In 1988 the Securities and Exchange Board of India (SEBI) was established by the

Government of India through an executive resolution, and was subsequently

upgraded as a fully autonomous body (a statutory Board) in the year 1992 with the
passing of the Securities and Exchange Board of India Act (SEBI Act) on 30th
January 1992. In place of Government Control, a statutory and autonomous
regulatory board with defined responsibilities, to cover both development &
regulation of the market, and independent powers have been set up. Paradoxically
this is a positive outcome of the Securities Scam of 1990-91.

IT was formed officially by the Government of India in 1992 with SEBI Act
1992[2] being passed by the Indian Parliament. SEBI is headquartered in the business
district of Bandra-Kurla complex in Mumbai, and has Northern, Eastern, Southern
and Western regional offices in Kolkata, Chennai and Ahmedabad.
Controller of Capital Issues was the regulatory authority before SEBI came into
existence it derived authority from the Capital Issues (Control) Act, 1947.

Initially SEBI was a non statutory body without any statutory power. However in
1995, the SEBI was given additional statutory power by the Government of India
through an amendment to the securities and Exchange Board of India Act 1992. In
April, 1998 the SEBI was constituted as the regulator of capital market in India
under a resolution of the Government of India.

Since its inception SEBI has been working targetting the securities and is attending
to the fulfillments of its objectives with commendable zeal and dexterity. The
improvements in the securities markets like capitalization requirements, margining,
establishment of clearing corporations etc. reduced the risk of credit and also
reduced the market.

SEBI has introduced the comprehensive regulatory measures, prescribed

registration norms, the eligibility criteria, the code of obligations and the
code of conduct for different intermediaries like, bankers to issue,
merchant bankers, brokers and sub-brokers, registrars, portfolio managers,
credit rating agencies, underwriters and others. It has framed bye-laws, risk
identification and risk management systems for Clearing houses of stock
exchanges, surveillance system etc. which has made dealing in securities
both safe and transparent to the end investors.

Two broad approaches of SEBI is to integrate the securities market at the

national level, and also to diversify the trading products, so that there is an
increase in number of traders including banks, financial institutions,
insurance companies, mutual funds, primary dealers etc. to transact
through the Exchanges. In this context the introduction of derivatives
trading through Indian Stock Exchanges permitted by SEBI in 2000 AD is a
 real landmark.

SEBI appointed the L. C. Gupta Committee in 1998 to recommend the

regulatory framework for derivatives trading and suggest bye-laws for
Regulation and Control of Trading and Settlement of Derivatives Contracts.
The Board of SEBI in its meeting held on May 11, 1998 accepted the
recommendations of the committee and approved the phased introduction
of derivatives trading in India beginning with Stock Index Futures. The
Board also approved the "Suggestive Bye-laws" as recommended by
the Dr LC Gupta Committee for Regulation and Control of Trading and
Settlement of Derivatives Contracts.

SEBI then appointed the J. R. Verma Committee to recommend Risk

Containment Measures (RCM) in the Indian Stock Index Futures Market.
The report was submitted in november 1998.

However the Securities Contracts (Regulation) Act, 1956 (SCRA) required

amendment to include "derivatives" in the definition of securities to enable
SEBI to introduce trading in derivatives. The necessary amendment was
then carried out by the Government in 1999. The Securities Laws
(Amendment) Bill, 1999 was introduced. In December 1999 the new
framework was approved.

Derivatives have been accorded the status of `Securities'. The ban imposed
on trading in derivatives in 1969 under a notification issued by the Central
Government was revoked. Thereafter SEBI formulated the necessary
regulations/bye-laws and intimated the Stock Exchanges in the year 2000.
The derivative trading started in India at NSE in 2000 and BSE started
trading in the year 2001.

Functions of SEBI*

1. To protect the interests of investors through proper education and guidance

as regards their investment in securities. For this, SEBI has made rules
and regulation to be followed by the financial intermediaries such as
brokers, etc. SEBI looks after the complaints received from investors for
fair settlement. It also issues booklets for the guidance and protection of
small investors.

2. To regulate and control the business on stock exchanges and other security
markets. For this, SEBI keeps supervision on brokers. Registration of
brokers and sub-brokers is made compulsory and they are expected to
follow certain rules and regulations. Effective control is also maintained by
SEBI on the working of stock exchanges.
3. To make registration and to regulate the functioning of intermediaries such
as stock brokers, sub-brokers, share transfer agents, merchant bankers and
other intermediaries operating on the securities market. In addition, to
provide suitable training to intermediaries. This function is useful for
healthy atmosphere on the stock exchange and for the protection of small
investors.

4. To register and regulate the working of mutual funds including UTI (Unit
Trust of India). SEBI has made rules and regulations to be followed by
mutual funds. The purpose is to maintain effective supervision on their
operations & avoid their unfair and anti-investor activities.

5. To promote self-regulatory organization of intermediaries. SEBI is given

wide statutory powers. However, self-regulation is better than external
regulation. Here, the function of SEBI is to encourage intermediaries to
form their professional associations and control undesirable activities of
their members. SEBI can also use its powers when required for protection
of small investors.

6. To regulate mergers, takeovers and acquisitions of companies in order to

protect the interest of investors. For this, SEBI has issued suitable
guidelines so that such mergers and takeovers will not be at the cost of
small investors.

7. To prohibit fraudulent and unfair practices of intermediaries operating on

securities markets. SEBI is not for interfering in the normal working of
these intermediaries. Its function is to regulate and control
their objectional practices which may harm the investors and healthy
growth of capital market.

8. To issue guidelines to companies regarding capital issues. Separate

guidelines are prepared for first public issue of new companies, for public
issue by existing listed companies and for first public issue by existing
private companies. SEBI is expected to conduct research and publish
information useful to all market players (i.e. all buyers and sellers).

9. To conduct inspection, inquiries & audits of stock exchanges,

intermediaries and self-regulating organizations and to take suitable
remedial measures wherever necessary. This function is undertaken for
orderly working of stock exchanges & intermediaries.

10. To restrict insider trading activity through suitable measures. This

function is useful for avoiding undesirable activities of brokers and
securities scams.
Securities and Exchange Board of India Act, 1992 is having retrospective
effect and is deemed to have come into force on January 30, 1992.
Relatively a brief act containing 35 sections, the SEBI Act governs all the
Stock Exchanges and the Securities Transactions in India.

A Board by the name of the Securities and Exchange Board of India

(SEBI) was constituted under the SEBI Act to amminister its provisions. It
consists of one Chairman and five members.

One each from the department of Finance and Law of the Central
Government, one from the Reserve Bank of India and two other persons
and having its head office in Bombay and regional offices in Delhi, Calcutta
and Madras.

The Central Government reserves the right to terminate the services of the
Chairman or any member of the Board. The Board decides questions in the
meeting by majority vote with the Chairman having a second or casting
vote.
Section 11 of the SEBI Act provides that to protect the interest of investors
in securities and to promote the development of and to regulate the
securities market by such measures, it is the duty of the Board. It has given
power to the Board to regulate the business in Stock Exchanges, register
and regulate the working of stock brokers, sub-brokers, share transfer
agents, bankers to an issue, trustees of trust deeds, registrars to an issue,
merchant bankers, underwriters, portfolio managers, investment advisers,
etc., also to register and regulate the working of collective investment
schemes including mutual funds, to prohibit fraudulent and unfair trade
practices and insider trading, to regulate take-overs, to conduct enquiries
and audits of the stock exchanges, etc.

All the stock brokers, sub-brokers, share transfer agents, bankers to an

issue, trustees of trust deed, registrars to an issue, merchant bankers,
underwriters, portfolio managers, investment advisers and such other
intermediary who may be associated with the Securities Markets are to
register with the Board under the provisions of the Act, under Section 12 of
the Sebi Act. The Board has the power to suspend or cancel such
registration. The Board is bound by the directions vested by the Central
Government from time to time on questions of policy and the Central
Government reserves the right to supersede the Board. The Board is also
obliged to submit a report to the Central Government each year, giving true
and full account of its activities, policies and programmes. Any one of the
aggrieved by the Board's decision is entitled to appeal to the Central
Government

1. Power To Make Rules For Controlling

Stock Exchange :
SEBI has power to make new rules for controlling stock exchange in India.
For example, SEBI fixed the time of trading 9 AM and 5 PM in stock
market.

2. To Provide License To Dealers And Brokers :

SEBI has power to provide license to dealers and brokers of capital market.
If SEBI sees that any financial product is of capital nature, then SEBI can
also control to that product and its dealers. One of main example isULIPs
case. SEBI said, " It is just like mutual funds and all banks and financial and
insurance companies whowant to issue it, must take permission from
SEBI."

3. To Stop Fraud In Capital Market :

SEBI has many powers for stopping fraud in capital market.It can ban on
the trading of those brokers who are involved in fraudulent and unfair trade
practices relating to stock market. It can impose the penalties on
capital market intermediaries if they involve in insider trading.

4 ToControl The Merge, Acquisition And Takeover The

Companies :
Many big companies in India want to create monopoly in capital market.
So, these companies buy all other companies or deal of merging. SEBI sees
whether this merge or acquisition is for development of business or to harm
capital market.

5. To Audit The Performance Of Stock Market :

SEBI uses his powers to audit the performance of different Indian stock
exchange for bringing transparency in the working of stock exchanges.

6. To Make New Rules On Carry -

Forward Transactions :
Share trading transactions carry forward can not exceed 25% of broker's
total transactions.90 day limit for carry forward.
7. To Create Relationship With ICAI :
ICAI is the authority for making new auditors of companies. SEBI creates
good relationship with ICAI for bringing more transparency in the auditing
work of company accounts because audited financial statements are mirror
to see the real face of company and after this investors can decide to invest
or not to invest. Moreover, investors of India can easily trust on audited
financial reports. After Satyam Scam, SEBI is investigating with ICAI,
whether CAs are doing their duty by ethical way or not.

8. Introduction Of Derivative Contracts

On Volatility Index :
For reducing the risk of investors, SEBI has now been decided to permit
Stock Exchanges to introduce derivative contracts on Volatility
Index, subject to the condition that a. The underlying Volatility Index has a
track record of at least one year. The Exchange has in place the appropriate
risk management framework for such derivative contracts.

9. To Require Report Of Portfolio Management

Activities
SEBI has also power to require report of portfolio management to check
the capital market performance.Recently, SEBI sent the letter to all
Registered Portfolio Managers of India for demanding report.

10. To Educate The Investors :

Time to time, SEBI arranges scheduled workshops to educate the investors.
On 22 may 2010 SEBI imposed workshop. If you are investor, you can get
education through SEBI leaders by getting update information on this page.

SEBI during 1996-96 took several steps to promote and regulate self
regulatory organisations. The measures taken by SEBI are discussed below.
Association of Merchant Bankers of India (AMBI)
AMBI was granted recognition to set up professional standards for
providing efficient services and establish standard practices in merchant
banking and financial services. It was promoted for healthy business
practice and to exercise overall supervision over its members in the matters
of compliance with statutory rules and regulations pertaining to merchant
banking and other activities. AMBI in consultation with SEBI is working
towards improving disclosures standards in the offer document as well as
meeting the statutory requirement in a systematic manner.
Association of Mutual Funds of India (AMFI)
The Association of Mutual Funds of India (AMFI) has been set up. SEBI
undertakes regular consultations with members of AMFI on various issues
affecting mutual funds. In February 1997, SEBI held a meeting with
trustees of all mutual funds to discuss with them their responsibilities for
prudential oversight of mutual funds in the light of SEBI (Mutual Funds)
Regulations, 1996.
Association of Custodial Agencies of India (ACAI)
Following the notification of the SEBI (Custodians of Securities)
Regulations, 1997, custodians of securities have registered an association,
ACAI. While ACAI is still in its preliminary stages, SEBI has been engaging
in a dialogue with ACAI to streamline custodial practices and to ensure that
custodians do not function in isolation from the clearing and settlement
systems. ACAI has also highlighted to SEBI from time to time difficulties
encountered by custodians on behalf of their clients who are mainly foreign
institutional investors, domestic mutual funds, financial institutions,
corporates and high networth individuals.
Registrars Association of India (RAIN)
The Registrars Association of India (RAIN) a self regulatory organisation
for registrars to an issue and share transfer agents has been set up

RBI*
RBI stands for Reserve Bank of India and is the central bank of the country. It is
the banker to all banks and the government of India. It was established in 1935 and
was nationalized in 1949 after India got independence. It has a board of directors
with a governor. RBI is the sole body in the country to issue currency notes. It
maintains minimum reserves of gold and foreign currency amounting 200 crores.
RBI performs all transactions of the government as it receives and makes payments
on behalf of the government.
Every bank in the country is required to keep a minimum cash reserve with the
RBI to meet its liabilities. RBI issues licenses to all banks to carry on banking
operations and has the right to cancel this licence if it deems fit. RBI also sets the
lending rates for all banks which is the rate at which banks are required to
distribute loans to consumers both in industry and agriculture sector.

SEBI
The basic motive of the government behind setting up of an autonomous body
called SEBI in 1992 was to protect the interests of investors in securities, to help in
growth of securities market and to regulate it efficiently so as to attract foreign
investors. SEBI has been performing these duties with zeal and efficiency. It has
introduced extensive regulatory methods, stringent code of obligation, registration
norms, and eligibility criteria that has helped Indian securities market
tremendously.
All affairs of SEBI are managed by an appointed board that comprises a chairman
and 5 other members. Companies that wish to bring a public offer of more than
rupees 50 lakhs are required get approval from SEBI.
required get approval from SEBI.
Of late there is news of a tug of war between these two watchdogs of Indian
economy as SEBI wishes to amend the definition of securities to bring into
its fold all marketable instruments. This has meant alarm bells for RBI as
then currency derivatives would come within purview of SEBI bypassing
RBI. SEBI has proposed to keep FD’s and insurance policies out of the
amendment but it could include many more instruments currently falling
under the jurisdiction of RBI. Negotiations are on between RBI and SEBI
and soon a formula may be worked out to settle the issue.

*RBI vs SEBI*

RBI is the central bank of India whereas SEBI is the Securities and
Exchange Board of India. Both of them play vital role in Indian economy.
RBI is the body responsible for maintaining bank notes in the country, to
keep currency reserves to maintain monetary stability and to keep the
credit and currency system of the country working efficiently. SEBI on the
other hand is an autonomous body constituted in 1992 to oversee the
operations of investment markets in the country. The board performs the
function of a regulator to keep markets stable and efficient markets. There
are obvious differences in the roles and responsibilities of two monetary
bodies that will be discussed highlighting their features.

Policies And Programmes*

This Annual Report of the Securities and Exchange Board of India (SEBI)
reviews the policies and programmes of SEBI and its working and
operations for the fiscal year 1996-97. It describes the manner in which
SEBI has been carrying out its functions and exercising its powers in terms
of the Securities and Exchange Board of India Act, 1992; the Securities
Contracts (Regulation) Act, 1956; the Companies Act, 1956 and the
Depositories Act, 1996. The Report also gives details of developments in
 Indian securities markets in 1996-97, and their bearing on and relation to
the work of SEBI. The Report has been prepared in accordance with the
format prescribed in the Securities and Exchange Board of India (Annual
Report) Rules, 1994, notified in the Official Gazette on April 7, 1994.
During 1996-97 SEBI continued its operations and initiatives in regulating
and developing the Indian securities markets in fulfilment of the twin
objectives of investor protection and market development set forth in the
SEBI Act, 1992. Throughout its five year existence as a statutory body, SEBI
has sought to balance the two objectives by constantly reviewing and
reappraising its existing policies and programmes, formulating new policies
and crafting new regulations in areas hitherto unregulated to foster
development in these areas and implementing them to ensure growth of the
markets with efficiency, integrity and protection of investors' interest. The
developments and reforms in Indian securities markets since January 1992,
when SEBI was given statutory powers are given in the box below.

Securities Markets Reforms And Development January

1992 To March 1996*

1. The Securities and Exchange Board of India, set up in 1988 under an

administrative arrangement, given statutory powers with the enactment of
the SEBI Act, 1992
2. Capital Issues(Control) Act, 1947 repealed and the Office of Controller of
Capital Issues abolished; control over price and premium of shares
removed. Companies now free to raise funds from securities markets after
filing letter of offer with SEBI
3. SEBI introduces regulations for primary and secondary market
intermediaries, bringing them within the regulatory framework
4. New reforms by SEBI in the primary market include improved disclosure
standards, introduction of prudential norms and simplification of issue
procedures. Companies required to disclose all material facts and specific
risk factors associated with their projects while making public issues.
5. Disclosure norms further strengthened by introducing cash flow statements
6. Listing agreements of stock exchanges amended to require listed
companies to furnish annual statement to the stock exchanges showing
variations between financial projections and projected utilisation of funds
in the offer document and at actuals, to enable shareholders to make
comparisons between performance and promises
7. New issue procedures introduced - partial book building for institutional
investors - aimed at reducing costs of issue
8. SEBI introduces a code of advertisement for public issues for ensuring fair
and truthful disclosures
9. The power to regulate stock exchanges delegated to SEBI by the
government
10. SEBI reconstitutes the governing boards of the stock exchanges,
introduces capital adequacy norms for brokers and issues rules for making
the client/broker relationship more transparent, in particular, segregating
client and broker accounts
11. Over the Counter Exchange of India (OTC) set up with computerised
on line screen based nation-wide electronic trading and rolling
settlement
12. National Stock Exchange of India (NSE) set up as a stock exchange
with computerised on line screen based nation- wide electronic trading
13. The Stock Exchange, Mumbai (BSE) introduces on line screen based
trading
14. Capital adequacy requirement for brokers introduced
15. System of mark to market margins introduced on the stock exchanges
16. "Revised carry forward" system introduced in place of "badla"
17. National Securities Clearing Corporation Limited set up by the NSE
18. SEBI frames regulations for mutual funds. Private mutual funds
permitted and several such funds have already been set up. All mutual
funds allowed to apply for firm allotment in public issues - also aimed
at reducing issue costs
19. SEBI introduces regulations governing substantial acquisition of
shares and take-overs and lays down the conditions under which
disclosures and mandatory public offers are to be made to the
shareholders
20. Indian companies permitted to access international capital markets
through Euroissues
21. Foreign Direct Investment allowed in stock broking, asset
management companies, merchant banking and other non- bank
finance companies
22. Foreign Institutional Investors (FIIs) allowed to access to Indian
capital markets on registration with SEBI
23. Guidelines for Off shore Venture Capital Funds announced
by the government
24. SEBI strengthens surveillance mechanisms in SEBI and directs all
stock exchanges to have separate surveillance departments

*Role Of Sebi In A Public Issue*

Any company making a public issue or a rights issue of securities of value

more than Rs 50 lakhs is required to file a draft offer document with SEBI
for its observations. The validity period of SEBI’s observation letter is three
months only i.e. the company has to open its issue within the period of
three month starting from the date of issuing the observation letter. There
is no requirement of filing any offer document / notice to SEBI in case of
preferential allotment and Qualified Institution Placement (QIP). In QIP,
Merchant Banker handling the issue has to file the placement document
with Stock Exchanges for making the same available on their websites.

Given Below Are Few Clarifications

Regarding The Role Played By SEBI

(a)Till the early nineties, Controller of Capital Issues used to decide about
entry of company in the market and also about the price at which securities
should be offered to public. However, following the introduction of
disclosure based regime under the aegis of SEBI, companies can now
determine issue price of securities freely without any regulatory
interference, with the flexibility to take advantage of market forces.
(b) The primary issuances are governed by SEBI in terms of SEBI
(Disclosures and Investor protection) guidelines. SEBI framed its DIP
guidelines in 1992. The SEBI DIP Guidelines over the years have gone
through many amendments in keeping pace with the dynamic market
scenario. It provides a comprehensive framework for issuing of securities
by the companies.
(c) Before a company approaches the primary market to raise money by the
fresh issuance of securities it has to make sure that it is in compliance with
all the requirements of SEBI (DIP) Guidelines, 2000. The Merchant Banker
are those specialised intermediaries registered with SEBI, who perform the
due diligence and ensures compliance with DIP Guidelines before the
document is filed with SEBI.
(d) Officials of SEBI at various levels examine the compliance with DIP
guidelines and ensure that all necessary material information is disclosed in
the draft offer documents.

* Role Of Sebi In Primary & Secondary Market*

The SEBI is the regulatory authority established under Section 3 of SEBI

Act 1992 to protect the interests of the investors in securities and to
promote the development of, and to regulate, the securities market and for
matters connected therewith and incidental thereto.

Primary Market
The primary market is that part of the capital markets that deals with the
issuance of new securities. Companies, governments or public sector
institutions can obtain funding through the sale of a new stock or bond
issue. This is typically done through a syndicate of securities dealers. The
process of selling new issues to investors is called underwriting. In the case
of a new stock issue, this sale is an initial public offering (IPO). Dealers
earn a commission that is built into the price of the security offering,
though it can be found in the prospectus. Features of primary markets are:
This is the market for new long term equity capital. The primary market is
the market where the securities are sold for the first time. Therefore it is
also called the new issue market (NIM). In a primary issue, the securities
are issued by the company directly to investors.
Secondary Market
Secondary Market refers to a market where securities are traded after being
initially offered to the public in the primary market and/or listed on the
Stock Exchange. Majority of the trading is done in the secondary market.
Secondary market comprises of equity markets and the debt markets.

For the general investor, the secondary market provides an efficient

platform for trading of his securities. For the management of the company,
Secondary equity markets serve as a monitoring and control conduit—by
facilitating value-enhancing control activities, enabling implementation of
incentive-based management contracts, and aggregating information (via
price discovery) that guides management decisions.

What Is The Difference Between The Primary Market

And The Secondary Market?
Primarily there are two types of stock markets – the primary market and
the secondary market. This is true for the Indian stock markets as well.
Basically the primary market is the place where the shares are issued for the
first time. So when a company is getting listed for the first time at the stock
exchange and issuing shares – this process is undertaken at the primary
market. That means the process of the Initial Public Offering or IPO and
the debentures are controlled at the primary stock market. On the other
hand the secondary market is the stock market where existing stocks
are brought and sold by the retail investors through the brokers. It is the
secondary market that controls the price of the stocks. Generally when we
speak about investing or trading at the stock market we mean trading at the
secondary stock market. It is the secondary market where we can invest and
trade in the stocks to get the profit from our stock market investment.
Now these are the broadest classification of the stock markets that is true
for any country as well as India. But the Indian stock markets can be
divided into further categories depending on various aspects like the mode
of operation and the diversification in services. First of the two largest stock
exchanges in India can be divided on the basis of operation. While the
Bombay stock exchange or BSE is a conventional stock exchange with a
trading floor and operating through mostly offline trades, the National
Stock Exchange or NSE is a completely online stock exchange and the first
of its kind in the country. The trading is carried out at the National Stock
Exchange through the electronic limit order book or the LOB. With the
immense popularity of the process and online trading facility other
exchanges started to take up the online route including the BSE where you
can trade online as well. But the BSE is still having the offline trading
facility that is carried out at the trading floor of the exchange at its Dalal
Street facility.

Apart from these classifications there are also different types of stock
market in India and the classification is made on the type of instrument
that is being traded at the market. Both the Bombay Stock Exchange and
the National Stock Exchange have these types of stock markets

What Are The Various Departments

Of SEBI Regulating Trading In The Secondary
Market?
The following departments of SEBI take care of the activities in the
secondary market.

Sr.No. Name of the Major Activities

Department
1. Market Intermediaries Registration, supervision, compliance monitoring and inspections of all
Registration and market intermediaries in respect of all segments of the markets viz.
Supervision department equity, equity derivatives, debt and debt related derivatives.
(MIRSD)
2. Market Regulation Formulating new policies and supervising the functioning and
Department (MRD) operations (except relating to derivatives) of securities exchanges, their
subsidiaries, and market institutions such as Clearing and settlement
organizations and Depositories (Collectively referred to as
‘Market SROs’.)
3. Derivatives and New Supervising trading at derivatives segments of stock exchanges,
Products Departments introducing new products to be traded, and consequent policy changes
(DNPD)
Literature Review

Jain (1996)
in his study on restructuring capital market observed that the agenda for further
reforms of capital market in India broadly comprise the developments in the debt
market, revival of equity markets and improved disclosures and corporate
governance standards, reforms in insurance and pension funds to enable flow of
funds to infrastructure and the emergence of financial derivatives and risk
management products.

Neelamegam R. and Srinivasan R (1996)

studied the competency of different protective measures in purview of existing
Securities Contracts Act 1956, Securities and Exchange Board of India Act 1992.
They also examined the trading activities of primary and secondary market in
India. They figured out that though preventive measures were taken by regulators
through legislative systems, investors lost their confidence even after the setup of
SEBI.

Gupta and Biswas (2006)

examines the development and efficiency of Indian capital market during the post
liberalization period and conducted that the process of reforms has led to a pace of
growth of Indian stock market a most unparalleled in the history of any country.
Ironically, this market suffers from the menace of over speculation and excessive
price fluctuations, which are in fact fiercer than many of its counterparts. These
vices are sufficient to defeat at basic purpose of financial liberalization where the
society in effect authorizes the financial systems to mobilize and allocate
resources.
Juhi Ahuja (2012)
presents a review of Indian Capital Market & its structure. In last decade or so, it
has been observed that there has been a paradigm shift in Indian capital market.
The application of many reforms & developments in Indian capital market has
made the Indian capital market comparable with the international capital markets.
However, the market has witnessed its worst time with the recent global financial
crisis that originated from the US sub-prime mortgage market spread over to the
entire world as a contagion. The capital market of India delivered as sluggish
performance.

Dr. KVSN JawaharBabu and S. Damodar Naidu (2012)

In their research paper ‘Investor protection measures by SEBI’ found that investor
education programmes conducted by SEBI got positive results to some extent. But
still lot more efforts needs to be put in practice. Indian investors have steadily
vanished from the market which calls for prompt action of the apex body to frame
and efficiently implement the measures to protect small investors’ interest and
restore their confidence in the stock market.

Chandra (1991), in a study on the proper functioning of the securities markets,

examined the government policy of favouring the small shareholders in terms of
allotment of shares. The study argued that, such a policy suffered from several
lacunae such as higher issue and servicing costs and lesser vigilance about the
functioning of companies, because of inadequate knowledge. The study suggested
that there was a need to eliminate the bias as that would lead to a better functioning
of the Capital Market and would strengthen investors’ protection. With
proportional allocation being advocated by SEBI, a shift in the policy was evident.
However, there appeared to be some re-thinking on the proportional allocation
after the recent experiences which clearly demonstrate that such a policy could
result in a highly skewed ownership patterns.
Pandya (1992), in a study, “SEBI: Its Role, Powers, Functions and Activities”,
observed that as a regulatory and development body, SEBI's efforts in the direction
of investor protection are varied and unlimited. The measures brought in by SEBI
broadly cover measures for allocation efficiency in the primary market with a fair
degree of transparency. It was found out that reforms in the secondary market
institutions, mutual funds and regulation of various market intermediaries and
above all for the protection of the investing public, were necessary.
Barua and Varma (1993), in a study on the activities of the scams reported that
press reports first appeared in April 1992, indicating that there was a shortfall in
Government Securities held by the State Bank of India (SBI). Investigations
revealed that it was just the tip of an iceberg which came to be called the securities
scam. It involved the misappropriation of funds to the tune of over Rs. 3500 crore
(about $ 1.2 billion). The scam had engulfed top executives of large nationalized
banks, foreign banks, financial institutions, brokers, bureaucrats and politicians.
The functioning of the money market and the stock market had been thrown into
disarray. The scam had generated such immense public interest that it had become
a permanent feature on the front pages of newspapers. A large number of agencies,
namely, the Reserve Bank of India (RBI), the Central Bureau of Investigation
(Indian CBI), the Income Tax Department, the Directorate of Enforcement and the
Joint Parliamentary Committee (JPC) all set out to investigate the various aspects
of the scam. The government set up the Janakiraman Committee to probe the scam,
which broke out between April, 1991, and June, 1992. At least 10 commercial
banks were involved, including the Standard Chartered Bank, the SBI and National
Housing Bank (an RBI subsidiary).
Barua and Varma (1993), in another study, stated the modus operandi used in the
scam. It found out that in form, the brokers used the Ready Forward (RF) deal,
which was not a loan at all. The borrowing bank (Bank 2) actually sold the
securities to the lending bank (Bank 1) and bought them back at the end of the
period of the deal at (typically) a slightly higher price. The price difference
represented the profit on the deal. It was found out that the RF instrument was used
in other countries, known as a repurchase (or repo) agreement. It was a very safe
and secured form of lending and it was very common throughout the world. The
US repo market, for example, is about a hundred times larger than the Indian RF
market. It found out that the RF in India served two main purposes: (a) it provided
much needed liquidity to the government securities markets and (b) it was an
important tool in the hands of the banks to manage their Statutory Liquidity Ratio
(SLR) requirements. Banks in India were required to maintain 38.5% of their
Demand and Time Liabilities (DTL) in government securities and certain approved
securities which were collectively known as SLR securities.
Barua and Varma (1993), in a study, examined the impact of the scam and found
out that it resulted in a sharp fall in the share prices. The index fell from 4500 to
2500, representing a loss of Rs. 100,000 crores in market capitalization. Though
one may be tempted to blame the steep decline in prices on the scam, but they
think that the reason for this fall was not the scam directly. It found out that the
scam resulted in the withdrawal of about Rs. 3,500 crore from the market, which
for a market of the size of Rs. 250,000 crores (at an index level of4500) was a very
small amount, and therefore should have had little impact on the prices. The study
found out that there were however, two major reasons for the fall, both related to
the government's knee jerk response to the scam. First was the phenomenon of
tainted shares which created panic in the market and second was the perceived
slowdown of the reform process which destroyed the very foundation on which the
boom was based. It was found out that Harshad Mehta and others were being
described as the products of the situation, this was as a result of political pressures
and the bad press it received during the scam. The study revealed that it was the
liberalization policies of the government which did not function properly and
which were later on put on hold for a while. The Securities Exchange Board of
India (SEBI) postponed sanctioning of the private sector mutual funds. Some
question marks arose regarding privatization as the chairman of the committee
looking into this ended up in jail on charges of involvement in the scam.
Dhillon (1993),
in a doctoral dissertation examined the regulatory policies of the Bombay Stock
Exchange (BSE) over a four year period (July 1986 - June 1990). The findings
showed that regulatory authorities decided changes in their margin policy on the
basis of market activity. It found out that the margins were prompted by changes in
settlement returns, price volatility, trading volume and open positions. The Granger
causality results showed that there was limited causality in the reverse direction:
margin changes did not affect returns, and had only a limited impact on price
volatility, trading volume and open positions. The event study methodology
applied to daily margins showed similar results, except that daily margin on sellers
did not appear to be affected by the market variables. Further, there was also
evidence of under margining leading to excessively levered positions, thereby
increasing the insolvency risk. The results revealed that regulations through this
instrument had only a marginal impact on the dual objectives of controlling market
activities and insolvency risk.
Barua and Varma (1993),
in a related study of the scam, defined the term "securities scam" as a diversion of
funds to the tune of over Rs. 3500 crore from the banking system to various
stockbrokers in a series of transactions (primarily in Government securities) during
the period April 1991 to May 1992. It found out that in April 1992, the first press
report appeared indicating that there was a shortfall in the Government Securities
held by the State Bank of India. In a little over a month, investigations revealed
that this was just the tip of an kiiceberg which came to be called the securities
scam, involving misappropriation of funds to the tune of over Rs. 3500 crores. The
scam engulfed top executives of large nationalized banks, foreign banks and
financial institutions, brokers, bureaucrats and politicians. The functioning of the
money market and the stock market was thrown in disarray. The scam generated
such immense public interest that it became a permanent feature on the front pages
of newspapers. A large number of agencies, namely, the Reserve Bank of India
(RBI), the Central Bureau of Investigation (CBI), the Income Tax Department, the
Directorate of Enforcement and the Joint Parliamentary Committee (JPC) were all
set to investigating the various aspects of the scam.

Varma (1996),
in a study of the weaknesses of the Securities Market, found out that investors
were being treated unfairly. Thus, investors were being misled with impunity.
Using two examples, the study pointed out how easily issuers and merchant
bankers got away with grossly misleading advertisements for public issues. The
first example was the reported decision of the Ministry of Finance to rescind the
penalty imposed by the Securities and Exchange Board of India (SEBI) on SBI
Caps for its role as lead manager of the infamous MS Shoes public issue. The
second was the issue advertisements of the IDBI deep discount bonds which failed
to mention that the IDBI had a call option to redeem the bond at various dates at
various prices. This was necessary information that was not made available to the
investors. On the basis of such information investors could decide whether to
invest or not, since the bond without call options were worth Rs 5,300. With call
options it was worth only about Rs 4,800. This showed how significant the
concealed information really distorted the deal in favour of the issuers. The found
out that, as the Indian Capital Markets became more developed, the most important
element of investor protection was to ensure that the information given to investors
was true, fair and adequate to enable the investors to make well informed
investment decisions. It found out that it was a matter of grave concern that issue
advertisements in India flout such a requirement with impunity.
Varma (1996)
stated that, it was necessary to distinguish between the role of SEBI as a market
regulator and the role of Government as the formulator of national economic
policy. The study found out that it was not the function of the market regulator to
manipulate the micro structure of the market in order to nudge stock prices up or
down. Any such attempt is unreasonable and amounted to rigging stock prices. The
study stated that the job of the market regulator was to create a market environment
which was efficient and transparent. It stated that such an environment should
allow the direction of price movements to the free play of the market forces rather
than force in manipulations. It stated that the government as the formulator of
economic policy had a very different role to play, that is, the role of controlling the
economic fundamentals which were the ultimate determinants of stock prices.
Varma and Barua (1996)
also stated that, investors must be protected in all deals, whether they are rights
issue, script issue or merger. The study stated that, the right to protection of the
investor was of paramount importance. Thus, it lamented that “Under the proposed
merger of Hindustan Lever Limited (HLL) and Brooke Bond Lipton India Limited
(BBLIL), shareholders of BBLIL were to receive 9 shares of HLL for every 20
shares of BBLIL held by them. Minority shareholders of BBLIL were unhappy
because the 20:9 or 2.222222:1 ratio was worse than the ratio of 2:1 (or more
accurately 1.9:1) implicit in the market prices at the time of the announcement. It
stated that, the awkward ratio of 2.222222:1 left the small shareholders of BBLIL
with a large percentage of odd lots after the merger. It found out that the swap ratio
was decided on the basis of the advice of two respected firms of accountants and
two well-known merchant bankers. This brought to the surface the question of how
so many experts could together come up with such an unreasonable conclusion. It
found out that the answer was that though the government abolished the office of
the Controller of Capital Issues long ago, the ghost of its formula continued
haunting Indian companies as well as their accountants and merchant bankers. It
was argued that, such a ghost must be exorcised, if dealings in the Indian capital
market were to be done at fair and reasonable valuations.
Varma and Barua (1996), in a study, “SEBI Comes down on Bulls to Punish the
Bears”, pointed out the reasons which were often given for introducing circuit
breakers in the Securities Markets as follow:
a). they prevented a sudden collapse of confidence,
b). they provided time for payment and thereby reduced the risk of default,
c). they provided time for market operators to think through and to decide the
stance they found necessary to take in the market.
The study found out that the first reason was extremely erroneous, since it mixed
up cause and effect. The last reason given was even more erroneous. It stated that
an open market provided an opportunity to trade, but did not create a compulsion
to trade. Finally, the argument about default risk was also not valid, because Stock
Exchanges could and should use margin requirements to deal with such a risk. It
should be borne in mind that this does not at all render the Securities Market a risk
free investment environment.
The study advanced several valid arguments against circuit breakers which were as
follows:
a). they did not allow the markets to self-correct themselves,
b). they in fact exacerbated the trend by inducing higher volumes as the prices
moved close to the band limit, and traders became desperate executing the trade
before the circuit breaker took effect,
c). they created illiquidity precisely at times when liquidity was most needed by
the market,
d). when applied to only one market, they created arbitrage opportunities.
It stated that, such arguments indicated that regulators must allow a free play of
market forces to determine prices of securities in the Market. It pointed out that
everything should be done to ensure that reliable information which was the
biggest facilitator of proper free markets should be made available simultaneously
and easily to all operators for informed decision making purposes.
Varma and Raghunathan (1996), in a study, stated that, the new takeover code by
the Bhagwati committee was comprehensive and well drafted. The study pointed
out that the code added little value over the existing code of SEBI. It pointed out
that some provisions of the code were retrograde, while others lacked rigour. It
revealed that the new code was seen as:
(1). A useful tool in the capital market. In one of the most pernicious steps, the new
code blocked acquisitions through an exchange of shares.
(2). The stipulation of the Minimum Offer Price was discordant with the spirit of
free pricing, and was a needless obstacle in the emergence of an orderly market for
corporate control.
(3) While it appeared to allow conditional offers, the code effectively made them
unconditional by stipulating that even if the conditions were not met, the acquirer
must acquire at least 20 per cent of the shares. This norm was unwarranted and
could make transparent takeovers difficult.
(4) The committee had shown excessive concern for incumbent managements by
legitimising a creeping takeover.
(5) Together with the effective ban on stock offers, the requirement for an escrow
account prevented takeovers by successful, but cash strapped companies.
Furthermore, the stipulated 10 per cent was too low to achieve the desired
objective.
(6) The code also contained many drafting errors and ambiguities and made
understanding rather difficult.

Drucker (1999),
identified systemic risk as risk that was inherent in the Capital Market and could
not be avoided. The study pointed out that, the only way to avoid it was to abandon
the Capital Market investment business. Furthermore, it pointed out that, the
Capital Market risks were concerned with volatility in prices and also some poor
market conditions which affected demand, in the case of futures and options. It
pointed out that SEBI was helping the investors in reducing the Capital Market
risks by carefully educating them, bringing in careful rules and regulations which
should reduce risks and also the imposition of margin trading.
Varma (2002), with a view on Corporate Governance, stated that from the days of
Adam Smith, those who have placed their faith in the free markets had done so in
the full knowledge of the greed that permeated human society. It pointed out that,
the breakdown of market discipline may be attributed to State interventions in the
free market that fatally weakened its ability to correct itself. However, the
arguments were that:
(i). Corporate Governance was compromised by weakening corporate pillars of
etiquette and internal control,
(ii). Capital Market discipline was weakened by regulatory restrictions on short
sales and inefficient banking regulations,
(iii). the contract enforcement mechanism that was critical for free market
capitalism was weakened by restricting private securities litigation,
(iv). the private sector watchdogs failed, because they operated as cosy oligopolies
that had no incentive to succeed.
The study stated that, the massive regulatory failures represented by the Enron case
and other corporate frauds in the USA are evidence of lack of good Corporate
Governance. Failures in market discipline are equally evident, leaving the markets
vulnerable and distressing the Investors. The study pointed out that, Corporate
Governance checks and balances had not been carefully implemented as they
should in corporate and market environment. It concluded that in a nutshell, an
infectious greed seemed to have gripped much of the business community and
helped to destroy it, at the detriment of the investors.
Dubey (2007)
examined the risk management of companies and pointed out that, the
management of companies dealing in the Capital Market must make sure that all
risks taking activities were carefully identified and disclosures made. Such
activities as the increased use of derivatives, which possessed a potentially
indomitable and preposterous nature, were fuelling the systemic risk in the Indian
Capital Market.
Gaggav (2007), in a study of risk assessment, pointed out that, risk assessment and
management was fast becoming an area of disclosure in the report of Board of
directors, and therefore the Capital Market should not be an exception. It pointed
out that, the era of demutualization in the Capital Market meant that careful
disclosure of risk management
27

activities, put in place by management, minimized the losses that resulted both to
the company and the investors.
Hyderabad (2007), in a study of risk management measures, pointed out that risk
management measures should be a continuous process. Stating that, the process
should help in identifying all risk factors, analyzing risks factors and deciding upon
good measures of effective risks handling and control. It found out that, risks
handling and control therefore involved such activities as risks identification, risks
quantification, risks mitigation and risk insurance. It pointed out that, like other
parameters used in taking the temperature of the Capital Market and reporting to
investors when to buy and when to sell, there should be a risk measurement
parameter that should be reporting the risky level of the Capital Market, so that
investors should know when to invest and when not to invest. A risk measurement
index was very necessary in the Capital Market. This could help to inform
investors when to expect low returns.
Hyderabad (2007), in a study of business decision making, found out that, business
decision making involved the consideration of risk and return, because higher risks
generally entailed higher returns. However, it concluded that, this was not true in
the Capital Market, where higher risks led to low returns and even losses.
Kansara (2007), in a study of the capital market, pointed out that, the primary
market in India had earlier witnessed two major boom periods. The current one
was the third and most sustained. There was a fundamental difference in the state
of the primary market then and what it was on the earlier two occasions. The first
bull phase was during the period of 1986- 88, following the Rajiv Gandhi-led
government taking charge at the Centre. It was then that the market witnessed a
slew of public issues hitting the market. The second boom was during 1994-96,
which saw all kinds of entities – from the well-run to the fly-by-night (next day
house to let), tapping the Capital Market without any substantial fund-raising
programme in sight. The Securities & Exchange Board of India (SEBI),(the Capital
Market regulator), learnt its lessons from these two experiences and came out with
the Comprehensive Disclosure and Investor Protection (DIP) Guidelines, for the
first time in the year 2000. These regulations made a vast change in the Indian
Primary Market and were a key factor in
28

the sustainable Bull Run that had been witnessed in the IPO market, since June
2003. The study pointed out that, on the earlier two occasions of the IPO boom,
investors were provided with very little information by companies raising funds
through the IPO market, to take informed decisions on whether to subscribe to an
issue or not. Based on the poor information provided, in the prospectus (all issues
were fixed price issues then), decision making was a difficult task. This was
because, Companies and merchant bankers hardly used to disclose information
about the company’s past, present and future performance. Following SEBI’s
decision to move to a disclosure-based process in the fund-raising exercise, the
quality of the issuers’ information provision improved, and it has helped in the
raising of larger amounts of capital from the domestic market. The situation in the
earlier days was that very little information was provided, making investment
decisions difficult. The study found out that, the full size of a prospectus, then, was
not more than 50 pages, but today due to the comprehensive disclosure
requirements, every Draft Red Herring Prospectus (DRHP) for the book built
issues), runs into nothing less than 400 pages. The study concluded that, following
the Disclosure and Investor Protection (DIP) Guidelines, in the year 2000, the
disclosure-based regime in the fund-raising process had attained a maturity level.
Reddy (2007), in a study on corporate governance in the financial sector, pointed
out that, in India, as in the case of many other countries, there are several agencies
entrusted with the task of regulation and supervision of different institutions and
market participants in the financial sector. It pointed out that, the RBI regulated
and supervised the major part of the financial system through its various
departments under the provisions of the Banking Regulation Act, 1949 and the
Reserve Bank of India Act, 1934. Its supervisory domain covers Commercial
Banks, Non- Banking Financial Companies (NBFCs), Urban Cooperative Banks
(UCBs) and some of the All-India Financial Institutions (AIFIs). Some of these
AIFIs, in turn, regulated and/or supervised other institutions in the financial sector.
Thus, the Regional Rural Banks (RRBs) and Central and State Cooperative Banks
were supervised by the Reserve Bank of India through National Bank for
Agriculture and Rural Development (NABARD); State Financial Corporations
(SFCs) through the Industrial Development Bank of India (IDBI) (since transferred
to SIDBI) and the Housing Finance Companies through National Housing Bank
(NHB). It pointed out that, since 1992, the
29

Securities and Exchange Board of India (SEBI) has regulated the Capital Markets
and supervised several institutions such as the Stock Exchanges, Mutual Funds,
Asset Management Companies, securities dealers and brokers, Merchant Bankers
and Credit Rating Agencies. SEBI regulated venture capital funds also. The entities
in the insurance sector were regulated by the Insurance Regulatory and
Development Authority (IRDA), since 1999.
Economic Times of India (2007), reported that the Securities and Exchange Board
of India (SEBI) created a database of all participants in the bourses, a move that
helped the regulator to keep a watch on traders, investors and intermediaries
operating in the market.
It stated that the National Institute of Securities Market (NISM) was coordinating
certification in the country's Securities Markets and engaged agencies to administer
computer-based tests across the country, (SEBI release). NISM, established by
SEBI, also put in place a comprehensive continuing professional education
framework involving reputed institutions. SEBI had always organised workshops
for market participants on `Certification of associated persons in the Securities
Markets. It pointed out that, certification had been mandated in the US, UK and
Singapore among other countries. In India, certification was mandated for
distributors of mutual funds, traders in derivatives segment and depository
participants. The regulations introduced in the year 2007, had enlarged the scope of
mandated certification to a number of new segments of intermediaries and their
associated persons. It pointed out that, all persons handling investors' money,
investor complaints, dealing with operational risk, attending to compliance and
persons responsible for management of intermediates must have to demonstrate
minimum proficiency standards in order to maintain their registration with SEBI.
The certificate was to be obtained by passing an examination approved by SEBI
and was valid for three years.
The above reviews fall short of quantifying the risks in the Capital Market. This
research project should be able to quantify the risks and examine the functions of
SEBI as regulator of the Indian Capital Market. This should be able to guide
investors to invest wisely, avoiding losses.
Varma (2009), in a study, Risk Management Lessons from the Global Financial
Crisis for Derivative Exchanges, stated that during the global financial turmoil of
2007 and 2008, no

major derivative clearing house in the world encountered distress, while many
banks were pushed to the brink and beyond. An important reason for this was that
derivative exchanges have avoided using value at risk, normal distributions and
linear correlations. The study stated that this was an important lesson. Pointing out
that the global financial crisis has also taught the public that in risk management,
robustness was more important than sophistication and that it was dangerous to use
models that are over calibrated to short time series of market prices. The study
applied these lessons to the important exchange traded derivatives in India and
recommended major changes to the current margining systems to improve their
robustness. It also discussed directions in which global best practices in exchange
risk management could be improved to take advantage of recent advances in
computing power and finance theory. The study argued that risk management
should evolve towards explicit models based on coherent risk measures (like
expected shortfall), fat tailed distributions and non- linear dependence structures.
Varma (2009), in a study, Indian Financial Sector and the Global Financial Crisis,
stated that though the Indian financial sector had very limited exposure to the toxic
assets at the heart of the global financial crisis, it suffered a severe liquidity crisis
after the Lehman bankruptcy. The study stated that the liquidity crisis could have
been averted with timely injection of liquidity into the system by the Reserve Bank
of India. Apart from the liquidity crisis, India also had to deal with the collapse of
global trade finance; deflation of an asset market bubble; demand contraction for
exports; and corporate losses on currency derivatives. Looking ahead, the paper
argued that the crisis was a wake-up call for the Indian banks and financial system
for better managing their liquidity and credit risks, re-examining the international
expansion policies of banks, and reviewing risk management models and stress test
methodologies. The study rejected the widely held notion that financial innovation
caused the global crisis and offered examples from the bond markets and
securitization to establish the necessity of continuing with the financial reforms. It
pointed out that, while India had a high growth potential, the growth was not
inevitable. It pointed out that, only the right economic and financial policies and a
favourable global environment could make rapid growth a sustainable
phenomenon.
31

Varma (2009), in a study, Satyam Fraud: The Regulatory Response stated that a
major fraud was an opportunity to push through important reforms which would
otherwise be resisted by powerful vested interests. It stated that this opportunity
was missed in India. Point out that the initial regulatory response to the Satyam
fraud was swift and appropriate, but this momentum was lost very quickly. Those
who hoped for comprehensive and decisive reforms had been disappointed. This
means the Corporate Governance principles only rely mainly on the SEBI clause
49 for enforcement
Varma (2009), in a study Corporate Governance in India: Disciplining the
Dominant Shareholder stated that, the nascent debate on corporate governance in
India had tended to draw heavily on the large Anglo-American literature on the
subject. This paper argued, however, that the corporate governance problems in
India were very different. The governance issue in the US or the UK was
essentially that of disciplining the management who had ceased to be effectively
accountable to the owners. The paper stated that the problem in the Indian
corporate sector (be it the public sector, the multinationals or the Indian private
sector) was that of disciplining the dominant shareholder and protecting the
minority shareholders. Clearly, the problem of corporate governance abuses by the
dominant shareholder can be solved only by forces outside the company itself. The
paper discussed the role of two such forces - the regulator and the capital market.
Regulators face a difficult dilemma in that correction of governance abuses
perpetrated by a dominant shareholder. This often implied that a micro-
management of routine business decisions which lied beyond the regulators’
mandate or competence existed. The paper discussed the increasing power of the
capital market to discipline the dominant shareholder by denying him access to the
capital market. The newly unleashed forces of deregulation, disintermediation,
institutionalization, globalization and tax reforms are making the minority
shareholder more powerful and are forcing the companies to adopt healthier
governance practices. These trends are expected to become even stronger in future.
The study pointed out that, the Regulators could facilitate the process by measures
such as: enhancing the scope, frequency, quality and reliability of information
disclosures; promoting an efficient market for corporate control; restructuring or
privatizing the large public sector institutional investors; and reforming bankruptcy
and related laws. In short, the key to better corporate governance in India today lies
in a more efficient and vibrant capital market. The study pointed out that, things
could change in the
32

future, if the Indian corporate structures also approach the Anglo-American pattern
of near complete separation of management and ownership.
Literature Gaps
(1) The Indian Capital Market listed companies have not monitored their
performance in any form, for a very long time. It necessary to examine
performance trends between the period 1992 to 2006 (15 years) to see the
significant difference between the market returns performance and company
returns performance.
(2) The risks present in the Indian Capital Market, has never been quantified to let
the investors know how much risks they have to bear as investors of the Capital
Market.
(3) Brokers, sub-brokers and investors’ perception about SEBI has never been
studied. There is a need to study their perception, in order to fine out their
problems. This leads us to part two, the Regulatory and Empirical Framework of
SEBI.
Chapter two has carefully provided the literature review of this project. The
literature review has revealed the reasons why this research work was necessary.
This literature review has helped to bring out the gaps (as mentioned above) which
this research would help to close up.

SEBI*

The basic motive of the government behind setting up of an autonomous

body called SEBI in 1992 was to protect the interests of investors in
securities, to help in growth of securities market and to regulate it
efficiently so as to attract foreign investors. SEBI has been performing these
duties with zeal and efficiency. It has introduced extensive regulatory
methods, stringent code of obligation, registration norms, and eligibility
criteria that has helped Indian securities market tremendously.
All affairs of SEBI are managed by an appointed board that comprises a
chairman and 5 other members. Companies that wish to bring a public offer
of more than rupees 50 lakhs are required get approval from
The basic motive of the government behind setting up of an autonomous
body called SEBI in 1992 was to protect the interests of investors in
securities, to help in growth of securities market and to regulate it
efficiently so as to a
The basic motive of the government behind setting up of an autonomous
body called SEBI in 1992 was to protect the interests of investors in
securities, to help in growth of securities market and to regulate it
efficiently so as to attract foreign investors. SEBI has been performing these
duties with zeal and efficiency. It has introduced extensive regulatory
methods, stringent code of obligation, registration norms, and eligibility
criteria that has helped Indian securities market tremendously.
All affairs of SEBI are managed by an appointed board that comprises a
chairman and 5 other members. Companies that wish to bring a public offer
of more than rupees 50 lakhs are required get approval from SEBI.L late
there is news of a tug of war between these two watchdogs of Indian
economy as SEBI wishes to amend the definition of securities to bring into
its fold all marketable y. This has meant alarm bells for RBI as then
currency derivatives would come within purview of SEBI bypassing RBI.
SEBI has proposed to keep FD’s and insurance policies out of the
amendment but it could include many more instruments currently falling
under the jurisdiction of RBI. Negotiations are on between RBI and SEBI
and soon a formu