THE SECURITIES CONTRACTS (REGULATION) ACT, 1956

INTRODUCTION

In order to prevent undesirable transactions in securities and to regulate the working of stock changes in the country, the central government enacted the Securities Contracts (Regulation) Act in 1956.

It came into force on February 20, 1957.

The Act applies to the whole India

SECURITIESShares, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate;

Government securities;

Such other instruments as may be declared by the central government to be securities;

Derivative (derivative includes a security derived from a debt instrument, share, loan whether secured or unsecured, risk instrument or contract for difference or any other form of security);

Units of any other instrument issued by any collective scheme to the investors in such schemes;

Rights or interests in securities;

Stock exchange means any body of individuals, whether incorporated or not, constituted for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities. [Sec 2(j)]

RECOGNISED STOCK EXCHANGES

•A stock exchange performs a vital function in the economic activity of a country. By encouraging people to save and invest, the stock exchange helps the capital formation which is essential ingredient for quicker industrial development. • The Securities Contracts (Regulation) Act, 1956 provides that only those stock exchanges which are granted recognition by the Central government can function in India. No person shall, except with the permission of the Central Government, organise or assist in organising or be a member of any stock exchange (other than a recognised stock exchange) for the purpose of assisting in, entering into or performing any contracts in securities.

Application for reorganisation of stock exchange Grant of recognition of stock exchange Withdrawal of recognition Government control over trading methods Power of recognised stock exchange to make rules restricting

voting rights Power of central government to direct rules to be made or to

make rules. Power of recognised stock exchanges to make bye-laws. Power of Securities and Exchange Board of India to make or

amend bye-laws of recognised stock exchanges. Nominees of SEBI on governing body

RECOGNISED STOCK EXCHANGES