SEBI: The Purpose, Objective and

Functions of SEBI

1. Issuers:
For issuers it provides a market place in which they can raise finance fairly and
easily.
2. Investors:
For investors it provides protection and supply of accurate and correct
information.
3. Intermediaries:
For intermediaries it provides a competitive professional market.
 Objectives of SEBI:

• 1. To regulate the activities of stock exchange.

• 2. To protect the rights of investors and ensuring
safety to their investment.
• To prevent fraudulent and malpractices by having
balance between self regulation of business and
its statutory regulations.
• 4. To regulate and develop a code of conduct for
intermediaries such as brokers, underwriters,
etc.
 Functions of SEBI:

• The SEBI performs functions to meet its

objectives. To meet three objectives SEBI has
three important functions. These are:
• i. Protective functions
• ii. Developmental functions
• iii. Regulatory functions.
• 1) It Checks Price Rigging:
• 2) It Prohibits Insider trading:
•  3)SEBI prohibits fraudulent and Unfair Trade Practices:
• 2. Developmental Functions:
• i) SEBI promotes training of intermediaries of the securities market.
• (ii) SEBI tries to promote activities of stock exchange by adopting
flexible and adoptable approach in following way:
• (a) SEBI has permitted internet trading through registered stock
brokers.
• (b) SEBI has made underwriting optional to reduce the cost of issue.
• (c) Even initial public offer of primary market is permitted through
stock exchange.
• 3. Regulatory Functions:
• These functions are performed by SEBI to regulate the business in stock
exchange. To regulate the activities of stock exchange following functions are
performed:
• (i) SEBI has framed rules and regulations and a code of conduct to regulate the
intermediaries such as merchant bankers, brokers, underwriters, etc.
• (ii) These intermediaries have been brought under the regulatory purview and
private placement has been made more restrictive.
• (iii) SEBI registers and regulates the working of stock brokers, sub-brokers, share
transfer agents, trustees, merchant bankers and all those who are associated
with stock exchange in any manner.
• (iv) SEBI registers and regulates the working of mutual funds etc.
• (v) SEBI regulates takeover of the companies.
• (vi) SEBI conducts inquiries and audit of stock exchanges.
• The Organisational Structure of SEBI:
• 1. SEBI is working as a corporate sector.
• 2. Its activities are divided into five departments. Each
department is headed by an executive director.
• 3. The head office of SEBI is in Mumbai and it has branch
office in Kolkata, Chennai and Delhi.
• 4. SEBI has formed two advisory committees to deal
with primary and secondary markets.
• 5. These committees consist of market players, investors
associations and eminent persons.
• Objectives of the two Committees are:
• 1. To advise SEBI to regulate intermediaries.
• 2. To advise SEBI on issue of securities in primary market.
• 3. To advise SEBI on disclosure requirements of companies.
• 4. To advise for changes in legal framework and to make
stock exchange more transparent.
• 5. To advise on matters related to regulation and
development of secondary stock exchange.
• These committees can only advise SEBI but they cannot
force SEBI to take action on their advice.
 POWERS OF SEBI

• Powers relating to stock exchanges & intermediaries

SEBI has wide powers regarding the stock exchange and intermediaries dealing in

securities. It can ask information from the stock exchanges and intermediaries
regarding their business transactions for inspection or scrutiny and other purpose.
• Power to impose monetary penalties

SEBI has been empowered to impose monetary penalties on capital market

intermediaries and other participants for a range of violations.
• Power to initiate actions in functions assigned

SEBI has a power to initiate actions in regard to functions assigned. For example, it
can issue guidelines to different intermediaries or can introduce specific rules for
the protection of interests of investors.
 CONTINUE…

• Power to regulate insider trading:

SEBI has power to regulate insider trading or can regulate the functions of merchant bankers.
• Powers under Securities Contracts Act:

For effective regulation of stock exchange, the Ministry of Finance issued a Notification on 13
September, 1994 delegating several of its powers under the Securities Contracts (Regulations)
Act to SEBI.
SEBI is also empowered by the Finance Ministry to nominate three members on the Governing
Body of every stock exchange.
• Power to regulate business of stock exchanges:

SEBI is also empowered to regulate the business of stock exchanges, intermediaries associated
with the securities market as well as mutual funds, fraudulent and unfair trade practices
relating to securities and regulation of acquisition of shares and takeovers of companies.
 INTRODUCTION : SAHARA

• Sahara India Pariwar is an Indian conglomerate company headquarter in Lucknow

• Diversified business in finance, infrastructure & housing, media & entertainment,
consumer merchandise retail venture etc
• Started by Mr. Subrata Roy in 1978
• Peak success in very short period
• The company has a market capitalization of US$25.94 billion as of March 2011
 SAHARA VS SEBI MATTER

• Sahara India Real Estate Corporation Ltd (SIRECL) & Sahara Housing Investment
Corporation Ltd (SHICL) issued Optionally fully convertible debentures (OFCDs)
through subscriptions from investors w.e from 25th April 2008 upto 13th April 2011
• Raised around Rs. 20,000 cr from investors
• However amount was collected from about 30 million investors in the guise of
“Private Placement”
• SEBI passed an order stating the two companies to refund the money Rs. 17,400 Cr
within 3 months with 15% interest
• Sahara filed an Appealed before Securities Appellate Tribunal
 SEBI PERFORM IN SAHARA

• SEBI deemed the fund-raising illegal, to which Sahara responded with full-page
advertisements in newspapers.

•  Sebi’s whole time director Prashant Saran orders Subrata Roy and three
other directors of the Sahara group to appear before him at 3pm on April
10 and submit a list of all their assets and copies of their income and
wealth tax returns from financial year 2007-08
• June 2011 - SEBI ordered Sahara firms to immediately refund the
money collected through sales of OFCDs.

• June 2012 - SEBI informed Supreme Court that real estate division
of Sahara india pariwar had no right to mobilize Rs.27,000 crore
from investors through optionally fully convertible debentures
(OFCD) without complying norms of Market regulator - SEBI

• Sahara India Real Estate Corp voices its grievance over a news channel reporting its
proposal made to the Securities and Exchange Board of India on securing the money
it mopped up from the market.
• The Supreme Court tells market regulator SEBI that it was free to initiate action
against two real estate companies of the Sahara group if they fail to take steps for
the refund of investors' money as directed by the apex court

• Sebi files a contempt petition against Sahara claiming it had not furnished the
investor documents within the court stipulated time. The Sahara group in
response moved the Securities Appellate Tribunal (SAT) in protest against
market regulator Sebi's refusal to extend the deadline for the submission of
documents relating to the bond flotations by two unlisted group firms.
• Sahara Group moves the Supreme Court after
SAT rejects its appeal against SEBI.
• The Supreme Court tells market regulator Sebi that it was free to freeze accounts
and seize properties of Sahara group's two companies for defying court orders by
not refunding Rs. 24,000 crore to investors.

• Market regulator Securities Exchange Board of India also cautioned investors and
the general public against dealing with two Sahara group companies -- Sahara India
Real Estate Corp and Sahara Housing Investment Corp -- and their promoters
• Sebi files a contempt petition against Sahara in SC. Says company flouting SC
direction to make refund.

• The Securities and Exchange Board of India (SEBI) urges the Supreme Court to
award maximum punishment to Sahara India's head Subrata Roy. 

• The Supreme Court directs the Sahara Group to give original title deeds of its
assets worth Rs.20,000 crore to SEBI as a guarantee towards the payment of
investors money.
 OVERVIEW OF CASE
• The Supreme Court on 31st August, 2012 in one of its most anticipated judgment of
recent times has directed the Sahara Group.
• Sahara Group and its two group companies Sahara India Real Estate Corporation
Limited (SIRECL) and Sahara Housing Investment Corporation Limited (SHICL)
• To refund around Rs 17,400 crore to their investors within 3 months from the date
of the order with an interest of 15%.
• The Supreme Court while confirming the findings of the SAT has further asked
SEBI to probe into the matter and find out the actual investor base who have
subscribed to the Optionally Fully Convertible Debentures (OFCDs) issued by the
two group companies SIRECL and SHICL.
 BACKGROUND OF CASE

• SIRECL and SHICL floated an issue of OFCDs.

• Sahara India Real Estate Corporation, in an extraordinary general meeting held on March 3,
2008, had resolved through a special resolution to raise funds through unsecured OFCDs by
way of private placement to friends, associates, group companies, workers/employees and
other individuals associated/affiliated or connected in any manner with the Sahara group,
without giving any advertisement to the public.
• red herring prospectus was field with the Registrar of Companies, Kanpur, on March 13, 2008.
• In Prospectus mentioned that the fund raised by the real estate development construction,
townships et cetera — and infrastructure project.
• The memorandum of information for prospective investors clarified that the issue was a
private placement and the company had no intention of listing the OFCDs in any exchange in
India or abroad
• Collecting subscriptions from investors with effect from 25th April 2008 up to 13th April
2011.
• The Both company had a total collection of over Rs 17,656 crore.
• The amount was collected from about 30 million investors.
• The guide of “Private Placement” norms were not followed by company.
• On January 4, 2010, Roshan Lal, a resident of Indore, sent a note, written in Hindi,
to the National Housing Bank, requesting it to look into housing bonds issued by
two companies of the Lucknow-headquartered Sahara group, Sahara India Real
Estate Corporation and Sahara Housing Investment Corporation.
• Being a chartered accountant, Lal wrote in the small note, he found that the bonds,
bought by a large number of investors, were not issued according to the rules.
• The National Housing Bank forward same letter to SEBI (Securities and Exchange
Board of India )
• The Whole Time Member of SEBI while taking cognizance of the matter passed an
order dated 23rd June, 2011 thereby directing the two companies to refund the
money so collected to the investors and also restrained the promoters of the two
companies including Mr. Subrata Roy from accessing the securities market till
further orders.
• The companies have 90 days to deposit the money with Sebi, which has been tasked
by the Supreme Court to return the money to the investors.
WE TAKE A LOOK AT THE DRAMATIC TWISTS AND TURNS THE
CASE HAD TAKEN SINCE AUGUST 2012
IN YEAR 2013
IN YEAR 2014
SEBI VS SAHARA
THANK
YOU!