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Securities and Exchange Board of India A CRITICAL ANALYSIS
Flow of Presentation • A Brief History • Introduction • SEBI - Preamble • Objectives • Functions • Contributions • Summary
MET-IOM
SEBI- A Critical Analysis
2
A Brief History Prior to SEBI the security markets and stock exchange were regulated by several Acts, which were: • The Bombay Securities Contracts Control Act, 1925 • The Capital Issues (Control) Act, 1947
• The Securities Contracts (Regulation) Act, 1956 • Registrar of Companies (The Indian Companies Act, 1956)
For a healthy growth of capital markets and to prevent malpractices in trading, the Government subsequently decided to “set up a separate board for the regulation and orderly functioning of Stock Exchange and the securities industry” MET-IOM
SEBI- A Critical Analysis
3
A Brief History (Contd…) • In July 1987, the Cabinet Committee on Economic Affairs approved the broad features of SEBI and process of establishment of SEBI was commenced • The statement of Purpose and Approach outlined twin objectives of SEBI as, - promoting healthy and orderly development of securities markets and - ensuring adequate investor protection and emphasized the developmental philosophy with which SEBI would operate
MET-IOM
SEBI- A Critical Analysis
4
Introduction • SEBI was established as a statutory authority through an Ordinance
promulgated on 30.01.1992 by the President of India • SEBI is the regulator for the Securities Market in India • It is managed by a Board comprising of nine including the chairman • Paradoxically this is a positive outcome of the Harshad Mehta Securities Scam of 1990-91
MET-IOM
SEBI- A Critical Analysis
5
SEBI - PREAMBLE The Preamble of the Securities and Exchange Board of India describes the basic functions of the Securities and Exchange Board of India as "...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 or incidental thereto"
MET-IOM
SEBI- A Critical Analysis
6
Purpose and Role of SEBI • SEBI was set up with the main purpose of keeping a check on malpractices and protect the interest of investors. It was set up to meet the needs of three groups • Issuers: • For issuers it provides a market place in which they can raise finance fairly and easily
• Investors: • For investors it provides protection and supply of accurate and correct information
• Intermediaries: • For intermediaries it provides a competitive professional market
MET-IOM
SEBI- A Critical Analysis
7
Basic Objectives • To protect the interests of investors in securities
• To promote the development of Securities Market • To regulate the securities market and • For matters connected therewith or incidental thereto
MET-IOM
SEBI- A Critical Analysis
8
Powers of SEBI • Powers relating to stock exchanges and intermediaries: • SEBI has wide powers regarding the stock exchanges and intermediaries dealing in securities • It can ask information from the stock exchanges and intermediaries regarding their business transactions for inspection/scrutiny and other purposes
MET-IOM
SEBI- A Critical Analysis
9
Powers of SEBI (Contd…) • Powers relating to monetary penalties: • SEBI’ has been empowered to impose monetary penalties on capital market intermediaries and other participants for a range of violations • It can even impose suspension of their registration for a short period
MET-IOM
SEBI- A Critical Analysis
10
Powers of SEBI (Contd…) • Powers to initiate actions relating to functions assigned: • SEBI has a power to initiate actions in regard to functions assigned • For example, it can issue guidelines to different intermediaries or can introduce specific rules for the protection of interests of investors
MET-IOM
SEBI- A Critical Analysis
11
Powers of SEBI (Contd…) • Powers under Securities Contracts (Regulation) Act : • For effective regulation of stock exchanges, the Ministry of Finance issued a Notification on 13 September, 1994 delegating several of its powers under the Securities Contracts (Regulation) Act to SEBI
• SEBI is also empowered by the Finance Ministry to nominate three on the Governing Body of every stock exchange instead of earlier practice of government making such nominations
MET-IOM
SEBI- A Critical Analysis
12
Powers of SEBI (Contd…) • Powers to regulate business of stock exchanges : • SEBI is empowered to regulate the business of stock exchanges • Intermediaries associated with the securities market as well as mutual funds, fraudulent and unfair trade practices relating to securities and regulation of acquisition of shares and takeovers of companies
MET-IOM
SEBI- A Critical Analysis
13
Powers of SEBI (Contd…) • Powers relating to insider trading: • SEBI has power to regulate insider trading or can regulate the functions of merchant bankers
MET-IOM
SEBI- A Critical Analysis
14
Functions of SEBI • The SEBI performs functions to meet its objectives.
• Functions can be broadly divided into: • Protective functions • Developmental functions • Regulatory functions
MET-IOM
SEBI- A Critical Analysis
15
Functions of SEBI (Contd…) • Protective Functions• It Checks Price Rigging • It Prohibits Insider trading • SEBI prohibits fraudulent and Unfair Trade Practices
• SEBI undertakes steps to educate investors • SEBI promotes fair practices and code of conduct in security market
MET-IOM
SEBI- A Critical Analysis
16
Functions of SEBI (Contd…) • Developmental Functions• SEBI promotes training of intermediaries of the securities market. • SEBI tries to promote activities of stock exchange by adopting flexible and adoptable approach in following way: • SEBI has permitted internet trading through ed stock brokers. • SEBI has made underwriting optional to reduce the cost of issue. • Even initial public offer of primary market is permitted through stock exchange.
MET-IOM
SEBI- A Critical Analysis
17
Functions of SEBI (Contd…) • Regulatory Functions• It has framed rules and regulations and a code of conduct to regulate the intermediaries such as merchant bankers, brokers, underwriters, etc. • It s and regulates the working of all those who are associated with stock exchange in any manner. • It s and regulates the working of mutual funds etc. • It regulates takeover of the companies. • It conducts inquiries and audit of stock exchanges.
MET-IOM
SEBI- A Critical Analysis
18
Change in the Market • The complete transformation of the trading, clearing and settlement
infrastructure • Dramatic transformation to a paperless market and transparent trading system
• Cutting the settlement cycle and now going forward towards a T+1 settlement system • SEBI has made the markets much safer for investors MET-IOM
SEBI- A Critical Analysis
19
Contributions • Issue of guidelines • Public interest ments • Dealing with complaints of investors • Investor education • Investor surveys • Introduction to stockinvest • Disclosures by companies
MET-IOM
SEBI- A Critical Analysis
20
Board of SEBI
MET-IOM
Shri U. K. Sinha, Chairman, SEBI, SEBI Bhavan, Bandra Kurla Complex, Bandra (E), Mumbai - 400051
Shri Arvind Mayaram Secretary, Department of Economic Affairs, Ministry of Finance, New Delhi Member Nominated
Shri Rajeev Kumar Agarwal Whole-Time Member, SEBI, SEBI Bhavan, Bandra Kurla Complex, Bandra (E), Mumbai - 400051
Shri V. K. Jairath 194 B Kalpatru Horizon, S.K. Ahire Marg, Worli, Mumbai 400018 Member Appointed
Shri Prashant Saran Whole-Time Member, SEBI, SEBI Bhavan, Bandra Kurla Complex, Bandra (E), Mumbai - 400051.
Shri S. Raman Whole-Time Member, SEBI, SEBI Bhavan, Bandra Kurla Complex, Bandra (E), Mumbai - 400051.
SEBI- A Critical Analysis
21
BOARD (contd..)
Shri Anand Sinha Deputy Governor Reserve Bank of India Member Nominated
MET-IOM
Shri Naved Masood Secretary, Ministry of Corporate Affairs Member Nominated
SEBI- A Critical Analysis
Shri Prakash Chandra Chhotaray IRS (Retired Chairman of Income Tax Settlement Commission, New Delhi) Part-time Member
22
Summary • For the development of any economy • Capital Market, which is one of the main organ to mobilize funds of huge order • shall evolve all steps to develop the market • simultaneously bringing in the credibility in the financial market, which is watched world wide • through effective and speedy implementable regulations, ultimately, protecting the interest of the Investors and the Country
MET-IOM
SEBI- A Critical Analysis
23
Know your Stock Markets • Major Stock Exchanges in India: • National Stock Exchange (NSE) • Bombay Stock Exchange (BSE) • MCX’SX Stock Exchange (MCX’sx)
• Various products for investments: • Equities • Derivatives • Commodities
• Currencies / Forex MET-IOM
SEBI- A Critical Analysis
24
Terminologies used in Stock Markets • Primary Market and Secondary Market • Broker or Brokerage Firm
• Know Your Customers (KYC) • Demat • Trading
• Delivery • Intraday • Blue Chip Stocks
• Bull and Bear Market MET-IOM
SEBI- A Critical Analysis
25
Terminologies used in Stock Markets • Investor and Speculator • Quote
• Settlement • Portfolio • Liquidity
• Volatility • Hedging • Arbitrage
• Insider Trading MET-IOM
SEBI- A Critical Analysis
26
Know more about Stock Markets • https://www.nseindia.com • https://www.bseindia.com • http://www.moneycontrol.com • http://www.managementparadise.com/forums/stock-markets-tips-gyan/22083definations-every-word-used-stock-market-known-must-read.html • http://www.tmxmoney.com/en/research/glossary.html • http://www.timothysykes.com/2013/06/trading--you-need-to-know/ MET-IOM
SEBI- A Critical Analysis
27
Presented BySr. No. Name
Roll No.
1
ANSHARI NAWED ABDUL VAHID
61
2
ATTRA GURUDEV RAVINDERSINGH
62
3
COUTINHO JOHN PETER
63
4
JAIN ASHISH GANPATHLAL
74
5
KHAN DANISH WAHID
80
6
PAYYAPPATE RASHMI RAVINDRAN
103
MET-IOM
SEBI- A Critical Analysis
28
Thank You
Flow of Presentation • A Brief History • Introduction • SEBI - Preamble • Objectives • Functions • Contributions • Summary
MET-IOM
SEBI- A Critical Analysis
2
A Brief History Prior to SEBI the security markets and stock exchange were regulated by several Acts, which were: • The Bombay Securities Contracts Control Act, 1925 • The Capital Issues (Control) Act, 1947
• The Securities Contracts (Regulation) Act, 1956 • Registrar of Companies (The Indian Companies Act, 1956)
For a healthy growth of capital markets and to prevent malpractices in trading, the Government subsequently decided to “set up a separate board for the regulation and orderly functioning of Stock Exchange and the securities industry” MET-IOM
SEBI- A Critical Analysis
3
A Brief History (Contd…) • In July 1987, the Cabinet Committee on Economic Affairs approved the broad features of SEBI and process of establishment of SEBI was commenced • The statement of Purpose and Approach outlined twin objectives of SEBI as, - promoting healthy and orderly development of securities markets and - ensuring adequate investor protection and emphasized the developmental philosophy with which SEBI would operate
MET-IOM
SEBI- A Critical Analysis
4
Introduction • SEBI was established as a statutory authority through an Ordinance
promulgated on 30.01.1992 by the President of India • SEBI is the regulator for the Securities Market in India • It is managed by a Board comprising of nine including the chairman • Paradoxically this is a positive outcome of the Harshad Mehta Securities Scam of 1990-91
MET-IOM
SEBI- A Critical Analysis
5
SEBI - PREAMBLE The Preamble of the Securities and Exchange Board of India describes the basic functions of the Securities and Exchange Board of India as "...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 or incidental thereto"
MET-IOM
SEBI- A Critical Analysis
6
Purpose and Role of SEBI • SEBI was set up with the main purpose of keeping a check on malpractices and protect the interest of investors. It was set up to meet the needs of three groups • Issuers: • For issuers it provides a market place in which they can raise finance fairly and easily
• Investors: • For investors it provides protection and supply of accurate and correct information
• Intermediaries: • For intermediaries it provides a competitive professional market
MET-IOM
SEBI- A Critical Analysis
7
Basic Objectives • To protect the interests of investors in securities
• To promote the development of Securities Market • To regulate the securities market and • For matters connected therewith or incidental thereto
MET-IOM
SEBI- A Critical Analysis
8
Powers of SEBI • Powers relating to stock exchanges and intermediaries: • SEBI has wide powers regarding the stock exchanges and intermediaries dealing in securities • It can ask information from the stock exchanges and intermediaries regarding their business transactions for inspection/scrutiny and other purposes
MET-IOM
SEBI- A Critical Analysis
9
Powers of SEBI (Contd…) • Powers relating to monetary penalties: • SEBI’ has been empowered to impose monetary penalties on capital market intermediaries and other participants for a range of violations • It can even impose suspension of their registration for a short period
MET-IOM
SEBI- A Critical Analysis
10
Powers of SEBI (Contd…) • Powers to initiate actions relating to functions assigned: • SEBI has a power to initiate actions in regard to functions assigned • For example, it can issue guidelines to different intermediaries or can introduce specific rules for the protection of interests of investors
MET-IOM
SEBI- A Critical Analysis
11
Powers of SEBI (Contd…) • Powers under Securities Contracts (Regulation) Act : • For effective regulation of stock exchanges, the Ministry of Finance issued a Notification on 13 September, 1994 delegating several of its powers under the Securities Contracts (Regulation) Act to SEBI
• SEBI is also empowered by the Finance Ministry to nominate three on the Governing Body of every stock exchange instead of earlier practice of government making such nominations
MET-IOM
SEBI- A Critical Analysis
12
Powers of SEBI (Contd…) • Powers to regulate business of stock exchanges : • SEBI is empowered to regulate the business of stock exchanges • Intermediaries associated with the securities market as well as mutual funds, fraudulent and unfair trade practices relating to securities and regulation of acquisition of shares and takeovers of companies
MET-IOM
SEBI- A Critical Analysis
13
Powers of SEBI (Contd…) • Powers relating to insider trading: • SEBI has power to regulate insider trading or can regulate the functions of merchant bankers
MET-IOM
SEBI- A Critical Analysis
14
Functions of SEBI • The SEBI performs functions to meet its objectives.
• Functions can be broadly divided into: • Protective functions • Developmental functions • Regulatory functions
MET-IOM
SEBI- A Critical Analysis
15
Functions of SEBI (Contd…) • Protective Functions• It Checks Price Rigging • It Prohibits Insider trading • SEBI prohibits fraudulent and Unfair Trade Practices
• SEBI undertakes steps to educate investors • SEBI promotes fair practices and code of conduct in security market
MET-IOM
SEBI- A Critical Analysis
16
Functions of SEBI (Contd…) • Developmental Functions• SEBI promotes training of intermediaries of the securities market. • SEBI tries to promote activities of stock exchange by adopting flexible and adoptable approach in following way: • SEBI has permitted internet trading through ed stock brokers. • SEBI has made underwriting optional to reduce the cost of issue. • Even initial public offer of primary market is permitted through stock exchange.
MET-IOM
SEBI- A Critical Analysis
17
Functions of SEBI (Contd…) • Regulatory Functions• It has framed rules and regulations and a code of conduct to regulate the intermediaries such as merchant bankers, brokers, underwriters, etc. • It s and regulates the working of all those who are associated with stock exchange in any manner. • It s and regulates the working of mutual funds etc. • It regulates takeover of the companies. • It conducts inquiries and audit of stock exchanges.
MET-IOM
SEBI- A Critical Analysis
18
Change in the Market • The complete transformation of the trading, clearing and settlement
infrastructure • Dramatic transformation to a paperless market and transparent trading system
• Cutting the settlement cycle and now going forward towards a T+1 settlement system • SEBI has made the markets much safer for investors MET-IOM
SEBI- A Critical Analysis
19
Contributions • Issue of guidelines • Public interest ments • Dealing with complaints of investors • Investor education • Investor surveys • Introduction to stockinvest • Disclosures by companies
MET-IOM
SEBI- A Critical Analysis
20
Board of SEBI
MET-IOM
Shri U. K. Sinha, Chairman, SEBI, SEBI Bhavan, Bandra Kurla Complex, Bandra (E), Mumbai - 400051
Shri Arvind Mayaram Secretary, Department of Economic Affairs, Ministry of Finance, New Delhi Member Nominated
Shri Rajeev Kumar Agarwal Whole-Time Member, SEBI, SEBI Bhavan, Bandra Kurla Complex, Bandra (E), Mumbai - 400051
Shri V. K. Jairath 194 B Kalpatru Horizon, S.K. Ahire Marg, Worli, Mumbai 400018 Member Appointed
Shri Prashant Saran Whole-Time Member, SEBI, SEBI Bhavan, Bandra Kurla Complex, Bandra (E), Mumbai - 400051.
Shri S. Raman Whole-Time Member, SEBI, SEBI Bhavan, Bandra Kurla Complex, Bandra (E), Mumbai - 400051.
SEBI- A Critical Analysis
21
BOARD (contd..)
Shri Anand Sinha Deputy Governor Reserve Bank of India Member Nominated
MET-IOM
Shri Naved Masood Secretary, Ministry of Corporate Affairs Member Nominated
SEBI- A Critical Analysis
Shri Prakash Chandra Chhotaray IRS (Retired Chairman of Income Tax Settlement Commission, New Delhi) Part-time Member
22
Summary • For the development of any economy • Capital Market, which is one of the main organ to mobilize funds of huge order • shall evolve all steps to develop the market • simultaneously bringing in the credibility in the financial market, which is watched world wide • through effective and speedy implementable regulations, ultimately, protecting the interest of the Investors and the Country
MET-IOM
SEBI- A Critical Analysis
23
Know your Stock Markets • Major Stock Exchanges in India: • National Stock Exchange (NSE) • Bombay Stock Exchange (BSE) • MCX’SX Stock Exchange (MCX’sx)
• Various products for investments: • Equities • Derivatives • Commodities
• Currencies / Forex MET-IOM
SEBI- A Critical Analysis
24
Terminologies used in Stock Markets • Primary Market and Secondary Market • Broker or Brokerage Firm
• Know Your Customers (KYC) • Demat • Trading
• Delivery • Intraday • Blue Chip Stocks
• Bull and Bear Market MET-IOM
SEBI- A Critical Analysis
25
Terminologies used in Stock Markets • Investor and Speculator • Quote
• Settlement • Portfolio • Liquidity
• Volatility • Hedging • Arbitrage
• Insider Trading MET-IOM
SEBI- A Critical Analysis
26
Know more about Stock Markets • https://www.nseindia.com • https://www.bseindia.com • http://www.moneycontrol.com • http://www.managementparadise.com/forums/stock-markets-tips-gyan/22083definations-every-word-used-stock-market-known-must-read.html • http://www.tmxmoney.com/en/research/glossary.html • http://www.timothysykes.com/2013/06/trading--you-need-to-know/ MET-IOM
SEBI- A Critical Analysis
27
Presented BySr. No. Name
Roll No.
1
ANSHARI NAWED ABDUL VAHID
61
2
ATTRA GURUDEV RAVINDERSINGH
62
3
COUTINHO JOHN PETER
63
4
JAIN ASHISH GANPATHLAL
74
5
KHAN DANISH WAHID
80
6
PAYYAPPATE RASHMI RAVINDRAN
103
MET-IOM
SEBI- A Critical Analysis
28
Thank You
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