MODULE - 8

A) SECURITIES CONTRACT REGULATION ACT, 1956 OBJECTS To prevent undesirable transaction in securities Regulation of business of dealing therein DEFINITIONS 1. 2. Sec. 2(a) : Contract means a contract for or relating to the purchase or sale of securities Sec. 2(h) : Securities include : i) shares, scripts, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated 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 investors under any mutual fund scheme; ie) any Certificate or instrument (by whatever name called), issued to an investor by any issuer being a special purpose distinct entity which possesses any debt or receivable, including mortgage debt, assigned to such entity, and acknowledging beneficial interest of such investor in such debt or receivable, including mortgage debt as the case may be; ii) Government Securities; iia) such other instruments as may be declared by the Central Government; and iii) rights and interests in securities; Sec. 2(j) : Stock Exchange means : a) any body of individuals, whether incorporated or not, constituted before corporatisation and demutualisation under Secs. 4A and 4B or

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a body corporate incorporated under The Companies Act, 1956 (1 of 1956) whether under a scheme of corporatisation and 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 Central Government) i) Governing body ii) powers and duties of Office bearers iii) members iv) 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 with the conditions imposed and in public and trade interest grant recognition 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

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 for the following purposes : a) periodical settlement of contracts and differences thereunder b) delivery and payment of securities c) 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 the company and company can go and appeal to Securities Appellate Tribunal against said decision

Sec. 22 & 23 Right to appeal to Securities Appellate Tribunal against direction of refusal to list MISCELLANEOUS 1) 2) 3) 4) 5) Central Government can prohibit and declare illegal and void certain contracts by notification Additional trading flow to allow a trading facility outside its area of operation Offences and Penalties __________ Primary and Secondary Market 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 securities b) promote development of and regulation of securities in market and 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 succession b) a common seal c) powers subject to this Act d) capable of acquiring, holding and disposing property both moveable and immoveable 4

e) to contract in its own name f) to sue and be sued Head Office at Bombay with other offices at other places in India

Sec. 4 Constitution : Chairman Two members amongst officials of Central Government One from Reserve Bank of India Five 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 - Functions A) General i) Protect the interests of investors in securities ii) Promote development and regulation of Securities Market B) Specific i) Regulating business in Stock Exchanges and other Securities Market ii) Registering and regulating the working of all persons and intermediaries who may be associated with the Securities Market and others as per notification Eg. : Stock Brokers iii) Registering and regulating the working of Venture Capital Funds and Collective Investment Schemes including Mutual Funds iv) Promoting and regulating self-regulatory organizations v) Prohibiting fraudulent and unfair trade practices relating to Securities Market vi) Promoting investors education and training of intermediaries of Securities Market 5

vii) viii) ix) x) xi) xii) xiii) xiv) xv)

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Prohibiting insider trading in securities Regulating substantial acquisition of shares and take over of companies Calling for information and supervising Stock Exchange, Mutual Funds and persons, and intermediaries and self regulatory organizations in the Securities Market Calling for information or records from Authorities in respect of securities under inquiry To carry out functions under Securities Contract (Regulation) Act Levying fees or charges for the purposes of this Act Conducting research Calling for information from Authorities for purpose of discharge of its function Call for information from public companies listed or who have applied for listing if it has reasonable ground to believe that such Company has been indulging in insider trading, fraudulent and unfair trade practice relating to Securities Market Some powers of civil court under Civil Procedure Code to exercise above powers

C) Measures during inquiry and investigation i) Suspend the trading of any security in a recognised Stock Exchange ii) Restricting and prohibiting dealing of some persons in Securities Market iii) Suspend any Office bearer or any Stock Exchange or self regulatory organisation from holding such position iv) Impound and retain the proceeds or securities in respect of any transaction which is under investigation v) Attachment of bank accounts vi) Direction not to dispose or alienate an asset during investigation Sec. 11A Board may subject to provisions of The Companies Act regulate or prohibit issue of prospectus, offer document or advertisement soliciting money for issue of securities Sec. 11AA Board may determine a Collective Investment Scheme

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, 1956 2) Securities Exchange Board of India, 1992