Security Analysis

And
Portfolio
Management

ASSIGNMENT

Submited To: Submitted By:

Prof. Kamal Kishore Deepak Kumar
17/014
 Objectives of SEBI
Securities & Exchange Board of India (SEBI) formed under the SEBI Act,
1992 with the prime objective of
– Protecting the interests of investors in securities,
– Promoting the development of, and
– Regulating, the securities market and for matters connected therewith
or incidental thereto.’
Focus being the greater investor protection, SEBI has become a vigilant
watchdog

Functions Of SEBI
Section 11 of the Securities and Exchange Board of India Act.

A) Regulation Of Business In The Stock Exchanges: A review of the

market operations, organizational structure and administrative control of the
exchange.

• Administrative control of the exchange

 All stock exchanges are required to be Body Corporates
 The exchange provides a fair, equitable and growing market to
investors.
 The exchange’s organisation, systems and practices are in
accordance with the Securities Contracts (Regulation) Act (SC(R)
Act), 1956

B) Prohibiting fraudulent and unfair Trade Practices In the

Securities Market

SEBI is vested with powers to take action against these practices relating to
securities market manipulation and misleading statements to induce sale/purchase
of securities.
C) Prohibition of Insider Trading
– Stock Watch System, which has been put in place, surveillance over
insider trading would be further strengthened.

D) Investor education and the training of intermediaries

– SEBI distributed the booklet titled “A Quick Reference Guide for
Investors” to the investors
– SEBI also issued a series of advertisement /public notices in national
as well as regional newspapers to educate and caution the investors
about the risks associated with the investments in collective investment
schemes
– SEBI has also issued messages in the interest of investors on National
Channel and Regional Stations on Doordarshan.

E) Registration And Regulation Of The Working Of Intermediaries

PRIMARY MARKET SECONDARY MARKET

Merchant Bankers Stock Brokers

Underwriters Sub-Brokers
Portfolio Managers

• Regulates the working of the depositories [participants], custodians of

securities, foreign institutional investors, credit rating agencies and such
other intermediaries

F) Registration And Regulation Of Mutual Funds, Venture Capital

Funds & Collective Investment Schemes.

 AMFI-Self Regulatory Organization-'promoting and protecting the

interest of mutual funds and their unit-holders, increasing public awareness
of mutual funds, and serving the investors' interest by defining and
maintaining high ethical and professional standards in the mutual funds
industry'.

 Every mutual fund must be registered with SEBI and registration is

granted only where SEBI is satisfied with the background of the fund.
  SEBI has the authority to inspect the books of accounts, records and
documents of a mutual fund, its trustees, AMC and custodian where it deems
it necessary.

 SEBI (Mutual Funds) Regulations, 1996 lays down the provisions for the
appointment of the trustees and their obligations.

 Every new scheme launched by a mutual fund needs to be filed with SEBI
and SEBI reviews the document in regard to the disclosures contained in
such documents.

 Regulations have been laid down regarding listing of funds, refund

procedures, transfer procedures, disclosures, guaranteeing returns etc.

 SEBI has also laid down advertisement code to be followed by a mutual fund
in making any publicity regarding a scheme and its performance.

 SEBI has prescribed norms / restrictions for investment management with a

view to minimize / reduce undue investment risks.

 SEBI also has the authority to initiate penal actions against an erring MF.

 In case of a change in the controlling interest of an asset management

company, investors should be given at least 30 days time to exercise their
exit option.

G) Promoting & Regulating Self Regulatory Organizations.

– In order for the SRO to effectively execute its responsibilities, it would
be required to be structured, organized, managed and controlled such
that it retains its independence, while continuing to perform a genuine
market development role.

H) Inspection and inquiries.

I) Regulating substantial acquisition of shares and take-overs.

J) Performing such functions and exercising such powers under
the provisions of the securities contracts (regulation) act, 1956 as
may be delegated to it by the central government.

K) Levying fees or other charges for carrying out the purposes of

this section.

L) Conducting research for the above purposes.

 Powers of SEBI
In order to carry out its functions SEBI has been given various powers which were
previously vested with the Central Government. These include:
• Power to call for periodical returns from Stock Exchanges.
• Power to call upon the Stock Exchange or any member of the exchange to
furnish relevant information.
• Power to appoint any person to make inquiries into the affairs of the Stock
Exchange.
• Power to amend the bye-laws of the Stock Exchange.
• Power to compel a public company to list its shares in any Stock Exchange.
• Power to control and regulate stock exchanges
• Power to grant registration to market intermediaries
• Power to register and regulate working of collective investment schemes
including mutual funds
• Power to promote and regulate self-regulatory bodies
• Power to prohibit insider trading and fraudulent and unfair trade practices
relating to securities
• Power to promote investor’s education and training of intermediaries in the
market
• Power to regulate substantial acquisition of shares and takeover of
companies
• Power to levy fees
• Power to conduct research and other functions
 Security Appellate Tribunal
The Central Government by notification has established an Appellate Tribunal
known as the Securities Appellate Tribunal. Security Appellate tribunal is formed
to:

 Hear appeals against SEBI orders and penalties.

 Hear appeals against listing refusal by SE and delisting by SE.
 Follows principles of Natural Justice.
 Presided by Supreme Court Judge
 Appeal lies to Supreme Court

A Securities Appellate Tribunal shall consist of a Presiding Officer and two

other Members, to be appointed, by notification, by the Central Government:

Powers of SAT
(1) The Securities Appellate Tribunal is not bound by the procedure laid down
by the Code of Civil Procedure, 1908(5 of 1908), but it is guided by the principles of
natural justice and, subject to the other provisions of SEBI Act and of any rules, the
Securities Appellate Tribunal has powers to regulate their own procedure including
the places at which they shall have their sittings.

(2) The Securities Appellate Tribunal has, for the purposes of discharging
their functions under the SEBI Act, the same powers as are vested in a civil court
under the Code of Civil Procedure, 1908(5 of 1908), while trying a suit, in respect of
the following matters, namely:

(a) Summoning and enforcing the attendance of any person and examining
him on oath;

(b) Requiring the discovery and production of documents;

(c) Receiving evidence on affidavits;

(d) Issuing commissions for the examination of witnesses or documents;

 (e) Reviewing its decisions;

(f) Dismissing an application for default or deciding it ex parte;

(g) Setting aside any order of dismissal of any application for default or any
order passed by it ex parte;

(h) Any other matter which may be prescribed.

(3) Every proceeding before the Securities Appellate Tribunal deems to be

a judicial proceeding within the meaning of sections 193 and 228, and for the
purposes of section 196 of the Indian Penal Code(45 of 1860), and the Securities
Appellate Tribunal is deemed to be a civil court for all the purposes of section 195
and Chapter XXVI of the Code of Criminal Procedure, 1973(2 of 1974).

Insider Trading

What Does Insider Trading Mean? .

The buying or selling of a security by someone who has access to material,

nonpublic information about the security. Insider trading can be illegal
or legal depending on when the insider makes the trade: it is illegal when the
material information is still nonpublic--trading while having special knowledge is
unfair to other investors who don't have access to such knowledge. Illegal insider
trading therefore includes tipping others when you have any sort of nonpublic
information. Directors are not the only ones who have the potential to be
convicted of insider trading. People such as brokers and even family members can
be guilty .

Insider trading is legal once the material information has been made public, at
which time the insider has no direct advantage over other investors. The SEC,
however, still requires all insiders to report all their transactions. So, as insiders
have an insight into the workings of their company, it may be wise for an investor to
look at these reports to see how insiders are legally trading their stock.