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SEBI

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4/19/12

Companies Act

The issue of capital and matters incidental thereto Capital structure of companies Dividend distribution Inter-corporate investment Matters regarding shareholder’s meetings and format of annual accounts Procedure for allotment of shares and

• • • •

• 4/19/12

Securities Contracts (Regulation) Act, 1956
• • • •

Regulate Stock Exchanges Recognise, De-recognise, Stipulate laws and by-laws Prohibition of security transaction outside the exchanges Gave GOI the ultimate say in everything Administered by MoF, Deptt of 4/19/12 Economic Affairs, GOI

Capital Issues (Control) Act. 1992. 1947 • Repealed and replaced as Capital Issues (Control) Repeal Act. Regulated the Primary or New Issues Market – • To protect the investors Ensure good corporate investment Ensure soundness of capital structure Looking after congestion of Public Issues regulate Foreign Investment as well – – – – To 4/19/12 .

statutory and integrated – – • Need of Vigilant Regulatory Body – 4/19/12 .LPG • • • LPG made the IFS vulnerable Harshad Mehta Scam Existing frame work – Fragmented Ill-coordinated Inadequate Autonomous.

SEBI • • • • • Established on 12th April 1988 Became powerful post 1992 CICA repealed and CIC abolished Under control of MoF HO in Mumbai 4/19/12 .

SEBI Constitution • 6 Members – Chairman 2 from amongst the officials of Central Gov. Ministries dealing with finance and law 2 professionals having experience and/or knowledge of Securities Market 1 from RBI Board – – – 4/19/12 .

Organisation Structure 4/19/12 .

Self-Regulatory Organisations.The Primary Market Policy. Intermediaries. 4/19/12 – . and Investor Grievance and Guidance Deptt • Looks after overall Policy Matters and regulatory issues pertaining to Primary Market like: – Registration Merchant Bankers Portfolio Management Services Investment Advisers Debenture Trustees – – – – Underwriters.

The Issue Management and Intermediaries Department • Examination and Evaluation of prospectus and letter of offers to public and right issues Coordinating with Primary Market policies Registration Regulation and Monitoring of Issuerelated Intermediaries 4/19/12 • • • .

• • • • . Operations and Exchange Administration. New Investment Products and Insider Trading Deptt.• Policies and regulatory issues of secondary market and new investment products Registration and monitoring of mebers of stock exchanges Market surveillance Monitoring Price Movements Insider Trading 4/19/12 The Secondary Market Policy.

Inspection and nonmember Intermediaries Deptt Looks after smaller stock exchanges and Inspection Registration Regulation and monitoring of nonmember intermediaries such as brokers 4/19/12 • • • .• The Secondary Market Exchange Administration.

Mergers and substantial acquisition of shares • IOSCO (International Organisation of Securities and Commissions) membership. Research and Publications and International Relations and IOSCO Deptt • Policy. international relations. Domestic Mutual Funds. and research.Institutional Investment (Mutual Funds and FII). Mergers and Acquisitions. publication and annual report of SEBI 4/19/12 . registration. regulation and monitoring of FIIs.

Legal Department and Investigation Department 4/19/12 .

Objectives of SEBI • To protect the interest of the investors in securities To promote the development of securities market To regulate the securities market • • 154/19/12 .

Functions of SEBI • Regulating the business in stock exchange and any other securities market Registering and regulating the workings of intermediaries associated with securities market Registering and regulating the working of collective investment schemes including mutual funds Promoting and regulating self-regulatory organizations • • • 164/19/12 .

conducting enquiries and audits of the stock exchanges. intermediaries and self-regulatory organizations in the securities market • • • 174/19/12 .Functions of SEBI • Promoting investors education and training of intermediaries in securities market Prohibiting insiders trading in securities Regulating substantial acquisition of shares and take-over of companies Calling for information. undertaking inspection.

SEBI Regulates………. 184/19/12 .

SEBI & Primary Market Measures undertaken by SEBI:• Entry norms Promoters’ contribution Disclosure Book building Allocation of shares Market intermediaries • • • • • 194/19/12 .

Conti……….when post-issue net worth becomes more than 5 times the pre-issue net worth For Manufacturing company not having such track record – appraise project by a public financial institution or a scheduled commercial bank. Already listed companies . For corporate body – 5 public shareholders for every Rs. b) c) d) e) 204/19/12 .1 lakh of the net capital offer made to the public Banks – 2 yrs of profitability for issues above par. 1. Entry norms a) Track record of dividend payment for minimum 3 yrs preceding the issue..

Promoters’ contribution • Should not be less than 20% of the issued capital. 2. Receiving of promoters’ contribution. Lock in period as per SEBI. • • • 3.Conti………. Cases of non-under written public issues.. Disclosure • draft prospectus Un audited financial results • 214/19/12 .

. Allocation of shares • • • 224/19/12 .Conti………. Book building • One of the mode of public issue through prospectus. Minimum application of shares Reservation for small investors Allotment of securities • • 5. 4. Minimum 30 centers. Role of syndicate members and book runners.

transfer agents. registrars. etc.. Merchant bankers net worth – Rs.Conti……….. – – – 234/19/12 . Market intermediaries – Licensing of merchant bankers Licensing of underwriters. 6.5 crores Segregate fund based from fee based activities.

SEBI & Secondary Market Reforms in the secondary market:1. 3. 8. 244/19/12 . 7. 6. Governing board Infrastructure Settlement & clearing Debt market Price stabilization Delisting Brokers Insider Trading 2. 5. 4.

Governing board – Brokers and non-brokers representation made 50:50 60% of brokers in arbitration..Conti………. Infrastructure – On-line screen based trading terminals 254/19/12 . 1. disciplinary & default committees For trading members 40% representation – – 2.

.Conti………. Weekly settlements Auctions for non-delivered shares within 80 days of settlement Advice to set up clearing houses. clearing corporation or settlement guarantee fund Warehousing facilities permitted by SEBI. Settlement & clearing – 3. – – – 264/19/12 .

Listing of debt instruments Invt.. Debt market segment – 4. Range for FIIs – – 274/19/12 .Conti………. Regulates through SEBI (depository & participants) regulation Act 1996.

5. Monitor prices of newly listed scrip from the first day of trading.. Price stabilization – Division to monitor the unusual movements in prices.Conti………. Circuit breaker system and other monitoring restrictions could be applied Imposing of special margins of 25% on purchase in addition to regular margin. Price filters Price bands – – – – – 284/19/12 .

§ § 294/19/12 . Delisting § On voluntary de-listing from regional stock exchanges – buy offer to all share holders Promoters to buy or arrange buyers for the securities 3 yrs listing fees from companies and be kept in Escrow A/c with the stock exchange. 6.Conti………..

12 FIIs got registered At the 4/19/12 end of 1996-97. 439 FIIs were registered • • • • • • • • • . and Persons of Indian Origin (PIOs) to enter into both Primary & Secondary market in India through the portfolio investment scheme (PIS). Under this scheme. allowed• Foreign Institutional Investors (FIIs) Non-Resident Indians (NRIs).SEBI and the FIIs Union Govt. Implications:Affects the sensex movements Determines the market indications Guidelines announced in 1992 In 1993. FIIs/NRIs can acquire shares/debentures of Indian companies through the stock exchanges in India. under Liberalized policy regime.

4/19/12 . subject to the approval of the board and the general body of the company passing a special resolution to that effect.The ceiling for overall investment for FIIs:- • 24% of the paid up capital of the Indian company 10% for NRIs/PIOs. 20% of the paid up capital in the case of public sector banks. including the State Bank of India. • • Modifications in ceilings:- • The ceiling of 24 % for FII investment can be raised up to sectoral cap/statutory ceiling.

Monitoring Foreign Investments The Reserve Bank of India • monitors the ceilings on FII/NRI/PIO investments in Indian companies on a daily basis. For effective monitoring of foreign investment ceiling limits. • 4/19/12 . the Reserve Bank has fixed cut-off points that are two percentage points lower than the actual ceilings.

FIIs breakup in Indian Capital Market 4/19/12 .

Valid up to 5 yrs.SEBI guidelines for FIIs:According to the 1995 regulations. Have track record. general reputation of fairness and integrity. FIIs should hold certificate granted by SEBI to trade in Indian stock market. professional & competence record. 3. Permission under the provisions of FERA Act 1973.(FEMA 2006) 2. 4/19/12 . Regulated by an appropriate foreign regulatory authority. To grant the certificate the applicant should – 1. financial soundness.

Custodians • • • • • Is an agency appointment of the custodian Maintenance of accounts Submission of semi-annual reports (SEBI & RBI) Inspection of accounts SEBI Guidelines:• Foreign brokers can operate only on behalf of registered FIIs. Execution of orders for sale and purchase of securities are done by a member of an Indian 4/19/12 stock exchange • .

Preferential allotment -To boost up the financial Regulation:Under mutual consent of the shareholders As per the ceilings Allotment on the highest price (26 weeks) Permitted up to 15% of the equity within the ceiling Holdings of a single FII – increased from 5% to 10% of the equity of a company 4/19/12 resources • • • • • .

Allowed to invest in unlisted stocks of any company.10 cr. Mandatory to settle transactions through dematerialized mode for FIIs having securities more than Rs.Recent developments in FIIs • Exemption from attaching copy of RBI approval with each market lots. • • • 4/19/12 . Allowed to invest up to 100% in debt instruments.

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