CHAPTER:1

HISTORY
Before 1992, the three principal Acts governing the securities markets
were: (a) the Capital issues (Control) Act, 1947, which restricted issuers
access to the securities market and controlled the pricing of issues; (b) the
Companies Act, 1956, which sets out the code of conduct for the
corporate sector in relation to issue, allotment and transfer of securities,
and disclosures to be made in public issues; and (c) the Securities
Contract (Regulation) Act, 1956, which provides for regulation of
transactions in securities through control over stock exchanges. The
capital issues (Control) Act, 1947 had its origin during the war in 1943
when the objective was to channel resources to support the war effort.
The Act was retained with some modifications as a means of controlling
the raising of capital by companies and to ensure that national resources
were channeled into proper lines, i.e, for desirable purpose to serve goals
and priorities of the government, and to protect the interests of investors.
Under the Act, any firm wishing to issue securities had to obtain approval
from the Central Government, which also determined the amount, type
and price of the issue.
Major part of the liberalization process was the repeal of the capital issues
(Control) Act, 1947 in May 1992. With this, Governments control over
issue of capital, pricing of the issues, fixing of premia and rates of interest
on debentures etc. ceased. The office which administered the Act was
abolished and the market was allowed to allocate resources to competing
uses. However to ensure effective regulation of the market, SEBI Act,
1992 was enacted to empower SEBI with statutory powers for (a)
protecting the interests of investors in securities, (b) promoting the
development of the securities market, and (c) regulating the securities
market. Its regulatory jurisdiction extend over corporate in the issuance of
capital and transfer the securities in addition to all intermediaries and
persons associated with securities market. SEBI can specify the matters to
be disclosed and the standards of disclosure required for the protection of
investors in respect of issues; can issue directions to all intermediaries
and other persons associated with the securities market in the interest of
investors or of orderly development for securities market; and can
conduct enquiries, audits and inspection of all concerned and adjudicate
offences under the Act. In short, it has been given necessary autonmy and
authority to regulate and develop an orderly securities market.

Page 1

Securities and Exchange Board of

India

SEBI Bhavan, Mumbai headquarters

Agency overview
Formed

12 April 1992[1]

Jurisdiction Government of India

Headquarters Mumbai, Maharashtra
Employees

525 (2009)[2]

Agency
executive

U. K. Sinha,
Chairman
Website

www.sebi.gov.in

Page 2

CHAPTER:2
INTRODUCTION
The capital market has witnessed tremendous growth in recent times
characterized particularly by the increasing participation of public.
Investors confidence in the capital market can be sustained largely by
ensuring investor protection. With this end in view, the government
decided to vest SEBI immediately with statutory powers required to do
effectively with all matters relating to capital market.
It was felt by the government that by transferring the powers of the
controller of capital issues to an independent body it would enable it to
effectively regulate, promote and monitor the working of stock exchange
in the country.
Earlier, the regulation of the securities market was being done through the
office of controller of capital issues under the capital issues (control) Act,
1947 which has been since reapled.
Accordingly, SEBI has been set up under the SEBI Act, 1992. The CCI
Act has now ceased to have any application and stand withdrawn from
the law w.e.f 246.5.1992. The Securities Exchange Board Of India Act
was passed by the parliament as Act No.15 of 1992 and received the
assent of the President on 4th April, 1992.
The Securities and Exchange Board of India Act, 1992 (the SEBI Act)
was amended in the years 1995, 1999 and 2002 to meet the requirements
of changing needs of the securities market and responding to the
development in the securities market.
Based on the Report of Joint Parliamentary Committee (JPC) dated
December 2, 2002, the SEBI Act was amended to address certain
shortcomings in its provisions. The mission of SEBI is to make India as
one of the best securities market of the world and SEBI as one of the
most respected regulator in the world. SEBI also endeavors to achieve the
standards of IOSCO/FSAP.
In this background, the internal group constituted by SEBI consisting of
its senior officers had proposed certain amendments to the SEBI Act. The
SEBI Board had constituted an Expert Group under the Chairmanship of
Mr Justice M. H .Kania (Former Chief Justice of India) to consider the
proposals. The report of the Expert Group is placed for eliciting public
comments on the recommendations. It may be noted that the Report does

Page 3

not necessarily reflect the views of SEBI on the various proposals and
recommendations. SEBI would consider the comments received from
various sources before taking any final view on the recommendations.

Page 4

CHAPTER:3
ESTABLISHMENT OF THE
SECURITIES AND EXCHANGE BOARD OF INDIA
Establishment and incorporation of Board: With effect from such date as the Central Government may, by
notification, appoint, there shall be established, for the purposes of this
Act, a Board by the name of the Securities and Exchange Board of
India.
The Board shall be a body corporate by the name aforesaid, having
perpetual succession and a common seal, with power subject to the
provisions of this Act, to acquire, hold and dispose of property, both
movable and immovable, and to contract, and shall, by the said name,
sue or be sued.
The head office of the Board shall be at Bombay.
The Board may establish offices at other places in India.
Management of the Board: The Board shall consist of the following members, namely: a Chairman;
two members from amongst the officials of the [Ministry] of the
Central Government dealing with
Finance [and
administration of the Companies Act, 1956(1 of 1956)];
one member from amongst the officials of [the Reserve Bank];
five other members of whom at least three shall be the whole-time
members] to be appointed by the central Government.
The general superintendence, direction and management of the affairs
of the Board shall vest in a Board of members, which may exercise all
powers and do all acts and things which may be exercised or done by
the Board.
Save as otherwise determined by regulations, the Chairman shall also
have powers of general superintendence and direction of the affairs of
the Board and may also exercise all powers and do all acts and things
which may be exercised or done by that Board.
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 The Chairman and members referred to in clauses (a) and (d) of subsection (1) shall be appointed by the Central Government and the
members referred to in clauses (b) and (c) of that sub-section shall be
nominated by the Central Government and the [Reserve Bank]
respectively.
The Chairman and the other members referred to in clauses (a) and (d)
of sub-section (1) shall be persons of ability, integrity and standing
who have shown capacity in dealing with problems relating to
securities market or have special knowledge or experience of law,
finance, economics, accountancy, administration or in any other
discipline which, in the opinion of the Central Government, shall be
useful to the Board.
Term of office and conditions of service of Chairman and members of
the Board: The term of office and other conditions of service of the Chairman and
the members referred to in clause (d) of sub- section (1) of section 4
shall be such as may be prescribed.
Notwithstanding anything contained in sub-section (1), the Central
Government shall have the right to terminate the services of the
Chairman or a member appointed under clause (d) of sub-section (1)
of section 4, at any time before the expiry of the period prescribed
under sub-section (1), by giving him notice of not less than three
months in writing or three months salary and allowances in lieu
thereof, and the Chairman or a member, as the case may be, shall also
have the right to relinquish his office, at any time before the expiry of
the period prescribed under sub-section (1), by giving to the Central
Government notice of not less than three months in writing.
Removal of member from office:The Central Government shall remove a member from office if he
is, or at any time has been, adjudicated as insolvent;
is of unsound mind and stands so declared by a competent court;

Page 6

 has been convicted of an offence which, in the opinion of the Central

Government, involves a moral turpitude;
has, in the opinion of the Central Government, so abused his position
as to render his continuation in office detrimental to the public
interest:
Provided that no member shall be removed under this clause
unless he has
been given a reasonable opportunity of being heard
in the matter.
Meetings: The Board shall meet at such times and places, and shall observe such
rules of procedure in regard to the transaction of business at its
meetings (including quorum at such meetings) as may be provided by
regulations.
The Chairman or, if for any reason, he is unable to attend a meeting of
the Board, any other member chosen by the members present from
amongst themselves at the meeting shall preside at the meeting.
All questions which come up before any meeting of the Board shall
be decided by a majority votes of the members present and voting,
and, in the event of an equality of votes, the Chairman, or in his
absence, the person presiding, shall have a second or casting vote.
Member not to participate in meetings in certain cases:Any member, who is a director of a company and who as such
director has any direct or indirect pecuniary interest in any matter coming
up for consideration at a meeting of the Board, shall, as soon as possible
after relevant circumstances have come to his knowledge, disclose the
nature of his interest at such meeting and such disclosure shall be recorded
in the proceedings of the Board, and the member shall not take any part in
any deliberation or decision of the Board with respect to that matter.
Vacancies etc., not to invalidate proceedings of Board:No act or proceeding of the Board shall be invalid merely by reason of
any vacancy in, or any defect in the constitution of, the Board; or

Page 7

 any defect in the appointment of a person acting as a member of the

Board; or
any irregularity in the procedure of the Board not affecting the merits
of the case.
Officers and employees of the Board: The Board may appoint such other officers and employees as it
considers necessary for the efficient discharge of its functions
under this Act.
The term and other conditions of service of officers and employees
of the Board appointed under sub- section (1) shall be such as may
be determined by regulations.

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CHAPTER:4
ORGANIZATION STRUCTURE
THE BOARD COMPRISES
Name

Designation

Upendra Kumar
Sinha

Chairman

Prashant Saran

Whole Time Member

Rajeev Kumar
Agarwal

Whole Time Member

Dr. Thomas
Mathew

Joint Secretary, Ministry of

Finance

V. K. Jairath
magya

Member Appointed

Anand Sinha

Deputy Governor, Reserve Bank

of India

Naved Masood

Secretary,Ministry of Corporate
Affairs

Page 9

CHAPTER:5
POWERS AND FUNCTIONS OF SEBI
Functions of Board: Subject to the provisions of this Act, it shall be the duty of the Board
to protect the interests of investors in securities and to promote the
development of, and to regulate the securities market, by such
measures as it thinks fit.
Without prejudice to the generality of the foregoing provisions, the
measures referred to therein may provide for regulating the business in stock exchanges and any other securities
markets;
registering and regulating the working of stock brokers, subbrokers, share transfer agents, bankers an issue, trustees of trust
deeds, registrars to an issue, merchant bankers, underwriters,
portfolio managers, investment advisers and such other
intermediaries who may be associated with securities markets in
any manner;
registering and regulating the working of the depositories,
[participants,] custodians of securities, foreign institutional
investors, credit rating agencies and such other intermediaries as
the Board may, by notification, specify in this behalf;
registering and regulating the working of [venture capital funds and
collective investment schemes],including mutual funds;
promoting and regulating self-regulatory organisations;
prohibiting fraudulent and unfair trade practices relating to
securities markets;
promoting investors' education and training of intermediaries of
securities markets; prohibiting insider trading in securities;
regulating substantial acquisition of shares and take-over of
companies;
calling for information from, undertaking inspection, conducting
inquiries and audits of the [ stock exchanges, mutual funds, other
persons associated with the securities market] intermediaries and
self- regulatory organizations in the securities market;
calling for information and record from any bank or any other
authority or board or corporation established or constituted by or
under any Central, State or Provincial Act in respect of any

Page 10

transaction in securities which is under investigation or inquiry by

the Board;
performing such functions and exercising such powers under the
provisions of the Securities Contracts (Regulation) Act, 1956(42
of 1956), as may be delegated to it by the Central Government;
levying fees or other charges for carrying out the purposes of this
section;
conducting research for the above purposes;
calling from or furnishing to any such agencies, as may be
specified by the Board, such information as may be considered
necessary by it for the efficient discharge of its functions;
performing such other functions as may be prescribed.
Without prejudice to the provisions contained in sub-section (2),
the Board may take measures to undertake inspection of any book,
or register, or other document or record of any listed public
company or a public company (not being intermediaries referred
to in section 12) which intends to get its securities listed on any
recognised stock exchange where the Board has reasonable
grounds to believe that such company has been indulging in
insider trading or fraudulent and unfair trade practices relating to
securities market.

Page 11

CHAPTER:6
OBJECTIVE OF SEBI
In 1988 the Securities and Exchange Board of India (SEBI) was
established by the Government of India through an executive resolution,
and was subsequently upgraded as a fully autonomous body (a statutory
Board) in the year 1992 with the passing of the Securities and Exchange
Board of India Act (SEBI Act) on 30th January 1992. In place of
Government Control, a statutory and autonomous regulatory board with
defined responsibilities, to cover both development & regulation of the
market, and independent powers have been set up. Paradoxically this is a
positive outcome of the Securities Scam of 1990-91.
The basic objectives of the Board were identified as:

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 there to.

Since its inception SEBI has been working targeting the securities and is
attending to the fulfillment of its objectives with commendable zeal and
dexterity. The improvements in the securities markets like capitalization
requirements, margining, establishment of clearing corporations etc.
reduced the risk of credit and also reduced the market.
SEBI has introduced the comprehensive regulatory measures, prescribed
registration norms, the eligibility criteria, the code of obligations and the
code of conduct for different intermediaries like, bankers to issue,
merchant bankers, brokers and sub-brokers, registrars, portfolio
managers, credit rating agencies, underwriters and others. It has framed
bye-laws, risk identification and risk management systems for Clearing
houses of stock exchanges, surveillance system etc. which has made
dealing in securities both safe and transparent to the end investor.
Another significant event is the approval of trading in stock indices (like
S&P CNX Nifty & Sensex) in 2000. A market Index is a convenient and
effective product because of the following reasons:

It acts as a barometer for market behavior;

It is used to benchmark portfolio performance;

Page 12

It is used in derivative instruments like index futures and index

options;

It can be used for passive fund management as in case of Index

Funds.

Two broad approaches of SEBI is to integrate the securities market at the

national level, and also to diversify the trading products, so that there is
an increase in number of traders including banks, financial institutions,
insurance companies, mutual funds, primary dealers etc. to transact
through the Exchanges. In this context the introduction of derivatives
trading through Indian Stock Exchanges permitted by SEBI in 2000 AD
is a real landmark.
SEBI appointed the L. C. Gupta Committee in 1998 to recommend the
regulatory framework for derivatives trading and suggest bye-laws for
Regulation and Control of Trading and Settlement of Derivatives
Contracts. The Board of SEBI in its meeting held on May 11, 1998
accepted the recommendations of the committee and approved the phased
introduction of derivatives trading in India beginning with Stock Index
Futures. The Board also approved the "Suggestive Bye-laws" as
recommended by the Dr LC Gupta Committee for Regulation and
Control of Trading and Settlement of Derivatives Contracts. SEBI then
appointed the J. R. Verma Committee to recommend Risk Containment
Measures (RCM) in the Indian Stock Index Futures Market. The report
was submitted in november 1998.
However the Securities Contracts (Regulation) Act, 1956 (SCRA)
required amendment to include "derivatives" in the definition of
securities to enable SEBI to introduce trading in derivatives. The
necessary amendment was then carried out by the Government in 1999.
The Securities Laws (Amendment) Bill, 1999 was introduced. In
December 1999 the new framework was approved.
Derivatives have been accorded the status of `Securities'. The ban
imposed on trading in derivatives in 1969 under a notification issued by
the Central Government was revoked. Thereafter SEBI formulated the
necessary regulations/bye-laws and intimated the Stock Exchanges in the
year 2000. The derivative trading started in India at NSE in 2000 and
BSE started trading in the year 2001.

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CHAPTER:7
SEBI - SEBI ADMINISTRATION
The Securities and Exchange Board of India Act, 1992 is having
retrospective effect and is deemed to have come into force on January 30,
1992. Relatively a brief act containing 35 sections, the SEBI Act governs
all the Stock Exchanges and the Securities Transactions in India.
A Board by the name of the Securities and Exchange Board of India
(SEBI) was constituted under the SEBI Act to administer its provisions. It
consists of one Chairman and five members.
One each from the department of Finance and Law of the Central
Government, one from the Reserve Bank of India and two other persons
and having its head office in Bombay and regional offices in Delhi,
Calcutta and Madras.
The Central Government reserves the right to terminate the services of
the Chairman or any member of the Board. The Board decides questions
in the meeting by majority vote with the Chairman having a second or
casting vote.
Section 11 of the SEBI Act provides that to protect the interest of
investors in securities and to promote the development of and to regulate
the securities market by such measures, it is the duty of the Board. It has
given power to the Board to regulate the business in Stock Exchanges,
register and regulate the working of stock brokers, sub-brokers, share
transfer agents, bankers to an issue, trustees of trust deeds, registrars to an
issue, merchant bankers, underwriters, portfolio managers, investment
advisers, etc., also to register and regulate the working of collective
investment schemes including mutual funds, to prohibit fraudulent and
unfair trade practices and insider trading, to regulate take-overs, to
conduct enquiries and audits of the stock exchanges, etc.
All the stock brokers, sub-brokers, share transfer agents, bankers to an
issue, trustees of trust deed, registrars to an issue, merchant bankers,
underwriters, portfolio managers, investment advisers and such other
intermediary who may be associated with the Securities Markets are to
register with the Board under the provisions of the Act, under Section 12
of the Sebi Act. The Board has the power to suspend or cancel such
registration. The Board is bound by the directions vested by the Central
Government from time to time on questions of policy and the Central
Government reserves the right to supersede the Board. The Board is also
Page 14

obliged to submit a report to the Central Government each year, giving

true and full account of its activities, policies and programmers. Any one
of the aggrieved by the Board's decision is entitled to appeal to the
Central Government.

Page 15

CHAPTER:8
DEPARTMENT OF SEBI AND ITS FUNCTIONS
MARKET
INTERMEDIARIES
REGULATION
SUPERVISION DEPARTMENT (MIRSD):-

AND

The Market Intermediaries Regulation and Supervision Department is

responsible for the registration, supervision, compliance monitoring and
inspections of all market intermediaries in respect of all segments of the
markets viz. equity, equity derivatives, debt and debt related
derivatives. The Department also handles the work related to action
against the intermediaries for regulatory violations (As regards action it
is clarified that the current practice of issuing show cause notices,
appointment of Enquiry/Adjudication officers and consequential action
up to serving of Chairmans order and maintenance of database will be
with the respective Divisions). The following divisions will perform the
functions of the department.
MIRSD-1 (A-M)
This division would look after work relating to registration,
monitoring, supervision, inspection, investor grievances and policy
related issues of Stock Brokers and Fees related matters including
coordination of summary proceedings.
MIRSD-2 (N-Z)
This division would look after the work relating to
Registration, monitoring, supervision, inspection, investor grievances
and policy related issues of Stock Brokers and Sub-Brokers.
MIRSD-3
This division would look after the work relating to
Registration, monitoring, supervision, inspection, investor grievances
and policy related issues of the following Primary market related
intermediaries:
Merchant Bankers
Registrars to Issue
Bankers to Issue
Underwriters.

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 MIRSD-4
This division would look after the work relating to
Registration, monitoring, supervision, inspection, investor grievances
and policy related issues of the following intermediaries:
Debenture Trustees,
Credit Rating Agencies
Depository Participants
MIRSD-5
This division looks into the matters relating to the following
intermediaries:
Sub-brokers
Debenture Trustees
Bankers to Issue
DEPARTMENT OF ECONOMIC AND POLICY ANALYSIS
(DEPA):The Department will handle its functions through the following
Divisions:
Division of Policy Analysis (DPA)
This division would look after the following:
Partnering/vetting of policy/concept papers.
Need based research
Regulatory Impact Assessment (RIA) and benchmarking of
regulations.
Research Support to Committees and Working Groups set up by
SEBI.
Development of Strategic Action Plan/Vision Statement.
Any other tasks that may be assigned.
Division of Economic Analysis (DEA)
This division would look after the following:
Tracking and analysis of market developments.
Tracking and analysis of other economic developments.
Repository of data (and data analysis)
Preparation and publication of Annual Report.

Preparation and publication of SEBI Bulletin and Handbook

of Statistics.
Conducting periodic Investor Survey.
Page 17

 History of Securities Market Project.

Any other tasks that may be assigned.
OFFICE OF THE CHAIRMAN (OCH)
Office of the Executive Assistant to Chairman
The office will be responsible to provide such administrative and
other support as the Chairman may require. The functions would
include strategic planning and managing new initiatives.
Office of International Affairs
The office would perform the following:
Implement information-sharing initiatives with international
regulators
Participate in international regulatory organizations
Handle all matters related to Foreign assisted projects
Establish guidelines for interaction with foreign Government
agencies and foreign jurisdictions, including providing technical
assistance.
Communications Division
The division would be responsible for all communications of
SEBI. These include:
Media releases and other forms of communication including the
publication of SEBI materials.
News conferences and responding to inquiries from the press
Human Resources Division
The Human Resources Division will perform all the functions in its
role as the principal personnel and human resources authority in
SEBI.
INFORMATION TECHNOLOGY DEPARTMENT:This department would perform its role as the technical support group
for SEBI.
THE REGIONAL OFFICES (RO's):The Regional Office will handle work as per existing delegation and
shall continue to report to functional heads for specific departmental
functions while reporting administratively to SEBI Executive
Directors.

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CHAPTER: 9
SEBI FORMATION

MUTUAL FUND
An investment vehicle that is made up of a pool of funds collected from
many investors for the purpose of investing in securities such as stocks,
bonds, money market instruments and similar assets. Mutual funds are
operated by money managers, who invest the fund's capital and attempt to
produce capital gains and income for the fund's investors. A mutual fund's
portfolio is structured and maintained to match the investment objectives
stated in its prospectus.

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SECURITIES AND EXCHANGE BOARD OF INDIA (MUTUAL

FUNDS)
(SECOND AMENDMENT) REGULATIONS, 2012.
No. LAD-NRO/GN/2012-13/17/21502 - In exercise of the powers
conferred under section 30 of the Securities and Exchange Board of India
Act, 1992 (15 of 1992), the Board hereby makes the following
regulations to amend the Securities and Exchange Board of India
(Mutual Funds) Regulations, 1996, namely: These regulations may be called the Securities and Exchange Board of
India (Mutual Funds) (Second Amendment) Regulations, 2012.
These regulations shall come into force on the first day of October,
2012.
In the Securities and Exchange Board of India (Mutual Funds)
Regulations, 1996 in regulation 48, sub-regulation (2) and the proviso shall be
substituted with the following, namely -"(2) The Net Asset Value
of the scheme shall be calculated on daily basis and published in
at least two daily newspapers having circulation all over India.".
after regulation 51, the following new regulation shall be inserted,
namely- Credit of exit load to scheme.
51A. The exit load charged, if any, after the commencement of
the SEBI (Mutual Funds) (Second Amendment) Regulations,
2012, shall be credited to the scheme.
in regulation 52,o sub- regulation (2) shall be substituted with the following,
namely- (2) The asset management company may charge the
scheme with investment and advisory fees which shall be fully
disclosed in the offer document..
o in sub-regulation (4), the words mutual fund shall be
substituted with the word scheme.
o in sub-regulation (6), for clause (a), the following shall be substituted, namely(a) in case of a fund of funds scheme, the total expenses of
the scheme including weighted average of charges levied by
the underlying schemes shall not exceed 2.50 per cent of the
daily net assets of the scheme..

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in clause (b), the words weekly average shall be

substituted with the words daily.
in clause (c), the words "or average weekly" and or weekly
average wherever appearing shall be omitted.
o after sub-regulation (6), the following new sub-regulation shall
be inserted, namely-"(6A) In addition to the limits specified in
sub-regulation (6), the following costs or expenses may be
charged to the scheme, namely brokerage and transaction costs which are incurred for the
purpose of execution of trade and is included in the cost of
investment, not exceeding 0.12 per cent in case of cash
market transactions and 0.05 per cent in case of derivatives
transactions;
expenses not exceeding of 0.30 per cent of daily net assets,
if the new inflows from such cities as specified by the
Board from time to time are at least
(i)
30 per cent of gross new inflows in the scheme, or;
(ii) 15 per cent of the average assets under management
(year to date) of the scheme, whichever is higher:
Provided that if inflows from such cities is less than
the higher of sub-clause (i) or sub- clause (ii), such
expenses on daily net assets of the scheme shall be
charged on proportionate basis: Provided further that
expenses charged under this clause shall be utilised
for distribution expenses incurred for bringing
inflows from such cities:
Provided further that amount incurred as expense on
account of inflows from such cities shall be credited
back to the scheme in case the said inflows are
redeemed within a period of one year from the date of
investment;
additional expenses, incurred towards different heads
mentioned under sub-regulations (2) and (4), not exceeding
0.20 per cent of daily net assets of the scheme..
in sub-regulation (7), the words, symbols and number "subregulation (6)" shall be substituted with the words, symbols
and numbers "subregulations (6) and (6A)".
for regulation 59, the following shall be substituted,
namely-Half-yearly Disclosures.
o A mutual fund and asset management company shall within
one month from the close of each half year, that is on

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31stMarch and on 30thSeptember, host a soft copy of its

unaudited financial results on their website:
Provided that the half-yearly unaudited report referred to in this
subregulation shall contain details as specified in Twelfth
Schedule and such other details as are necessary for the
purpose of providing a true and fair view of the operations of
the mutual fund.
o A mutual fund and asset management company, shall publish
an advertisement disclosing the hosting of such financial
results on their website, in atleast one English daily newspaper
having nationwide circulation and in a newspaper having wide
circulation published in the language of the region where the
Head Office of the mutual fund is situated..

In Twelfth Schedule, in serial number 6.5, the words and symbols

"daily/weekly average" wherever appearing shall be substituted
with the word "daily".

CAPITAL MARKET
ROLE OF SEBI IN INDIAN CAPITAL MARKET
SEBI is regulator to control Indian capital market. Since its establishment
in 1992, it is doing hard work for protecting the interests of
Indian investors. SEBI gets education from past cheating with naive
investors of India. Now, SEBI is more strict with those who commit
frauds in capital market.The role of security exchange board of India
(SEBI) in regulating Indian capital market is very important because
government of India can only open or take decision to open new stock
exchange in India after getting advice from SEBI. If SEBI thinks that
it will be against its rules and regulations, SEBI can ban on any stock
exchange to trade in shares and stocks.Now, we explain role of SEBI in
regulating Indian Capital Market more deeply with following points:
Power to make rules for controlling stock exchange :SEBI has power to make new rules for controlling stock exchange in
India. For example, SEBI fixed the time of trading 9 AM and 5
PM in stock market.
To provide license to dealers and brokers :SEBI has power to provide license to dealers and brokers of capital
market. If SEBI sees that any financial product is of capital nature,
then SEBI can also control to that product and its dealers. One of
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main example is ULIPs case. SEBI said, " It is just like mutual
fundsand all banks and financial and insurance companies who want
to issue it, must take permission from SEBI."
To Stop fraud in Capital Market:SEBI has many powers for stopping fraud in capital market.
It can ban on the trading of those brokers who are involved in
fraudulent and unfair trade practices relating to stock market.
It can impose the penalties on capital market intermediaries if they
involve in insider trading.
To Control the Merge, Acquisition and Takeover the companies :
Many big companies in India want to create monopoly in capital
market. So, these companies buy all other companies or deal
of merging. SEBI sees whether this merge or acquisition is for
development of business or to harm capital market.
To audit the performance of stock market :
SEBI uses his powers to audit the performance of different Indian
stock exchange for bringing transparency in the working of stock
exchanges.
To make new rules on carry - forward transactions :
Share trading transactions carry forward can not exceed 25% of
broker's total transactions.
90 day limit for carry forward.
To create relationship with ICAI:ICAI is the authority for making new auditors of companies. SEBI
creates good relationship with ICAI for bringing more transparency
in the auditing work of company accounts because audited financial
statements are mirror to see the real face of company and after this
investors can decide to invest or not to invest. Moreover, investors of
India can easily trust on audited financial reports. After Satyam Scam,
SEBI is investigating with ICAI, whether CAs are doing their duty by
ethical way or not.
Introduction of derivative contracts on Volatility Index: For reducing the risk of investors, SEBI has now been decided to
permit Stock Exchanges to introduce derivative contracts on
Volatility Index, subject to the condition that;
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The underlying Volatility Index has a track record of at least

one year.
The Exchange has in place the appropriate risk management
framework for such derivative contracts.

Before introduction of such contracts, the Stock Exchanges shall

submit the following:
Contract specifications
Position and Exercise Limits
Margins
The economic purpose it is intended to serve
Likely contribution to market development
The safeguards and the risk protection mechanism adopted by
the exchange to ensure market integrity, protection of
investors and smooth and orderly trading.
The infrastructure of the exchange and the surveillance system
to effectively monitor trading in such contracts, and
Details of settlement procedures & systems
Details of back testing of the margin calculation for a period
of one year considering a call and a put option on the
underlying with a delta of 0.25 & -0.25 respectively and actual
value of the underlying.
To Require report of Portfolio Management Activities:SEBI has also power to require report of portfolio management to
check the capital market performance. Recently, SEBI sent the letter
to all Registered Portfolio Managers of India for demanding report.
To educate the investors:Time to time, SEBI arranges scheduled workshops to educate the
investors. On 22 may 2010 SEBI imposed workshop. If you are
investor, you can get education through SEBI leaders by getting
update information on this page.

STOCK EXCHANGES
Powers of sebi in stock exchanges
Power to call for information:The Board may from time to time call for any information, documents
or records from the recognised stock exchange or the recognised

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clearing corporation, or their governing board or any shareholder

thereof.
Power of inspection: The Board may at any time undertake inspection, conduct inquiries
and audit of any recognised stock exchange or recognised clearing
corporation, any associate of such exchange or clearing
corporation, any shareholder of such stock exchange or clearing
corporation or any associate and agent of such shareholder.
Where an inspection under sub-regulation (1) is undertaken by the
Board, such recognised stock exchange or recognised clearing
corporation or shareholder or associate and every manager,
director, managing director, chairperson or officer and other
employee of such recognised stock exchange, recognised clearing
corporation, shareholder or associate shall co-operate with the
Board.
Directions by the Board:Without prejudice to exercise of its powers under the provisions of the
Act or the Securities and Exchange Board of India Act, 1992 and rules
and regulations made there under, the Board may, either suo motu or
on receipt of any information or during pendency of any inspection,
inquiry or investigation or on completion thereof, in the interest of
public or trade or investors or the securities market, issue such
directions as it deems fit, including but not limited to any or all of the
following:
directing a person holding equity shares or rights over equity
shares in a recognised stock exchange or recognised clearing
corporation in contravention of these regulations to divest his
holding, in such manner as may be specified in the direction;
directing transfer of any proceeds or securities to the Investor
Protection Fund of a recognised stock exchange or Settlement
Guarantee Fund of a recognised clearing corporation;
Power to remove difficulties:In order to remove any difficulties in the interpretation or application
of the provisions of these regulations, the Board shall have the power
to issue directions through guidance notes or circulars.
Power to specify procedures, etc. and issue clarifications.

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For the purposes of implementation of these regulations and matters

incidental thereto, the Board may specify norms, procedures,
processes, manners or guidelines as specified in 21 these regulations,
by way of circulars to recognised stock exchange(s) and recognised
clearing corporation(s).

Repeal and savings.: On and from the commencement of these regulations, the
Securities Contracts (Regulation) (Manner of Increasing and
Maintaining Public Shareholding in Recognized Stock Exchanges)
Regulations, 2006, shall stand repealed.
Notwithstanding such repeal, anything done or any action taken or
purported to have been taken or contemplated under the repealed
regulations before the commencement of these regulations shall be
deemed to have been done or taken or commenced or contemplated
under the corresponding provisions of these regulations.
After the repeal of the regulations referred to in sub-regulation (1),
any reference thereto in any regulation, guideline, circular or
direction issued by the Board shall be deemed to be a reference to
the relevant provisions of these regulations.

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CHAPTER:10
REGISTRATION CERTIFICATE
Registration of stock brokers, sub-brokers, share transfer agents,
etc.
No stock-broker, sub- broker, share transfer agent, banker to an
issue, trustee of trust deed, registrar to an issue, merchant banker,
underwriter, portfolio manager, investment adviser and such other
intermediary who may be associated with securities market shall
buy, sell or deal in securities except under, and in accordance with,
the conditions of certificate of registration obtained from the Board
in accordance with the
[regulations] made under this Act:
Provided that a person buying or selling securities or otherwise
dealing with the securities market as a stock- broker, sub-broker,
share transfer agent, banker to an issue, trustee of trust deed,
registrar to an issue, merchant banker, underwriter, portfolio
manager, investment adviser and such other intermediary who may
be associated with securities market immediately before the
establishment of the Board for which no registration certificate was
necessary prior to such establishment, may continue to do so for a
period of three months from such establishment or, if he has made
an application for such registration within the said period of three
months, till the disposal of such application.
Provided further that any certificate of registration, obtained
immediately before the commencement of the Securities Laws
(Amendment) Act, 1995, shall be deemed to have been obtained
from the Board in accordance with the regulations providing for
such registration.
No depository, [participant,] custodian of securities, foreign
institutional investor, credit rating agency or any other
intermediary associated with the securities market as the
Board may by notification in this behalf specify, shall buy or
sell or deal in securities except under and in accordance
with the conditions of a certificate of registration obtained
from the Board in accordance with the regulations made
under this Act:
Provided that a person buying or selling securities or
otherwise dealing with the securities market as a depository,
[participant,] custodian of securities, foreign institutional
investor or credit rating agency immediately before the
commencement of the Securities Laws (Amendment) Act,
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1995, for which no certificate of registration was required

prior to such commencement, may continue to buy or sell
securities or otherwise deal with the securities market until
such time regulations are made under clause (d) of subsection (2) of section 30.
No person shall sponsor or cause to be sponsored or carry on
or cause to be carried on any venture capital funds or
collective investment schemes including mutual funds,
unless he obtains a certificate of registration from the Board
in accordance with the regulations:
Provided that any person sponsoring or causing to be
sponsored, carrying on or causing to be carried on any
venture capital funds or collective investment schemes
operating in the securities market immediately before the
commencement of the Securities Laws (Amendment) Act,
1995, for which no certificate of registration was required
prior to such commencement, may continue to operate till
such time regulations are made under clause (d) of subsection (2) of section 30.
Every application for registration shall be in such manner and on
payment of such fees as may be determined by regulations.
The Board may, by order, suspend or cancel a certificate of
registration in such manner as may be determined by regulations.
Provided that no order under this sub-section shall be made unless
the person concerned has been given a reasonable opportunity of
being heard.

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CHAPTER:11
CONCLUSION
The enactment of the SEBI Act within the context of other statutes such
as the Companies Act and Depositories Act has provided a strong
regulatory framework for the Indian market. Subsequently much of the
growth of the Indian market can be attributed to the robust processes for
issuance, pricing, allotment and listing of securities enabled by SEBI.
Strengthening SEBI's power in the investigative, administrative and legal
aspects of enforcement would enable it to speedily address legal
challenges such as those faced during dematerialization or disclosure
requirements. In the future, SEBI should adopt more transparency to gain
higher public confidence.

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CHAPTER:12
BIBLOGRAPHY
http://www.investopedia.com/terms/s/sebi.asp
http://www.123helpme.com/securities-and-exchange-board-of-indiasebi-view.asp?id=167244
www.wikipedia.com
www.sebi.gov.in
www.slideshare.com
www.scribd.com

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