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Capital Market Regulation In keeping with the broad thrust of the ongoing programmes of economic reform, the mechanism

of administrative controls over capital issues has been dismantled and pricing of capital issues is now essentially market determined. Regulation of the capital markets and protection of investor's interest is now primarily the resposibility of the Securities and Exchange Board of India (SEBI), which is located in Bombay. Accordingly, SEBI's functions include: * Regulating the business in stock exchange and any other securities markets * Registering and regulating the working of collective investment schemes, including mutual funds. * Prohibiting fraudulent and unfair trade practices relating to securities markets. * Promoting investor's education and training of intermediaries of securities markets. * Prohibiting insider trading in securities, with the imposition of monetary penalties, on erring market intermediaries. * Regulating substantial acquisition of shares and takeover of companies. * Calling for information from, carrying out inspection, conducting inquiries and audits of the stock exchanges and intermediaries and self regulatory organisations in the securities market. Keeping this in view, SEBI has issued a new set of comprehensive guidelines governing issue of shares and other financial instruments, and has laid down detailed norms for stock-brokers and sub-brokers, merchant bankers, porfolio managers and mutual funds. On the recommendations of the Patel Committee report, SEBI on 27th July 1995, permited carry forward deals. Some pf the major features of the revised carry-forward transactions as directed by SEBI are: * Carry forward deals permitted only on stock exchanges wchich have screen based trading system. * Transactions carried forward cannot exceed 25% of a broker's total transactions on any one day. * 90-day limit for carry forward and squaring off allowed only till the 75th day(or the end of the fifth settlement). * Daily margins to rise progressively from 20% in the first settlement to 50% in the fifth. On 26th January,1995, the government promulgated an ordinance amending the SEBI Act, 1992, and the Securities Contracts (Regulation) Act, 1956. In accordance with the amendment adjudicating mechanism will be created within SEBI and any appeal against this adjudicating authority will have to be made to the Securities Appelate Tribunal, which is to be separately constituted. These appeals will be heard only at the High Courts.

IPO

The following are exempted from the ENs . Note :. 3 crores for 3 full years. They are as under Entry Norm II (EN II) • • Issue shall be through book building route. The minimum post-issue face value capital shall be Rs. The minimum post-issue face value capital shall be Rs.Any company or a listed company making a public issue or a rights issue of value of more than Rs 50 lakhs is required to file a draft offer document with SEBI for its observations. The company can proceed further only after getting observations from SEBI.issue net worth. atleast 50% revenue for preceding 1 year should be from the new activity. If change in name. 10 crore or there shall be a compulsory market-making for at least 2 years. Distributable profits in atleast three years. with at least 50% to be mandatory allotted to the Qualified Institutional Buyers (QIBs). The issue size does not exceed 5 times the pre. The entry norms are as Entry Norm I (EN I): The company shall meet the following requirements • • • • • follows Net Tangible Assets of at least Rs. OR Entry Norm III (EN III) • • The "project" is appraised and participated to the extent of 15% by FIs/Scheduled Commercial Banks of which at least 10% comes from the appraiser(s). The entry norms are only for companies making a public issue (IPO or FPO) and not for listed company making a rights issue. The company has to open its issue within three months from the date of SEBI's observation letter.The company should also satisfy the criteria of having at least 1000 prospective allotees. 10 crore or there shall be a compulsory market-making for at least 2 years. for accessing the primary Market. Through public issues. SEBI has provided two other alternative routes to company not satisfying any of the above conditions to provide sufficient flexibility and also to ensure that genuine companies do not suffer on account of rigidity of the parameters. 1 crore in three years. SEBI has laid down eligibility norms for entities accessing the primary market. Net worth of at least Rs.

The Lead manager certifies that the disclosures made in the offer document are generally adequate and are in conformity with SEBI guidelines for disclosures and investor protection in force for the time being. Does SEBI tag make my money safe? The investors should make an informed decision purely by themselves based on the contents disclosed in the offer documents. in terms of SEBI . How does SEBI ensure compliance with DIP? The Merchant Banker are the specialized intermediaries who are required to do due diligence and ensure that all the requirements of DIP are complied with while submitting the draft offer document to SEBI.• • • • Private Sector Banks Public sector banks An infrastructure company whose project has been appraised by a PFI or IDFC or IL&FS or a bankwhich was earlier a PFI and not less than 5% of the project cost is financed by any of these institutions. Who decides the price of an issue? How does one come to know about the issues on offer? And from where can I get copies of the draft offer document? Who is eligible to be a BRLM? What are the relevant regulations and where do I find them? Will SEBI answer my queries online in case of doubts and clarifications? Does SEBI approve the contents of the issue? It is to be distinctly understood that submission of offer document to SEBI should not in any way be deemed or construed that the same has been cleared or approved by SEBI. 2003 (CLA Regulations) issued on August 21. attract penal action from SEBI. They are strongly warned against any 'tips' or news through unofficial means. 2003 and amended up to October 14. This requirement is to facilitate investors to take an informed decision for making investment in the proposed issue. Any non compliance on their part. 2003. SEBI does not associate itself with any issue/issuer and should in no way be construed as a guarantee for the funds that the investor proposes to invest through the issue. the investors are generally advised to study all the material facts pertaining to the issue including the risk factors before considering any investment. However. Rights issue by a listed company FAQs on Public Issue • • • • • • • • • Does SEBI approve the contents of the issue? Does SEBI tag make my money safe? How does SEBI ensure compliance with DIP? The Central Listing Authority's (CLA) functions have been detailed under Regulation 8 of SEBI (Central Listing Authority) Regulations.

With the presence of the Central Listing Authority (CLA). The draft offer document filed by Merchant Banker is also placed on the website for public comments. to undertake any other functions as may be delegated to it by the Board from time to time. 2003 and amended up to October 14. 2003 (CLA Regulations) issued on August 21. SEBI as the regulator of the securities market examines all the policy matters pertaining to issues and will continue to do so even during the existence of the CLA.(Merchant Bankers) Regulations. Ground Floor. the reply to this question would be updated thereafter. Mumbai 400021 . where the company and LM stipulate a floor price or a price band and leave it to market forces to determine the final price (price discovery through book building process). In brief. it covers processing applications for letter precedent to listing from applicants. what would be the role of SEBI in the processing of Offer docume nts for an issue? The Central Listing Authority's (CLA) functions have been detailed under Regulation 8 of SEBI (Central Listing Authority) Regulations. There is no price formula stipulated by SEBI. SEBI does not play any role in price fixation. There are two types of issues one where company and LM fix a price (called fixed price) and other. The draft offer documents are put up on the website under Reports/Documents section. Copies of the draft offer documents in hard copy form may be obtained from the office of SEBI Mittal Court. and. Since the CLA is not yet operational. The final offer documents that are filed with SEBI/ROC are also put up for information under the same section. How does one come to know about the issues on offer? And from where can I get copies of the draft offer document? SEBI issues press releases every week regarding the draft offer documents received and observations issued during the period. 'A' wing. Who decides the price of an issue? Indian primary market ushered in an era of free pricing in 1992. Following this. 224. The company and merchant banker are however required to give full disclosures of the parameters which they had considered while deciding the issue price. Nariman Point. including the listing agreements. the guidelines have provided that the issuer in consultation with Merchant Banker shall decide the price. 2003. 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. listing conditions and disclosures to be made in offer documents. to make recommendations to the Board on issues pertaining to the protection of the interest of the investors in securities and development and regulation of the securities market.

The final offer documents that are filed with SEBI/ROC can also be downloaded from the same section of the website. Rules.100 or from SES. if the queries are legalistic and deep in nature. . Regulations. LMs etc. 1992 is eligible to act as a Book Running Lead Manager to an issue. Rules. 2003. The soft copies can be downloaded from the SEBI website under Reports/Documents section. Will SEBI answer my queries online in case of doubts and clarifications? The "Feedback" section on the SEBI website has a provision for the visitors to the site to ask questions on clarifications on smaller issues pertaining to the availability of information and a facility for users to provide feedback on the same. Some LMs also make it available on their webisties for download. What are the relevant regulations and where do I find them? The SEBI Manual is SEBI authorized publication that is a comprehensive databank of all relevant Acts. they are to be referred to SEBI under the SEBI (informal Guidance) Scheme. Regulations and Guidelines that are related to the functioning of the Board. However. Who is eligible to be a BRLM? A Merchant banker possessing a valid SEBI registration in accordance with the SEBI (Merchant Bankers) Regulations. Guidelines and Circulars are placed on the SEBI website under the "Legal Framework" section. The details pertaining to the Acts.on a payment of Rs. The periodic updates are uploaded onto the SEBI website regularly.