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Presented By-
× Yrikant
× Adithya
× Buddhini

 
! Ytock market regulation a pre- independence
phenomenon.
! The objective was to ensure orderly and healthy growth
of capital markets.
! To avoid undue congestion or over crowding of public
issues.
! Yet-up of Controller of Capital Issues(CCI).
! Enactment of Yecurities Contracts(Regulations) Act with
provisions relating to the issue of prospectus, disclosure
of accounting, and financial information, listing of
securities, etc.
! During the sixth year plan period, the securities market
showed a potential not only to mobilise the savings of
the household but also to allocate for industrial
development.
J

 
 J 

! Janipulation of security prices.

! Price Rigging.

! Insider trading.

! Delay in settlement.

! Delay in listing.
 

   J 
× xack of diversity in financial instruments.

× Disclosure of financial information.

× Preponderance of speculative trading.

× Poor liquidity.

× xack of control over brokers.

Yecurities And Exchange Board of India
! It was set-up on April 12, 1988 as a non statutory
body.
! xater, a separate legislation was made in the name of
Yecurities and Exchange Board of India Act, 1992
conferring statutory powers.
Ô

 
× To protect the interest of investors for steady flow
of savings into the capital market.
× To regulate the securities market nad ensure fair
prices by issuers of security.
× To promote efficient services by brokers, merchant
bankers, and other intermediaries.

 
× Regulatory Functions:
a. Regulation of stock exchange and self
regulatory organisation.
b. Registration and regulation of stock brokers,
sub-brokers, merchantbankers, underwriters,
portfolio managers and intermediaries.
c. Prohibition of fraudulent and unfair trade
practices.
d. Prohibition of insider trading in securities.
e. Regulating substantial acquisition of shares
and take over of companies.
× Developmental functions:

a. Promoting investors education.

b. Promoting self regulatory organisations.

c. Training of intermediaries.

d. Promotion of fair practices. Code of

conduct for self regulatory organisations.

e. Conducting research and published

information useful to all market participants.

 
× Power to call periodical returns from recognised
stock exchange.
× Power to call any information from stock
exchanges or their members.
× Power to direct enquiries to be made in relation
to affairs of stock exchanges.
× Power to grant approval or make of bye laws of
recognised stock exchanges.
× Power to control and regulate stock exchanges.
× Power to grant registration to market
intermediaries.
× Power to compel listing of securities by
companies.
Ô  
! It provides statutory board consisting of six members.
! The chairman and two members to be appointed by
central government.
! One member be appointed by Reserve Bank Of India,
and two members having experience in securities
market be appointed by central government.

Division of YEBI into 4 operational departments:

× Primary market department.

× Issue management and intermediaries department.
× Yecondary market department.
× Institutional investment department.
Y 
 
! Guidelines for primary market: (Public Issue)
× Prospectus has to be attached with application.
× Company has to highlight the risk factors.
× Company·s management, past history and present
business of the firm should be highlighted.
× Yubscription of public issues should be kept open for a
min. of 3 days and max. of 10 days.
× The collection centers should be at least 30 which
include all centers with stock exchanges.
× Collection agents not to collect application money in
cash.
× Jinimum no. of shares per application has been fixed
at 500 shares of face value of Rs.100.
× Underwriting has been made mandatory.
× The compliance report in the prescribed form should
be submitted to the YEBI in 45 days from the date of
closure of issue.
× The allotment have to be made in multiples of tradable
lot of 100 shares of Rs. 10 each.
× If the minimum subscription of 90% has not been
received, the entire amount has to be refunded to the
investors within 120 days.
× The capital issue should be fully paid up in 120 days.
× ximit of listing companies issue on the stock exchange
has been increased to Rs. 5 crores.
× The gap between the closure dates of various issues
viz. rights and public should not exceed 30 days.
× Issues should make adequate disclosure regarding the
terms and conditions of redemption, conversion, etc
so that an investor can take decision properly.
Guidelines for secondary market:
× Ytock Exchange:
a. All the recognised stock exchanges will have to inform about the
transactions in 24 hours.
b. Capital adequacy norms have to be laid down for members of
various stock exchanges depending upon their turnover.
c. Working hours of all stock exchanges have been fixed uniformly.
d. Board of directors of the stock exchange has to be reconstituted
to the extent of 50% of total no. of members.
× Brokers:
a. Registration of brokers and sub-brokers is made compulsory.
b. Compulsory of brokers book and filing of audit report with YEBI
have been made mandatory.
c. No broker is allowed to underwrite more than 5% of public
issue.
d. YEBI has made it mandatory for brokers to disclose transaction
price and brokerage separately for transparency.
Guidelines for Foreign Institutional Investors:
× Foreign Institutional Investors have been allowed
to invest in all securities traded in primary and
secondary markets.
× There would be no restriction on the volume of
investment for the purpose of entry of FIIs.
× The holding of single FII in a company will not
exceed the ceiling of 5% of the equity capital of
company.
× Disinvestment will be allowed only trough stock
exchanges in India.
× FIIs have to pay a concessional tax rate of 10
percent on large capital gain (more) than one
year and 30% on short term capital gains. A tax
rate of 20% on dividend and interest is
prescribed.
Guidelines for Bonus Issue:(
Issue:(w.e.f April 13, 1994)
× There should be provision in the articles of association of the
company for issue of BY or if not then should pass
resolution in general body meeting.
× The bonus is made out of free reserves built out of genuine
profits or share premiums collected in cash only.
× Reserves created by revaluation of fixed assets are not
permitted to be capitalised.
× Bonus shares are not allowed till the shares are fully paid and
also within 12 months of any public issue/rights issue.
× No bonus issue is allowed if the company defaults any
statutory dues, payment of interest to debenture holders.
× Issue of BY after any public/ rights issue is subject to the
condition that no bonus shall be made which will dilute the
rights of debentures.
× Consequent to the issue of BY, if the subscribed and paid up
capital exceed the authorised capital, then a resolution has to
be passed at its general body meeting.
Guidelines for Rights Issue:
× Public and rights issue can made at different prices as
composite issue.
× Appointment of merchant banker is not mandatory
for less than 50 lakhs.
× Jinimum subscription of 90% should be received in
120 days from the date of issue.
× No preferential allotment shall be made along with the
rights issue.
× Underwriting of rights issue is not mandatory.
× Over subscription must not be retained.
× Promoters contribution should be 20% in the rights
issue and it should not fall.
× Advertisement regarding the issue should me made in
at least two all India newspapers.
× Compliance report within 45 days of the closure of
the rights issue should be forwarded to the YEBI.
Guidelines for debentures and holders:
× The amount of working capital debentures should not
exceed 20% of current assets.
× The Ô
  
should not exceed 2:1.
× Credit rating is compulsory for all debentures issued
except by PYUs.
× Debentures above 7 years cannot be issued.
× Debentures issued to the public have to be secured
and registered.
× Debenture redemption reserve is to be set up out of
profits of the company.
× Withdrawal from the DDR will be permitted only
after 10% of the liability is redeemed.
× The security should be created within six months
from the date of issue of debentures . It can be
created within 12 months provided 2% of penal
interest is paid to debenture holders.
Guidelines for underwriters:
× No person can act as underwriter unless he holds
certification of registration granted by YEBI.
× The certificate of registration is valid for the period
of three years.
× The total underwriting obligations should not
exceed 20 times of his net worth.
× The books of account should be maintained for a
period of 5 years.
× In the case of devolvement the underwriters should
subscribe to the securities within 30 days of the
intimation of the company.
× The underwriter should furnish within the period of
6 months from the end of Financial Year a copy of
balance sheet, profit & loss A/c, capital adequacy
statement and various other documents to YEBI.
Guidelines for investor protection:
× The issuing company should provide fair and
correct information at the time of new issue.
× Allotment process should be transparent.
× No delay in refund or dispatch of share
certificates.
× Risk factors and highlights should be fairly stated.
× Both stock exchange and companies are
responsible for investor protection.
× YEBI regulates insider trading by imposing 5 lakhs
of penalty for those who indulge.
× YEBI has registered with active investors
association and have also come up with investor
grievance cell to solve investors complaints.
Guidelines on Book building:
× The book building method uses investors demand for
share at various prices as an important input to arrive
at offer price.
× j   
 is one who applies for not more than
Rs.1 lakh securities.
×    Ô
 
  is any financial institution/
bank/ mutual fund/ FII/ venture capital who also bids
for securities.
× j Ô 
  it does not have details of
either price or no. of shares, it is disclosed day just
prior to date of issue.
× Ô Ô
  a kind of prospectus, it has to be filed
with the registrar of stock exchanges and companies.
× In book building issue the issuer is required to indicate
price band, the lower end is called 

 and
higher end is called   . And the mid of two is
called as 
 
Guidelines on buy back of shares:
× Buyback is cancellation of shares. It leads to reduction
in share capital.
× Why buy back?
a. To reduce equity base for flexibility.
b. To prevent take over bids.
c. To return surplus cash to shareholders.
d. To maintain a target capital structure.
e. To increase the underlying share value.
× The companies can buy back through: tender offers,
open offers, Dutch auction, reverse rights issue,
employee stock option.
× No company is allowed to withdraw the buyback
offer once it is announced.
× The buy back should be done only in cash and
escrow A/c should be maintained.
× Companies buying through stock exchange must
disclose the purchase details daily.
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THANK
YOU!!
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