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The Securities and Exchange Board of India and Stock Exchange
- 1. SEBI & STOCK EXCHANGES Dr.Saurabh Goyal
- 2. ESTABLISMENT In 1988the Securities and Exchange Board of India was established by Government of India through an executive resolution and was subsequently upgraded as a fully autonomous body (a statutory body) in the year 1992 with the passing of Securities and Exchange Board of India Act (SEBI Act) on 30th January 1992
- 3. SEBI head quatered inpopular business district of bandra- kurla complex in mumbai
- 4. Salient features ofSEBI act 1992 Shall be a body corporate with perpetual succession an common seal with power to acquire hold and dispose of property. HQ will be in Mumbai and may establish offices at other places in India. Chairman and members of board will be appointed by the central government. Government can prescribe terms of offices and other conditions of service of the board and chairman. Primary duties of the board is to protect the interest of the investors.
- 5. Amendments Can undertakeinspection of any books. Issue commission for the examinations of witness of documents. Power to regulate or prohibit issue of prospectus. Power to prohibit manipulative and deceptive devices. Penalties levied under the act have been enhanced.
- 6. Objectives of SEBI Theprimary objective of SEBI is to promote healthy and orderly growth of the securities market and secure investor protection. The objective of SEBI are as follows:- To protect the interest of investors, so that , there is a steady flow of savings into to the capital market. To regulate the securities market and ensure fair practices. To promote efficient services by brokers , merchant bankers and financial intermediaries, so that, they become competitive and professional.
- 7. Functions of SEBI TheSEBI act 1992 has entrusted with two functions they are 1. Regulatory functions and 2. Developmental functions
- 8. Regulatory functions Regulationof stock exchanges and self regulatory organizations. registration and regulation of stock brokers , sub-brokers , registrars of all issues, merchant bankers, underwriters, portfolio managers..etc Registration and regulation of the working of collective investment schemes including mutual funds. Prohibition of fraudulent and unfair trade practices relating to securities market. Prohibiting of insider trading. Regulating substantial acquisition of shares and takeovers of the company.
- 9. Developmental functions Promotinginvestors education. Training of intermediaries. Conducting research and publishing information useful to all market participants. Promoting of fair practices. Promotion of self regulatory organisations.
- 10. Powers of SEBI Power to call periodical returns from recognized stock exchanges . Power to compel listing of securities by public companies. Power to levy fees or other changes for carrying out the purposes of regulation. Power to call information or explanation from recognized stock exchanges or their members. Power to grant approval to bye-laws of recognized stock exchanges. Power to control and regulate stock exchanges.
- 11. Power todirect enquiries to be made in relation to affairs of stock exchanges or their members. Power to make or amend bye-laws of recognized stock exchanges. Power to grant registration to market intermediaries Power to declare applicability of section 17 of the securities contract (regulation) act 1956 in any state or area to grant licenses to dealers
- 12. Structure of SEBI the board shall consists of following members:- 1. Chairman 2. Two members, one from amongst the officials of the central government dealing with finance and another from the administration of companies act of 1956. 3. One members from amongst the officials of the reserve bank of india. 4. five other members of whom atleast three shall be the whole-time members to be appointed by the central government.
- 13. Model code ofconduct code of conduct:- the code of conduct has to be strictly observed and those employees, officers, or directors of the company who violate the code of conduct will be subject to disciplinary action by SEBI or by the company. Duty of officers:- every listed company has to employ a compliance officer who as to report to MD or CEO of the company. Security;- confidential files should be protected and kept secure. these pertain to all files but especially computer files and passwords, which are likely to have sensitive price information.
- 14. Closed tradingwindow:- every company should have a closed trading window period when no trade take places. It should be closed period when the annual P&L and b/s have been declared, when dividends have to be declared and amalgamations have to made. Open trading window:- SEBI has also provided that trading windows would open only after 24 hours of making sensitive price available to the public. Information;- to avoid insider trading practices each listed company has to provide sensitive information on a continuous basis to the stock exchange. Problems:- SEBI deals with the problems faced by the investors. These are dealt with the investor grievance cell.
- 15. Investor grievance Investorgrievance are usually due to delays in dispatch of allotment letters, refund orders, misleading statements in advertisements or in the prospectus, delay in transfer of securities, non-payment of interest or dividend. These grievance are dealt with either SEBI or department of company affairs.
- 16. Ombudsman SEBI issuedombudsman regulation in 2003 to provide fair and transperent system of redressal of grievance. These regulation empower an investor to get redressal against both the company and the intermediaries. Complaints dealt by ombudsman act are 1. Delays in receiving refund orders, allotment letters, dividend or interest. 2. Non-receipt of dividend, certificates, bonus shares, annual reports, refunds in allotment or redemption of mutual fund unit. 3. Non-receipt of letter of offers in respect of buy back of shares or incase of delisting. 4. Complaints against grievance against intermediaries or listed companies.
- 17. Rights of investor To participate and to vote in annual general meetings and right to receive a notice for them or their proxy to attend the meeting. To receive dividend, right shares , bonus offers , from the company ,after there approval of the board. To receive and inspect minutes of the meeting. To receive balance sheet , P&L account , auditors report , and directors report. To receive allotment letters and share certificates. To requisition an extra ordinary general meeting. To apply for winding up of the company. To proceed in civil or criminal proceedings against the company.
- 18. Stock Exchange Market Theexpression 'stock market' refers to the market that enables the trading of company stocks (collective shares), other securities, and derivatives. Bonds are still traditionally traded in an informal, over-the-counter market known as the bond market. Commodities are traded in commodities markets, and derivatives are traded in a variety of markets (but, like bonds, mostly 'over-the-counter').
- 19. Importance of StockMarket Acts as sources for companies to raise money. Clearinghouse for each transaction Facilitates economic growth Indicator of share prices and other assets of a company
- 20. Role and FunctionsOf Stock Market Established for the purpose of assisting, regulating and controlling business of buying, selling and dealing in securities Provides a market for the trading of securities to individuals and organizations seeking to invest their saving or excess funds through the purchase of securities Provides a physical location for buying and selling securities that have been listed for trading on that exchange Establishes rules for fair trading practices and regulates the trading activities of its members according to those rules Ensure transparency by providing information to the investor and helps in intelligent decision making about the particular stock based on information
- 21. Benefits of Listing •Visibility • Market support • Investors confidence • Increased demand for products and services • Overall increase in profitability
- 22. Delisting Stock exchange candelist companies for a number of reasons including :- • Merger with another company • Solvency problems • Failure to comply with exchange rules
- 23. Desirable Characteristics ofa stock market Availability of information Market efficiency Prices react quickly to new information Liquidity Small price fluctuations
- 24. Financing the exchange •Transaction fees paid by members for each order executed • Fees paid by firms when their securities are originally listed • Annual fees by firms • Entrance fees from new members • Sale of historic trading and market information
- 25. Major Challenges forstock exchanges • Cross border trading • Issuers and investors are expanding their horizons beyond their home markets • Investors becoming much more demanding