Symbiosis 9

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MODULE - 8

A) SECURITIES CONTRACT REGULATION ACT, 1956

OBJECTS- To prevent undesirable transaction in securities- Regulation of business of dealing therein

DEFINITIONS

1. Sec. 2(a) : Contract means a contract for or relating to thepurchase or sale of securities

2. Sec. 2(h) : Securities include :i) shares, scripts, stocks, bonds, debentures, debenture stock

or other marketable securities of a like nature in or of anyincorporated company or other body corporate

ia) derivative;ib) units or any other instrument issued by any collective

investment schemes to the investors in such scheme;ic) a security receipt as defined in clause (zg) of Sec. 2 of The

Securitisation and Reconstruction of Financial Assets and

Enforcement of Security Interest Act, 2002;id) units of any other such instrument issued to the investorsunder any mutual fund scheme;

ie) any Certificate or instrument (by whatever name called),issued to an investor by any issuer being a special purposedistinct entity which possesses any debt or receivable,including mortgage debt, assigned to such entity, andacknowledging beneficial interest of such investor in suchdebt or receivable, including mortgage debt as the case maybe;

ii) Government Securities;iia) such other instruments as may be declared by the Central

Government; andiii) rights and interests in securities;

3. Sec. 2(j) : Stock Exchange means :a) any body of individuals, whether incorporated or not,

constituted before corporatisation and demutualisation underSecs. 4A and 4B or

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b) a body corporate incorporated under The Companies Act,1956 (1 of 1956) whether under a scheme of corporatisationand demutualisation or otherwise;

for the purpose of assisting, regulating or controlling the business of

buying, selling or dealing in securities.

STOCK EXCHANGE

Sec. 3- Stock Exchange to be recognised to make application in the

prescribed manner to the Central Government- Application to contain :

a) prescribed particulars

b) copy of bye-laws (Sec. 9)c) rules relating to : (Sec. 7A - Sou-moto, Sec. 8 - as per CentralGovernment)i) Governing bodyii) powers and duties of Office bearersiii) membersiv) procedure for registration of partnerships as members

Sec. 4- Central Government after inquiry and on satisfaction that the rules

and bye-laws are proper, Stock Exchange is willing to comply withthe conditions imposed and in public and trade interest grantrecognition

- Central Government may impose conditions for recognition- Grant of recognition to be published in Official Gazette- If application is refused, opportunity of being heard to be given

Sec. 4A- provides for corporatisation and demutualisation of Stock Exchange

Sec. 5- ground for withdrawal of recognition by Central Government is that

in the interest of public and trade it should be withdrawn- procedure is to give notice and an opportunity of being heard and

then notify withdrawal

Sec. 6- Every recognised Stock Exchange to furnish to SEBI (Securities

Exchange Board of India) periodical returns

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Sec. 7- Every recognised Stock Exchange to furnish Annual Report to

Central Government

Sec. 8A- Recognised Stock Exchange with prior approval of SEBI transfer

function and duties of Clearing House to a Clearing Corporation forthe following purposes :a) periodical settlement of contracts and differences thereunderb) delivery and payment of securitiesc) related matters

Sec. 10

- SEBI can make or amend bye-laws of recognised Stock Exchange

Sec. 11- Central Government can supercede governing body or recognised

Stock Exchange when it is of the opinion that it has to

Sec. 12- In the event of an emergency the Central Government may suspend

business of recognised Stock Exchange

Sec. 12A- SEBI may issue directions to recognised Stock Exchange in the

interest of investors in securities and securities market

LISTING OF SECURITIES

Sec. 17A- Securities to be listed only when they fulfill the eligibility criteria

specified by SEBI

Sec. 21- Person listing securities to comply with conditions of listing

agreement with Stock Exchange

Sec. 21A- Recognised Stock Exchange can de-list securities on ground

provided in the Act after an opportunity of being heard given to thecompany and company can go and appeal to Securities Appellate

Tribunal against said decision

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Sec. 22 & 23- Right to appeal to Securities Appellate Tribunal against direction of

refusal to list

MISCELLANEOUS

1) Central Government can prohibit and declare illegal and void certaincontracts by notification

2) Additional trading flow to allow a trading facility outside its area ofoperation

3) Offences and Penalties

__________

4) Primary and Secondary Market

5) Insider Trading

B) SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992

OBJECTS

- To provide for the establishment of a Board to :a) protect interests of investors in securitiesb) promote development of and regulation of securities in marketand matter connected therewith

DEFINITION

Sec. 2(a) : Board means the Securities and Exchange Board of India

established under Sec. 3.

SECURITIES EXCHANGE BOARD OF INDIA (SEBI)

- Established by notification by Central Government- A body corporate having :

a) perpetual successionb) a common sealc) powers subject to this Act

d) capable of acquiring, holding and disposing property bothmoveable and immoveable

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e) to contract in its own namef) to sue and be sued

- Head Office at Bombay with other offices at other places in India

Sec. 4- Constitution :

ChairmanTwo members amongst officials of Central GovernmentOne from Reserve Bank of IndiaFive other members out of which three to be whole time members

Sec. 5- Hold Office at pleasure of Central Government

Sec. 6- Central Government may remove member on ground specified

Sec. 7- Board to conduct business by holding meetings

Sec. 9- Board may appoint officers and employees

Sec. 11 - FunctionsA) General

i) Protect the interests of investors in securitiesii) Promote development and regulation of Securities Market

B) Specifici) Regulating business in Stock Exchanges and other Securities

Marketii) Registering and regulating the working of all persons and

intermediaries who may be associated with the SecuritiesMarket and others as per notificationEg. : Stock Brokers

iii) Registering and regulating the working of Venture CapitalFunds and Collective Investment Schemes including MutualFunds

iv) Promoting and regulating self-regulatory organizationsv) Prohibiting fraudulent and unfair trade practices relating to

Securities Market

vi) Promoting investors education and training of intermediariesof Securities Market

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vii) Prohibiting insider trading in securitiesviii) Regulating substantial acquisition of shares and take over of

companiesix) Calling for information and supervising Stock Exchange,

Mutual Funds and persons, and intermediaries and selfregulatory organizations in the Securities Market

x) Calling for information or records from Authorities in respect ofsecurities under inquiry

xi) To carry out functions under Securities Contract (Regulation)Act

xii) Levying fees or charges for the purposes of this Actxiii) Conducting researchxiv) Calling for information from Authorities for purpose of

discharge of its functionxv) Call for information from public companies listed or who haveapplied for listing if it has reasonable ground to believe thatsuch Company has been indulging in insider trading,fraudulent and unfair trade practice relating to SecuritiesMarket

xvi) Some powers of civil court under Civil Procedure Code toexercise above powers

C) Measures during inquiry and investigation

i) Suspend the trading of any security in a recognised StockExchange

ii) Restricting and prohibiting dealing of some persons inSecurities Market

iii) Suspend any Office bearer or any Stock Exchange or selfregulatory organisation from holding such position

iv) Impound and retain the proceeds or securities in respect ofany transaction which is under investigation

v) Attachment of bank accounts

vi) Direction not to dispose or alienate an asset duringinvestigation

Sec. 11A- Board may subject to provisions of The Companies Act regulate or

prohibit issue of prospectus, offer document or advertisementsoliciting money for issue of securities

Sec. 11AA

- Board may determine a Collective Investment Scheme

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Sec. 11B- Board to issue directions in respect of its functions to persons

concerned

Sec. 11C- Board to conduct investigation if any violation is suspected

Sec. 11D- Board on inquiry can give directions against a person to cease and

desist from committing or causing such violation

BIBLIOGRAPHY

Bare Acts :1) Securities Contract (Regulation) Act, 19562) Securities Exchange Board of India, 1992

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