bodies. For the process of trading
in stock exchange there is the basic need for a transaction between an individual and the broker
execute customer's order to buy or sell on the stock exchange trading ring. The exchange of scrip
between the member of the exchange in from of buying or selling is called trading Broker is the
member of recognized stock exchange and help the customers in buying or selling the securities
for the brokerage that he receives.

Trading Method
Listing securities are traded on the floor of recognized stock exchange where its member traded.
An investor is not permitted to enter the floor of stock exchange and he has trust the broker to:
*.Negotiate the best price for the trade.
*.Settle the account, i.e. payment for securities sold on due date.

*.Take delivery of securities purchase.

TYPES OF TRADING

Trading in stock exchange is conducted in two ways:

  Ready delivery contract.

  Forward delivery contract.

BASKET TRADING SYSTEM

The Basket Trading System provides the arbitrageurs an opportunity to take advantage of price
differences in the underlying Sensex and Futures on the Sensex by simultaneous buying and
selling of baskets comprising the Sensex scrips in the Cash Segment and Sensex Futures. This is
expected to provide balancing impact on the prices in both cash and futures markets. The
Exchange has commenced trading in the Derivatives Segment with effect from June 9, 2000 to
enable the investors to, inter-alias, hedge their risks. Initially, the facility of trading in the
Derivatives Segment was confined to Index Futures. Subsequently, the Exchange has introduced
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the Index Options and Options & Futures in select individual stocks. The investors in cash market
had felt a need to limit their risk exposure in the market to movement in Sensex. To participate in
this system, the member-brokers need to indicate number of Sensex basket(s) to be bought or
sold, where the value of one Sensex basket is arrived at by the system by multiplying Rs.50 to
prevailing Sensex. For e.g., if the Sensex is 4000, then value of one basket of Sensex would be
4000 x 50= i.e., Rs. 2,00,000/-. The investors can also place orders by entering value of Sensex
portfolio to be brought or sold with a minimum value of Rs. 50,000/- for each order.

PROCEDURE OF TRADING

1.Select of broker

The first step is buying or selling of share is to select a broker for transaction business on behalf
of the investor. The trading of securities on the stock exchange can be done through members of
the exchange.

An investor prefers to select a broker who shall. 

Act with due skill. Care and diligence in the conduct of all his business.

Not create false market either singly or in concert with other.

2 .Opening An Account With The Broker

The next step to open account with the broker. It helps the investor to provide his credit
worthiness, if the clients were not to do margin money with the broker.

3.Selection Of Securities

This is application for buying securities. The investor may be consulted with broker and take
advise for selection of securities.

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4.Selection Of Time For Trading
This is important to get the best advantage from buying or selling the securities.

5. Placing an Order
Various method of placing an order with the broker has been evolved to give the broker leverage
when he is on the floor of the stock exchange.

6. Preparation of Contract Note

SEBI circular of 4th Feb. 1991 requires that  all member of the recognized stock  exchange issue
contract note to the investors on the execution of trade. Brokers, therefore issue contract note to
the client, which gives the name of the company, price of trade, brokerage, time of execution,
provision regarding arbitration etc. in term of the bye-laws of stock exchange, this is statutory
requirement and mandatory.

7. Settlement
The settlement is the process where by payment is made by brokers who have made purchase and
share delivery by those brokers who have made sales.

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 OBJECTIVES OF THE STUDY

 To study the capital market of India

 To study the mutual fund registration in SEBI
 To study the protection given to the investors by SEBI
 To study the government regulations to stop the insider trading
 To study the role of SEBI in Indian economy

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 SCOPE OF THE STUDY

 Study helps to understand various categories of SEBI

 Helps to study the regulations of SEBI
 To know the capital market development

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 NEED OF THE STUDY

 To know about the stock-exchange

 To know the Government Regulations of SEBI
 To know the Development of Capital market and mutual funds
 To stop the unethical trading in stock market

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 RESEARCH METHODOLOGY

The analysis of the project was based on the available information. Any information about the topic is called
the data. Research methodology is a method of collecting all sorts of information and data pertaining to the
subject question. The data was gathered from various sources: primary data and secondary data.

Primary Data:
Primary Data has been collected through well structured comprehensive questionnaires. The questions were
designed keeping in view of the objectives of the study. Two sets of questionnaires were developed, one for the
SBI bank customers and one for the bank execution. In some cases, the researcher also had personal discussion
with the respondents with the objectives of soliciting additional information and using this information to
supplement the information collected through questionnaires. The final sets of questionnaires along with
covering letter were then mailed to a total of 1000 SBI bank customers and 60 bank employees selected via
convenient sampling technique from Sonipat and Rohtak Districts of Haryana state. Following procedure was
adopted to collect data from the targeted respondents.

Secondary Data is the data which is available in published form and which was collected earlier by people for
some purposes. There may be various sources of secondary data such as-newspapers, magazines, journals,
books, reports, documents and other published information.

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 LIMITATIONS

 The research was carried out in a short period.

 The due to lack of secondary data source the information gathered may be volatile.
 Though due care was taken to include the related data, there is every possibility of deviation from the
content of project
 There are chances of occurrence of agreeable errors as the data is explored through secondary sources
may not be reliable
 As the project is time bound, it is quite impossible to include the relevance of information.
 The quantitative data used in developing the graphs are of presumptive in few cases.

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 INDUSTRY PROFILE

The word “bank” is believed to have its origin from the word “bank” in Italian, which means a
bamboo bench. The early bankers in 17th century used to sit in the market place on bamboo
benches to deal with money. The Indian Banking Starts from Bank of Hindustan Established in
1770 and it was first bank at Calcutta under European management. It was liquidated in 1830-
32.Here we are sharing some most important points related to “History of Banking in India”.
Evolution of banking in India started From Bank of Hindustan in 1770, and this evolution can be
divided into three different periods as follows:

Phase I: Early phase of primitive Indian banks to Nationalization of Banks in 1969

Phase II: From Nationalization of India banks in 1969 up to advent of liberalization and banking
reforms in 1991

Phase III: From Indian Financial and Banking Sector Reforms 1991 onwards. In 1786 General
Bank of India was set up. The largest bank, and the oldest still in existence, is the State Bank of
India, which originated in the Bank of Calcutta in June 1806, which almost immediately became
the Bank of Bengal. This was one of the three presidency banks, the other two being the Bank of
Bombay and the Bank of Madras, all three of which were established under charters from the
British East India Company. The three banks merged in 1921 to form the Imperial Bank of India,
which, upon India’s independence, became the State Bank of India in 1955. For many years the
presidency banks acted as quasi-central banks, as did their successors, until the Reserve Bank of
India was established in 1935. In 1969 the Indian government nationalized all the major banks
that it did not already own and these have remained under government ownership. They are run
under a structure know as ‘profit-making public sector undertaking’ (PSU) and are allowed to
compete and operate as commercial banks. The Indian banking sector is made up of four types of
banks, as well as the PSUs and the state banks, they have been joined since the 1990s by new
private commercial banks and a number of foreign banks.

Indian companies Act and Banking Regulation Act defined banking business only but not the
word “Bank”. While the former defines business of banking, the later i.e. Banking Regulation
Act defined the banking by stating the essential functions of a Banker. It also states the various

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other items of business that a banking company can be engaged in, and also some other items of
business i.e. Prohibited to perform. Section 5(b) of BR Act defines the term banking as
“accepting deposits of money from the public”, for the purpose of lending or reinvestment,
repayable on demand or otherwise and withdraw able by checks, draft, and order or otherwise.
Acceptance of deposits of money, but not goods or non-money financial assets from public and
such deposits are repayable as well as with draw able in a certain specified manner, and the
acceptances of such deposits are for purpose of lending or reinvestment but not for any other
trading\manufacturing activity.

BRIEF HISTORY OF BANKING IN INDIA:

From the ancient times in India, an indigenous banking system has prevailed. The businessmen
called Shroffs, Seths, Sahukars, Mahajans, Chettis etc. had been carrying on the business of
banking since ancient times. These indigenous bankers included very small money lenders to
shroffs with huge businesses, who carried on the large and specialized business even greater than
the business of banks. The origin of western type commercial Banking in India dates back to the
18th century. The story of banking starts from Bank of Hindustan established in 1770 and it was
first bank at Calcutta under European management. In 1786 General Bank of India was set up.
Since Calcutta was the most active trading port in India, mainly due to the trade of the British
Empire, it became a banking center. Three Presidency banks were set up under charters from the
British East India Company- Bank of Calcutta, Bank of Bombay and the Bank of Madras. These
worked as quasi central banks in India for many years.

The Bank of Calcutta established in 1806 immediately became Bank of Bengal. In 1921 these 3
banks merged with each other and Imperial Bank of India got birth. It is today’s State Bank of
India. The name was changed after India’s Independence in 1955. So, State bank of India is the
oldest Bank of India. In 1839, there was a fruitless effort by Indian merchants to establish a Bank
called Union Bank. It failed within a decade. Next came Allahabad Bank which was established
in 1865 and working even today. The oldest Public Sector Bank in India having branches all over
India and servingThe Oldest Joint Stock bank of India was Bank of Upper India established in
1863 and failed in 1913. The first Bank of India with Limited Liability to be managed by Indian
Board was Oudh Commercial Bank. It was established in 1881 at Faizabad. This bank failed in
1958. The firstBank purely managed by Indian was Punjab National Bank, established in Lahore
in 1895. The Punjab national Bank has not only survived till date but also is one of the largest
banks in India. However, the first Indian commercial bank which was wholly owned and
managed by Indians Was Central Bank of India which was established in 1911. Central Bank of
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India was dreams come true of Sir Sorabji Pochkhanawala, founder of the Bank. Sir Pherozesha
Mehta was the first Chairman of this Bank. Many more Indian banks were established between
1906-1911. This was the era of the Swadeshi Movement in India. Some of the banks are Bank of
India, Corporation Bank, Indian Bank, Bank Of Baroda, Canara Bank and Central Bank of India.
Bank of India was the first Indian bank to Open a branch outside India in London in 1946 and the
first to open a branch in continental Europe At Paris in 1974. The Bank was founded in
September 1906 as a private entity and was nationalized in July 1969. Since the logo of this Bank
is a star, its head office in Mumbai is located in Star House, Bandra East, and Mumbai. There
was a district in Today’s Karnataka state called South Canara under the British Empire. It Was
bifurcated in 1859 from Canara district, thus making Dakshina Kannada and Udupi district. It
was the undivided Dakshina Kannada district. It was renamed as Dakshina Kannada in 1947.

Four banks started operation during the period of Swadeshi Movement and so this was known as
“Cradle of Indian Banking. This was the first phase of Indian banking which was a very slow in
development. This era saw Many ups and downs in the banking scenario of the country. Second
Phase starts from 1935 when Reserve bank of India was established. The period Between 1911-
1948, there were more than 1000 banks in India, almost all small Banks. The Reserve Bank of
India was constituted in 1934 as an apex Bank, however withoutmajor government ownership.
Government of India came up with the Banking Companies Act 1949. This act was later changed
to Banking Regulation (Amendment) Act 1949. The Banking Regulation (Amendment) Act of
1965 gave extensive powers to the Reserve Bank of India. The Reserve Bank of India was made
the Central Banking Authority. The banking sector reforms started immediately after the
independence. These reforms were basically aimed at improving the confidence level of the
public as most banks were not trusted by the majority of the people. Instead, the deposits with the
Postal department were considered safe.

The first major step was Nationalization of the Imperial Bank of India in 1955 via State Bank of
India Act. State Bank of India was made to act as the principal agent of RBI and handle banking
transactions of the Union and State Governments. In a major process of nationalization, 7
subsidiaries of the State Bank of India were nationalized by the Indira Gandhi regime. In 1969,
14 major private commercial banks were nationalized.

The 14 banks Nationalized in 1969 are as follows:

Central Bank of India

Bank of Maharashtra
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Dena Bank

Punjab National Bank

Syndicate Bank

Canara Bank

Indian Bank

Indian Overseas Bank

Bank of Baroda

Union Bank

Allahabad Bank

UCO Bank

Bank of India.

The above was followed by a second phase of nationalization in 1980, when Government of India
acquired the ownership of 6 more banks, thus bringing the total number of Nationalized Banks to
20. The private banks at that time were allowed to function side by side with nationalized banks
and the foreign banks were allowed to work under strict regulation. After the two major phases
of nationalization in India, the 80% of the banking sector came under the public sector /
government ownership.

The following sequence of events:

Creation of Reserve bank of India: 1935

Nationalization of Reserve Bank of India: 1949 (January)

Enactment of Banking Regulation Act: 1949 (March)

Nationalization of State Bank of India: 1955

Nationalization of SBI Subsidiaries: 1959

Nationalization of 14 major Banks: 1969

Creation of Credit Guarantee Corporation: 1971

Creation of Regional Rural Banks: 1975

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Nationalization of 7 more banks with deposits over Rs. 200 Crore: 1980

The result was outstanding. The public deposits in these banks increased by 800%, as the
Government ownership gave the public faith and trust. The third phase of development of
banking in India started in the early 1990s when India started Its economic liberalization. The
largest bank, and the oldest still in existence, is the State Bank of India (S.B.I). It originated As
the Bank of Calcutta in June 1806. In 1809, it was renamed as the Bank of Bengal. This was one
of the three banks funded by a presidency government, the other two were the Bank of Bombay
in 1840 and the Bank of Madras in 1843. The three banks were merged in 1921 to form. The
Imperial Bank of India, which upon India’s independence, became the State Bank of India in
1955. For many years the presidency banks had acted as quasi-central banks, as did their
successors, Until the Reserve Bank of India was established in 1935, under the Reserve Bank of
India Act, 1934. In 1960, the State Banks of India was given control of eight state-associated
banks under The State Bank of India (Subsidiary Banks) Act, 1959. These are now called its
associate banks. In 1969 the Indian government nationalized 14 major Private banks, one of the
big banks was Bank of India. In 1980, 6 more private banks werenationalized. These nationalized
banks are the majority of lenders in the Indian economy. They dominate the banking sector
because of their large size and widespread networks. The Indian banking sector is broadly
classified into scheduled banks and non-scheduled banks. The scheduled banks are those included
under the 2nd Schedule of the Reserve Bank of India Act, 1934.

The scheduled banks are further classified into: nationalized banks; State Bank of India and its
associates; Regional Rural Banks (RRBs); foreign banks; and other Indian private sector banks.
The term commercial banks refer to both scheduled and non-scheduled commercial banks
regulated under the Banking Regulation Act, 1949.Generally banking in India is fairly mature in
terms of supply, product range and reach-even though reach in rural India and to the poor still
remains a challenge.

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 COMPANY PROFILE

Securities and Exchange Board of India (SEBI) was first established in 1988 as a non-statutory
body for regulating the securities market. It became an autonomous body on 30 January 1992 and
was accorded statutory powers with the passing of the SEBI Act 1992 by the Indian Parliament.
SEBI has its headquarters at the business district of Bandra Kurla Complex in Mumbai and has
Northern, Eastern, Southern and Western Regional Offices in New Delhi, Kolkata, Chennai,
and Ahmedabad respectively. It has opened local offices at Jaipur and Bangalore and has also
opens offices at Guwahati, Bhubaneshwar, Patna, Kochi and Chandigarh in Financial Year 2013–
2014.

Controller of Capital Issues was the regulatory authority before SEBI came into existence; it
derived authority from the Capital Issues (Control) Act, 1947.

The SEBI is managed by its members, which consists of the following:

 The chairman is nominated by the Union Government of India.

Officers from the Union Finance Ministry.

 One member from the Reserve Bank of India.

 The remaining five members are nominated by the Union Government of India, out of them at
least three shall be whole-time members.

After the amendment of 1999, collective investment schemes were brought under SEBI
except nidhis, chit funds and cooperatives.

Functions and responsibilities

The Preamble of the Securities and Exchange Board of India describes the basic functions of the
Securities and Exchange Board of India as "...to protect the interests of investors in securities and
to promote the development of, and to regulate the securities market and for matters connected
there with or incidental there to".

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SEBI has to be responsive to the needs of three groups, which constitute the market:

 issuers of securities
 investors
 market intermediaries

SEBI has three powers rolled into one body: quasi-legislative, quasi-judicial and quasi-executive.

It drafts regulations in its legislative capacity, it conducts investigation and enforcement action in
its executive function and it passes rulings and orders in its judicial capacity. Though this makes
it very powerful, there is an appeal process to create accountability. There is a Securities
Appellate Tribunal which is a three-member tribunal and is currently headed by Justice Tarun
Agarwala, former Chief Justice of the Meghalaya High Court.A second appeal lies directly to
the Supreme Court. SEBI has taken a very proactive role in streamlining disclosure requirements
to international standards.

Powers

For the discharge of its functions efficiently, SEBI has been vested with the following powers:

 To approve by−laws of Securities exchanges.

 To require the Securities exchange to amend their by−laws.
 Inspect the books of accounts and call for periodical returns from recognised Securities
exchanges.
 Inspect the books of accounts of financial intermediaries.
 Compel certain companies to list their shares in one or more Securities exchanges.
 Registration of Brokers and sub-brokers

SEBI committees

 Technical Advisory Committee

 Committee for review of structure of infrastructure institutions
 Advisory Committee for the SEBI Investor Protection and Education Fund
 Takeover Regulations Advisory Committee
 Primary Market Advisory Committee (PMAC)
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 Secondary Market Advisory Committee (SMAC)
 Mutual Fund Advisory Committee
 Corporate Bonds & Securitisation Advisory Committee

♦ There are two types of brokers:

Discount brokers
Merchant brokers
Eliminate malpractices in security market

Major Achievements

SEBI has enjoyed success as a regulator by pushing systematic reforms aggressively and
successively. SEBI is credited for quick movement towards making the markets electronic and
paperless by introducing T+5 rolling cycle from July 2001 and T+3 in April 2002 and further to
T+2 in April 2003. The rolling cycle of T+2means, Settlement is done in 2 days after Trade date.
SEBI has been active in setting up the regulations as required under law. SEBI did away with
physical certificates that were prone to postal delays, theft and forgery, apart from making the
settlement process slow and cumbersome by passing Depositories Act, 1996.

SEBI has also been instrumental in taking quick and effective steps in light of the global
meltdown and the Satyam fiasco.In October 2011, it increased the extent and quantity of
disclosures to be made by Indian corporate promoters. In light of the global meltdown, it
liberalised the takeover code to facilitate investments by removing regulatory structures. In one
such move, SEBI has increased the application limit for retail investors to ₹ 200,000, from ₹
100,000 at present.

Controversies

Supreme Court of India heard a Public Interest Litigation (PIL) filed by India Rejuvenation

Initiative that had challenged the procedure for key appointments adopted by Govt of India. The
petition alleged that, "The constitution of the search-cum-selection committee for recommending
the name of chairman and every whole-time members of SEBI for appointment has been altered,
which directly impacted its balance and could compromise the role of the SEBI as a
watchdog." On 21 November 2011, the court allowed petitioners to withdraw the petition and file
a fresh petition pointing out constitutional issues regarding appointments of regulators and their
independence. The Chief Justice of India refused the finance ministry's request to dismiss
21
the PIL and said that the court was well aware of what was going on in SEBI. Hearing a similar
petition filed by Bengaluru-based advocate Anil Kumar Agarwal, a two judge Supreme Court
bench of Justice Surinder Singh Nijjar and Justice HL Gokhale issued a notice to the Govt of
India, SEBI chief UK Sinha and Omita Paul, Secretary to the President of India.

Further, it came into light that Dr. K. M.Abraham(the then whole time member of SEBI Board)
had written to the Prime Minister about malaise in SEBI. He said, "The regulatory institution is
under duress and under severe attack from powerful corporate interests operating concertedly to
undermine SEBI". He specifically said that Finance Minister's office, and especially his advisor
Omita Paul, were trying to influence many cases before SEBI, including those relating to Sahara
Group, Reliance, Bank of Rajasthan and MCX

SEBI and Regional Securities Exchanges

SEBI in its circular dated May 30, 2012 gave exit – guidelines for Securities exchanges. This was
mainly due to illiquid nature of trade on many of 20+ regional Securities exchanges. It had asked
many of these exchanges to either meet the required criteria or take a graceful exit. SEBI's new
norms for Securities exchanges mandates that it should have minimum net-worth of Rs. 1 billion
and an annual trading of Rs. 10 billion. The Indian Securities market regulator SEBI had given
the recognized Securities exchanges two years to comply or exit the business.

Process of de-recognition and exit

Following is an excerpts from the circular:

Exchanges may seek exit through voluntary surrender of recognition.
Securities where the annual trading turnover on its own platform is less than Rs 10 billion
can apply to SEBI for voluntary surrender of recognition and exit, at any time before the expiry
of two years from the date of issuance of this Circular.
If the Securities exchange is not able to achieve the prescribed turnover of Rs 10 billion on
continuous basis or does not apply for voluntary surrender of recognition and exit before the
expiry of two years from the date of this Circular, SEBI shall proceed with compulsory de-
recognition and exit of such Securities exchanges, in terms of the conditions as may be specified
by SEBI.
Securities Exchanges which are already de-recognised as on date, shall make an application for
exit within two months from the date of this circular. Upon failure to do so, the de-recognised
exchange shall be subject to compulsory exit process.

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SEBI departments

SEBI regulates Indian financial market through its 20 departments.

 Commodity Derivatives Market Regulation Department (CDMRD)

 Corporation Finance Department (CFD)
 Department of Economic and Policy Analysis (DEPA)
 Department of Debt and Hybrid Securities (DDHS)
 Enforcement Department – 1 (EFD1)
 Enforcement Department – 2 (EFD2)
 Enquiries and Adjudication Department (EAD)
 General Services Department (GSD)
 Human Resources Department (HRDM)
 Information Technology Department (ITD)
 Integrated Surveillance Department (ISD)
 Investigations Department (IVD)
 Investment Management Department (IMD)
 Legal Affairs Department (LAD)
 Market Intermediaries Regulation and Supervision Department (MIRSD)
 Market Regulation Department (MRD)
 Office of International Affairs (OIA)
 Office of Investor Assistance and Education (OIAE)
 Office of the chairman (OCH)
 Regional offices (ROs).

23
 Objectives of SEBI
The fundamental objective of SEBI is to safeguard the interest of all the parties involved in
trading. It also regulates the functioning of the stock market. SEBI’s objectives are:
· To monitor the activities of the stock exchange.
· To safeguard the rights of the investors
· To curb fraudulent practices by maintaining a balance between statutory regulations and self-
regulation.
· To define the code of conduct for the brokers, underwriters, and other intermediaries. 

Role and Functions of SEBI:

 Primary Markets: SEBI has regulated the primary market through the regulation of issuers’
access to market
 Regulation of information production at the time of issue
 Regulation of processes and procedures relating to the issuance of securities
 Disclosure: Disclosure standards are not limited to accounting information but was extended to
other issue related communications such as advertisements.
 Corporate Governance: SEBI has made a constant effort to improve the standards of Corporate
Governance in India.
 Settlement Systems
 Dematerialization of securities
 Institutionalization of Trading and ownership of securities
 Market Integrity and Insider Trading
 To help in developing the capital market so that the business activities don’t get hampered
 To bring companies and organizations under its regulation so that the interests of investors are
not harmed
 To curtail unethical trading which includes insider trading also
 To get done the registration of Mutual Funds and Systematic Investment Plans(SIPs) and all such
funds comply with laid down rules and regulations of Mutual funds and SIPs
 To impart training to market participants on a regular basis

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 THEORETICAL FRAMEWORK

ECONOMIC DEVELOPMENT

Economic development is the process by which emerging economies become advanced

economies. In other words, the process by which countries with low living standards become
nations with high living standards. Economic development also refers to the process by which the
overall health, well-being, and academic level the general population improves.

During the development, there is a population shift from agriculture to industry, and then to
services.A longer average life expectancy, for example, is one of the results of economic
development. Improved productivity, higher literacy rates, and better public education, are also
consequences. economic development is all about improving living standards. Improved living
standards’ refers to higher levels of education and literacy, workers’ income, health, and life
spans.

By the Cambridge Dictionary

“The process in which an economy grows or changes and becomes more advanced, especially
when both economic and social conditions are improved.”

Economic Growth

Economic growth is an increase in the production of economic goods and services, compared
from one period of time to another. It can be measured in nominal or real terms. Traditionally,
aggregate economic growth is measured in terms of gross national product (GNP) or gross
domestic product (GDP), although alternative metrics are sometimes used.

25
Key takeaways

Economic growth is an increase in the production of goods and services in an economy.

Increases in capital goods, labour force, technology, and human capital can all contribute to
economic growth.

Economic growth is commonly measured in terms of the increase in aggregated market value of
additional goods and services produced, using estimates such as GDP.

Economic development vs growth

Although the terms economic development and economic growth cover similar concepts, they are
not the same.

Economic growth

Economic growth is all about expanding GDP, i.e., making the size of the economy
bigger. GDP stands for gross domestic product.

GDP is the sum of all economic activity in a nation over a specific period. It is the net value of all the
products and services that an economy produces.

Economic development

Development, on the other hand, looks at a much wider range of statistic than simply GDP or  GDP per
capita. GDP per capita is GDP divided by the total population.

Role and Functions of SEBI:

 Primary Markets: SEBI has regulated the primary market through

 The regulation of issuers’ access to market

 Regulation of information production at the time of issue

 Regulation of processes and procedures relating to the issuance of securities

 Disclosure: Disclosure standards are not limited to according information but was extended
to other issue related communications such as advertisements.

26
 Corporate Governance: SEBI has made a constant effort to improve the standards of
Corporate Governance in India.
 Settlement Systems
 Dematerialization of securities
 Institutionalization of Trading and ownership of securities
 Market Integrity and Insider Trading
 To help in developing the capital market so that the business activities don’t get hampered
 To bring companies and organizations under its regulation so that the interests of investors
are not harmed
 To curtail unethical trading which includes insider trading also
 To get done the registration of Mutual Funds and Systematic Investment Plans(SIPs) and all
such funds comply with laid down rules and regulations of Mutual funds and SIPs
 To impart training to market participants on a regular basis

Factors that Influence the Economic Development of a Country

A) Economic Factory in Economic Development:

In a country`s economic development the role of economic factors is decisive. The stock of
capital and the rate of capital accumulation in most cases settle the question whether at a juven
point of time a country will grow or not. There are a few other economic factors which also have
some bearing on development but their importance is hardly comparable to that of capital
formation. The surplus of food grains output available to support urban population, foreign trade
conditions and the nature of economic system are some such factors whose role in economic
development has to be analyzed.

B) Capital Formation:

The strategic role of capital in raising the level of production has traditionally been
acknowledged in economics. It is now universally admitted that a country which wants to
accelerate the pace of growth, has choice but to save a high ratio of its income, with the objective
of raising the level of investment, Great reliance on foreign aid is highly risky, and thus has to be
avoided. Economists rightly assert that lack of capital is forthcoming.

27
Whatever be the economic system, a country cannot hope to achieve economic progress unless a
certain minimum rate of capital accumulation is realized. However, if some country wishes to
make spectacular strides, it will have to raise its

C) Natural Resources:

The principal factor affecting the development of an economy is the natural resources. Among
the natural resources, the land area and the quality of the soil, forest wealth, good river system,
minerals and oil-resources, good and bracing climate, etc., are include. For economic growth, the
existence of natural resources in abundance is essential. A country deficient in natural resources
may not be in a position to develop rapidly. In fact, natural resources are necessary conditions for
economic growth but not a sufficient one. Japan and India are the two contradictory examples

According to Lewis, “other things being equal man can make better use of rich resources than
they can of poor”. In less developed countries, natural resources are unutilized, under-utilized or
Mis-utilized. This is one of the reasons of their backwardness. This is due to economic
backwardness and lack of technological factors.

According to Professor Lewis, “A country which is considered to be poor in resources may be

considered very rich in resources some later time, not merely because unknown resources are
discovered, but equally because new methods are discovered for the known resources”. Japan is
one such country which is deficient in natural resources but it is one of the advanced countries of
the world because it has been able to discovery new use for limited resources.

D) Marketable Surplus of Agriculture:

Increase in agricultural production accompanied by a rise in productivity is important from the

point of view of the development of a country. But what is more important is that the marketable
surplus of agriculture increases. The term `marketable surplus` refers to the excess of output in
the agricultural sector over and above what is required to allow the rural population to subsist.

The importance of the marketable surplus in a developing economy emanates from the fact that
the urban industrial population subsists on it. With the development of an economy, the ratio of
the urban population increases and increasing demands are made on agriculture for food grains.
These demands must be met adequately; otherwise the consequent scarcity of food in urban areas
will arrest growth.

In case a country fails to produce a sufficient marketable surplus, it will be left with no choice
except to import food grains which may cause balance of payments problems. Until 1976-77,
28
India was faced with this problem precisely. In most of the years during the earlier planning
period, market arrivals of food grains were not adequate to support the urban population.

If some country wants to step-up the tempo of industrialization, it must not allow its agriculture
to lag behind. The supply of the farm products particularly food grains, must increase, as the
setting-up of industries in cities attracts

4) Conditions in foreign trade:

The classical theory of trade has been used by economists for a long time to argue that trade
between nations is always beneficial to them. In the existing context, the theory suggests that the
presently less developed countries should specialize in production of primary products as they
have comparative cost advantage in their production. The developed countries, on the contrary,
have a comparative cost advantage in manufactures including machines and equipment and
should accordingly specialize in them.

Foreign trade has proved to be beneficial to countries which have been able to set-up industries in
a relatively short period. These countries sooner or later captured international markets for their
industrial products. Therefore, a developing country should not only try to become self-reliant in
capital equipment as well as other industrial products as early as possible, but it should also
attempt to push the development of its industries to such a high level that in course of time
manufactured goods replace the primary products as the country’s principal exports.

Structure of SEBI

SEBI has a corporate framework comprising of various departments each managed by a

department head. There are about 20 departments under SEBI. Some of these departments are
corporation finance, economic and policy analysis, debt and hybrid securities, enforcement,
human resources, investment management, commodity derivatives market regulation, legal
affairs, and more. The hierarchical structure of SEBI consists of the following members:

The chairman of SEBI is nominated by the Union Government of India.

Two officers from the Union Finance Ministry will be a part of this structure.

One member will be appointed from the Reserve Bank of India.

Five other members will be nominated by the Union Government of India.

29
Functions of SEBI

SEBI is primarily set up to protect the interests of investors in the securities market.

It promotes the development of the securities market and regulates the business.

SEBI provides a platform for stockbrokers, sub-brokers, portfolio managers, investment advisers,
share transfer agents, bankers, merchant bankers, trustees of trust deeds, registrars, underwriters,
and other associated people to register and regulate work.

It regulates the operations of depositories, participants, custodians of securities, foreign portfolio

investors, and credit rating agencies.

It prohibits insider trading, i.e. fraudulent and unfair trade practices related to the securities
market.

It ensures that investors are educated on the intermediaries of securities markets.

It monitors substantial acquisitions of shares and take-over of companies.

SEBI takes care of research and development to ensure the securities market is efficient at all
times.

Authority and Power of SEBI

The SEBI has three main powers: 

1. Quasi-Judicial: SEBI has the authority to deliver judgments related to fraud and other
unethical practices in terms of the securities market. This helps to ensure fairness,
transparency, and accountability in the securities market. 

2. Quasi-Executive: SEBI is empowered to implement the regulations and judgements made

and to take legal action against the violators. It is also authorised to inspect Books of
accounts and other documents if it comes across any violation of the regulations. 

3. Quasi-Legislative: SEBI reserves the right to frame rules and regulations to protect the
interests of the investors. Some of its regulations consist of insider trading regulations, listing
obligations, and disclosure requirements. These have been formulated to keep malpractices at
bay. Despite the powers, the results of SEBI’s functions still have to go through the
Securities Appellate Tribunal and the Supreme Court of India.

30
Some of the regulations for mutual funds laid down by SEBI are:

A sponsor of a mutual fund, an associate or a group company, which includes the asset
management company of a fund, through the schemes of the mutual fund in any form cannot
hold: (a)10% or more Mutual Fund Regulations by SEBI

of the shareholding and voting rights in the asset management company or any other mutual fund.
(b) An asset management company cannot have representation on a board of any other mutual
fund.

A shareholder cannot hold 10% or more of the shareholding directly or indirectly in the asset
management company of a mutual fund.

No single stock can have more than 35% weight in the index for a sectoral or thematic index; the
cap is 25% for other indices.

The cumulative weight of the top three constituents of the index cannot exceed 65%.

An individual constituent of the index should have a trading frequency of a minimum of 80%.

AMCs must evaluate and ensure compliance to the norms at the end of every calendar quarter.
The constituents of the indices must be made public by publishing them on their website.

New funds must submit their compliance status to SEBI before being launched.

All liquid schemes must hold a minimum of 20% in liquid assets such as government securities
(G-Secs), repo on G-Secs, cash, and treasury bills.

A debt mutual fund can invest up to only 20% of its assets in one sector; previously the cap was
25%. The additional exposure to housing finance companies (HFCs) is updated to 15% from 10%
and a 5% exposure on securitised debt based on retail housing loan and affordable housing loan
portfolios.

As per SEBI’s recommendation, amortisation is not the only method for evaluating debt and
money market instruments. The mark-to-market methodology is also used.

An exit penalty will be levied on investors of liquid schemes who exit the scheme within a period
of seven days.
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Mutual funds schemes must invest only in the listed non-convertible debentures (NCD). Any
fresh investment in commercial papers (CPs) and equity shares are allowed in listed securities as
per the guidelines issued by the regulator.

Liquid and overnight schemes are no longer allowed to invest in short-term deposits, debt, and
money market instruments that have structured obligations or credit enhancements.

When investing in debt securities having credit enhancements, a minimum of four times security
cover is mandatory for investing in mutual funds schemes. A prudential limit of 10% is
prescribed on total investment by such schemes in debt and money market instruments.

Mutual Funds and SEBI

Mutual funds are managed by Asset Management Companies (AMC), which need to be approved
by SEBI. A Custodian who is registered with SEBI holds the securities of various schemes of the
fund. The trustees of the AMC monitor the performance of the mutual fund and ensure that it
works in compliance with SEBI Regulations.

The firm must be established as a separate AMC to offer mutual funds. The net worth of such a
parent firm or AMC must be at least Rs 50,000,000. Mutual funds dealing exclusively with
money markets must register with the Reserve Bank of India (RBI); all other mutual funds must
register with SEBI.

Recently, a self-regulation agency for mutual funds has been set up called the Association of
Mutual Funds of India (AMFI). AMFI focuses on developing the Indian mutual fund industry in
a professional and ethical manner.

AMFI aims to enhance the operational standards in all areas with a view to protect and promote
mutual funds and their stakeholders. To date, there are 44 Asset Management Companies that are
registered with SEBI and are members of AMFI.Some of them are Aditya Birla Sun Life AMC
Limited, BNP Paribas Asset Management India Private Limited, Edelweiss Asset Management
Limited, and Quant Money Managers Limited. A sponsor of a mutual fund scheme, a group of
the company or an associate, which involves AMC of the fund, cannot hold the following in any
form:10% or above of the voting rights and shareholding in the AMC or any other mutual fund
scheme.An AMC cannot have representation on the board of any other mutual fund.

32
Shareholders can’t hold more than 10% of the shares both directly and indirectly in AMC of the
mutual fund.SEBI Guidelines on Mutual Funds Reclassification Funds must be named based on
the core intent of the fund and asset mix. It should specify the risk associated clearly. SEBI has
suggested 16 classifications for debt funds, ten classifications for equity funds, six classifications
for hybrid, two for solution funds, and two for index funds. SEBI has reclassified large-cap, mid-
cap, and small-cap based on market cap relative rankings rather than absolute market cap cut-
offs.The debt fund classification is prescribed based on the duration of the fund and the asset
quality mix.All categories except index funds can only have one fund per classification, i.e. an
AMC can have a maximum of 34 funds other than index funds.

 Capital Markets

Meaning of Capital Market

Capital market is a market for long-term securities that includes both debt and equity. Companies
and governments can raise long term funds (more than a year) through this market. The capital
market connects the surplus units with the deficit units. It means that the funds are channelized
from those who have excess capital to those who need it.

 Funds are raised by issuing capital market instruments like stocks and bonds. These instruments
have a higher risk than money market instruments. However, at the same time, these instruments
generate higher returns. These markets are strictly regulated in order to avoid any fraudulent
practice.

Functions of Capital Market

Capital market plays an important role in the development of an economy. Let us discuss the
functions of these markets for a deeper insight.

 Savings Mobilization

Capital market acts as a link between savers and entrepreneurial borrowers. It transfers money
from savers (households) to entrepreneurial borrowers (companies who need capital). This way
these markets mobilize savings in an economy and divert them into productive investment.
Productive usage of funds paves the way for economic growth and prosperity.

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 Formation of Capital

Capital formation is the process of increasing the stock of real capital. It includes the creation of
capital goods like factories, machinery, tools, equipment and so on. These capital goods are
utilized for the production of other goods. Savings are mobilized through the capital market to
various sectors such as the agricultural sector, industrial sector, etc in an optimal manner.
Optimal allocation increases the rate of capital formation in an economy.

 Rapid Economic Growth

The allocation of capital is done optimally, for better utilization of scarce resources. Improvement
in capital goods increases the efficiency of labor. Superior and technologically advanced capital
goods increase overall productivity. This increased productivity enhances economic growth.

 Benefits to Investors

In the capital market, investors are provided with an avenue for long-term investments. Most
importantly, investors are offered a wide variety of instruments like bonds, mutual funds,
insurance policies, equities, etc. This enables investors to diversify and channelize their savings
into the most profitable avenues. To protect investors from any unscrupulous activities, these
markets are strictly regulated.

 Variety of Services

The capital market provides a wide array of services. Services such as underwriting, export
finance, consultancy, merchant banking, credit rating, etc. are offered to investors.

 Liquidity of Funds

In this market, funds are available for long term investments. Because of organized stock and
other exchanges, both security sellers and buyers are readily available. This makes the capital
market a liquid market as funds are available continuously.

34
 Types of Capital Market

Capital Markets are classified into two major markets: Primary Market and Secondary Market.

Primary Market

The market in which securities are issued for the very first time to the investors is known as the
Primary Market or the New Issue Market. The main role of the primary market is capital
formation. A company raises capital by issuing securities such as shares or bonds in the primary
market. The investors who invest in the new issue of the company, become the shareholders of
the company. In the primary market, the transactions directly take place between the company
and the investors. The money invested by the investors in the primary market directly goes to the
company. A company can raise funds from the primary market through various methods like
Public Issue, Private Placement, Right Issue, etc.

 Public Issue

Public issue or Initial Public Offering is the process of issuing shares to the public for the first
time.

 Private Placement

A private placement is offering of shares to a few selected investors. These selected investors
could be mutual funds, venture capital, banks, insurance companies, etc.

 Rights Issue

Rights Issue or Rights Offer is a way through which a listed company raises capital by offering
shares to the existing shareholders. For example, XYZ company comes out with 1:2 right issue.
This means that XYZ shareholders can buy an extra share for every 2 shares they have. Usually,
the stocks issued in the form of the right issues are lower priced than the prevailing market price
of the share.

35
Secondary Market

Trading of previously issued securities takes place in the secondary market. An Investor can
directly buy a share from the seller. The secondary market has a huge volume and magnitude of
transactions that affect the primary market. Secondary market includes both stock exchanges and
over the counter market. Some of the popular stock exchanges are the London Stock Exchange
(LSE), New York Stock Exchange (NYSE), Bombay Stock Exchange (BSE) etc. There are two
types of secondary market. They are the Over-the-Counter market and Dealer Market.

Over the Counter market

Over-the-counter or Off-exchange trading is a form of decentralized trading of securities. Trading

of securities takes place directly between the parties. The buyers and sellers openly announce the
prices at which they are willing to sell or buy securities. It is less transparent than exchanges.

Dealer Market

In the dealer market, the buyers and sellers do not gather at a common place physically. The
brokers and the dealers act as an intermediary between the buyers and the sellers. A lot of dealers
exist in this market. Therefore, due to competition dealers offer the best price to the investors.

Stopping insider trading

INSIDER Regulation 2(g)

Insider is the person who is “connected” with the company, who could have the Unpublished
price sensitive information or receive the information from Somebody in the company.

Under the new definition, an insider would mean a person in possession of or has Access to
price-sensitive information or Connected Person.

SEBI defines ‘Insider’ to include persons connected on the basis of being in any Contractual,
fiduciary or employment relationship that allows such people access To unpublished price
sensitive information (UPSI).

Information, relating to a company or its securities, directly or indirectly, that is 

Not generally available which upon becoming generally available, is likely to 

Materially affect the price of the securities and shall, ordinarily but not restricted 

36
To information relating to the following:

1. Financial results 
2. Dividends 
3. Change in capital structure 
4. Mergers, de-mergers, acquisitions, delisting, disposals and expansion of Business and such
other transactions 
5. Changes in key managerial personnel and 
6. Material events in accordance with the listing agreement.

Communication or procurement of unpublished price sensitive information:

 No insider shall communicate, provide or allow access to any UPSI except Where such
communication is in furtherance of legitimate purposes, Performance of duties or discharge
of legal obligations, likewise
 No person shall procure from or cause the communication by any insider of UPSI except in
furtherance of legitimate purposes, performance of duties or Discharge of legal obligations.
 Unpublished PSI may be communicated, provided, allowed access to or Procured, in
connection with a transaction that would entail an obligation to Make an open offer under the
takeover regulations where the board of Directors of the company is of informed opinion that
the proposed transaction Is in the best interests of the company. In such cases, the board of
directors shall Require the parties to execute agreements to contract confidentiality and non-
Disclosure obligations. 
 Unpublished PSI may be communicated, provided, allowed access to or Procured where the
board of directors of the company is of informed opinion That the proposed transaction is in
the best interests of the company and UPSI Is disseminated to be made generally available at
least 2 working days prior to The proposed transaction being effected in such form as the
Board of Directors May determine.

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GOVERNING REGULATIONS:

Securities& Exchange Board Of India Act, 1992

SEBI (Insider Trading) Regulations, 1992

SEBI (Prohibition of Insider Trading) (Amendment) Regulations, 2002

SEBI (Prohibition of Insider Trading) (Amendment) Regulations, 2003

SEBI (Prohibition of Insider Trading) (Amendment) Regulations, 2008

SEBI (Prohibition of Insider Trading) (Amendment) Regulations, 2011

SEBI (Prohibition of Insider Trading) Regulations, 2015

Investor Protection Measures by SEBI 

Investors are the pillar of the financial and securities Market. They determine the level of activity
in the market. They put the money in funds, stocks, etc. to help grow the market and thus, the
Economy. It thus very important to protect the interests of the investors. Investor protection
involves various measures established to protect the interests of investors from malpractices.
Securities and Exchange Board of India (SEBI) is responsible for regulations of the Mutual
Funds and safeguard the interests of the investors. Investor protection measures by SEBI are in
place to safeguard the investors from the malpractices in shares, the stock market, Mutual Fund,
etc.

Investor Protection

 The investor insurance money is a symbol of assurance. In simpler words investor protection
implies that up to a specific breaking point, you get your cash back if the dealer goes into
Bankruptcy or submits extortion. It is a significant Factor to consider when you open a Trading
Account or a record with an online dealer. At the point when you open an exchanging account at
a brokerage, you normally get financial backer security.

The Role of SEBI in Investor Protection

SEBI has given out various methods and measures to ensure the investor protection from time to
time. It has published various directives, driven many investor awareness programmes, set up
investor protection Fund (IPF) to compensate the investors. We will look into the investor
protection measures by SEBI in detail:

38
To begin with, SEBI constructs the limit of financial backers through instruction and attention to
empower a financial backer to take educated choices. SEBI tries to guarantee that the financial
backer gets the hang of contributing. In simpler words, SEBI ensures that the investor gets and
utilizes data needed for contributing and assesses different speculation alternatives to suit his
particular objectives.

It helps the investor find out his privileges and commitments in a specific venture, bargains
through enlisted mediators, plays it safe, looks for help if there should be an occurrence of any
complaint, and so on.

SEBI has been putting together financial backer schooling and mindfulness workshops through
financial backer affiliations and market members, and has been urging market members to sort
out comparable projects.

It keeps a refreshed, far reaching site for training of financial backers. It distributes different sorts
of alerts through media. It reacts to the questions of financial backers through phone, messages,
letters, and face to face for the individuals who visit SEBI office.

Secondly, SEBI makes everything of interest accessible in public domain. SEBI has received
revelation based administrative system. Under this structure, backers and go-betweens unveil
applicable insights concerning themselves, the items, the market and the guidelines so the
financial backer can take educated venture choices dependent on such divulgences. SEBI has
endorsed and screens different introductory and persistent exposures.

Thirdly, SEBI guarantees that the market has frameworks and practices which make exchanges
safe. SEBI has taken different estimates, for example, screen based exchanging framework,
dematerialization of protections and outlined different guidelines to direct delegates. It has also
issued an exchange of protections, corporate rebuilding, etc. to ensure the interests of financial
backers in protections. It additionally guarantees that only legitimate people are permitted to
work on the lookout, each member has motivation to agree with the recommended principles, and
the defaulters are granted praiseworthy discipline.

Lastly, SEBI encourages a redressal of financial backer complaints. SEBI has a far-reaching
system to encourage redressal of financial backer complaints against middle people and recorded
organizations. It circles back to the organizations and middle people who don’t change financial
backers’ complaints, by sending suggestions to them and having gatherings with them. It makes
proper implementation moves as given under the law (counting dispatch of settling, indictment

39
 procedures, bearings ) where progress in redressal of financial backer complaints isn’t good. It
has set up a complete mediation instrument in stock trades and vaults for goal debates of the
financial backers. The stock trades have financial backer security assets to remunerate financial
backers when a dealer is pronounced a defaulter. Store repays financial backers for misfortune
because of carelessness of storehouse or safe member.

Investor Protection Measures by SEBI

Investor protection legislation is implemented under the Section 11(2) of the SEBI Act. The
measures are as follows:

 E-Stock Exchange and other securities market Business regulation.

 Registering and regulating the intermediaries of the business like brokers, transfer agents,
bankers, trustees, registrars, portfolio managers, investment consultants, merchant bankers, etc.
 Recording and monitoring the work of custodians, depositors, participants, foreign investors,
credit rating agencies, etc.
 Registering investment schemes like Mutual fund & venture Capital funds, and regulating their
Functioning.
 Promotion and controlling of self-regulatory companies.
 Keeping as check on frauds and unfair trading methods related to the securities market.
 Observing and regulating major transactions and Take-over of the companies.
 Carry out investor awareness and education programme.
 Train the intermediaries of the business.
 Inspecting and auditing the security exchanges (SES) and intermediaries. Assessment of fees and
other charges.

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 DATA ANALYSIS AND INTERPRETATION

GRAPHICAL REPRESENTATION OF DATA

Q1. current broker Indians trading?

Name of the Percentage of

stock brokrer Response
Zerodha 70%
Upstox 12%
Angel broking 8%
ICICI direct 6%
OTHER 4%
TOTAL NO OF 100%
PEOPLE

Percentage of Response

Zerodha
Upstox
Angel broking
I direct
OTHER

Interpretation:
Most of the people choose zerodha because it offers free equity delivery trading. Zerodha has low
fees, the web and mobile trading platforms are easy to use and well designed. so most off the
people choose zerodha. It is in the first place above all the other trading platforms. It occupies
70%, upstox 12%,angel broking8%, ICICI 6%, other 4%

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Q2. Who would provide better service?

Particulars No. of Percentage of Response

Respondents
Broker 82 82%

Sub broker 18 18%

TOTAL NO OF 100 100%

PEOPLE

No. of Respondents
Sub broker
18%

Broker
82%

INTERPRETATION:
The sub broker carries out the same function a broker carries out being a middle man between
two parties. Sub broker earns nearly 60% of income a broker makes, sub broker can offered
much cheaper the Broker. But the people likes experienced broker in stock market so they
choose broker. So 82% of people choose broker and 18% of people choose sub broker.

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 Particulars No. of Respondents Percentage of
Response
YES 94 94%
NO 6 6%
TOTAL NO OF PEOPLE 100 100%

Q3. Do you know about stock exchange?

No. of Respondents

YES
NO
TOTAL NO OF PEOPLE

INTERPRETATION:
Most of the people in India know about the stock market but some of the
people does not aware of stock market because risk barrier and fear in their minds
make them shut.

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Q4. Do you ever invested in share market?

Particulars No. of Respondents Percentage of

Response
YES 75 74%
NO 25 26%
TOTAL NO OF 100 100%
PEOPLE

No. of Respondents

NO
40%

YES
60%

Interpretation:
People do not want to invest in share market due to social and psychological factors. Normal
people keep themselves away from equity market.

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 Q5. Are you a long term investor are short time investor?

Particulars No. of Respondents Percentage of

Response
YES 60 60%
NO 40 40%
TOTAL NO OF 100 100%
PEOPLE

No. of Respondents

NO
40%

YES
60%

Interpretation:
Investors have historical experience much higher rate of success over the long term investors. 60% of people
invest in long term period and 40% people invest in short term period.

FINDINGS

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 SEBI can work on more important issues
 Negatively charged SEBI’s appointment process has always been criticise
 SEBI should take more precautions to prevent corruption by SEBI staff
 The accountability mechanism that envelope SEBI are quite poor
 SEBI should monitor efficiently the working of stock exchange

 SEBI is poor in tracking the price manipulation

SUGGESTIONS
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 SEBI can work on more important issues
 Negatively charged SEBI’s appointment process has always been criticise
 SEBI should take more precautions to prevent corruption by SEBI staff
 The accountability mechanism that envelope SEBI are quite poor
 SEBI should monitor efficiently the working of stock exchange
 SEBI is poor in tracking the price manipulation

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 CONCLUSION
From the analysis it is able to understand the capital market and rules and regulations of
SEBI and the role played by SEBI enhancing Indian Economy. It provides the security to the
interest of investors SEBI brings the all aspects of stock exchange in to one roof.

The present research dealt with the role of SEBI Indian Economy of 2016-21 SEBI showed
a more performance in stopping the insider trading and building the capital market in registration
of mutual funds.

We also come to know about the total functions of SEBI. However the SEBI contribution
in developing the capital market is phenomenal. SEBI regulates the all the performances in
security exchanges.

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 BIBLIOGRAPHY

 The material supplied by the faculty guide

 Annual reports of sebi
 Sebi magazines

Web resources
 www.sebi.co.in
 www.sebi.com
 www.economictimes.timesindia.com
 www.sebi.gov.in

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