PREPARED BYSRIPATI DASH

ROLE OF "SEBI" IN NEW ISSUE MARKET

INTRODUCTIONThe Securities and Exchange Board of India,set up

in 1988 under an administrative arrangement ,given statutory powers with the enactment of the SEBI Act 1992.

The act provides for the establishment of the board to protect the interest of investors in securities market.

The board consists of a chairman , two members from the govt. of india,ministries of law and finance,one member from the RBI and two other members

It describe the manner in which SEBI Act 1992,the SCRA 1956,the companies Act 1956 and the depository act 1996.

SEBI has been enjoined upon to develop the Indian securities market, regulate it, and Importantly, to protect the investors.

The power given to SEBI included those to levy penalty against corporates and individuals for violation of regulations, manipulation of market, insider trading and unfair practices.

It can suspend the trading of any security, restrain persons from accessing the securities market or prohibit any person associated with the securities market from buying selling or dealing in securities.

The trading system has become on-line, fully automated, screen-based.

Open octucry is now out moded and discarded.It has cut down the cost, time and risk involved.

OBJECTIVES OF “SEBI”

The three main objectives are:-

To protect the interest of the investors in securities

To promote the development of securities market

To regulate the securities market

Functions of SEBIRegulating business in stock exchanges and

any other securities marketRegistering and regulating the working of

stockbrokers,subbrokers, share transfer agents, bankers to an issue,trustees of trust deeds,registrars to an issue,merchant bankers,underwriters,portfolio managers,investment advisors and other intermediaries associated with securities markets.

Registering and regulating the working of depositories,custodian of securities,FIIs,credit rating agencies

Registering and regulating the working of venture capital funds and collective investment schemes,including mutual funds

Promoting and regulating Self-Regulatory Organisations(SROs)

Prohibiting fraudlent and unfair trade practices relating to securities market

Promoting investor’s education and training intermediaries of securities market

Prohibiting insider trading in securitiesRegulating substantial acquisition of shares and

takeover of companiesCalling for information from,undertaking

inspection,conducting inquiries and audits of the stock exchanges,mutual funds,intermediaries and self-regulatory organizations in the securities market

Levying fees and other charges for carrying out its work.

Matters to be disclosed by companies:- The board may specify the matters relating

to the issue of capital ,transfer of securitiesPower to issue directions:- The Board conducts an enquiry of the

securities market to protect the interests of the investors.It maintains proper management and development of securities market.

Power of the central government to issue directions:-

SEBI is bound by the central govt..The central govt. directs the SEBI on the policies to be adopted,which it gives in writing form time to time.

Supervision of board:- The Board of SEBI may be superseded by

central governmrnt if it is of the opinion that ,on account of grave emergency,the board is unable to discharge the functions and duties imposed on it under the provisions of the Act.

Guidelines / Regulations:- The guidelines / regulations issued by the

SEBI may grouped under primary market and secondary markets.Mutual funds are also regulated by SEBI.

ROLE OF SEBI IN NEW ISSUE MARKETAny company or a listed company making a

public issue or a rights issue of value or more than Rs50 lakhs is required to fill a draft offer document with SEBI for its observation.

The company can proceed further only after getting observation from SEBI.

The company has to open its issue within three months from the date of SEBI’s observation letter.

Through public issues,SEBI has laid down eligibility norms for entities accessing the primary market.

The Entry Norms :- Entry Norm I (EN I) :-Net tansible assets of atleast Rs 3crore for 3 full

yearsDistributable profits in atleast 3 yearsNet worth of atleast Rs 1crore in 3 yearsIf change in name , atleast 50% revenue for

preceding 1 year should be from the new activity.The issue size does not exceed 5 times the pre-

issue net worth.

SEBI has provide two other alternatives routes to company not satisfying any of the aboveconditions to provide sufficient flexibility and also to ensure that genuine companies do not suffer on account of rigidity of the parameters.

Entry Norm II (EN II):-Issue shall be through book building route with

atleast 50% to be mandatory alloted to the qualified institutional buyers (QIBs)

The minimum post issue face value capital shall be Rs 10 crore or there shall be a compulsory market-making for atleast 2 years

Entry Norm III (EN III):-The “project” is appraised and participated to the

extent of 15% by Fis / scheduled commercial banks of which at least 10% comes from the appraisers.

The minimum post issue face value capital shall be Rs 10 crore or there shall b e a compulsory market-making for atleasyt 2 years.