DEVINA VARMA

GAJANAN

ADVITIYA PANDIT

PRITHVIRAJ P

SEBI
The Securities and Exchange Board of India was setup in
1988 through an administrative order and it became a
statutory body in 1992.
Established on April 12, 1992 in accordance with the
provisions of the Securities and Exchange Board of India
Act, 1992.
The Preamble of SEBI describes its objective as
"...to protect the interests of investors in securities and
to promote the development of, and to regulate the
securities market and for matters connected therewith or
incidental thereto

FINANCIAL CONSTITUENTS EXISTING

BEFORE SEBI
Companies Act, 1956

Securities Contracts (Regulation) Act , 1956

Capital Issues (Control) Act , 1947

GENESIS OF SEBI
Liberalization and reforms to IFS in 1991 led to
significant increase in volume of business in the primary
and secondary markets ,making the system vulnerable to
external shocks.
The 1992 scam
It was felt that the existing regulatory system was
fragmented and ill coordinated and there was a need of
an autonomous, statutory, integrated organization to
work as an efficient watchdog for smooth functioning of
IFS.

CONSTITUTION OF SEBI
Chairman

2 officials of central
govt. dealing with
finance and law

2 professionals
related to security
market

1 official from RBI

SEBI is a six member body, as shown in the diagram

above.
All members ,except the RBI member, are appointed by
the government.
The Central govt. is empowered to supersede the SEBI in
public interest, or on account of grave emergency.

REGULATORY APPROACH OF SEBI

SEBIs Twin task of Regulation and Development Rapid and
healthy market development is the outcome of well
regulated structures.

Self regulation and regulation by exception are the

cornerstones of the regulatory framework.
SEBI also aims at efficient mobilization and allocation of
resources through securities markets, stimulating
competitions and encouraging innovations.

ORGANIZATION OF SEBI
The Primary Market Policy, Intermediaries,SROs,
and Investor Grievance and Guidance
Department

The Issue Management and Intermediaries

Department

The Secondary Market Policy, Operations and

Exchange Administrations, New Investment
Products and Insider Trading Department

ORGANIZATION OF SEBI contd.

The Secondary Market Exchange Administration,
Inspection and Non-Member Intermediaries
Department
Institutional Investments, Mergers and
Acquisitions, Research and Publications, and
International Relations and IOSCO Department
Legal Department

Investigation Department

FUNCTIONS OF SEBI
Regulating the business in stock exchanges and any
other securities market.
Registering and regulating the working of collecting
investment schemes, including mutual funds.
Promoting and regulating self regulatory organizations.
Prohibiting fraudulent and unfair trade practices in the
securities market.
Promoting investor education and trading of securities
in the securities market.

POWERS OF SEBI
Some functions SEBI can carry out with its powers are
Ask any intermediary or market participant for
information.
Inspect books of depository participants, issuers or
beneficiary owners.
Suspend or cancel a certificate of registration granted to
a depository participant or issuer.
Suspend or cancel certification issued to the custodian of
securities.
Suspend or cancel registration issued to foreign
institutional investors.

SEBI: BROAD
FUNCTIONAL
REALMS

SEBI PERFORMANCE
Primary Securities Market
Secondary Market and
Intermediaries
Mutual Funds
Miscellaneous

PRIMARY SECURITIES MARKET

Raising the Disclosure Standards in Public Issues and thereby enhancing
their transparency- implementation of the Malegam Committee Report.
The pricing of preferential allotment of securities has to be at market
related levels and has a minimum of five-year lock in period.

The top 100 listed companies have to compulsorily include Business

Responsibility Report as part of the annual report.
Bankers to an issue and portfolio managers have to be registered with
SEBI.

PRIMARY SECURITIES CONTD

Centralized Web Based Complaints Redressal System, SCORES, to
address investor complaints.

Companies desirous of getting their stock equities listed on stock

exchanges were mandated to obtain SCORES authentication.

Public Issues in electronic form: A broker network of more than

1000 locations for distributing electronic form of public issues.
Revised Eligibility Criteria for making IPOs: Issuers should be
profitable for at least three of the preceding five years, the
minimum average profit being 15 Crore INR.

SECONDARY MARKET AND

INTERMIDIARIES
Centralisation of KYC records of Investors opening
accounts from January2012.
Flexibility in PAN verification: Intermediaries can perform
this verification online.
Acceptance of Aadhaar as proof of identity and address.

SEBI has mandated sending the details of the transactions

through SMS or e-mail alerts by end of trading day.
Penal Action Directly by SEBI against any member of a
stock exchange for any violations of the SEBI Act.

SECONDARY MARKETS CONTINUED..

Mandatory for Stock Brokers to reveal the transaction price
and brokerage charges in the contract document.

Timeline for transfer of debt securities and transfer of

shares has been reduces to 15 days from a month vide the
circular dated July 05,2012.
Requirement of Base Minimum Capital(BMC) for a stock
broker or trading member which has to be proportionate to
the risks brought into the system by the broker.

MUTUAL FUNDS
26 MFs registered with SEBI on
March 31, 1996 while the UTI
has been brought under SEBI
since July 1994.

Every MF needs to have a

minimum of 20 investors with
no investors holding not
exceeding 25% of the corpus.

MFs are required to make

complete disclosures in the halfyearly trustee report to SEBI
regarding the investor education
and awareness initiatives.

MFs to have separate plans for

direct investments(investments
not routed through a
distributor)

MISCELLANEOUS

Under the May 2012

regulations of SEBI,
Private Equity
Funds, Real Estate
Funds, Hedge Funds
are required to be
registered with
SEBI.

Under January 2013

regulations of SEBI,
all individual,
corporate and
partnership firms
providing
investment advices
have to be registered
with SEBI.

Limit for FII

investments(revised
in 2006-2007):
IN GOVT SECURITIES:
US$ 1.75 Billion to
US$2.0 Billion
IN CORPORATE DEBT:
US$ 0.5 Billion to
US$1.5 Billion

ACKNOWLEDGMENT OF SEBIs
EFFORTS

IOSCO International Organisation

of Securities Commission, a group
of international capital market
watchdogs, has appreciated SEBIs
efforts and its early implementation
of effective measures to curb
misconduct in cross-border financial
services.

REGULATORY DEVELOPMENTS
The following regulations were framed in 2006-2007:
SC( R )(Manner of Increasing and Maintaining Public
Shareholding in Recognized Stock Exchanges)
Regulation ,2006
SEBI (Regulatory Fee on Stock Exchanges) Regulations,
2006

REGULATORY DEVELOPMENTS
The following regulations were amended in 2006-2007

SEBI (Stock Brokers and Sub-brokers) Regulations ,1992

SEBI (Merchant Bankers) Regulations,1992
SEBI (Portfolio Managers) Regulations, 1993
SEBI (Registrars to an Issue and Share Transfer Agents)
Regulations ,1993
SEBI (Underwriters) Regulations, 1993
SEBI (Debentures Trustees) Regulations, 1993
SEBI (Bankers to an Issue) Regulations, 1994
SEBI (Foreign Institutional Investors) Regulations,1995

REGULATORY DEVELOPMENTS

SEBI(Custodian of Securities) Regulations, 1996

SEBI (Venture Capital Fund) Regulations, 1996
SEBI (Mutual Fund ) Regulations, 1996
SEBI (Substantial Acquisition of Shares and Takeovers)
Regulations, 1997
SEBI (Credit Rating Agencies) Regulations, 1999
SEBI (Ombudsman ) Regulations ,2003
SEBI (Central Listing Authority) Regulations, 2003

SCAMS
Used to buy stock at rock bottom prices and then push it up.
Self-made man who was media savvy.
Banks involved in the scam.
Instruments misused were Ready Forward Deal and Bank Receipts.
Promoters of Companies were involved and Operated through close network of brokers.
Foreign banks that were involved in scam like Citibank, Standard Chartered and ANZ Grindlays.
SBI suffered Rs. 600 cr loss as he manipulated with Old Economy stocks.
Scam occurred inspite of presence of SEBI.

MEASURES TAKEN BY SEBI

Curbed Insider Trading by suspending the brokers who acted as
directors and other office bearers of BSE.
Imposed volatility margins on net outstanding sale positions of
FIIs, financial institutions, banks and mutual funds.
Imposed an additional 10% volatility margin on A Group shares as
well as margins on ALBM and BLESS Schemes
Stopped naked short sales in March 2001 and Launched trade
guarantee fund to guarantee all transactions

Rolling settlements system made compulsory and Allowed banks

to offer collateralized lending only through BSE & NSE, to increase
liquidity

SEBI ON ILLEGAL TRADING

It undertakes investigation to probe into suspected or alleged
infringements of security market regulations such as price manipulation,
insider trading, artificial volume creation or any unfair trade practices.

Investigations are initiated based on evidence available from various

sources including SEBIs own surveillance activities, stock exchanges, other
intermediaries and complaints from various sources.

On completion of investigation, SEBI takes action such as warning,

suspension of activities, cancellation of registration, denial of access to
the capital markets for a period of time of permanently.

During 2012-13, about 55% of the cases taken up for investigation pertain to market
manipulation and price rigging, as against about 47 % of such cases in the previous year.
During 2012-13, about 44% of the cases completed pertain to issue related to manipulation
and 34 % of the cases completed pertain to market manipulation and price rigging.

Source:-SEBI Annual Report 2012-13

Source:-SEBI Annual Report 2012-13

Source:-SEBI Annual Report 2012-13

INVESTOR PROTECTION

INVESTOR PROTECTION MEASURES

Automated Complaint Handling System

Fortnightly press releases by SEBI

Representative of SEBI supervises the share
allotment process
Print/Media Advertisements to enlighten investors
on various issues related to Securities market

CLASSIFICATION OF COMPLAINTS

Type I Non receipt of refund orders/allotment

letters/stockinvests
TYPE II Non-receipt of dividend

TYPE III Non-receipt of share

certificates/bonus shares
TYPE IV Non-receipt of debenture certificates and
allied payments
TYPE V Non-receipt of annual reports, rights issue
forms etc

INVESTORS GRIEVANCES
REDRESSAL
Comprehensive investor grievance mechanism
Online : Scores
Stock Exchanges / Depositories
OMBUDSMAN set up in 2003 to redress the grievances of the
investors against the intermediaries and the listed companies
Settlement either by mutual agreement, or by award of
adjudication.

Status of Investor Grievances Received and Redressed

Source:-SEBI Annual Report 2012-13

FUTURE PLANS
INVESTORS

Aims to empower investors who can make informed

decisions
Plans to launch nationwide awareness campaigns and
enhancing continuous disclosure standards

CORPORATES

Aims to make sure corporations and their managers meet

regulatory obligations.
Plans to strengthen corporate governance code.

MARKETS AND
INTERMEDIARIES

Aims to ensure consumers and other participants believe

markets are efficient, orderly and clean
Strengthen secondary markets, derivatives markets and
review of market infrastructure

REGULATORY
REGIME

Aims to create an appropriate and effective regulatory regime

Review of regulations making regulatory process more
transparent

CONCLUSION
SEBI setup as a statutory body in 1992

Primary objective is to protect investors and regulate securities market

Extended powers provided post 2002 ordinance in SEBI Act.

Taken steps to improve corporate governance and regulatory compliances

Challenges include technological advancements , integration of Indian
markets with world markets
SEBI should be made an independent and autonomous body which currently
is not.

REFERENCES
icmrindia.org.
ALBM: Automated Lending and Borrowing
Mechanism; BLESS: Borrowing and Lending of
Securities Scheme.
indianblogger.com
ismb-blogspot.in
http://flame.org.in/knowledgecenter/scam.aspx
SEBI Annual Report 2012-13

THANK YOU