INTRODUCTION

Ø
ØNeed for Sebi
Ø
ØPurpose of the Sebi Act 1992
Ø
ØManagement
Purpose of the act
 The establishment of the board is to


 Protect the interest of the investors in

securities


 Promote the development of the securities

market


 To regulate the securities market



 For matters connected therewith or incidental

thereto
 Constitution
 1.) A chairman by the central govt.


2.) 2 members who have been serving the

Ministry of the Central Govt. and dealing with
finance and administration of the companies
act 1956 and nominated by the central govt.
3.) 1 member serving and nominated by the RBI

4.) 5 other members of whom at least 3 shall be



whole time members appointed by the central

govt.
 

Establishment of sebi
Ø SEBI WAS ESTABLISHED ON APRIL
12,1992 .
ØSEBI WAS ESTABLISHED AS A
STATUTORY BODY.
ØSTATUTORY BOARD WITH DEFINED
RESPONSIBILTIES WAS SET UP.
ØIT WAS A POSITIVE OUTCOME OF
SECURITIES SCAM OF 1990-91
( POPULARLY KNOWN AS HARSHAD
MEHTA SCAM).
Ø
 OBJECTIVES OF SEBI
ØTO PROTECT THE INTEREST OF
INVESTORS IN SECURITIES .
ØTO PROMOTE THE DEVELOPMENT OF
SECURITIES MARKET.
ØTO REGULATE THE SECURITIES MARKET.
Ø FOR ANY OTHER MATTER CONNECTED
THEREWITH.
 SEBI IS:

SEBI has three functions rolled into one body

ØIt drafts regulations in its legislative capacity

ØIt conducts investigation and enforcement action in its executive function
ØIt passes rulings and orders in its judicial capacity.
Regulatory Function

1. Regulation of stock exchanges and



registration of brokers and sub brokers and

other players in the market.


2. Registration of collective investment schemes



and Mutual Funds.



3. Regulation of Stock Bankers and portfolio



exchanges, and merchant bankers.




Protection Function
 1. Prohibition of fraudulent and unfair trade
practices.
practices


 2. Controlling insider trading and takeover bids

and imposing penalties for such practices.


 3. Calling for information by undertaking

inspection,
inspection conducting enquiries and audits
of stock exchanges and intermediaries.
Promotional Function
1. Investor education
2. Training of intermediaries

3. Promotion of fair practices and code of

conduct.
4. Conducting research and publishing

information useful to all market

participants.
 P o w e rs
ØPower to call for direct enquiries
ØPower to approve the bye-laws of stock
exchanges
ØPower of SEBI to make or amend bye-laws of
recognized stock exchanges
ØLicensing of dealers in securities in certain
areas
ØPower to compel listing of securities by public
companies
ØPower to punish
ØPower to delegate
Ø
 GUIDELINES

ØFor Initial Public Offers

ØFor Public Issues
ØFor Mutual Funds
Guidelines for Public
Issue
ØNet Tangible Assets of at least Rs. 3Cr for 3
full years.
ØDistributable Profits in at least 3 years.
ØNet Worth of at least Rs. 1 Cr in three years.
ØThe issue size does not exceed 5 times the
pre-issue net worth.
ØIf change in name, at least 50% revenue for
preceding 1 year should be from the new
activity.
Guidelines for IPOs
ØIPOs of Small Companies
ØSize of the Public Issue
ØPromoter Contribution
ØCollection Centers for receiving applications
ØRegarding Allotment of shares
ØTimeframes for the Issue and Post Issue
Formalities
ØDispatch of Refund Orders
Guidelines for Mutual
Funds
ØAt least two thirds of the directors of trustee
company or board of trustees must be
independent.
ØThey should also not be associated with the
sponsors.
Ø50% of the directors of the AMC must be
independent.
ØAll mutual funds are required to be registered
with SEBI before they launch any new
scheme.
ØFor Original Investments, the offer document
has to be amended to make investors aware
of loads at the time of investments.
PENALTIES
 Fines are imposed
ØFor failure to furnish information, return etc. (Section 15 A)

ØFor failure by any person to enter into agreement with clients (Section 15 B)
Ø
ØFor failure to redress investor’s grievances (Section 15C)
Ø
ØFor certain defaults in case of mutual defaults (Section 15D)
Ø
ØFor failure to observe rules and regulations by an asset management
company(Section 15E)
Ø
ØFor default in case of stock Brokers (Section 15F)
Ø
ØFor insider trading (Section 15G)
Ø
ØFor non disclosure of acquisitions of shares and takeovers (Section 15H)
Ø
ØFor fraudulent and unfair trade practices (Section 15 H A)
Ø
ØFor contravention where no separate penalty has been provided (Section 15 HB)
Ø Penalties for failure to pay the penalties (Section 24)
Ø
ØSection 15JA  Crediting sums realised by way of penalties to
Consolidated Fund Of India