m

Y
 

„ The Securities and Exchange Board of India was

established by the government of India on 12
April 1988 as an interim administrative body to
promote orderly and healthy growth of the
securities market and for investor protection.
„ It was to function under the overall
administrative control of the Ministry of Finance
of the GOI.
Y
 

„ The SEBI was given a statutory status on 30 Jan

1992 through an ordinance.
„ The ordinance was later replaced by an Act of
Parliament known as the Securities and Exchange
Board of India Act 1992.
½
  

 
m

„ The capital market had witnessed a tremendous
growth during the 1980·s characterized by the
increasing participation of the public.
„ This ever expanding investor population and market
capitalization led to a variety of malpractices on the
part of companies, brokers, merchant bankers,
investment consultants and others involved in the
securities market.

 

„ The glaring examples of these malpractices include

existence of self styled merchant bankers, unofficial
private placements, rigging of prices, unofficial
premium on new issues, non adherence of provisions
of The Companies Act , violation of rules and
regulations of stock exchanges and listing
requirements, delay in delivering shares etc.
„ These malpractices and unfair trade practices have
eroded investor confidence and multiplied investor
grievances

 

„ The government and the stock exchanges were rather

helpless in redressing the investors problems because
of lack of proper penal provisions in the existing
legislation.
„ Therefore the GOI decided to set up SEBI a separate
regulatory body
¦ ½¦
m ½
 
m


„ To the issuers it aims to provide a market place in

which they can confidently look forward to raising
finances they need in an easy fair and efficient
manner.
„ To the investors it provides protection of their rights
and interests through adequate accurate and
authentic information and disclosure of information
on a continuous basis.

 

„ To the intermediaries it offers a competitive ,

professionalized and expanding market with
adequate and efficient infrastructure so as to render
better service to investors and issuers.

 
 

„ To regulate stock exchanges and the securities

industry and to promote their orderly functioning.
„ To guide , educate and protect the rights and
interests of individual investors.
„ To prevent trading malpractices and achieve a
balance between self regulation by the securities
industry and its statutory regulation.
 
 

„ To regulate and develop a code of conduct and fair

practices by brokers , merchant bankers with a view
to make them competitive and proffesional.
 
m


„ ½  
½ 
m

½egistration of brokers and sub brokers and

other players in the market

½egistration of collective investment schemes

and Mutual Funds
½ 
  


Prohibition of fraudulent and unfair trade

practices

Controlling insider trading and takeover bids and

imposing penalties for such practices
ÿ    


„ Investor education

„ Training of intermediaries

„ Promotion of fair practices and code of conduct of all

S½Os

„ Conducting research and publishing information

useful to all market participg






 

„ The activities of SEBI have been divided into 5

operational departments.
„ Each department is headed by an Executive Director
„ apart from its head office at Mumbai SEBI has
regional offices in Kolkata, Chennai, Delhi to attend
to investor complaints and liaise with the issuers,
intermediaries and stock exchanges in the concerned
region

 

„ SEBI has formed 2 advisory committees ²

Primary market advisory committee
Secondary market advisory committee

„ These committees are non statutory in nature and SEBI

is not bound by the advice of the committees. These
committees are a part of SEBIs constant endeavour to
obtain feedback from the market playerson issues
relating to the regulations and development of the
market
¦ 

„ SEBI has the right to search and seizure where just

cause can be given. In matters of security trading,
SEBI has the power to restrict and allow trading in
a given scrip without any external (i.e. judicial or
executive) intervention.
„ Mutual funds cannot invest more than 10 per cent of
the total net assets of a scheme in the short-term
deposits of a single bank, said the Securities and
Exchange Board of India.
Î Announcing guidelines for parking of funds in short-term
deposits of scheduled commercial banks (SCBs) by mutual
funds, the regulator said that investment cap would also
take into account the deposit schemes of the bank's
subsidiaries.

Î The SEBI has also defined 'short term' for funds'

investment purposes as a period not exceeding 91 days.
 m
 ÿ  m


½   ÿm
"

 
  

 
   


   


   "

  

 

 
 
   


  ÿ
 ½m

„ They will only be open for 15 days. (ELSS funds

though will continue to stay open for up to 90 days)
It will save investors from a prolonged NFO period
and being harangued by advisors and advertisements.
The motivation behind the rule seems to be simple ²
if you can invest anytime, why keep NFO period
long?
 

  
  
 
  
 

„ Earlier, Mutual funds would keep an NFO open for
30 days, and the minute they received their first
cheque, the money would be directly invested in the
market; creating a skewed accounting for those that
entered later since they get a fixed NFO price.
The market regulator has corrected this by
extending Application Supported by Blocked Amount
(ASBA) to mutual funds.
By the ASBA process one can continue to earn interest in
the bank account until the NFO closes (remember there is
usually no rejection or ´oversubscriptionµ in a mutual
fund NFO) which means that the cheque goes for clearing
after the NFO has closed irrespective of when it was
sent. The fund manager will be able to invest once the
NFO closes.
ÿ

 
  




 

 


„ It will reduce both the quantum of dividends
announced, and the measures used by MFs to garner
investor money using dividend as a carrot to entice
new investors.
 
 


 


  
 
  
 
„ This will help mutual funds become more active and
not just that, they must reveal, in their annual
reports from next year, what they did in each ´voteµ.
„ SEBI has now made it mandatory for funds to
disclose whether they voted for or against moves
(suggested by companies in which they have invested)
such as mergers, demergers, corporate governance
issues, appointment and removal of directors. MFs
have to disclose it on their website as well as annual
reports.
6 

     

„ Equity Funds were allowed to charge 1% more as

management fees if the funds were ´no-loadµ; but
since SEBI has banned entry loads, this extra 1% has
also been removed.
½ 

 

„ The market regulator states that information documents

that Asset Management Companies (AMCs) have been
entering into revenue sharing arrangements with offshore
funds in respect of investments made on behalf of Fund
of Fund schemes create conflict of interest. Henceforth,
AMCs shall not enter into any revenue sharing
arrangement with the underlying funds in any manner
and shall not receive any revenue by whatever means
from the underlying fund.
„ These guidelines set by the SEBI will lead to greater
transparency for the common investor.
m 

 
 


„ Mutual funds were allowed to participate in

securities lending subject to certain disclosures
and reporting requirements. The guidelines issued
lay down the disclosure requirements in the offer
documents which include intention to lend the
securities belonging to the scheme, the exposure
limit regarding securities lending both for the
scheme as well as for a single intermediary and the
risks associated with stock-lending transactions.
ÎThe specifications regarding the valuation of the
collateral have been prescribed in the guidelines to
minimize the risk involved in securities lending
transactions. To ensure adequate checks and balances
regarding the securities lending transactions, the
requirement of reporting to trustees and SEBI have been
stipulated.
"