Download - SEB law (1)
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PREPARED BY:
Anurag Garg(61)
Himanshu Kumar Singh
Himanshu Kumar(82)
Manish Kumar(90)
Gautam Saini
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Why do we need a regulatory body for Investor
protection in India?
India is an ` informationally ' weak market
Boosting capital market demands restoring the
confidence of lay investors who have been beaten
down by repeated scams
Progressively softening interest rates and an under
performing economy have eroded investment
options, and require enhanced investing skills.
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What is SEBI?
Securities and Exchange Board of India(SEBI)
was established on April 12,1992 in accordance
with the provisions of the Securities and ExchangeBoard of India Act, 1992 to regulate the functions
Of the securities market with a view to promote
their orderly and healthy development ,to provide
adequate protection to investors and to thus create
an environment to facilitate mobilization of
adequate resources through the securities market.
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History of SEBI
Set up originally in 1988 by Govt.of India
Acquired statutory form in 1992under SEBI Act 1992
Chairmanis Sh. CB Bhave Headquartered in Mumbai
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Objectives of SEBI
To protect the interest ofinvestorsinsecurities .
To promote the development of the securitymarket.
To regulate the securities market.
Focus being the greater investor protection, SEBI has
become a vigilantwatchdog
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Functions of SEBI
The functions of SEBI arise out ofits objectives.
It follows 3 kinds of functions:-
I. ProtectiveII. Developmental
III. Regulatory
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Protective Functions
1. SEBI prohibits fraudulent and unfair trade
practicesin the securities market.These
include:Price Rigging
Making misleadingstatements
2. SEBI prohibitsinsider trading
3. SEBI undertakessteps to educate investors.
4. SEBI promotes fair practices and code of
conduct insecurities market.
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Developmental Functions
1. SEBI promotes training ofintermediaries of
the securities market.
2. SEBI undertakes measures to develop thecapital markets by adapting a flexible andadoptable approach.
For Example:
SEBI has permitted internet trading.
SEBI has made underwriting optional.
SEBI has accepted the system of using the
stock exchanges to market IPOs.
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Regulatory Functions
1. SEBI regulates the businessinstock exchangesand any other securities market.
2. SEBI regulates and registers the working ofstock brokers, sub brokers, share transferagents , bankers to anissue, trustees of trustdeeds , registrars to anissue, merchant bankers
, underwriters , portfolio managers, investmentadvisors and other intermediaries who may beassociated with securities market in anymanner.
3. SEBI regulates takeover of companies.
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Continued
4. SEBI conductsinquiries and audits of thestock exchanges.
5. Registers and regulates the working ofcollective investment schemes, including
mutual funds etc.
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Management Of The Board
The board shall consist of following members:
a. A chairman;
b. Two members from amongst the officials of theministry of the central government dealing with finance
and administration of the companies act 1956;
c. One member from amongst the officials of the RBI;
d. Five other members of whom at least 3 shall be thewhole time members to be appointed by centralgovernment.
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Change In Market
The complete transformation of the trading, clearingand settlement infrastructure
Dramatic transformation to a paperless market andtransparent trading system. All trades on the NationalStock Exchange are settled in demat (paperlessmode).
By also moving towards rolling settlement (albeitafter a considerable and unnecessary delay), cuttingthe settlement cycle and now going forward towards aT+1 settlement system, SEBI has made the marketsmuch safer for investors
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Evaluation Of SEBI s Performance
Enhancing disclosures
In most case only the minimum information requiredunder the Companies Act is made available
The manner in which the swap ratio is fixed and whatthe management thinks of the same is largely taken
for granted.
valuation reports are made available for inspection,but access is not easy for all investors.
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Inability To Utilize The Existing Powers Effectively
SEBI could initiate prosecution proceedings on insider trading
only in one case and seven cases on fraudulent and unfair
practices.
Only in seven of the 181 cases, SEBI resorted to cancellation of
registration during the last four years.
Though SEBI has the power to impose a penalty of Rs 1.50
lakhs every time a person fails to furnish the requisite
information, but rarely has this power has been exercised by it .
The provision for mandatory punishment of imprisonment in
addition to award for penalty has scarcely has been used.
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Financial Scams
The Indian Bank Scam- Rs 763 crore
Helped by the main accused M.Gopalakrishnan, Chairman
of IndianBank, a series of borrowers- mostly small
corporates and exportersfrom south were lent huge sums of
money which were not paid.Cases filed:45 since 1992Charge-sheets filed:27Convictions:None as yet
Recoveries:Nil, Government has pumped in Rs 2,675 crore to
revive the bank.
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Continued..
Kaypee-Rs 3,218 Crore
Ketan Parekh funnelled crores of rupeesinto the K-10
stocks, which saw their pricesspurt . Parekh tripped finally
when pay ordersissued by Madhavpura Mercantile
Cooperative Bank(MMCB) bounced, leading to a default
with the Bank of India.
Cases filed:3, in March and May 2001Charge-sheets filed :2Recoveries:Nil
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Home Trade-Rs 1,200 Crore.
Even though the dotcom rage had died
down, home trade manged to give theimpression of being the place which could
manage your money. Unfortunately for the
investors Sanjay Agarwal had simply re
invented the wheel swindling a series of
cooperative banks and using their money in
stock market.Charge sheets filed:Not yet filed
Convictions:None
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