sebippt-120114111207-phpapp02.pptx

7/28/2019 sebippt-120114111207-phpapp02.pptx

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SEBI & STOCK

EXCHANGES


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ESTABLISMENT

In 1988 the securities and exchange board of india

was established by government of india through an

executive resolution and was subsequently upgradedas a fully autonomous body (a statutory body) in the

year 1992 with the passing of securities and

exchange board of india act (SEBI act) on 30th janury

1992


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SEBI head quateredin popular businessdistrict of bandra-kurla complex in

mumbai


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Salient features of SEBI act 1992

Shall be a body corporate with perpetual succession ancommon seal with power to acquire hold and dispose of

property.

HQ will be in Mumbai and may establish offices at otherplaces in India.

Chairman and members of board will be appointed by thecentral government.

Government can prescribe terms of offices and otherconditions of service of the board and chairman.

Primary duties of the board is to protect the interest of theinvestors.


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Amendments

Can undertake inspection of any books.

Issue commission for the examinations of witness of

documents. Power to regulate or prohibit issue of prospectus.

Power to prohibit manipulative and deceptive devices.

Penalties levied under the act have been enhanced.


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Objectives of SEBI

The primary objective of SEBI is to promote healthy and orderly

growth of the securities market and secure investor protection.

The objective of SEBI are as follows:- To protect the interest of investors, so that , there is a steady

flow of savings into to the capital market.

To regulate the securities market and ensure fair practices.

To promote efficient services by brokers , merchant bankersand financial intermediaries, so that, they become competitive

and professional.


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Functions of SEBI

The SEBI act 1992 has entrusted with two functions they

are

1. Regulatory functions and

2. Developmental functions


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Regulatory functions

Regulation of stock exchanges and self regulatory organizations.

registration and regulation of stock brokers , sub-brokers ,

registrars of all issues, merchant bankers, underwriters, portfoliomanagers..etc

Registration and regulation of the working of collective investment

schemes including mutual funds.

Prohibition of fraudulent and unfair trade practices relating to

securities market. Prohibiting of insider trading.

Regulating substantial acquisition of shares and takeovers of the

company.


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Developmental functions

Promoting investors education.

Training of intermediaries.

Conducting research and publishing information useful to allmarket participants.

Promoting of fair practices.

Promotion of self regulatory organisations.


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Powers of SEBI

Power to call periodical returns from recognized stock

exchanges .

Power to compel listing of securities by public companies. Power to levy fees or other changes for carrying out the

purposes of regulation.

Power to call information or explanation from recognized

stock exchanges or their members. Power to grant approval to bye-laws of recognized stock

exchanges.

Power to control and regulate stock exchanges.


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Power to direct enquiries to be made in relation to affairs of

stock exchanges or their members.

Power to make or amend bye-laws of recognized stockexchanges.

Power to grant registration to market intermediaries

Power to declare applicability of section 17 of the securities

contract (regulation) act 1956 in any state or area to grantlicenses to dealers


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Structure of SEBI

the board shall consists of following members:-

1. Chairman

2. Two members, one from amongst the officials of the centralgovernment dealing with finance and another from the

administration of companies act of 1956.

3. One members from amongst the officials of the reserve bank

of india.4. five other members of whom atleast three shall be the

whole-time members to be appointed by the central

government.


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Model code of conduct

code of conduct:- the code of conduct has to be strictlyobserved and those employees, officers, or directors of thecompany who violate the code of conduct will be subject todisciplinary action by SEBI or by the company.

Duty of officers:- every listed company has to employ acompliance officer who as to report to MD or CEO of thecompany.

Security;- confidential files should be protected and keptsecure. these pertain to all files but especially computer filesand passwords, which are likely to have sensitive priceinformation.


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Closed trading window:- every company should have a closedtrading window period when no trade take places. It should beclosed period when the annual P&L and b/s have been declared,

when dividends have to be declared and amalgamations have tomade.

Open trading window:- SEBI has also provided that tradingwindows would open only after 24 hours of making sensitive priceavailable to the public.

Information;- to avoid insider trading practices each listed companyhas to provide sensitive information on a continous basis to thestock exchange.

Problems:- SEBI deals with the problems faced by the investors.These are dealt with the investor grievance cell.


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Investor grievance

Investor grievance are usually due to delays in dispatch of

allotment letters, refund orders, misleading statements in

advertisements or in the prospectus, delay in transfer ofsecurities, non-payment of interest or dividend.

These grievance are dealt with either SEBI or department of

company affairs.


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Ombudsman

SEBI issued ombudsman regulation in 2003 to provide fair andtransperent system of redressal of grievance.

These regulation empower an investor to get redressal against both

the company and the intermediaries. Complaints dealt by ombudsman act are1. Delays in receiving refund orders, allotment letters, dividend or

interest.2. Non-receipt of dividend, certificates, bonus shares, annual reports,

refunds in allotment or redemption of mutual fund unit.3. Non-receipt of letter of offers in respect of buy back of shares or

incase of delisting.4. Complaints against grievance against intermediaries or listed

companies.


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Rights of investor

To participate and to vote in annual general meetings and right to

receive a notice for them or their proxy to attend the meeting.

To receive dividend, right shares , bonus offers , from the company,after there approval of the board.

To receive and inspect minutes of the meeting.

To receive balance sheet , P&L account , auditors report , and

directors report.

To receive allotment letters and share certificates.

To requisition an extra ordinary general meeting.

To apply for winding up of the company.

To proceed in civil or criminal proceedings against the company.


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Stock Exchange Market

The expression 'stock market' refers to the market that

enables the trading of company stocks (collective shares),

other securities, and derivatives. Bonds are still traditionallytraded in an informal, over-the-counter market known as the

bond market. Commodities are traded in commodities

markets, and derivatives are traded in a variety of markets

(but, like bonds, mostly 'over-the-counter').


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Importance of Stock Market

Acts as sources for companies to raise money.

Clearinghouse for each transaction

Facilitates economic growth

Indicator of share prices and other assets of a

company


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Role and Functions Of StockMarket

Established for the purpose of assisting, regulating and controllingbusiness of buying, selling and dealing in securities

Provides a market for the trading of securities to individuals and

organizations seeking to invest their saving or excess funds throughthe purchase of securities

Provides a physical location for buying and selling securities thathave been listed for trading on that exchange

Establishes rules for fair trading practices and regulates the trading

activities of its members according to those rules Ensure transparency by providing information to the investor and

helps in intelligent decision making about the particular stockbased on information


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Benefits of Listing

Visibility

Market support

Investors confidence

Increased demand for products and services

Overall increase in profitability


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Delisting

Stock exchange can delist companies for a number of

reasons including :-

Merger with another company

Solvency problems

Failure to comply with exchange rules


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Desirable Characteristics of astock market

Availability of information Market efficiency

Prices react quickly to new information

Liquidity

Small price fluctuations


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Financing the exchange

Transaction fees paid by members for each order executed

Fees paid by firms when their securities are originally listed

Annual fees by firms

Entrance fees from new members Sale of historic trading and market information


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Major Challenges for stockexchanges

Cross border trading

Issuers and investors are expanding their horizons beyond their home

markets

Investors becoming much more demanding

sebippt-120114111207-phpapp02.pptx

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