Securities Exchange Board of India Act, 1992

Simplified By :-

Arvind Kohli FCS, FICA

199/7 Urban Estate, Gurgaon 122001

Tel:- 91 (95124) 2325184; 9811026619

e-mail: arvindkohli@gmail.com

HISTORY SEBI was set up by MOF on 12th April 1988 on basis of Patel Committee’s Report, which recommended to set up apex body for regulating the activities of SE’s on lines of SEC of USA and Securities and Investment Board of UK.

SEBI ordinance, 1992 was promulgated on 21st Jan, 1992. SEBI Bill, 1992 was passed by both houses of Parliament and President’s assent was granted on 4th April, 1992 deemed to have come into force w.e.f. 31st Jan, 1992.

OBJECTIVES OF THE ACT

Establishment of Board

--To protect the interests of investors in securities;

--To promote the development of securities market;

--To regulate the securities market; and

--The matters connected therewith or incidental thereto.

SECURITIES MARKET - CONSTITUENTS THEREOF

The issuers of securities

The investors

The intermediaries for e.g. Stock Exchanges, Portfolio Manager, Mutual Funds, Underwriters, Registrar to an issue and STA, Debenture Trustee, Bankers to an Issue, Stock Brokers and Sub- Brokers, FIIs, Depositories and Participants, Custodian of Securities, Credit Rating Agencies, Collective Investment Scheme, Venture Capital Funds

BROAD SCHEME OF THE ACT

1. Establishment of the SEBI

2. Powers and functions of the Board (SEBI)

3. Registration certificate

4. Finance, Accounts, Audit

5. Penalties and Adjudications

6. Establishment, jurisdiction, Authority and Procedure of Appellate Tribunal

7. Miscellaneous

1. ESTABLISHMENT OF SEBI

A. SECTION 3 ESTABLISMENT OF SECURITIES AND EXCHANGE BOARD OF INDIA

B. SECTION 4 MANAGEMENT OF THE BOARD

C. SECTION 5 TERMS OF OFFICE AND OTHER CONDITIONS

D. SECTION 6 REMOVAL OF MEMBER

E. SECTION 7 MEETINGS

F. SECTION 7A MEMBERS INTERESTED

G. SECTION 8 VACANCIES ETC. NOT TO INVALIDATE PROCEEDINGS

2. POWERS AND FUNCTIONS OF SEBI Section 11

1. Regulating the business in Stock Exchanges and other securities market.

2. Registration and regulation of the working of intermediaries, depositories, participants, custodians of securities, FII’s, credit rating agencies, venture

capital fund, collective investment schemes including mutual funds.

3. Promoting and regulating self-regulatory organizations

Contd………

4. Prohibiting of fraudulent, unfair trade practices and insider trading relating to

securities market5. Providing investor education and training of

intermediaries of securities market6. Prohibiting in securities7. regulating substantial acquisitions of shares

and takeover of companiesFor accomplishing each of the above functions, SEBI has framed Rules.

POWERS AND FUNCTIONS OF SEBI Contd.

Sec. 11(A) Board to regulate or prohibit issue of prospectus, offer document or advertisement soliciting money

for issue of securities

Sec. 11B Power to issue directions

Sec. 11C Investigation

Sec. 11D Cease and desist proceedings

Sec. 12A Prohibition of manipulative and deceptive devices, insider trading and substantial acquisition of securities or control.

WIDEST POWERS IN RELATION TO SECURITIES MARKET

The following measures either pending investigation or an inquiry or on completion of such investigation or inquiry-

1. suspend trading of any security on any recognized stock exchange

2. restraint persons from accessing securities market i.e. to buy sell or deal in securities.

3. suspend any office bearer of any stock exchange.

impound and retain the proceeds of securities in respect of any transaction, which is under investigation.attach bank accounts of an intermediary or any person.direct intermediary or any person associated with the securities market not to dispose of or alienate an asset.

5. PENALTIES AND ADJUDICATION

PENALTIES FORFailure to furnish information,

returnFailure of any person to enter into

any agreement with clientFailure to redress investor

grievanceDefaults in case of mutual fundsFailure to observes R&R by AMCQuantum 1Cr. – 25 Cr.

Default in case of Stock BrokersFor Insider TradingFor non disclosure of Acquisitions

and takeoversFor Fraudulent and Unfair Trade

Practices

SECURITIES APPELLATE TRIBUNAL

ONLY ORDERS PASSED BY SEBI AFTER AMENDMENT ACT OF 1999

WITH IN 45 DAYS

ENTRUSTED WITH POWERS OF CIVIL COURT

RIGHT TO LEGAL REPRESENTATION

ORDERS APPEALABLE TO SUPREME COURT

SEBI: Various Rules and Regulations relating to

Intermediaries

Merchant BankersPortfolio ManagerMutual FundsUnderwritersRegistrar to an issue and STADebenture TrusteeBankers to an Issue

Stock Brokers and Sub-BrokersFIIsDepositories and ParticipantsCustodian of SecuritiesCredit Rating AgenciesCollective Investment SchemeVenture Capital Funds

Disclosure and Investor Protection Guidelines,2000 (Rules abolished and new Rules ISSUE OF CAPITAL AND DISCLOSURE REGULATIONS 2009 WERE implemented.)

Since there are Specialised institutions for the same, it is outside the scope of present discussions .

Employees Stock Option Scheme and Employees Stock Purchase Scheme

Substantial Acquisition of Shares and Takeover Reulations,1997 - 75% of SEBI FUNCTION ARE BASED ON THIS AREA ONLY

Prohibition of Insider Trading Regulations

Buy Back of Securities

SEBI: Various Rules and Regulations relating to specific actions

SEBI: SUBSTANTIAL ACQUISITION AND TAKEOVER REGULATIONS – MAIN

PROVISIONS

Reg. 3 Applicability of the Regulation – Exemptions from the applicability of Regulations 10-12.Reg. 6 Transitional provision Reg. 7 Acquisition of 5% and more shares of a

company Reg. 8 Continual disclosures - 10, 14, 55 & 74%Reg. 10 Acquisition of 15% or more shares or

voting rights of any company. Reg. 11 Consolidation of holdings Reg. 12 Acquisition of control over a company .