PRESENTED BY

SEBI(Securities Exchange

and Board Of India)The Securities and Exchange

Board Of India was established on April 12,1992 in accordance

with the provisions of the Securities and Exchange Board

of India Act,1992.

Its main function is to stop fraudulent activities of

stock market.

SEBI promotes orderly and healthy development in the stock market but initially SEBI was not able to exercise complete control over the stock market transactions.

It was left as a watch dog to observe the activities but was found ineffective in regulating and controlling them. As a result in May 1992, SEBI was granted legal status.

SEBI is a body corporate having a separate legal existence and perpetual succession.

Formed:12 April,1992Jurisdiction:

Government Of IndiaHeadquarters :

Mumbai , MaharashtraWebsite:

www.sebi.gov.in

Structure of SEBI

The board shall consists of the following members :-

Chairman Two members, one from amongst the officials of the Central government dealing with finance and another from the administration of Companies Act,1956. One member from amongst the officials of the Reserve Bank of India. Five other members of whom at three shall be the whole time members to be appointed by the Central Government

POWERS OF SEBIFor the discharge of its functions

efficiently, SEBI has been vested with the following powers:

To approve by−laws of stock exchanges by SEBI

To require the stock exchange to amend their by−laws.

Inspect the books of accounts and call for periodical returns from recognized stock exchanges.

Inspect the books of accounts of a financial intermediaries.

Compel certain companies to list their shares in one or more stock exchanges.

Registration brokers

Reasons For Establishment Of SEBI

With the growth in the dealings of stock markets, lot of malpractices also started in stock markets such as price rigging, ‘unofficial premium on new issue, and delay in delivery of shares, violation of rules and regulations of stock exchange and listing requirements.

Due to these malpractices the customers started

losing confidence and faith in the stock exchange.

So government of India decided to set up an agency or regulatory body known as Securities Exchange Board of India (SEBI).

Objectives Of SEBI

The overall objectives of SEBI are to protect the interest of investors and to promote the development of stock

exchange and to regulate the activities of stock market. The

objectives of SEBI are: To regulate the activities of stock

exchange. 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.

To regulate and develop a code of conduct for intermediaries such as brokers, underwriters, etc.

Purpose And Role Of SEBI

SEBI was set up with the main purpose of keeping a check on malpractices and protect the interest of investors. It was set up to meet the needs of three groups.

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.

Importance of SEBI

Power to make rules for controlling stock

exchange. To provide license to dealers and

brokers. To Stop fraud in Capital Market. To Control the Merge, Acquisition

and Takeover the companies. To audit the performance of stock

market. To make new rules on carry –

forward transactions

FUNCTIONS OF SEBI

Functions of SEBI

Functions can be broadly divided into:

› Protective functions

› Developmental functions

› Regulatory functions

Functions of SEBI1. Protective FunctionsThese functions are performed by SEBI

to protect the interest of investor and provide safety of investment.

As protective functions SEBI performs following functions:

(i) It Checks Price Rigging (ii) It Prohibits Insider trading (iii) SEBI prohibits fraudulent and

Unfair Trade Practices

Other  protective functions

SEBI undertakes steps to educate investors so that they are able to evaluate the securities of various companies and select the most profitable securities.

 SEBI promotes fair practices and code of conduct in security market by taking following steps:

• SEBI has issued guidelines to protect the interest of debenture-holders wherein companies cannot change terms in midterm.

• SEBI is empowered to investigate cases of insider trading and has provisions for stiff fine and imprisonment.

• SEBI has stopped the practice of making preferential allotment of shares unrelated to market prices.

2. Developmental Functions:

These functions are performed by the SEBI to promote and develop activities in stock exchange and increase the

business in stock exchange. Under developmental categories following functions are performed by SEBI:

SEBI promotes training of intermediaries of the securities market.

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:

SEBI has framed rules and regulations and a code of conduct to regulate the intermediaries such as merchant bankers, brokers, underwriters, etc.

These intermediaries have been brought under the regulatory purview and private placement has been made more restrictive.

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.

SEBI registers and regulates the working of mutual funds etc. SEBI regulates takeover of the companies. SEBI conducts inquiries and audit of stock exchanges.

GUIDELINES

BY SEBI

Guidelines by SEBI

Primary market Secondary market Foreign institutional investors issue of bonus shares Right issues Debentures Underwriters Investor protection

Guidelines For Primary Market

New company :a new company is one which has not completed 12 months commercial production and does not have audited results. The promoters do not have track record . These company have to issue shares only at par.

New company setup by existing company : when a new company is being setup by existing companies with a 5 yr track record of consistent profitability and a contribution of at least 50% in the equity of new company, it can issue its shares at premium.

Private and closely held companies- these having track record of consistent profitability for at least 3 yrs. Shall be permitted to price their issue freely.

The issue price shall be determined only by the issues in consultations with lead managers to the issue.

Existing listed companies- it will be allowed to raise fresh capital, by freely pricing expanded capital provided the promoters contribution is 50% first Rs. 100 crores of issue, 40% on next Rs. 200 crores , 30% on next Rs. 300 crores and 15% on balance issue amount.

Guidelines For Secondary Market

Stock Exchange:-

a. Board of directors of stock exchange has to be reconstituted so as to include non members, public representatives, government representative to the extent of 50% of total no. of members.

b. Capital adequacy norms have been led down for members of various stock exchanges depending upon their turnover of trade and other factors.

c. Working hours for all stock exchanges have been fixed uniformly.

d. All the recognized stock exchanges will have to inform about the transaction within 24 hours.

Brokers:

a. Registration of brokers and sub brokers is made compulsory.

b. Compulsory audit of brokers book and filing of audit report with SEBI have been made mandatory.

c. In order to ensure that brokers are professionally qualified and financially solvent, capital adequacy norms for registration of brokers have been evolved.

d. To bring about greater transparency and accountability in the broker-client relationship, SEBI has made it mandatory for brokers to disclose transaction price and brokerage separately in the contract notes issued to clients.

e. No broker is allowed to underwrite more than 5% of public issue.

Foreign Institutional Investors

FIIs have been allowed to investing all securities traded in primary and secondary market.

There would be no restrictions on the volume of investment for the purpose of entry of FIIs.

Guidelines For Rights Issue

o Where composite issues are made by listed companies, they can be issued at different prices.

o Gaps between the clearance dated of right issues and public issues should not exceed 30 days.

o If right issues of listed companies exceed 50 Rs Lakhs , issue should be managed by authorized merchant bankers.

o Underwriting of right issues is not mandatory but as per SEBI rules right issues can be underwritten.

o No preferential allotment shall be made along with the right issues.

Guidelines To Issue Of Bonus Share

Issue of bonus shares after any public/rights issue is subject to the condition that no bonus shall be made which will dilute the value or rights of holders of debentures, convertible fully or partly.

There should be a provision in the articles of association of the company for issue of bonus shares.

The bonus is made out of free reserves built out of the genuine profits or share premiums collected in cash only.

No bonus issue can be made within 12 months of any public issue/ rights issue.

Guidelines To Debentures

The amount of working capital debenture should not exceed 20% of the gross current asset.

Normally debentures above 7 years can not be issue

The rate of interest can be decided by the companies.

The debt equity ratio should not exceed 2:1 Debentures issued to public have to be

secured and registered. Credit rating is compulsory for all debentures

except those issued by public sector.

Guidelines For Underwriters

Hold certificate of registration granted by certificate is valid for 3 years.

Books of account to be maintained for a period of 5 yrs.

Guidelines For Investor Protection

New issues Prohibition of unfair trade practices

Investor education Grievance cell

INVESTOR PROTECTION

Investor protection is defined by the extent to which the commercial law and its enforcement protect investors from expropriation by company insiders.

Investor protection is essential to encourage honest advertising of financial products, and to prevent fraud to make sure that investors do not lose money if their investments default (are not repaid).

'Securities Investor Protection Corporation - SIPC'

A nonprofit corporation created

by an act of Congress to protect the clients

of brokerage firms that are forced into

bankruptcy.

Need for investor protection

Corporate scams and investment. Insider Trading. Non-Disclosure of material facts. Vanishing companies – Taking

investors’ money and disappearing.

Terrorist funding. Money laundering.

ROLE/CONTRIBUTION OF SEBI IN INVESTOR

PROTECTION :

 Issue of guidelines

SEBI has issued guidelines to companies (bringing new issues in the market) mutual funds, portfolio managers, merchant bankers, underwriters, lead managers, etc. These guidelines are for bringing transparency in their operations and also for avoiding exploitation of investors by one way or the other. In order to reduce the cost of issue, the underwriting is made optional on certain terms. These steps are also for the protection of investors. SEBI keeps watch on all intermediaries and see that they follow the guidelines in the right spirit. It also takes panel actions when the guidelines are not followed.

Public interest advertisements:

SEBI issues public interest advertisements toenlighten investors on the basic features of

various instruments and minimumprecautions they should take before

choosing an investment. The SEBI desires tocreate an awareness among investors about

their rights and about remedies ifproblem arise. It has published some

booklets for the information and guidance of

investors.

Dealing with complaints of investors:

The investors can make complaints to SEBI if they face problems relating to their

investment in industrial securities and financial assets. SEBI receives thousands of complaints relating to non-receipt of refund

orders, allotment letters, non-receipt of dividend or interest and delays in the transfer

of shares and debentures. SEBI is making efforts to solve such complaints through

appropriate measures.

Investor education:

SEBI is aware that investor education is important for his

protection. It encourages the formation of investor associations

that disseminateinformation through news letters.

More than nine such associations are registered

with SEBI. SEBI is bringing out two monthly publications for the

investors. These are:(a)SEBI- Market Review, (b) SEBI

News-letter. These publications are for the

education, guidance and protection of investors.

Investor surveys

SEBI has also conducted surveys in respect of investment and

opportunities for the benefit of small investors. The findings of

the surveys are givenwide publicity so as to provide proper guidance to investors

regarding theirinvestment decisions.

Introduction to stock invest

SEBI has introduced stock invest as a new instrument

useful while submitting application for shares. This new

instrument introducedthrough the co-operation of banks gives protection to

investors as they get interest onthe application money till the

allotment of shares.

Disclosures by companies:

SEBI has introduced norms for disclosure of half yearly

unaudited results of companies. It has also revised the format of

prospectus toprovide more information to

investors. It also insists that every share application. form

is accompanied by an abridged prospectus. The provisions relating

to disclosures arefor the information and protection of

small/average investors.

Code regarding takeovers

SEBI has now issued code regarding takeovers of

companies, mergers and amalgamations. It has introduced

regulations governingsubstantial acquisition of shares and

takeovers and lays down the conditions under

which disclosures and mandatory public offers have to be made to the

shareholders.Here, the purpose is to protect the interests of investors even when

they are notdirectly party to such takeovers.