role of sebi and its power in the capital market

7/29/2019 Role of SEBI and its power in the capital market

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Benson Varghese 19

Sarita Sapaliga 29

Aditi Mahapadi 40 Dhananjay Joshi 43

Shruti Kerkar 52


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SEBI is the regulator for Securities Market in India

SEBI was set up originally in 1988 by Govt. of India

Acquired statutory form in 1992 under SEBI Act

1992

Headquartered in Mumbai


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Growth of capital market during 1980s

Increase in investors lead to malpractices on part

of companies

These malpractices and unfair trade practices have

eroded investors confidence and multiplied

investor grievances Government and stock exchanges were rather

helpless


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To protect the interests of investors in securities

Make rules and regulation for the securities market

To promote efficient services by brokers, merchant

bankers and financial intermediaries


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Power to make rules for controlling stock exchange

To promote self-regulatory organization of intermediaries

To register and regulate the working of mutual funds

To provide license to dealers and brokers

To Stop fraud in Capital Market

To Control the Merge, Acquisition and Takeover

To issue guidelines to companies regarding capital issues

To audit the performance of stock market


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SEBI has to be responsive to the needs of three groups,

which constitute the market:

the issuer of securities

the investors the market intermediaries

SEBI has three functions rolled into one body:

Quasi-legislative

Quasi-judicial

Quasi-executive


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Upendra Kumar Sinha Chairman

Prashant Saran Whole Time Member

Rajeev Kumar Agarwal Whole Time Member

Dr. Thomas Mathew Joint Secretary, Ministry of Finance

V.K. Jairath Magya Member Appointed

Anand Sinha Deputy Governor, RBI

Naved Masood Secretary, Ministry of CorporateAffairs


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Power to issue directions In the best interest of investors To secure the proper management of any such

intermediary or person To any company

Investigation Inspection of any books, registers and other documents Calling for information and record from any bank or any

other authority Conducting research

Cease and desist proceedings Suspend the trading of any security Restrain persons from accessing the securities market Suspend any office-bearer from holding such position

Regulate or prohibit issue of prospectus, offer document oradvertisement soliciting money for issue of securities


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Technical Advisory Committee Committee for review of structure of market infrastructure institutions

Members of the Advisory Committee for the SEBI Investor Protection andEducation Fund

Takeover Regulations Advisory Committee

Primary Market Advisory Committee (PMAC)

Secondary Market Advisory Committee (SMAC)

Mutual Fund Advisory Committee

Corporate Bonds & Securitization Advisory Committee

Takeover Panel

SEBI Committee on Disclosures and Accounting Standards (SCODA)

High Powered Advisory Committee on consent orders and compoundingof offences

Derivatives Market Review Committee

Committee on Infrastructure Funds


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SEBI

Primary

Market SecondaryMarket MutualFundsForeign

Institutional

Investment


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Entry norms

Promoters contribution

Disclosure

Book building

Allocation of shares

Market intermediaries


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Registration, supervision, compliance monitoring andinspections of all market intermediaries in respect of allsegments of the markets viz. equity, equity derivatives, debtand debt related derivatives.

Formulating new policies and supervising the functioningand operations (except relating to derivatives) of securities

exchanges, their subsidiaries, and market institutions suchas Clearing and settlement organizations and Depositories(Collectively referred to as Market SROs.)


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Supervising trading at derivatives segments of stock

exchanges, introducing new products to be traded,and consequent policy changes


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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 number of members.

(b) Capital adequacy norms have been laid 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.


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Brokers:

(a) Registration of brokers and sub-brokers is made compulsory.

(b) Compulsory audit ofbrokers book and filing of audit reportwith SEBI have been made mandatory.

(c) In order to ensure that brokers are professionally qualifiedand financially solvent, capital adequacy norms for registrationof brokers have been evolved.

(d) To bring about greater transparency and accountabilityin the broker-client relationship, SEBI has made it mandatory forbrokers to disclose transaction price and brokerage separately inthe contract notes issued to client.

(e) No broker is allowed to underwrite more than 5% of publicissue.


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(a) Foreign institutional investors have been

allowed to invest in all securities traded in

primary and secondary markets.

(b) There would be no restriction on the volume of

investment for the purpose of entry of FIIs.

Holding of single FII will not exceed the ceiling of 5%

of equity capital Tax rate 10% on large capital gain , 30% on short

term capital gains, 20 % on dividend


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Issue related manipulations , misstatement in

prospectus, gray market operations and

irregularities in the issue process

Post listing market manipulations like price rigging,circular trading

Insider trading

Manipulations relating to takeovers and acquisitions Other violations of provisions of SEBI Act /

Regulations


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Administrative proceedings

Monetary penalty proceedings

Disciplinary proceedings

Prosecution

Civil litigation


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Contravention of provisionsof Insider Trading

Regulations

Penalty of Rs. 25 crore or 3times the amount of profits

made out of such insidertrading, whichever is higher.

Failure to redress thegrievances of investors, after

having been called upon bythe Board in writing toredress the grievances ofinvestors.

Penalty of Rs.1 lakh per dayduring which such failure

continues or Rs. 1 crore,whichever is less

Indulgence in any Fraudulentand Unfair Trade Practices. Penalty of Rs. 25 crore or 3times the amount of profitsmade out of such practices,

whichever is higher.


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Finally SEBI allowed insurers to raise money from existing ULIPs, but asked them not

to issue fresh ULIPs

The RBI Act, the Insurance Act, the SEBI Act and the Securities Contracts Regulation

Act were amended on 18 June 2010 and clarity on regulation of ULIPs was brought

The finance ministry broked peace between them

SEBI IRDA planned to move to the apex Court

IRDA asked insurers to ignore the order

SEBI banned 14 life insurance companies


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RBI

SEBI

IRDA

PFRDA

FMC

SAT

DICGC

FSDC


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United

Financial

Agency

IRDA

SEBI PFRDA

FMC

The Financial Sector Legislative Reforms Commission, headedby former justice B N Srikrishna recommended the creation ofa super regulator United Financial Agency


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Presently, over 60 Acts and multiple rules and

regulations govern the financial sector.

The fragmented regulatory architecture has led to a

loss of scale and scope UFA would deal with all financial firms other than

banking and payments

UFA would lead to economies of scale in the financial

system and provide benefits of minimising the

intermediation cost


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THANK YOU

role of sebi and its power in the capital market

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