Published on March 21, 2010
SEBI: THE INDIAN CAPITAL MARKET REGULATOR : SEBI: THE INDIAN CAPITAL MARKET REGULATOR BY: UMANG GOEL Slide 2: CAPITAL IS AN ESSENTIAL INPUT FOR ECONOMIC DEVELOPMENT. CAPITAL INVESTMENT LEADS TO ECONOMIC GROWTH,ONLY IF CHANILISED INTO PRODUCTIVE ACTIVITIES. THE SECURITIES MARKET IS THE CHANNEL THROUGH WHICH INVESTIBLE RESOURCES ARE ROUTED TO COMPANIES, AND ENABLE THEM TO PRODUCE GOODS AND SERVICES. A WELL ORGANISED AND EFFICIENT SECURITIES MARKET IS CONDUCIVE TO SUSTAINED ECONOMIC GROWTH. The securities and Exchange Board of India : The SEBI Act, 1992 was enacted to provide for the establishment of a board 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. The board of SEBI consists of six members comprising the chairman, two members from the amongst the official of the ministries of the central government dealing with finance and law, two members who are professional and have expertise or special knowledge relating to securities market, and one member for the RBI. The securities and Exchange Board of India Slide 4: SEBI has five operational departments. Besides that it has two more departments- the legal and the investigation departments. The primary market policy, intermediaries, self regulatory organizations and investor grievances and guidance department. The Issue management and intermediaries department. The secondary market policy, operations and exchange administrations, new investment products and insider trading department. The secondary market exchange administration, inspections and non member intermediaries dept. Slide 5: E) Institutional investment, mergers and acquisition, research and publication, and international relations and IOSCO Department. F) Legal Department- looks after all legal matters under the supervision of the general counsel. G) Investigation Department- carries out inspection and investigation under the supervision of the chief of investigation. Objectives of the Board : Section 11(1) of the SEBI Act, 1992 explains the powers and functions of SEBI. As per the Act, it shall be the duty of the board to protect interests of the investors in securities and to promote the development of, and to regulate the securities market by such measures as it thinks fit. Objectives of the Board Slide 7: The statutory objectives of the SEBI as per the Act are given below: Protection of investors interests in securities Promotion of the development of the securities market. Regulations of the securities market Matters connected therewith and incidental thereto. FUNCTIONS OF SEBI : To realise the above core objectives and to carry out its tasks, the act spells out the functions of SEBI in greater detail, as under Regulating the business in stock exchanges and any other securities markets Registering and regulating the working of stock brokers, sub-brokers, share transfer agents, bankers to an issue, trustees of trust deeds and such other intermediaries who may be associated with securities markets in any manner. FUNCTIONS OF SEBI Slide 9: c) Registering and regulating the working of venture capital funds and collective investment schemes including mutual funds. d) Promoting and regulating self regulatory organizations. e) Prohibiting fraudulent and unfair trade practices relating to securities markets. f) Promoting investors education and training of intermediaries of securities market. g) Prohibiting insider trading in securities. h)Levying fees or other charges. Slide 10: Conducting research j) Performing such other functions as may be prescribed. POWERS AND SCOPE OF SEBI : The Functional area of SEBI is very wide. It is a rule maker, a custodian and a watch dog of the security market. To carry out its responsibilities under the Act, the board is entrusted with the same powers as are vested in a civil court in respect of the following matters, namely: a) The discovery and production of books of account and other documents at such place and such time as may be specified by the board. POWERS AND SCOPE OF SEBI Slide 12: b) Summoning and enforcing the attendance of persons and examining them on oath. c) Inspection of any books, registers and other documents of stockbrokers, sub-brokers, and share transfer agents. SEBI is empowered to register any agency or intermediaries who may be associated with the securities market, except under and in accordance with the conditions of a certificate of registration issued by the SEBI. CERTAIN GUIDELINES AND REFORMS INTRODUCED BY SEBI : Primary Securities Market The issues of capital no longer requires any consent from any authority for making issue and for pricing it. SEBI raised the standards of disclosure in public issues and enhanced the transparency. The offer document is now made public even at the draft stage. Not less than 20% of equity should be offered to public. For issues above Rs 100 crore, book builiding requirement has been introduced. CERTAIN GUIDELINES AND REFORMS INTRODUCED BY SEBI Slide 14: 6) Bankers to an issue and portfolio managers have to be registered with the SEBI. INSIDER TRADING : Insider trading in securities is prohibited by SEBI under Insider Trading Regulations 1992. Insider trading can be defined as the sale or purchase of securities by persons who possess price sensitive information about the company, on account of their capacity involving confidence or trust. SEBI Insider regulations 1992 defines the insider as any person who is or was connected with company and who is reasonably expected to have access by virtue of such connections, to unpublished price sensitive information with respect to the securities of the company, or who has received or has had access to such unpublished price sensitive information INSIDER TRADING Slide 16: The SEBI Insider regulations, 1992 prohibits insider trading and lays down that no insider should: Either on his own behalf or on behalf of any other person, deals in securities of a company listed on any stock exchange on the basis of any unpublished price sensitive information. Communicate any unpublished price sensitive information to any person, with or without his or her request for such information except as required in the ordinary course of business or under any law. Any other person to deal in securities of any company on the basis of unpublished price sensitive information.