THE SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI)

*SAPM*Objectives of SEBITo protect the interest of the investors in securitiesTo promote the development of securities marketTo regulate the securities market

*SAPM*

Functions of SEBIRegulating the business in stock exchange and any other securities marketRegistering and regulating the workings of intermediaries associated with securities marketRegistering and regulating the working of collective investment schemes including mutual fundsPromoting and regulating self-regulatory organizationsProhibiting fraudulent and unfair trade practices in the securities market

*SAPM*Functions of SEBIPromoting investors education and training of intermediaries in securities marketProhibiting insiders trading in securitiesRegulating substantial acquisition of shares and take-over of companiesCalling for information, undertaking inspection, conducting enquiries and audits of the stock exchanges, intermediaries and self-regulatory organizations in the securities market

*SAPM*Organization of SEBIDepartmentsPrimary Mkt. dept.Issue Mgt. & Intermediaries Dept.Secondary Mkt. dept.Institutional Invt.AdvisoryCommittees

*SAPM*SEBI Regulates.

*SAPM*SEBI & Primary MarketMeasures undertaken by SEBI:-Entry normsPromoters contributionDisclosureBook buildingAllocation of sharesMarket intermediaries

*SAPM*Conti..1. Entry normsTrack record of dividend payment for minimum 3 yrs preceding the issue.Already listed companies - when post-issue networth becomes more than 5 times the pre-issue networthFor Manufacturing company not having such track record appraise project by a public financial institution or a scheduled commercial bank.For corporate body 5 public shareholders for every Rs.1 lakh of the net capital offer made to the publicBanks 2 yrs of profitability for issues above par.Offer documents to companies.

*SAPM*Conti..2. Promoters contributionShould not be less than 20% of the issued capital.Receiving of promoters contribution.Lock in period as per SEBI.Cases of non-under written public issues.

3. Disclosure draft prospectusUn audited financial results

*SAPM*Conti..4. Book buildingSEBI recommends two-tier under writing systemOne of the mode of public issue thru prospectus.Role of syndicate members and book runners.Minimum 30 centers. 5. Allocation of sharesMinimum application of sharesReservation for small investorsAllotment of securities

*SAPM*Conti..6. Market intermediariesLicensing of merchant bankersLicensing of underwriters, registrars, transfer agents, etc.,Merchant bankers net worth Rs.5 croresSegregate fund based from fee based activities.

*SAPM*SEBI & Secondary MarketReforms in the secondary market:-Governing boardInfrastructureSettlement & clearingDebt marketPrice stabilizationDelistingBrokersInsider Trading

*SAPM*Conti..1. Governing boardBrokers and non-brokers representation made 50:5060% of brokers in arbitration, disciplinary & default committeesFor trading members 40% representation

2. InfrastructureOn-line screen based trading terminals

*SAPM*Conti..Settlement & clearingWeekly settlementsAuctions for non-delivered shares within 80 days of settlementAdvice to set up clearing houses, clearing corporation or settlement guarantee fund Warehousing facilities permitted by SEBI.

*SAPM*Conti..Debt market segmentRegulates thru SEBI (depository & participants) regulation Act 1996.Listing of debt instrumentsInvt. Range for FIIsDual rating for above Rs.500 million

*SAPM*Conti..Price stabilizationDivision to monitor the unusual movements in prices.Monitor prices of newly listed scrip from the first day of trading.Circuit breaker system and other monitoring restrictions could be appliedImposing of special margins of 25% on purchase in addition to regular margin.Price filtersPrice bands

Conti..6. DelistingOn voluntary de-listing from regional stock exchanges buy offer to all share holdersPromoters to buy or arrange buyers for the securities3 yrs listing fees from companies and be kept in Escrow A/c with the stock exchange.

*SAPM*

SEBI and the FIIsUnion Govt. allowed- Foreign Institutional Investors (FIIs)Non-Resident Indians (NRIs), and Persons of Indian Origin (PIOs) to enter into both Primary & Secondary market in India through the portfolio investment scheme (PIS), under Liberalized policy regime. Under this scheme, FIIs/NRIs can acquire shares/debentures of Indian companies through the stock exchanges in India.Implications:-Affects the sensex movementsDetermines the market indicationsGuidelines announced in 1992In 1993, 12 FIIs got registeredAt the end of 1996-97, 439 FIIs were registeredCan trade in securities of listed companies including OTCEI.

The ceiling for overall investment for FIIs:-

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, subject to the approval of the board and the general body of the company passing a special resolution to that effect.

The ceiling of 10 % for NRIs/PIOs can be raised to 24% subject to the approval of the general body of the company passing a resolution to that effect.

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, the Reserve Bank has fixed cut-off points that are two percentage points lower than the actual ceilings.

FIIs breakup in Indian Capital Market

SEBI guidelines for FIIs:-

According to the 1995 regulations, FIIs should hold certificate granted by SEBI to trade in Indian stock market.

To grant the certificate the applicant should Have track record, professional & competence record, financial soundness, general reputation of fairness and integrity.Regulated by an appropriate foreign regulatory authority.Permission under the provisions of FERA Act 1973.(FEMA - 2006)

Valid up to 5 yrs.

*SAPM*CustodiansIs an agencyAppointment of the custodianMaintenance of accountsSubmission 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 stock exchangeTime stipulation for transaction b/w custodian & member of ISE is 48 hrs.

*SAPM*Preferential allotment -To boost up the financial resources

Regulation:-

Under mutual consent of the shareholdersAs per the ceilingsAllotment on the highest price (26 weeks)Permitted up to 15% of the equity within the ceilingHoldings of a single FII increased from 5% to 10% of the equity of a company

*SAPM*Recent developments in FIIsExemption from attaching copy of RBI approval with each market lots.Allowed to invest in unlisted stocks of any company.Allowed to invest up to 100% in debt instruments.Mandatory to settle transactions thru dematerialized mode for FIIs having securities more than Rs.10 cr.

*SAPM*

Critical review of SEBI

DisclosuresDissemination processSettlementBadla tradeSpecial watchCapital adequacySingle authorityStricter registration of brokers