bas

Insurance Assignment: SEBI

The Securities and Exchange Board of India

The Capital Market Regulator

Stock Exchanges in India were continued to be regulated directly by the Government of

India under powers conferred in terms of the Securities Contract (Regulations) Act 1956

up to the late Eighties. In the year 1988 the Government of India constituted the

Securities and Exchange Board of India (Popularly referred as 'SEBI') with Head office at

Mumbai through an executive resolution to act as the independent regulator of Stock

exchanges, the primary market, Mutual Funds etc. The Capital Issues (Control) Act of

1947 was abolished in May 1992. The abolition of CCI (Controller of Capital Issues) and

allowing free pricing of issues prompted many companies to raise funds from the equity

market at a premium. The ground was cleared for the incoming of a market regulatory

authority replacing direct government control. SEBI was made into a statutory corporate

body in the year 1992 with the passing of the Securities and Exchange Board of India Act

in 30th January 1992.

The objects clause of the Act explained the scope and purpose of the Act in the following

words:

An Act 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 or

incidental thereto.

Subsequently on 13th September 1994, the Government of India through a Gazette

Notification delegated the Powers conferred to it under the Securities Contracts

(Regulation) Act 1956 to SEBI. The Government in the year 1996 also passed the

Depositories Act 1996, which came into retrospective operation from 20 September

1995. SEBI is made the Regulator for monitoring the due compliance and enforcing the

provisions of this Act also.

Group 10: Anu Job and Michelle Machado


Organisational Structure of SEBI

1. The Board i.e. SEBI shall consist of the following members, namely:-

a. a Chairman;

b. two members from amongst the officials of the Ministries of the Central

Government dealing with Finance and Law;

c. one member from amongst the officials of the Reserve Bank of India

constituted under section 3 of the Reserve Bank of India Act, 1934;

d. two other members, to be appointed by the Central Government.

2. 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.

3. 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 the Board.

4. The Chairman and members referred to in clauses (a) and (d) of sub-section (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 of India respectively.

5. The Chairman and the other members referred to in clauses (a) and (d) of sub-

section (1) shall be from amongst the 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.



Powers and Functions of The Board (SEBI)

These are detailed in the second chapter of the Act under Section 11(1). The section

points out that it shall be duty of the Board to protect the interests of the investors in

securities and to promote and development of, and to regulate the securities market by

such measures as it thinks fit. In brief the statutory objectives of the SEBI enshrined in

the SEBI Act are fourfold-

1. Protection of investors interests in securities

2. Promotion of the development of the securities market

3. Regulation of the securities market and

4. Matters connected therewith and incidental thereto.

By way of amplification of the above core objectives, the Act enumerates as under the

different powers & functions of SEBI in greater details as under:-

a. regulating the business in stock exchanges and any other securities markets;

b. registering and regulating 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 and such

other intermediaries who may be associated with securities markets in any

manner.

c. 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.

d. registering and regulating the working of venture capital funds and collective

investment schemes including mutual funds;

e. promoting and regulating self-regulatory organisations;

f. prohibiting fraudulent and unfair trade practices relating to securities markets;



g. promoting investors' education and training of intermediaries of securities

markets;

h. prohibiting insider trading in securities;

i. regulating substantial acquisition of shares and take-over of companies;

j. calling for information from, undertaking inspection, conducting inquiries and

audits of the stock exchanges, mutual funds and other persons associated with the

securities market and intermediaries and self- regulatory organisations in the

securities market;

k. performing such functions and exercising such powers under the provisions of

Securities Contracts (Regulation) Act, 1956, as may be delegated to it by the

Central Government;

l. levying fees or other charges for carrying out the purpose of this section;

m. conducting research for the above purposes;

n. 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;

o. performing such other functions as may be prescribed.

For the due exercise of its responsibilities under the Act, the Board is vested with the

same powers as are vested in a civil court, in respect of the following matters, namely:-

i. the discovery and production of books of account and other documents, at such

place and such time as may be specified by the Board;

ii. summoning and enforcing the attendance of persons and examining them on oath;

iii. inspection of any books, registers and other documents of any person referred to

in section 12, at any place.



Matters to be Disclosed by the Companies to the Board [Section 11(A)]

The Board may, for the protection of investors, specify, by regulations,-

a. the matters relating to issue of capital, transfer of securities and other matters

incidental thereto; and

b. the manner in which such matters, shall be disclosed by the companies.

Power to Issue Directions [Section 11(B)]

SEBI is empowered to issue Directions to the following intermediaries with regards to

matters connection with Section 12:

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

Depository, depository participant, custodian of securities, foreign institutional

investor, credit rating agency or any other intermediary associated with the

securities market

sponsors of venture capital funds, or collective investment schemes including

mutual funds

and to any Company with regards to matters to be disclosed by the Companies as

specified in Section 11(A)

Registration of Intermediaries connected with Securities market

Different intermediaries mentioned above can commence functioning in their respective

activities only after registration with SEBI and complying with requirements as stated

under specific regulations intended for each.

(1) 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 a



certificate of registration obtained from the Board in accordance with the regulations

made under this Act.

(1A) 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.

(1B) 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.

SEBI has issued detailed Rules and Regulations to be adhered to by each of the

intermediaries above specified

Establishment of Securities Appellate Tribunals

The Central Government shall by notification, establish one or more Appellate Tribunals

to be known as the Securities Appellate Tribunal to function as Appellate Authority and

hear appeals

Civil Court not to have jurisdiction (Section 15Y)

No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any

matter which an adjudicating officer appointed under this Act or a Securities Appellate

Tribunal constituted under this Act is empowered by or under this Act to determine and

no injunction shall be granted by any court or other authority in respect of any action

taken or to be taken in pursuance of any power conferred by or under this Act. However

appeals against the decision of Securities Appellate Tribunal can be preferred before a

High Court.

SEBI since its inception has carried out its functions effectively and brought about

immense changes in the environment of the investment market to the benefit of the

common investor.



SEBI - Performance Objectives

SEBI was established by the Government of India with the objectives towards Protecting

the interest of the investors in securities; to Promote the development of, and Regulate

the securities market and matters connected therewith or incidental to. SEBI has drawn a

comprehensive Strategic Action Plan in order to realize this vision. The Plan envisages

achievement of strategic aims laid down for :

a. corporates,

b. markets and

c. regulatory regime

SEBI has drawn its Vision to become the "Most Dynamic and Respected

Regulator-Globally". Towards this end it has drawn a comprehensive

Strategic Action Plan in order to realize this vision. The Strategic Action

Plan has identified four key spheres and has set strategic aims for each

of the them as under:

Sphere of Responsibility Strategic Aim Identified

INVESTORS (CONSUMERS)

Investors are enabled to make informed

choices and decisions and achieve fair deals

in their financial dealings

FIRMS (CORPORATE)

Regulated firms and their senior management

understand and meet their regulatory

obligations

FINANCIAL MARKETS

(EXCHANGES,

INTERMEDIARIES)

Consumers and other participants have

confidence that markets are efficient, orderly

and clean

REGULATORY REGIME

An appropriate, proportionate and effective

regulatory regime is established in which all

the 'stakeholders' have confidence



Safeguards for Investors

A Number of steps have been taken to ensure that investors are enabled to make informed

choices and decisions and achieve fair deals in their financial dealings. Some of them are:

1. Electronic Data Filing and Retrieval System (EDIFAR) was made operational in

July 2002. This is an automated web based system for filing, retrieval and

dissemination of information pertaining to corporates. For period ending

December 2002, 1200 companies are required to electronically file the

documents.

2. Benchmarking has been made compulsory for debt oriented and balanced funds

for providing objective analysis of the performance of the mutual fund schemes.

3. A Code of conduct for Mutual fund intermediaries has been prescribed.

4. Guidelines for Risk Management System issued and implemented for the Mutual

Funds in order to eliminate/minimize the risks in operations of Mutual Funds.

5. Guidelines have been issued for the valuation of unlisted equity shares by Mutual

Funds with a view to bringing about uniformity in the calculation of NAV.

6. A provision of nomination for the unit holders has been introduced. This has been

an investor friendly measure.

7. Mutual Funds have been advised to follow a uniform method to calculate the sale

and repurchase price. This would avoid creation of confusion in the minds of the

investors.

8. SEBI prohibited rebating and discounting by the Mutual Funds, thus, ensuring

that all investors get fair treatment.

9. Guidelines were issued to Mutual Funds for exercising due diligence while

making investments in unlisted equity shares. The mutual funds now cannot buy

unlisted equity shares at a price higher than the price worked out in accordance



with detailed pricing formula. Thus mutual funds cannot buy unlisted equity

shares at arbitrary high prices.

10. A detailed study done on unit holding pattern in mutual funds industry for the first

time and the same is available on the SEBI web site.

11. With a view to improving corporate governance standards, trustees who act as

first line regulators are now required to meet on bi-monthly basis instead of

earlier requirement of meeting on quarterly basis. They are required to review the

performance and compliance of regulations on bi-monthly basis.

12. Depository charges for investors were rationalized after a SEBI initiative.

13. Depository Participants have been directed that no Account closure charges shall

be imposed on the closure of any Beneficial Owner accounts by any depository

participant.

14. Quarterly secretarial audit has been made mandatory for listed entities to

reconcile the issue capital and electronic shares.

15. 65 orders were passed against Collective Investment Schemes (Plantation

Schemes) entities under Section 11B of the SEBI Act, 1992 and 43 case of

prosecutions launched against errant promoters of these entities.

16. Out of the 25,929 investor complaints received during the period April 1st, 2002-

December 31st ,2002, 15066 complaints were redressed by the respective

companies.

Enforcement of Regulatory Obligations on the Part of Corporates

1. Prof Varma committee reviewed SEBI (Employee Stock Option Scheme &

Employee Stock Purchase Scheme) Guidelines, 1999 to strengthen the same and

to remove glitches, if any, in the operations of the same. The committee inter-alia

recommended mandatory disclosure of the fair value of the ESOPs (i.e. using



Black Scholes or similar models), the impact on profits and on EPS of the

company, had the company expensed the ESOPs on fair value basis and also

relaxation from lock-in requirement subject to certain disclosures in the offer

document in case company is going for IPO after the grant of options.

2. The Accounting Standards Committee has recommended additional disclosures

for investment in associate and subsidiaries. It also recommended introduction of

half yearly audited consolidate results and quarterly audit review.

3. Credit Rating Agencies have been asked to develop models for rating corporate

governance on the principles of wealth creation, wealth management and wealth

sharing. This would ensure that corporates adhere to the 'substance' element of

corporate governance.

4. Code of conduct has been specified for listed entities and regulated firms under

the Insider Trading Regulations.

5. SEBI brought a scheme to enable individuals and companies to disclose the

irregularities in reporting of acquisition of shares under the SEBI (SAST)

Regulations, 1997.



Towards Ensuring efficient, Orderly and Clean Markets and Intermediaries

Major Policy Reforms and Developments in the Securities Markets during 2002-03:

During 2002-03, SEBI initiated several structural changes in the securities market and

worked assiduously to achieve them. Some of the major accomplishments of SEBI during

the last financial year are as follows :

Implementation of T+3 rolling settlement for all listed securities across the

exchanges from April 2, 2002 to move T+2 on April 1, 2003.

Introduction of scientific model for risk management, based on VaR.

Introduction of Electronic Data Information Filing And Retrieval (EDIFAR)

System to facilitate electronic filing of certain documents/statements by the listed

companies and their immediate disclosure to the market participants.

Launch of Securities Market Awareness Campaign.

Introduction of rating corporate governance on the principles of wealth creation,

wealth management and wealth sharing.

Introduction of Straight Through Processing (STP) for the securities transaction.

Implementation of a comprehensive risk management system for Mutual Funds.

Introduction of the Dual fungibility of ADRs and GDRs.

Establishment of the Central Listing Authority (CLA). Issuance of necessary

guidelines/circulars for Corporatization and Demutualization of stock exchanges.

Introduction of the trading of Government Securities on the Stock Exchanges.

Posting all the orders passed by the Securities Appellate Tribunal (SAT) and the

Board on the SEBI website, to bring in regulatory transparency.



Introducing the consultative process on policy formulation by putting all reports

of committees and draft regulations on the SEBI website for seeking comments,

suggestions and opinions from public.

Issuance of guidelines on Delisting of Securities from the Stock Exchanges.

Establishment of inter-depository transfer through on-line connectivity between

CDSL and NSDL.

Announcement of Accounting Standards and disclosure practices of the Indian

companies by ICAI in consultation with SEBI in accordance with International

Accounting Standards.

Expansion of the derivatives products basket.

Introduction of benchmarking of all the Mutual Funds Schemes to facilitate the

understanding of the investors about the performance of the funds. Introduction of

nomination facility for the unit holders of mutual funds.

Simplification of documentation procedure for FII registration and reduction of

registration fee for FIIs.

Effective Regulatory Regime to Infuse Confidence Amongst all the Stakeholders

1. The SEBI Act, 1992 was amended in October 2002 and SEBI's powers were

enhanced to check cases of insider trading , fraudulent and unfair trading practices

in securities markets and market manipulation in order to protect the investors.

SEBI has been given powers to levy deterrent penalties against individuals,

corporates and individuals in the matters related to market manipulation, insider

trading and fraudulent practices.

2. As per the amendments, the SEBI Board has been enlarged with the provision of

three full time Board members. The Securities Appellate Tribunal has been

converted into a three member body with a sitting or retired judge of Supreme

Court or a sitting or retired Chief Justice of High Court as the presiding officer.



3. In an effort to enhance regulatory transparency all the orders passed by the

Securities Appellate Tribunal and Chairman , SEBI are being posted on the SEBI

website with effect from June 20, 2002.

4. It was felt that participation of regulatees as also the nation at large in the process

of designing the regulation will improve the efficacy of regulations . With this end

in view, a consultative mechanism was established by placing reports of

committees and draft regulations on the SEBI website and seeking comments,

suggestions and opinions.

SEBI Guidelines to Stock Exchanges for Conducting Internet Trading

The SEBI Board has approved the report on Internet Trading brought out by the SEBI

Committee on Internet Based Trading and Services.

Internet Based trading can take place through order routing systems, which will route

client orders, to exchange trading systems, for execution of trades on the existing stock

exchanges. SEBI Registered Brokers can introduce the service after obtaining permission

from respective Stock Exchanges. Exchanges while giving permission will be required to

ensure minimum conditions specified in the report.

The salient conditions to be met are:

1. Application for Permission by Brokers

SEBI registered Stock Brokers interested in providing Internet based trading

services will be required to apply to the respective stock exchange for a formal

permission. The stock exchange should grant approval or reject the application as

the case may be, and communicate its decision to the member within 30 calendar

days of the date of completed application submitted to the exchange.



The stock exchange, before giving permission to brokers to start Internet based

services shall ensure the fulfillment of the following minimum conditions:

2. Net worth Requirement

The broker must have a minimum net worth of Rs.50 lacs if the broker is

providing the Internet based facility on his own. However, if some brokers

collectively approach a service provider for providing the internet trading facility,

net worth criteria as stipulated by the stock exchange will apply. The net worth

will be computed as per the SEBI circular no FITTC/DC/CIR-1/98 dated June 16,

1998.

Operational and System Requirements

3. Operational Integrity:

The Stock Exchange must ensure that the system used by the broker has provision

for security, reliability and confidentiality of data through use of encryption

technology. (Basic minimum security standards are specified in following paras).

The Stock Exchange must also ensure that records maintained in electronic form

by the broker are not susceptible to manipulation.

4. System Capacity:

The Stock Exchange must ensure that the brokers maintain adequate backup

systems and data storage capacity. The Stock Exchange must also ensure that the

brokers have adequate system capacity for handling data transfer, and arranged

for alternative means of communications in case of Internet link failure

.

5. Qualified Personnel:



The Stock Exchange must lay down the minimum qualification for personnel to

ensure that the broker has suitably qualified and adequate personnel to handle

communication including trading instructions as well as other back office work

which is likely to increase because of higher volumes.

6. Written Procedures:

Stock Exchange must develop uniform written procedures to handle contingency

situations and for review of incoming and outgoing electronic correspondence.

7. Signature Verification/ Authentication:

It is desirable that participants use authentication technologies. For this purpose it

should be mandatory for participants to use certification agencies as and when

notified by Government / SEBI. They should also clearly specify when manual

signatures would be required.

Client Broker Relationship

8. Know Your Client:

The Stock Exchange must ensure that brokers comply with all requirements of

"Know Your Client" and have sufficient, verifiable information about clients,

which would facilitate risk evaluation of clients.

9. Broker-Client Agreement:

Brokers must enter into an agreement with clients spelling out all obligations and

rights. This agreement should also include inter alia, the minimum service

standards to be maintained by the broker for such services specified by

SEBI/Exchanges for the Internet based trading from time to time.



Exchanges will prepare a model agreement for this purpose. The broker

agreement with clients should not have any clause that is less stringent/contrary to

the conditions stipulated in the model agreement.

10. Investor Information:

The broker web site providing the internet based trading facility should contain

information meant for investor protection such as rules and regulations affecting

client broker relationship, arbitration rules, investor protection rules etc. The

broker web site providing the Internet based trading facility should also provide

and display prominently, hyper link to the web site/ page on the web site of the

relevant stock exchange(s) displaying rules/ regulations/circulars.

Ticker/quote/order book displayed on the web-site of the broker should display

the time stamp as well as the source of such information against the given

information.

11. Order/Trade Confirmation:

Order/Trade confirmation should also be sent to the investor through email at

client's discretion at the time period specified by the client in addition to the other

mode of display of such confirmations on real time basis on the broker web site.

The investor should be allowed to specify the time interval on the web site itself

within which he would like to receive this information through email. Facility for

reconfirmation of orders which are larger than that specified by the member's risk

management system should be provided on the internet based system.

12. Handling Complaints by Investors

Exchanges should monitor complaints from investors regarding service provided

by brokers to ensure a minimum level of service. Exchange should have separate

cell specifically to handle Internet trading related complaints. It is desirable that

exchanges should also have facility for on-line registration of complaints on their

web-site



Risk Management

13. Exchanges must ensure that brokers have a system-based control on the trading

limits of clients, and exposures taken by clients. Brokers must set pre-defined

limits on the exposure and turnover of each client

14. The broker systems should be capable of assessing the risk of the client as soon as

the order comes in. The client should be informed of acceptance/rejection of the

order within a reasonable period. In case system based control rejects an order

because of client having exceeded limits etc., the broker system may have a

review and release facility to allow the order to pass through.

15. Reports on margin requirements, payment and delivery obligations, etc. should be

informed to the client through the system.

Contract Notes

16. Contract notes must be issued to clients as per existing regulations, within 24

hours of the trade execution

Cross Trades

17. As in the case of existing system, brokers using Internet based systems for routing

client orders will not be allowed to cross trades of their clients with each other.

All orders must be offered to the market for matching.

It is emphasised that in addition to the requirements mentioned above, all existing

obligations of the broker as per current regulation will continue without changes.

Exchanges may also like to specify more stringent standards as they may deem fit

for allowing Internet based trading facilities to their brokers.

Network Security Protocols and Interface Standards



18. At present the Indian laws are silent on the security of Internet information.

However, the draft E-Commerce Act focuses on this issue and prescribes the

requirements like electronic certification, digital signatures etc. which will play an

important role on the authenticity of such information gathered from the Internet.

These requirements will also have to be met by Internet trading systems, as when

they come into force.

19. Network Security

The following security features are mandatory for all Internet based trading

systems:

i. User id

ii. First Level password (Private code)

iii. Automatic expiry of passwords at the end of a reasonable duration.

Reinitialise access on entering fresh passwords

iv. All transaction logs with proper audit facilities to be maintained in the

system.

v. Secured Socket Level Security for server access through Internet

vi. Suitable Firewalls between trading set-up directly connected to an

Exchange trading system and

vii. the Internet trading set-up.

20. The following advanced security products are advisable.

a. Microprocessor based SMART cards

b. Dynamic Password (Secure ID Tokens)

c. 64 bit/128 bit encryption **



d. Second Level password (personal information e.g. village name, birth date

etc.)

**DOT policy and regulations will govern the level of encryption.

e. Standards for Web Interfaces and Protocols

Between a Trading Web Server and Trading Client Terminals, Interfaces

Standards as per recommendations of IETF (Internet Engineering Task

Force) and W3C (World Wide Web Consortium) may be adopted. E.g.:

HTTP Ver 4 or above HTML Ver 4/XML

f. Systems Operations

a. Brokers should follow the similar logic/priorities used by the

Exchange to treat client orders

b. Brokers should maintain all activities/ alerts log with audit trail

facility

c. Broker Web Server should have internally generated unique

numbering for all client order/trades

d. Brokers should seek permission from the Exchange before

commencement of Internet trading facility after providing

complete details of the features of implemented systems.

e. Brokers should make periodic reporting to the Exchange as

specified by the Exchange.

Exchanges to make necessary arrangements and seek from SEBI approval of the Internet

trading systems submitted by their members for examination

On 26th January,1995, the government promulgated an ordinance amending the SEBI

Act, 1992, and the Securities Contracts (Regulation) Act, 1956.



In accordance with the amendment adjudicating mechanism will be created within SEBI

and any appeal against this adjudicating authority will have to be made to the Securities

Appelate Tribunal, which is to be separately constituted. These appeals will be heard only

at the High Courts.

The main features of the amendment to the Securities Contract (Regulation) Act, 1956,

are:

The ban on the system of options in trading has been lifted.

The time limit of six months, in which stock exchanges could amend their bye-

laws has been reduced to two months.

Additional trading floors on the stock exchanges can be established only with

prior permission from SEBI.

Any company seeking listing on stock exchanges would have to comply with the

listing agreements of stock exchanges, and the failure to comply with these, or

their violation is punishable

On August 26, 2003, SEBI revised Clause 49 of the listing agreement for improving the

standards of corporate governance.

The move came at a time when most of the aspects incorporated in the revised Clause 49

were also included in the Companies (Amendment) Bill, 2003 (introduced in the Rajya

Sabha on May 7, 2003).

These pertained to the implementation of the recommendations of the Committee on

Corporate Audit and Governance and contained clauses relating to directors' report,

qualifications and disqualifications of auditors, independent directors, meeting of the

board of directors and powers to be exercised only at the meetings of the board and

restrictions on board's powers, remuneration, inter-corporate loans and so on.

Even while this Bill was pending for consideration of Parliament, Sebi revised Clause 49

and included in it almost the same matters that were present in the Amendment Bill, with

the stipulation in sub-clause (4) of Clause 49 that the sub-clauses in this clause 'shall be



suitably modified or new clauses shall be added following the amendments to the

Companies Act, 1956 by the Companies (Amendment) Bill/Act, 2003' to harmonise with

the provisions in the Companies Act and the listing agreement.

The Companies Act recognises Sebi as an enforcement authority for administering

certain specific sections. Sebi has to enforce those sections under the Companies Act.

It cannot resort to the provisions of the Sebi Act to enforce the provisions of the

Companies Act in the absence of an enabling provision for the purpose in the Sebi Act.

Section 11B has no over-riding effect on the provisions of the Companies Act, as has

been made clear in Section 32 of the Sebi Act that the provisions of the Act 'shall be in

addition to and not in derogation of the provisions of any other law for the time being in

force'.

Section 11B cannot be invoked to take action against those who contravene the

provisions of Sections 69, 73 and 77 of the Companies Act and, in that view of the

matter, the impugned order made under Section 11B in the light of the respondent's

finding that the appellant had contravened Sections, viz, 69, 73(3A) and 77 of the

Companies Act, is without jurisdiction and as such, the order cannot be sustained.

Section 55A gives powers to Sebi in respect of sections mentioned therein only and

clarifies that in respect of the rest, the jurisdiction would be of the Central government.

The 'explanation' to the Section clarifies that all powers relating to all other matters,

including the matters relating to prospectus, statement in lieu of prospectus, return of

allotment, issue of shares and redemption of redeemable preference shares shall be

exercised by the Central government, (Tribunal) or the registrar of companies, as the case

may be.


bas

Documents

Transcript of bas