SEBI Annual Report 2014 PDF

This Report is in conformity with the format as per the Securities
and Exchange Board of India (Annual Report) Rules, 1994,

notied in Ocial Gazee on April 7, 1994
MEMBERS OF THE BOARD

(As on March 31, 2014)
Appointed under Section 4(1) (a) of the SEBI Act, 1992 (15 of 1992)
U. K. SINHA
CHAIRMAN
Appointed under Section 4(1) (d) of the SEBI Act, 1992 (15 of 1992)
PRASHANT SARAN
WHOLE TIME MEMBER
RAJEEV K. AGARWAL
WHOLE TIME MEMBER
S. RAMAN
WHOLE TIME MEMBER
P. C. CHHOTARAY
PART TIME MEMBER
Nominated under Section 4(1) (b) of the SEBI Act, 1992 (15 of 1992)
DR. ARVIND MAYARAM
Finance Secretary
Ministry of Finance
Government of India
NAVED MASOOD
Secretary
Ministry of Corporate Aairs
Government of India
MEMBERS OF THE SEBI BOARD

(As on March 31, 2014)
U. K. SINHA
Chairman
PRASHANT SARAN
Whole Time Member
RAJEEV K. AGARWAL
Whole Time Member
S. RAMAN
Whole Time Member
P. C. CHHOTARAY
Part Time Member
DR. ARVIND MAYARAM

Finance Secretary
Ministry of Finance
Government of India
NAVED MASOOD
Secretary
Ministry of Corporate Aairs
Government of India
CHAIRMAN, WHOLE TIME MEMBERS AND

EXECUTIVE DIRECTORS
Left to Right :
:
Shri S. Raman, Whole Time Member; Shri Prashant Saran, Whole Time Member;
Shri U K Sinha, Chairman; Shri Rajeev K Agarwal, Whole Time Member.
Standing :
Shri Ananta Barua, Executive Director; Shri R K Padmanabhan, Executive Director;

Shri J Ranganayakulu, Executive Director; Shri SVMD Rao, Executive Director;
Shri S. Ravindran, Executive Director; Shri Gyan Bhushan, Executive Director;
Shri P K Nagpal, Executive Director;
Sitting
CONTENTS
Page No.
List of Boxes ...............................................................................................................................................vi
List of Tables ............................................................................................................................................ vii
List of Charts ..............................................................................................................................................xi
Abbreviations ...........................................................................................................................................xii
PART ONE: POLICIES AND PROGRAMMES
1.
REVIEW OF THE GENERAL MACRO-ECONOMIC ENVIRONMENT AND THE

INVESTMENT CLIMATE .............................................................................................................. 1
2.
REVIEW OF POLICIES AND PROGRAMMES

I.
Primary Securities Market................................................................................................... 13
II.
Secondary Securities Market............................................................................................... 20
III.
Mutual Funds ........................................................................................................................ 36
IV.
Intermediaries Associated with Securities Market .......................................................... 38
V.
Foreign Institutional Investment ........................................................................................ 43
VI.
Other Policies and Programmes having a bearing on the working of

Securities Market .................................................................................................................. 46
VII.
Assessment and Prospects .................................................................................................. 51
PART TWO: REVIEW OF WORKING AND OPERATIONS OF THE SECURITIES AND

EXCHANGE BOARD OF INDIA IN THE SECURITIES MARKET
1.
2.
PRIMARY SECURITIES MARKET

I.
Resource Mobilisation through Public and Rights Issues .............................................. 56
II.
Resource Mobilisation through QIP and IPP ................................................................... 61
III.
Resource Mobilisation through Preferential Allotment.................................................. 63
IV.
Resource Mobilisation through Private Placement in Corporate Debt ........................ 64
SECONDARY SECURITIES MARKET

I.
Equity Market ....................................................................................................................... 65
II.
Performance of Major Stock Indices and Sectoral Indices .............................................. 69
III.
Turnover in Indian Stock Market ....................................................................................... 71
IV.
Market Capitalisation .......................................................................................................... 75
V.
Stock Market Indicators ....................................................................................................... 76
VI.
Volatility in Stock Markets .................................................................................................. 79
VII.
Trading Frequency ............................................................................................................... 82

i
CONTENTS
Page No.
VIII. Activities of Stock Exchanges ............................................................................................. 83
IX.
Dematerialisation ................................................................................................................. 86
X.
Derivatives Segment ............................................................................................................ 88
3.
MUTUAL FUNDS .......................................................................................................................... 98
4.
INTERMEDIARIES ASSOCIATED WITH SECURITIES MARKET................................. 104

I.
Portfolio Managers ............................................................................................................. 104
II.
Alternative Investment Funds .......................................................................................... 105
5.
FOREIGN INSTITUTIONAL INVESTMENT ....................................................................... 106
6.
OTHER ACTIVITIES HAVING A BEARING ON THE WORKING OF SECURITIES

MARKET ........................................................................................................................................ 112
I.
Corporate Bond Market ..................................................................................................... 112
II.
Wholesale Debt Market ..................................................................................................... 115
PART THREE: FUNCTIONS OF SEBI IN RESPECT OF MATTERS SPECIFIED IN SECTION

11 OF SEBI ACT, 1992
1.
2.
REGULATION OF BUSINESS IN STOCK EXCHANGES .................................................. 118

I.
Recognition of Stock Exchanges ....................................................................................... 118
II.
Trading and Settlement Practices at Stock Exchanges .................................................. 119
III.
Memorandum of Understanding (MoU) between Stock Exchanges .......................... 120
IV.
Steps taken by SEBI to ring-fence MCX-SX .................................................................... 120
V.
Exit of Stock Exchange ....................................................................................................... 121
VI.
Measures adopted for Regulation of Stock Exchanges ................................................. 122
REGISTRATION AND REGULATION OF WORKING OF INTERMEDIARIES

ASSOCIATED WITH THE SECURITIES MARKET ............................................................ 122
I.
Streamlining the Process of Initial / Permanent Registration of Intermediaries ....... 123
II.
Measures for Regulation of Intermediaries .................................................................... 124
III.
Registration of Stock Brokers............................................................................................ 124
IV.
Registration of Sub-brokers .............................................................................................. 127
V.
Registration of Other Intermediaries ............................................................................... 128
VI.
Registration of Foreign Institutional Investors, Sub-Accounts and Custodians ....... 129
VII.
Registration of Venture Capital Funds and Alternative Investment Funds .............. 130
VIII. Registration of Portfolio Managers and Investment Advisers..................................... 133

ii
CONTENTS
Page No.
3.
REGISTRATION AND REGULATION OF WORKING OF COLLECTIVE

INVESTMENT SCHEMES INCLUDING MUTUAL FUNDS ............................................ 134
I.
Registration of Collective Investment Schemes ............................................................. 134
II.
Inspection of Collective Investment Schemes ................................................................ 134
III.
Regulatory actions against Collective Investment Schemes ........................................ 134
IV.
Registration and Regulation of Mutual Funds............................................................... 139
4.
PROMOTION AND REGULATION OF SELF REGULATORY ORGANISATIONS .... 140
5.
FRAUDULENT AND UNFAIR TRADE PRACTICES .......................................................... 140

I. Types of fraudulent and unfair trade practices.............................................................. 140
6.
7.
8.
9.
II.
Fraudulent and unfair trade practices cases during 2013-14 ....................................... 141
III.
Steps taken to prevent the occurrence of fraudulent and unfair trade practices ...... 150
INVESTOR EDUCATION AND TRAINING OF INTERMEDIARIES ............................ 151

I.
Investor Education ............................................................................................................. 151
II.
Training of Intermediaries................................................................................................. 152
III.
Financial Education ............................................................................................................ 154
IV.
Investor Grievance Redressal ........................................................................................... 156
V.
Regulatory action against companies and their directors for non-redressal of

investor grievances ............................................................................................................. 157
VI.
Issuance of No-objection Certificate ................................................................................ 157
PROHIBITION OF INSIDER TRADING ............................................................................... 158

I.
Types of Insider trading practices .................................................................................... 158
II.
Insider trading cases during 2013-14 ............................................................................... 158
III.
Steps initiated to curb Insider Trading practices ........................................................... 164
SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS .................................. 164

I.
Open Offer ........................................................................................................................... 164
II.
Buyback................................................................................................................................ 166
INFORMATION CALLED FROM, INSPECTION UNDERTAKEN, INQUIRIES

AND AUDIT OF STOCK EXCHANGES AND INTERMEDIARIES AND SELF
REGULATING ORGANISATIONS CONDUCTED BY SEBI ............................................ 167
I.
Inspection of Stock Exchanges, Depositories and Clearing Corporations ................. 167
II.
Inspection of Market Intermediaries.......... ......... 168
III.
Prevention of Money Laundering .................................................................................... 170

iii
CONTENTS
Page No.
10. DELEGATED POWERS AND FUNCTIONS.......................................................................... 172
11. FEES AND OTHER CHARGES................................................................................................. 173
12. RESEARCH AND STUDIES ...................................................................................................... 175
I.
Research Activities ............................................................................................................. 175
II.
Systemic Stability Unit ...................................................................................................... 175
III.
Academic Interactions ....................................................................................................... 176
IV.
International Research Conference .................................................................................. 176
V.
New Research Initiatives ................................................................................................... 176
13. OTHER FUNCTIONS ................................................................................................................. 177

I.
Surveillance ......................................................................................................................... 177
II.
Investigation ........................................................................................................................ 179
III.
Enforcement of Regulations .............................................................................................. 184
IV.
Prosecution .......................................................................................................................... 191
V.
Litigations, Appeals and Court Pronouncements ......................................................... 194
VI.
Consent and Compounding ............................................................................................. 211
VII.
The Recovery Proceedings ................................................................................................ 212
VIII. Regulatory Changes ........................................................................................................... 213

IX.
Right To Information Act, 2005......................................................................................... 221
X.
Parliament Questions ......................................................................................................... 223
XI
International Co-operation ............................................................................................... 224
XII.
National Institute of Securities Markets.......................................................................... 237
PART FOUR: ORGANISATIONAL MATTERS OF SEBI

1.
SEBI BOARD ................................................................................................................................. 241
2.
AUDIT COMMITTEE ................................................................................................................. 241
3.
ORGANISATION RESTRUCTURING CELL AND PROJECT MANAGEMENT

OFFICE ........................................................................................................................................... 242
4.
HUMAN RESOURCES ............................................................................................................... 242

I.
Staff Strength, Recruitment, Resignation ........................................................................ 243
II.
Benefits ................................................................................................................................. 243
III.
Promotions .......................................................................................................................... 243
IV.
Strengthening of Regional/Local Offices ........................................................................ 243

iv
CONTENTS
Page No.
V.
Job Rotation ......................................................................................................................... 243
VI.
Disciplinary Matters........................................................................................................... 243
VII.
Training and Development ............................................................................................... 244
VIII. Internship............................................................................................................................. 244
5.
IX.
Extracurricular activities within SEBI ............................................................................. 245
X.
Initiatives in the realm of corporate social responsibility ............................................ 245
XI.
Scheme for recognizing and rewarding academic excellence of children of

employees ............................................................................................................................ 245
PROMOTION OF OFFICIAL LANGUAGE ........................................................................... 245

I.
Bilingualisation ................................................................................................................... 245
II.
Rajbhasha Competitions .................................................................................................... 245
III.
Aaj Ka Shabd ...................................................................................................................... 245
IV.
Hindi Noting and Hindi Quotes ..................................................................................... 246
V.
Incentive Schemes .............................................................................................................. 246
VI.
Hindi Workshops ............................................................................................................... 246
VII.
Rajbhasha Meetings and Seminars .................................................................................. 246
VIII. Investor Website and SCORES ........................................................................................ 246

IX.
Regional Offices .................................................................................................................. 246
6.
LOCAL OFFICES.............................. 246
7.
FACILITIES MANAGEMENT......... .................. 247
8.
VIGILANCE CELL.............. ................. 247
9.
INFORMATION TECHNOLOGY ............................................................................................ 247

I.
Implementation of unified communication and up-gradation of SEBI Network ..... 247
II.
Disaster Recovery Drill ...................................................................................................... 248
III.
Software for Investigation Department........................................................................... 248
IV.
Connectivity to local offices .............................................................................................. 248
V.
CIS Complaint System ....................................................................................................... 248
VI.
System for managing Resource Persons ......................................................................... 248
VII.
Software development for Recovery Division ............................................................... 248
VIII. Implementation of Centralised Biometric Attendance System ................................... 248

CHRONOLOGY OF MAJOR POLICY INITIATIVES BY SEBI ................................................. 249
v
LIST OF BOXES
Box No.
Name
Page No.
1.1
Compliance with Minimum Public Shareholding Requirement ...........................................16
1.2
Powers conferred on SEBI vide the Securities Laws (Amendment) Ordinance, 2014 ........19
1.3
Institutional Trading Platform.....................................................................................................21
1.4
Exchange Traded Cash Settled Interest Rate Futures (IRF) on 10 year Government of India
Security ...........................................................................................................................................22
1.5
Monetary relief from Investor Protection Fund (IPF) for investors .......................................24
1.6
International Research Conference on HFT, Algo and Co-location .......................................25
1.7
Principles of Financial Market Infrastructures (PFMIs) ..........................................................27
1.8
Third Meeting of the International Advisory Board of SEBI ..................................................35
1.9
Standardization and Simplification of Procedures for Transmission of Securities .............39
1.10 Foreign Portfolio Investor (FPI) Regime ....................................................................................43

2.1
Testing of software used in or related to trading and risk management ..............................86
3.1
Standard Operating Procedure (SOP) for stock exchanges for suspension and revocation
of trading of shares of listed entities for non-compliance of certain listing conditions....122
3.2
Simplification of Registration Requirements for Stock Brokers ...........................................123
3.3
SEBI (Alternative Investment Funds) Regulations, 2012.......................................................130
3.4
SEBI (Investment Advisers) Regulations, 2013 .......................................................................133
3.5
IOSCOs Asia-Pacific Regional Committee Meeting, New Delhi .........................................226
3.6
Conference on Investor Protection in Capital Markets .........................................................231
3.7
Asian Roundtable and SEBI-OECD Conference on Corporate Governance in

Mumbai - February, 2014 ...........................................................................................................234
vi
LIST OF TABLES
Table No.
Name
Page No.
1.1
National Income (at 2004-05 prices) ...................................................................................3
1.2
GDP (at Factor Cost) by Economic Activity (at 2004-05 prices) .....................................4
1.3
Index of Industrial Production (Base: 2004-05=100).........................................................4
1.4
Gross Domestic Savings and Investment ..........................................................................7
1.5a
Demat Statistics ...................................................................................................................12
1.5b
Number of Listed Companies ...........................................................................................12
1.6
Growth of Turnover in Various Segments in Indian Stock Market .............................12
1.7
Value of Assets of Foreign Investors reported by custodians.......................................12
2.1
Resource Mobilisation through Public and Rights Issues.............................................57
2.2
SME Platform .......................................................................................................................58
2.3
Sector-wise Resource Mobilisation ...................................................................................58
2.4
Size-wise Resource Mobilisation ......................................................................................59
2.5
Mega Issues in 2013-14 .......................................................................................................60
2.6
Industry-wise Resource Mobilisation ..............................................................................61
2.7
Resource Mobilisation through QIP and Conforming to MPS through IPP ..............62
2.8
Offer for Sale through Stock Exchange Mechanism to conform to MPS ....................63
2.9
Resource Mobilisation through Preferential Allotment ................................................63
2.10
Private Placement of Corporate Bonds Reported to BSE and NSE..............................64
2.11
Major Indicators of Indian Stock Markets .......................................................................67
2.12
Major Stock Indices and their Percentage Variation ......................................................69
2.13
Sectoral Stock Indices and their Returns .........................................................................70
2.14
Exchange-wise Cash Segment Turnover .........................................................................72
2.15
Turnover at BSE ,NSE and MCX-SX: Cash Segment ......................................................73
2.16
City-wise Turnover of Top 20 Cities in Cash Segment during 2013-14 .......................74
2.17
Market Capitalisation at BSE .............................................................................................75
2.18
Market Capitalisation at NSE ............................................................................................76
2.19
Select Ratios Relating to Stock Market .............................................................................77
2.20
Price to Earnings Ratio .......................................................................................................77
2.21
Price to Book-Value Ratio ...................................................................................................78
2.22
Average Daily Volatility of Benchmark Indices..............................................................80
2.23
Trends in Daily Volatility of International Stock Market Indices during 2013-14 .....81
2.24
Trading Frequency of Listed Stocks .................................................................................82
2.25
Share of Brokers, Securities and Participants in Cash Market Turnover ....................83
2.26
Trading Statistics of Stock Exchanges in the Cash Segment .........................................84
2.27
Turnover of Subsidiaries of Stock Exchanges .................................................................85
2.28
Depository Statistics ...........................................................................................................87

vii
LIST OF TABLES
Table No.
Name
Page No.
2.29
Depository Statistics: Debenture/Bonds and Commercial Paper.................................87
2.30
Cities According to Number of DP Locations: Geographical Spread .........................88
2.31
Trends in Turnover and Open Interest in Equity Derivatives Segment ......................89
2.32
Product-wise Derivatives Turnover at NSE, BSE and MCX-SX ...................................90
2.33
Trends in Index Futures at NSE, BSE and MCX-SX .......................................................91
2.34
Trends in Single Stock Futures at NSE, BSE and MCX-SX............................................92
2.35
Trends in Index Options at NSE, BSE and MCX-SX ......................................................93
2.36
Trends in Stock Options at NSE and BSE ........................................................................93
2.37
Shares of Various Classes of Members in Derivatives Turnover at NSE, BSE

and MCX-SX ........................................................................................................................94
2.38
Trends in the Currency Derivatives Segment .................................................................96
2.39
Product-wise Market Share in Currency Derivatives Volume .....................................97
2.40
Trends in Interest Rate Derivatives at NSE and BSE......................................................98
2.41
Mobilisation of Resources by Mutual Funds ..................................................................99
2.42
Sector-wise Resource Mobilisation by Mutual Funds during 2013-14 ......................100
2.43
Scheme-wise Resource Mobilisation and Assets under Management by Mutual

Funds as on March 31, 2014 .............................................................................................101
2.44
Number of Schemes by Investment Objective as on March 31, 2014 ........................102
2.45
Trends in Transactions on Stock Exchanges by Mutual Funds ..................................102
2.46
Unit holding pattern of all mutual funds as on March 31, 2014 ................................103
2.47
Unit holding pattern of private and public sector mutual funds as on

March 31, 2014 ...................................................................................................................104
2.48
Assets Managed by Portfolio Managers ........................................................................105
2.49
Cumulative amount mobilised by AIFs (as at the end of 31st March 2014) .............105
2.50
Cumulative Net Investments by VCFs and FVCIs.......................................................106
2.51
Category-wise Investors in VCFs ...................................................................................106
2.52
Investment by Foreign Institutional lnvestors ..............................................................107
2.53
Investments by Foreign Institutional lnvestors (Equity & Debt) ...............................108
2.54
QFI Investments during 2013-14 .....................................................................................109
2.55
Allocation of Debt Investment limits to FIIs and Sub-accounts during 2013-14 .....109
2.56
Debt Utilisation Status as on March 31, 2014 ................................................................110
2.57
Notional Value of Open Interest of Foreign Institutional investors in

Derivatives during 2013-14 ..............................................................................................111
2.58
Notional Value of Participatory Notes (PNs) Vs Assets Under Management

of FIIs ..................................................................................................................................112
2.59
Secondary Market: Corporate Bond Trades ..................................................................113

viii
LIST OF TABLES
Table No.
Name
Page No.
2.60
Settlement of Corporate Bonds .......................................................................................114
2.61
Business Growth on the Wholesale Debt Market Segment of NSE and BSE ...........115
2.62
Instrument-wise Share of Securities Traded in Wholesale Debt Market

Segment of NSE and BSE .................................................................................................116
2.63
Share of Participants in Turnover of Wholesale Debt Market Segment of NSE ......117
3.1
Stock Exchanges with Permanent Recognition.............................................................118
3.2
Renewal of Recognition Granted to Stock Exchanges during 2013-14......................119
3.3
Registered Stock Brokers .................................................................................................124
3.4
Applications under the Process of Registration in Cash Segment.............................125
3.5
Classification of Stock Brokers in Cash Segment on the Basis of Ownership ..........125
3.6
Number of Registered Members in Equity Derivatives Segment ..............................126
3.7
Number of Registered Members in Currency Derivatives Segment .........................126
3.8
Applications under the Process of Registration in Derivative Segment ...................127
3.9
Registered Sub-Brokers ....................................................................................................127
3.10
Registered Intermediaries other than Stock Brokers and Sub-Brokers .....................128
3.11
Process of Registration of other Intermediaries............................................................129
3.12
Number of Registered FIIs, Sub-accounts and Custodians ........................................129
3.13
Status of Registration of FII, Sub-accounts and Custodians during 2013-14 ...........130
3.14
Registered Venture Capital Funds and Alternative Investment Funds ....................130
3.15
Registered Portfolio Managers and Investment Advisers ..........................................133
3.16
Mutual Funds Registered with SEBI ..............................................................................139
3.17
Trends in Awareness Programs/ Workshops Conducted by SEBI .............................151
3.18
Regional Seminars Conducted by SEBI .........................................................................152
3.19
Status of Investor Grievances Received and Redressed ..............................................156
3.20
Failure to Redress Investor Grievances: Adjudication Proceedings ..........................157
3.21
Status of Draft Letter of Offers for Open Offers during 2013-14................................165
3.22
Trends of Open Offers ......................................................................................................165
3.23
Buyback cases during 2013-14 .........................................................................................167
3.24
Inspection of Stock Brokers/Sub-brokers.......................................................................169
3.25
Inspections by Stock Exchanges......................................................................................169
3.26
Inspection of other Market Intermediaries....................................................................170
3.27
Actions by stock exchanges and depositories for AML/ CFT related deficiencies ..171
3.28
Fees and other Charges ....................................................................................................174
3.29
Major Market Movement during 2013-14......................................................................178
3.30
Surveillance Actions during 2013-14 ..............................................................................179
3.31
Trends of Investigations ...................................................................................................180

ix
LIST OF TABLES
Table No.
Name
Page No.
3.32
Category-wise Nature of Investigation..........................................................................181
3.33
Type of Regulatory actions taken during 2013-14 ........................................................183
3.34
Age-wise Analysis of Enforcement Actions - u/s 11, 11B and 11D of

SEBI Act, 1992 ....................................................................................................................185
3.35
Age-wise Analysis of Enforcement Actions - Enquiry Proceedings ..........................186
3.36
Age-wise Analysis of Enforcement Actions - Adjudication Proceedings .................186
3.37
Age-wise Analysis of Enforcement Actions - Prosecution Proceedings ...................187
3.38
Age-wise Analysis of Enforcement Actions Summary Proceedings .........................188
3.39
Enquiry and Adjudication Proceedings Initiated during 2013-14 .............................188
3.40
Enquiry and Adjudication during 2013-14 ....................................................................188
3.41
Pending Enforcement Actions as on March 31, 2014 ...................................................189
3.42
Enquiry and Adjudication Proceedings against other Intermediaries during

2013-14 ................................................................................................................................189
3.43
Prosecutions Launched ....................................................................................................191
3.44
Region-wise Data on Prosecution Cases as on March 31, 2014 ..................................191
3.45
Nature of Prosecutions Launched as on March 31, 2014.............................................191
3.46
Number of Prosecution Cases decided by the Courts as on March 31, 2014 ...........192
3.47
Status of Court Cases where SEBI was a Party (Subject Matter) ................................194
3.48
Status of Court Cases where SEBI was a Party (Judicial Forum) ...............................195
3.49
Status of Appeals before the Securities Appellate Tribunal ........................................195
3.50
Disposals of Appeals by Securities Appellate Tribunal...............................................195
3.51
Status of Appeals before the Honble Supreme Court.................................................196
3.52
Status of Appeals before the Honble High Court .......................................................196
3.53
Receipt and Disposal of applications under Consent and Compounding Process.......211
3.54
Consent Applications filed with SEBI during 2013-14 ................................................212
3.55
Compounding Applications filed by the accused in criminal courts during

2013-14 ................................................................................................................................212
3.56
Details of Recovery Proceedings.....................................................................................213
3.57
Trends in RTI applications and First Appeal to SEBI ..................................................223
3.58
Trends in Appeals before Central Information Commission .....................................223
3.59
Parliament Queries Received and replied by SEBI during 2013-14 ...........................223
3.60
Data on Various References Received and Responded to during 2013-14 ...............224
3.61
Trends in Regulatory Assistance made and received by SEBI ...................................235
4.1
Board Meetings during 2013-14 ......................................................................................241
4.2
Promotions of Officers during the year .........................................................................243
4.3
Training Programmes during 2013-14 ...........................................................................244

x
LIST OF CHARTS
Chart No.
Name
Page No.
1.1
Share of Components of GDP (at Factor Cost) .................................................................. 5
2.1
Share of Broad Category of Issues in Resource Mobilisation ........................................ 57
2.2
Sector-wise Resource Mobilisation .................................................................................... 59
2.3
Movement of Benchmark Stock Market Indices .............................................................. 65
2.4
Value traded in Secondary Market (percent) ................................................................... 66
2.5
Year-on-Year Returns of International Indices ................................................................. 68
2.6
Movement of Sectoral Indices of BSE ................................................................................ 70
2.7
Movement of Sectoral Indices of NSE ............................................................................... 71
2.8
P/E Ratio of International Stock Market Indices.............................................................. 79
2.9
Annualised Volatility of International Stock Market Indices in 2013-14 ..................... 80
2.10
Derivatives Turnover vis--vis Cash Market Turnover .................................................. 89
2.11
Product-wise Share in Equity Derivatives Turnover at NSE and BSE ......................... 91
2.12
Participant-wise average share in F&O equity turnover in 2013-14 ............................. 95
2.13
Participant-wise share in equity derivative open interest at NSE at end of

the period .............................................................................................................................. 95
3.1
Trends in Financial Education Programs through Resource Persons ........................ 155
3.2
Trends of feedback for calls received in SEBI Helpline ................................................ 157
3.3
Category-wise Nature of Investigation Taken up ......................................................... 181
3.4
Category-wise Nature of Investigation Cases Completed ........................................... 182
3.5
Percentage share of type of Regulatory actions taken during 2013-14 ...................... 183
This Report can also be accessed on internet http://www.sebi.gov.in

Conventions used in this Report
`
: Rupees
Lakh
: Hundred thousand
Crore
: Ten million
Million : Ten lakh
Billion
: Thousand million/hundred crore
NA
: Not Available
Na
: Not Applicable
p.a.
: Per annum
Differences in total are due to rounding off and sometimes they may not exactly add up to
hundred per cent.
Source of Charts and Boxes where not mentioned, is SEBI.
xi
ABBREVIATIONS
AAUM
ADR
AGM
AIBI
AIF(s)
AMC(s)
AMFI
AML
APs
ASCI
ASJ
ATR(s)
AUC
AUM
BO
BSE
CAD
CBDT
CBI
CBLO
CBOE
CBSE
CC
CCI
CCP
CD(s)
CDS
CDSL
CFA
CFERM
CFT
CGM
CIC
CIIA
CIS
CISA
CISM
CISO
CISSP
Average Assets Under Management

American Depository Receipt
Assistant General Manager
Association of Investment Bankers of India
Alternative Investment Fund(s)
Asset Management Company/Companies
Association of Mutual Funds in India
Anti-Money Laundering
Authorised Persons
Administrative Staff College of India
Additional Sessions Judge
Action Taken Report(s)
Assets Under Custody
Assets Under Management
Beneficial Owner
Bombay Stock Exchange
Current Account Deficit
Central Board of Direct Taxes
Central Bureau of Investigation
Collateralized Borrowing and Lending Obligation
Chicago Board Options Exchange
Central Board of Secondary Education
Clearing Corporation
Competition Commission of India
Central Counter Party
Certificate of Deposit(s)
Credit Default Swaps
Central Depository Services (India) Limited
Charted Financial Analyst
Certificate in Financial Engineering and Risk Management
Countering Financing of Terrorism
Chief General Manager
Central Information Commission
Certificate in International Investment Analyst
Collective Investment Schemes
Certified Information Systems Auditor
Certified Information Security Manager
Chief Information Security Officer
Certified Information Systems Security Professional
xii
ABBREVIATIONS
CM
CMB
CoBoSAC
CP(s)
CPE
CPI
CPSS
CRA(s)
CRFR
CRR
CSE
CSL
CSO
DC(s)
DDPs
DFIs
DGM
DIP
DIS
DISA
DJIA
DLP
DMA
DMS
DP(s)
DR
DRG
DRS
DSRC
DT(s)
DVP
DWBIS
ECL
ECR
ED
EDCE
EFD
EGM
EOB
Clearing Member
Cash Management Bills
Corporate Bonds and Securitization Advisory Committee
Commercial Paper(s)
Continuing Professional Education
Consumer Price Index
Committee on Payments and Settlement Systems
Credit Rating Agency/Agencies
Committee on Rationalisation of Financial Resources
Cash Reserve Ratio
Calcutta Stock Exchange
Certificate in Securities Law
Central Statistical Office
Division Chief(s)
Designated Depository Participants
Development Finance Institutions
Deputy General Manager
Disclosure and Investor Protection
Delivery Instruction Slips
Post Qualification Certification in Information Systems Audit
Dow Jones Industrial Average
Data Leakage Protection
Direct Market Access
Document Management System
Depository Participant(s)
Disaster Recovery
Development Research Group
Disaster Recovery Site
Depository System Review Committee
Debenture Trustee(s)
Delivery vs. Payment
Data Warehousing and Business Intelligence System
Eastern Coalfields Limited
Export Credit Refinance
Executive Director/Enforcement Directorate
Equity Derivative Certification Examination
Enforcement Department
Extraordinary General Meeting
Electronic Order Book
xiii
ABBREVIATIONS
EPFO
Employee Provident Fund Organisation
ETF
Enforcement Task Force
ETF(s)
Exchange Traded Fund(s)
F&O
Futures and Options
FAQ(s)
Frequently Asked Question(s)
FATF
Financial Action Task Force
FCCB(s)
Foreign Currency Convertible Bond(s)
FCD
Fully Convertible Debentures
FDI
Foreign Direct Investment
FEMA
Foreign Exchange Management Act
FEW
Financial Education Website
FI(s)
Financial Institution(s)
FIA
Futures Industry Association
FII(s)
Foreign Institutional Investor(s)
FIMMDA
Fixed Income Money Market and Derivatives Association of India
FINRA
Financial Industry Regulatory Authority
FLIS
Financial Literacy and Inclusion Survey
FMC
Forward Markets Commission
FMI
Financial Market Infrastructure
FMP(s)
Fixed Maturity Plan(s)
FPI
Foreign Portfolio Investor
FPO(s)
Further Public Offering(s)/Follow-on Public Offer
FRRB
Financial Reporting Review Board
FRTI
Financial Regulators Training Initiative
FSAP
Financial Sector Assessment Programme
FSB
Financial Stability Board
FSDC
Financial Stability and Development Council
FSR
Financial Stability Report
FSRB
FATF-Style Regional Body
FSS
Financial Supervisory Service, South Korea
FTIL
Financial Technologies (India) Ltd
FUTP
Fraudulent and Unfair Trade Practices
FVCI(s)
Foreign Venture Capital Investor(s)
FY
Financial Year
GAAP(s)
Generally Accepted Accounting Principle(s)
GDCF
Gross Domestic Capital Formation
GDP
Gross Domestic Product
GDR(s)
Global Depository Receipt(s)
GDS
Gross Domestic Savings/Gold Deposit Scheme

xiv
ABBREVIATIONS
GETF(s)
GID
GM
GNI
GoI
GSE
G-Sec
HFC(s)
HFT
HNIs
HRD
HSD
HUF
IA
IAD
IAFE
IAIS
IASB
IBC
IBT
ICAI
ICAI-FRRB
ICCL
ICDR
ICLS
ICSI
ICWAI
IDF
IDR(s)
IEFJ
IFC
IFRSs
IGRC
IIP
IMD
IMF
IMSS
INR
IOSCO
Gold Exchange Traded Fund(s)

General Information Document
General Manager
Gross National Income
Government of India
Gauhati Stock Exchange
Government Securities
Housing Finance Company/Companies
High Frequency Trading
High Net Worth Individuals
Human Resource Development
High Speed Diesel
Hindu Undivided Family
Investment Advisers
Investor Awareness Division
International Association of Financial Engineers
International Association of Insurance Supervisors
International Accounting Standards Board
India Business Centre
Internet Based Trading
Institute of Chartered Accountants of India
Financial Reporting Review Board of the Institute of Chartered Accountants
of India
Indian Clearing Corporation Limited
Issue of Capital and Disclosure Requirements
Indian Corporate Law Sevice
The Institute of Company Secretaries of India
The Institute of Cost and Work Accountants of India
Infrastructure Debt Fund
Indian Depository Receipt(s)
International Economics and Finance Journal
Infrastructure Finance Companies
International Financial Reporting Standards
Investor Grievance Redressal Committee
Index of Industrial Production
Investment Management Department
International Monetary Fund
Integrated Market Surveillance System
Indian Rupee
International Organisation of Securities Commissions
xv
ABBREVIATIONS
IPC
Indian Penal Code
IPEF
Investor Protection and Education Fund
IPF
Investor Protection Fund
IPO
Initial Public Offer
IPP
Institutional Placement Programme
IPS
Intrusion Detection and Prevention System
IPV
In-Person Verification
IRAS
Indian Railway Accounts Service
IRDA
Insurance Regulatory and Development Authority
IRF
Interest Rate Futures
IRM
Information Rights Management
IRS
Indian Revenue Service
ISD
Integrated Surveillance Department
ISE
Inter-Connected Stock Exchange
ISIN
International Securities Identification Number
IT
Information Technology
ITD
Information Technology Department
ITeS
Information Technology Enabled Services
ITF
Implementation Task Force
ITP
Institutional Trading Platform
JF
Joint Forum
JPY
Japanese Yen
JSE
Jaipur Stock Exchange
KIM
Key Information Memorandum
KRA
KYC Registration Agency
KYC
Know Your Client
L&T
Larsen & Toubro
LAF
Liquidity Adjustment Facility
LES(s)
Liquidity Enhancement Scheme(s)
LLP
Limited Liability Partnership
LSE
Ludhiana Stock Exchange
LTP
Last Traded Price
MB(s)
Merchant Banker(s)
MCA
Ministry of Corporate Affairs
MCR
Monthly Cumulative Report
MCV
Multi-class share Vehicles
MCX
Multi-Commodity Exchange of India Ltd
MCX-SX
MCX Stock Exchange
MCX-SX CCL
MCX-SX Clearing Corporation Limited

xvi
ABBREVIATIONS
MD
Managing Director
MF(s)
Mutual Fund(s)
MFAC
Advisory Committee on Mutual Funds
MII(s)
Market Infrastructure Institution(s)
MMoU
Multilateral Memorandum of Understanding
MMTC
Minerals and Metals Trading Corporation of India
MoF
Ministry of Finance
MoU
Memorandum of Understanding
MPS
Minimum Public Shareholding
MPSE
Madhya Pradesh Stock Exchange Limited
MSE
Madras Stock Exchange
MSF
Marginal Standing Facility
MWPL
Market Wide Position Limit
NAV
Net Asset Value
NBFCs
Non-Banking Financial Companies
NCAER
National Council of Applied Economic Research
NCD
Non Convertible Debenture
NCFE
National Centre for Financial Education
NDP
Net Domestic Product
NDUs
Non Disposal Undertakings
NFLAT
National Financial Literacy Assessment Test
NFLIS
National Financial Inclusion Survey
NGO
Non-Government Organisation
NHB
National Housing Bank
NHPC
National Hydroelectric Power Corporation
NIFM
National Institute of Financial Management
NII(s)
Non-Institutional Investor(s)
NISM
National Institute of Securities Markets
NNI
Net National Income
NoC
No Objection Certificate
NRI
Non-Resident Indian
NRO
Northern Regional Office
NSCCL
National Securities Clearing Corporation Limited
NSDL
National Securities Depository Limited
NSE
National Stock Exchange
NSEL
National Spot Exchange Ltd
NSFE
National Strategy for Financial Education
NSMD
Network for Securities Markets Data
NTPC
National Thermal Power Corporation

xvii
ABBREVIATIONS
OCB
Overseas Corporate Body
OCRES
Online CPE Registration and Enrolment System
ODI(s)
Offshore Derivative Instrument(s)
OECD
Organisation for Economic Co-operation and Development
OFCD(s)
Optionally Fully Convertible Debenture(s)
OFS
Offer for Sale
OIAE
Office of Investor Assistance and Education
OMOs
Open Market Operations
OTC
Over the Counter
OTCEI
Over the Counter Exchange of India
P.A.
Per Annum
P/B Ratio
Price to Book-Value Ratio
P/E Ratio
Price to Earnings Ratio
PAN
Permanent Account Number
PCC
Protected Cell Companies
PCD
Partly Convertible Debenture
PCI
Press Council of India
PE
Private Equity
PF(s)
Provident Fund(s)
PFI
Public Financial Institution
PFMIs
Principles of Financial Market Infrastructures
PFRDA
Pension Fund Regulatory and Development Authority
PFUTP
Prohibition of Fraudulent and Unfair Trade Practices
PGCSM
Post Graduate Certificate in Securities Markets
PGPSM
Post Graduate Programme in Securities Markets
PID
Public Interest Directors
PIS
Portfolio Investment Scheme
PIT
Prohibition of Insider Trading
PMAC
Primary Market Advisory Committee
PMLA
Prevention of Money Laundering Act
PN
Participatory Notes
PSE
Pune Stock Exchange
PSUs
Public Sector Undertaking(s)
PTM
Proprietary Trading Member
QARC
Qualified Audit Review Committee
QDP
Qualified Depository Participant
QE
Quantitative Easing
QFI(s)
Qualified Foreign Investor(s)
QIB(s)
Qualified Institutional Buyer(s)

xviii
ABBREVIATIONS
QIP(s)
Qualified Institutions Placement(s)
RAIN
Registrars Association of India
RBI
Reserve Bank of India
RCG
Regional Committee Group
RDDBFI
Recovery of Debts due to Banks and Financial Institutions
RE
Revised Estimate
REER
Real Effective Exchange Rate
REIT
Real Estate Investment Trust
RFQ
Request for Quote
RGESS
Rajiv Gandhi Equity Savings Scheme
RHP
Red Herring Prospectus
RII
Retail Individual Investors
RMRC
Risk Management Review Committee
RP(s)
Resource Person(s)
RRD
Regulatory Research Division
RSE(s)
Regional Stock Exchange(s)
RTI
Right to Information
RTI/STA(s)
Registrar to an Issue and Share Transfer Agent(s)
SA(s)
Sub Account(s)
SAARC
South Asian Association for Regional Co-operation
SARFAESI
Securitization and Reconstruction of Financial Assets and Enforcement of

Security Interest Act
SAST
Substantial Acquisition of Shares and Takeovers
SAT
Securities Appellate Tribunal
SC(R)A
Securities Contracts (Regulation) Act
SCG
School for Corporate Governance
SCI
School for Certification of Intermediaries
SCM
Self Clearing Member
SCN
Show Cause Notice
SCODA
SEBI Committee on Disclosures and Accounting Standards
SCORES
SEBI Complaints Redress System
SCRR
Securities Contracts (Regulation) Rules
SCSB(s)
Self Certified Syndicate Bank(s)
SDIs
Securitised Debt Instruments
SEBI
Securities and Exchange Board of India
SEC
Securities and Exchange Commission
SECC
Stock Exchanges and Clearing Corporations
SGF
Settlement Guarantee Fund
SHA
Shareholders Agreement
xix
ABBREVIATIONS
SICCE
Securities Intermediaries Compliance (Non-Fund) Certification Examination
SID
Scheme Information Document
SIDD
Separately Identifiable Department or Division
SIEFL
School for Investor Education and Financial Literacy
SLB
Securities Lending and Borrowing
SLR
Statutory Liquidity Ratio
SMAC
Secondary Market Advisory Committee
SME
Small and Medium Enterprises
SMS
Short Message Services
SOP
Standard Operating Procedure
SPV(s)
Special Purpose Vehicle(s)
SRO(s)
Self Regulatory Organisation(s)
SRSS
School for Regulatory Studies and Supervision
SSE
School for Securities Education
SSIR
School for Securities Information and Research
STT
Securities Transaction Tax
STWT
Securities Trading using Wireless Technology
SWFs
Sovereign Wealth Funds
TAC
Technical Advisory Committee
T-Bills
Treasury Bills
TC
Technical Committee
TER
Total Expense Ratio
TM
Trading Member
UAT
User Acceptance Test
UIDAI
Unique Identification Authority of India
UIN
Unique Identity Number
UK
United Kingdom
UPSE
Uttar Pradesh Stock Exchange Limited
USA
United States of America
USD
United States Dollar
USE
United Stock Exchange
UTI
Unit Trust of India
VaR
Value at Risk
VCF(s)
Venture Capital Fund(s)
VPN
Virtual Private Network
WDM
Wholesale Debt Market
WFE
World Federation of Exchanges
WPI
Wholesale Price Index
WTM
Whole Time Member

xx
PART ONE: POLICIES AND PROGRAMMES

The Annual Report of the Securities
and Exchange Board of India (SEBI) for
2013-14 reviews significant developments
in securities markets in the backdrop of an
unprecedented spell of financial turbulence
transmitted by the tapering concerns, and the
subsequent restoration of normalcy in macroeconomic fundamentals. Indian economy
and financial markets came under acute
stress by the turmoil in the global financial
markets generated by the US Federal Reserve
announcements on tapering. However with
a swift and decisive policy response, India
was able to minimise the fallout on the real
economy and maintained financial stability.
quasi-judicial orders passed by the Board

during the year are also posted on the website.
SEBI Annual Report for 2013-14

articulates the policies and programmes
embarked during the financial year while
ensuring to fulfill its stated objective to
strengthen the Indian regulatory framework
of capital markets. This report has been
prepared as per the format prescribed by
the Securities and Exchange Board of India
(Annual Report) Rules, 1994. SEBI continued
to pursue its endeavour to achieve the
three statutory objectives viz. (a) protection
of the interests of investors in securities,
(b) promotion of the development of the
securities market and (c) regulation of the
securities market.
1.
In line with the stated objectives, this

Report provides the manner in which SEBI
discharged its responsibilities and exercised
its powers during the year in furtherance of
the objectives enshrined in (a) the Securities
and Exchange Board of India Act, 1992, (b)
the Securities Contracts (Regulation) Act,
1956 (c) the Depositories Act, 1996 and (d) the
relevant provisions of the Companies Act,
and newly enacted Companies Act, 2013. It
also covers the global developments relevant
to the Indian securities market.
REVIEW OF
ECONOMIC
AND
THE
CLIMATE
THE GENERAL
ENVIRONMENT
INVESTMENT
After the recovery of global economic

conditions in late 2012-13, the current
financial year unfolded an unprecedented
stress to Indian economy and markets. The
tightening of global liquidity increased
external pressures and heightened the focus
on Indias macroeconomic imbalances viz.,
high inflation, large current account and fiscal
deficits and structural weaknesses particularly
supply bottlenecks in infrastructure, power
and mining. The impact of US Federal
Reserves May 2013 announcement on Indian
financial markets was one of the most severe
amongst emerging markets with the rupee
depreciation weighing on the stock market,
foreign outflows from the debt market further
aggravating the forex markets and impacting
yields as also the equity market. Thus, the
global developments since May 2013 have
brought to the fore not just the stress in
the financial markets and asset prices, but
also their impact on other macroeconomic
parameters, including growth, public finances
In 2013-14, SEBI continued to channelise

its efforts to achieve these objectives by
reviewing its policies, implementing fresh
initiatives, disciplining the market through a
variety of appropriate enforcement actions,
facilitating redressal of grievances of investors
and nurturing a security culture for the orderly
and expansive growth of capital market. The
major policy issues are discussed in public
domain through discussion papers to ensure
transparency, efficiency, fairness, safety and
integrity of the capital market. The various
Annual Report 2013-14
in the advanced economies mainly due to

less favourable external environment and
country specific concerns like high inflation
and wide current account deficit producing
weak investor sentiments for emerging
markets.
and inflation, as also financial stability. In

the wake of intense exchange rate pressures,
stabilisation of the economy by restoring
exchange rate stability was the foremost
task. A series of exceptional monetary policy
actions were taken to tighten interest rates to
siphon off liquidity, to restrain the current
account deficit (CAD) and to improve its
financing. With the resultant improved
stability in the foreign exchange market,
exceptional liquidity and monetary measures
were normalised.
I.
Growth
The Indian economy, which witnessed

a slowdown after a robust growth of over
8 percent in 2010-11, troughed to a decadal
low rate of 4.5 percent in 2012-13 and the
provisional estimate stood at a marginal
high of 4.7 percent in 2013-14. As per the
provisional estimates of Central Statistical
Office (CSO), Gross Domestic Product (GDP)
at factor cost at constant (2004-05) prices in
the year 2013-14 is `57,41,791 crore, as against
the first revised estimate of GDP for the year
2012-13 of `54,82,111 crore (Table 1.1).
Having built the buffers in the interim,

Indian economy and markets withstood
the December 2013 tapering announcement
better than its emerging market peers. In
spite of the recent improvements in statistics,
country faces a challenging macro-economic
situation with growth slowing down,
persistent inflation and lingering structural
bottlenecks.
In 2013-14, the overall growth is

expected to improve on the back of a reviving
agriculture sector, with a growth rate of 4.7
percent as compared to 1.4 percent in 201213. However, Industry which recorded a
growth of 0.9 percent continues to dampen
further over the previous year. Service sector
continued to maintain its momentum over
the previous two years with a growth of 6.2
percent in 2013-14. However, sub-sectors
trade, hotels, transport and communication
recorded a sluggish growth of 3.0 percent in
2013-14.
The growth concerns remain dominant

for Indian economy with GDP growth
recording below 5 percent for seven
successive quarters and index of industrial
production (IIP) growth stagnating for two
successive years. Even though the agriculture
output and export performance strengthened,
industrial growth continues to stagnate.
The leading indicators of the services sector
exhibited a mixed picture. During the year,
growth picked up in emerging markets, but
the momentum appeared to be weaker than
Part One: Policies and Programmes
Table 1.1: National Income (at 2004-05 prices)

(` crore)
Item
2011-12
2012-13
2013-14
(2nd Revised
Estimate)
( 1st Revised
Estimate)
(Provisional
Estimate)
52,01,163
54,16,659
56,73,857
(6.9)
(4.1)
(4.7)
45,73,328
47,28,776
49,20,183
(6.5)
(3.4)
(4.0)
52,47,530
54,82,111
57,41,791
(6.7)
(4.5)
(4.7)
4,619,695
47,94,228
49,88,116
(6.2)
(3.8)
(4.0)
1,202
1,217
1,233
(1.3)
(1.2)
(1.3)
38,856
39,904
1
A. Estimates at Aggregate Level
1.
National Product
1.1 Gross National Income (GNI) at factor cost
1.2 Net National Income (NNI) at factor cost
2.
Domestic Product
2.1 Gross Domestic Product (GDP) at factor cost
2.2 Net Domestic Product (NDP) at factor cost
B. Estimates at Per Capita Level

1.
Population (million)
2.
Per Capita NNI at factor cost (`)
38,048
(5.1)
(2.1)
(2.7)
3.
Per Capita GDP at factor cost (`)
43,657
45,046
46,568
(4.9)
(3.2)
(3.4)
Notes: 1. Figures in the parentheses are percentage change over the previous year.
2. Growth rates in 2011-12 are based on growth calculated over 3rd revised estimates of 2010-11.
Source: Central Statistical Office
II.
Agriculture
meet increased food demand and mounting

input prices poses a challenge.
The
post-monsoon
rainfall
and
favourable progress of Rabi crops sown
in the current financial year is expected
to boost growth prospects in agriculture
sector remarkably by 4.7 percent in 2013-14
from that of 1.4 percent seen in 2012-13. The
production of food grains is expected to rise
by 5.6 percent in 2013-14, unlike the previous
year when the production grew at 2.8 percent
(Table 1.2). However, unseasonal rains and
the possible effects of El Nino in various
parts of the country, makes the sector prone
to uncertainties for future harvests. In this
context, the ability of agriculture sector to
Although share of agriculture in the

GDP accounts for approximately 14 percent
since last three years, but it is still the main
source of livelihood for majority of the rural
population. The agricultural growth had
accelerated significantly during 11th five
year plan with an average growth rate of
3.7 percent as opposed to the achievement
of 2.4 percent in the 10th five year plan. With
new structural changes taking place within
the sector, the 12th five year plan (2012-17)
maintained the growth target for agriculture
at 4.0 percent.
3
Table 1.2: GDP (at Factor Cost) by Economic Activity (at 2004-05 prices)
(` crore)
Industry
1.
1
Agriculture, Forestry & Fishing
2.
3.
4.
Mining and Quarrying

Manufacturing
Electricity, Gas and Water Supply
Industry (2+3+4)
5. Construction
6. Trade, Hotels, Transport and Communication
7. Financing, Insurance, Real Estate and
Business Services
8. Community, Social and Personal Services
Services (5+6+7+8)
GDP at Factor Cost
2011-12
2012-13
(2nd
Revised
Estimate)
2
7,53,832
(1st
Revised
Estimate)
3
7,64,510
1,10,725
8,54,098
1,00,646
10,65,469
4,15,188
14,02,261
9,45,534
6,65,246
34,28,229
52,47,530
2013-14
Percentage Change
over Previous Year
(Provisional
Estimate)
2012-13
2013-14
4
8,00,548
5
1.4
6
4.7
1,08,328
8,63,876
1,02,922
10,75,126
4,19,795
14,73,353
10,48,748
1,06,838
8,57,705
1,09,018
10,73,561
4,26,664
15,17,826
11,83,714
-2.2
1.1
2.3
0.9
1.1
5.1
10.9
-1.4
-0.7
5.9
-0.1
1.6
3.0
12.9
7,00,579
36,42,475
54,82,111
7,39,477
38,67,681
57,41,791
5.3
6.2
4.5
5.6
6.2
4.7
Note: Construction as per RBI classification comes under services sector.

III. Industry
in 2013-14 as opposed to 4.0 percent in

2012-13 (Table 1.3).
The prospects of industrial sector still

remain uncertain with negative growth
rate expected at 0.1 percent in 2013-14 from
0.9 percent as observed in 2012-13 (Table
1.2). Subdued investment pattern and
low consumption demand, encompassed
by dwindling production of capital
goods and consumer durables resulted in
downfall in industrial output. Mining and
manufacturing sector continued to record
a downfall similar to the previous fiscal
year, in contrast to electricity sector which
witnessed a significant growth of 6.1 percent
The Index of Industrial Production

contracted by 0.1 percent in 2013-14 when
compared with an expansion of 1.1 percent
recorded in 2012-13, led primarily by a
slowdown in core sector growth, which
stood at 2.6 percent in 2013-14 as against
3.2 percent in 2012-13. This sluggishness, in
part, reflects contraction in natural gas and
crude oil production and slow growth in all
other core industries, except electricity sector
which continues to outpace the others in the
year 2013-14.
Table 1.3: Index of Industrial Production (Base: 2004-05=100)

Month
Mining
(141.57)
2012-13
2013-14
Manufacturing
(755.27)
2012-13
2013-14
Average
April-March
125.5
124.5
183.3
Growth over the corresponding period of previous year
March
-2.1
-0.4
4.3
April-March
-2.3
-0.8
1.3
Electricity
(103.16)
2012-13
2013-14
General
(1000.00)
2012-13
2013-14
181.9
155.2
164.7
172.2
172.0
-1.2
-0.8
3.5
4.0
5.4
6.1
3.5
1.1
-0.5
-0.1
2012-13. The contraction recorded in

production of capital goods, a barometer of
demand, eased to 3.7 percent 2013-14, from
6.0 percent in the previous financial year.
In order to capture a better share in GDP, it
is indispensable to increase manufacturing
sector growth to 12-14 percent over the
years amidst global competitiveness and
sustainable environment, as perceived in
the National Manufacturing Policy.
Mining sector, partly accountable for

the overall contraction in industrial output,
recorded a decline of 0.8 percent in 2013-14
as against a decline of 2.3 percent in 201213. The sector with 14.1 percent weight
in IIP continues to exhibit weak activity
as compared to other sectors of the IIP on
account of regulatory and environmental
concerns (Table 1.3).
Manufacturing sector, which accounts
for a significant 75.5 percent weight in IIP,
witnessed 0.8 percent contraction in the
output in the current year as compared to
1.3 percent growth in 2012-13, highlighting
the weak domestic growth impulses. In
2013-14, the number of sub-sectors of the
manufacturing sector displaying contraction
rose to 10 out of 22, including industries like
radio, TV and communication equipment,
rubber and plastics, fabricated metal
products and motor vehicles. In terms of
Use-based classification, pace of growth
of intermediate goods output rose to 3.0
percent in 2013-14 from 1.6 percent in
The growth of electricity generation

improved to a robust 11.5 percent in February
2014 as compared to previous months of the
fiscal, led primarily by a pickup in growth
of thermal as well as hydro electricity
generation. On the whole, the sector posted
an improved growth of 6.1 percent in 2013-14
as compared to 4.0 percent growth in 2012-13,
continuing to outpace the other two sectors
in the current financial year. However, the
availability of electricity supply still remains
an area of concern, particularly in rural
areas where the per capita consumption of
electricity is mere 8 units per month.
Chart 1.1: Share of Components of GDP (at Factor Cost)
IV. Services
V.
Services sector has been a major

contributor to Indias GDP and growth with
a rising share of 67.3 percent in the GDP in
2013-14 as against 66.4 percent in 2012-13.
The sector, however, is expected to grow
at 6.2 percent in 2013-14, similar to growth
observed in 2012-13 but much higher than
the other two sectors of the economy.
As per the update of Central Statistical

Office (CSO), Indias Gross Domestic Savings
as a percentage of GDP at market prices is
reflecting a downward trend since 2009-10,
sliding further to 30.1 percent in 2012-13 from
31.3 percent in 2011-12. The decrease came
primarily on the back of reduced Private
corporate savings from 7.3 percent in 201112 to 7.1 percent in 2012-13 accompanied
by Household savings in physical assets
moving from 15.8 percent in 2011-12 to 14.8
percent in 2012-13, which may be attributed
to inflationary pressures experienced by
the economy for most of the year. The
mobilisation of financial savings impacted
by low deposit rates in the face of high
inflation saw a modest increase of 7.1 percent
(as a percentage of GDP at market prices) in
2012-13 from 7.0 percent in 2011-12, while
Public sector savings as a percentage of GDP
at market prices stood at 1.2 percent in 201213 as well as in 2011-12. The investment too
has seen a dwindling trend, declining to 34.8
percent in 2012-13 from 35.5 percent in 201112 and the peak of 36.5 percent recorded in
2009-10 and 2010-11.
The sector with high growth potential

was largely hampered due to a tad increase
of 3.0 percent observed in Trade, Hotels,
Transport and Communication sub -sector,
as compared to 5.1 percent recorded in 201213. Weak consumer confidence has impacted
the sale of passenger cars, commercial
vehicles and three wheelers. Nonetheless,
the reduction in excise duty on passenger
vehicles and two wheelers, as announced in
the interim budget for 2014-15, is expected to
augur well for the sector.
Financing, Insurance, Real Estate and
Business Services sub-sector has further
increased its share in GDP from 19.1 percent
in 2012-13 to 20.3 percent in the current year.
The sub-sector continues to outperform the
other three sub-sectors while recording a
growth rate of 12.9 percent in 2013-14 as
compared to 10.9 percent observed in 201213. Construction sub sector, with 7.4 percent
weight in GDP, is expected to grow at 1.6
percent in 2013-14 as against 1.1 percent
recorded in the previous financial year.
Savings and Investments
The expenditure side of GDP at market

prices indicates that the aggregate demand
of the Indian economy during the year
continued to remain weak even as net exports
remained strong. Private final consumption
expenditure, a principal component of GDP
at market prices, decelerated from 17.9
percent in 2011-12 to 12.3 percent in 2012-13 in
absolute terms on account of low agricultural
production and insistent high consumer price
inflation. On the contrary, the growth rate of
government final consumption expenditure
increased marginally from 15.3 percent in
2011-12 to 15.9 percent in 2012-13 due to
fiscal consolidation.
Community, Social and Personal

Services sub-sector, which contributes 13.1
percent share in GDP, is estimated to grow at
5.6 percent in the current year, slightly higher
than the growth rate of 5.3 percent achieved in
2012-13. Indias services sector has emerged
as a prominent sector over a decade in terms
of its contribution to national and states
incomes, FDI inflows and employment.
6
`1,11,295 crore in 2011-12 to `1,17,919 crore

in 2012-13 (Table 1.4).
In absolute terms, Gross Domestic

Savings at current prices in 2012-13 stood at
`30,43,474 crore as against `28,24,459 crore in
2011-12, registering a growth of 7.8 percent.
The savings of household sector has increased
by 7.7 percent from `20,54,737 crore in 201112 to `22,12,414 crore in 2012-13. While the
savings in physical assets witnessed a modest
growth of 5.1 percent to `14,95,283 crore in
2012-13 from `14,22,541 crore in 2011-12, the
financial savings increased by 13.4 percent
from `6,32,196 crore in 2011-12 to `7,17,131
crore in 2012-13. Private corporate savings
observed a rise of 8.3 percent from `6,58,428
crore in 2011-12 to `7,13,141 crore in 201213 while Public sector savings recorded a
growth of 6.0 percent in absolute terms from
The slowdown in savings rate as a

percentage of GDP at market prices across
the sectors has led to further widening of
the saving-investment gap in recent years
and the same stood at 4.7 percent in 201213, up from the 4.2 percent recorded in the
previous financial year. Consequently, there
has been heavy reliance on capital inflows
which increased by 27.0 percent from
`3,76,174 crore in 2011-12 to `4,77,925 crore
in 2012-13. Addressing structural policy
measures to lower inflation and facilitating
implementation of large investment projects,
while containing the fiscal deficit would cater
to reduce the savings investment imbalance.
Table 1.4: Gross Domestic Savings and Investment

S.No.
(Amount in `crore)
Item
2009-10
1
Household Saving
of which :
2010-11
(3rd RE)
2011-12
(2nd RE)
(Percent of GDP at market prices)

2012-13
(1st RE)
2009-10
2010-11
(3rd RE)
2011-12
(2nd RE)
2012-13
(1st RE)
16,30,799
18,00,174
20,54,737
22,12,414
25.2
23.1
22.8
21.9
a) Financial Assets
7,74,753
7,73,859
6,32,196
7,17,131
12.0
9.9
7.0
7.1
b) Physical Assets
8,56,046
10,26,315
14,22,541
14,95,283
13.2
13.2
15.8
14.8
Private Corporate Saving
5,40,955
6,20,300
6,58,428
7,13,141
8.4
8.0
7.3
7.1
Public Sector Saving
10,585
2,01,268
1,11,295
1,17,919
0.2
2.6
1.2
1.2
Gross Domestic Saving
21,82,338
26,21,742
28,24,459
30,43,474
33.7
33.7
31.3
30.1
Net Capital Inflow
1,80,794
2,19,715
3,76,174
4,77,925
2.8
2.8
4.2
4.7
Gross Domestic Capital

Formation
23,63,132
28,41,457
32,00,633
35,21,399
36.5
36.5
35.5
34.8
Total Consumption
Expenditure (a+b)
44,78,717
52,50,459
61,67,791
69,61,191
69.1
67.5
68.5
68.8
a)
Private Final
Consumption
Expenditure
37,07,566
43,60,323
51,41,896
57,72,059
57.2
56.0
57.1
57.1
b)
Government Final
Consumption
Expenditure
7,71,151
8,90,136
10,25,895
11,89,132
11.9
11.4
11.4
11.8
Saving-Investment Balance (4-6)
-1,80,794
-2,19,715
-3,76,174
-4,77,925
-2.8
-2.8
-4.2
-4.7
Public Sector Balance#
-5,82,203
-4,55,180
-5,84,540
-7,04,043
-9.0
-5.8
-6.5
-7.0
Private Sector Balance#
5,29,599
3,96,343
3,77,342
5,04,791
8.2
5.1
4.2
5.0
-2,45,154
-3,77,516
-2,54,854
-2,12,340
-3.8
-4.8
-2.8
-2.1
7,74,753
7,73,859
6,32,196
7,17,131
12.0
9.9
7.0
7.1
Memo Items
a)
Private Corporate Sector
b)
Household Sector
RE: Revised Estimate; #: Investment figures are not adjusted for errors and omissions.
VI. Current Account Deficit
have been replenished by mobilising USD

34 billion by way of non-resident Indian
(NRI) deposits and bank borrowings in
the international market. Indias foreign
exchange reserves, which stood at USD 303.7
billion as on March 28, 2014, are comfortable
in terms of various reserve adequacy criteria.
While India may still be vulnerable to debt
outflows on account of disorderly exit
from quantitative easing by major central
banks, this risk has been mitigated due
to the containment of the current account
deficit, reduction in the stock of the volatile
component of capital flows, and an increase
in foreign exchange reserves.
The year 2013-14 for Indian economy

reflected concerns with the current account
deficit and its financing in the early months.
However, circumstances improved and
external risk mitigated in second half of
the year. The narrowing of CAD followed a
lower trade deficit due to the higher exports
helped by a depreciating rupee as well as
moderation in imports, by curbing the import
demand arising from gold and other nonessential imports through tariff hikes and
administrative measures and to boost capital
flows through liberalisation and special
schemes.
Indias Current Account Deficit (CAD)
was USD 32.4 billion in 2013-14 (1.7 percent
of GDP), much lower than USD 87.8 billion
(4.7 percent of GDP) recorded in 2012-13 on
account of narrowing trade deficit and rising
net invisibles receipts. In Q4 of 2013-14, CAD
stood at USD 1.2 billion (0.2 percent of GDP)
compared to USD 4.2 billion (0.9 percent of
GDP) during Q3 of 2013-14, which is much
lower than USD 31.9 billion, a historic high
of 6.5 percent of GDP, during Q3 of 2012-13.
There has been a significant deceleration in
valuables with curbs on gold imports and this
is expected to positively impact household
financial savings and help restrain CAD.
VII. Fiscal Deficit
In Indian context, sustaining CAD

to a comfortable level is not only desired
but indispensable too as it would reduce
economys dependence on volatile foreign
capital inflows such as portfolio investments
to fund current account deficit. This leads to
a balanced situation funded through foreign
direct investment that is highly stable.
After tighter liquidity conditions

observed in 2012-13, the Q1 of 2013-14
witnessed considerably improved scenario
with liquidity deficit staying within the
comfort zone together with a decline in
deposit rate of SCBs, following a reduction
in the repo rate. However, to restore stability
in the foreign exchange market grounded
by capital outflows subsequent to the
announcement of tapering of US quantitative
easing programme, exceptional liquidity
measures were undertaken to tighten the
As the elevated fiscal deficit posed

a major challenge to the economy, several
measures for fiscal consolidation were
adopted such as phased reduction of diesel
subsidies. The fiscal performance in 2012-13
was better as the actual gross fiscal deficit
declined to 4.9 percent of GDP in 2012-13
as against the budgeted level of 5.1 percent.
For 2013-14, gross fiscal deficit stood at
4.5 percent of GDP. It has been budgeted
at a further reduced level of 4.1 percent for
2014-15.
VIII. Liquidity
In addition to containing the current

account deficit, efforts have also been made
to make the Indian economy more resilient by
building buffers. Foreign exchange reserves
8
decelerated to 14.1 percent in 2013-14 led by

sectors like gems and jewellery, petroleum
and mining even though credit to agriculture,
food processing, construction, glass and
paper recorded a pick up.
monetary and liquidity conditions. Hike in

Marginal Standing Facility (MSF) rate and
Cash Reserve Ratio (CRR) requirement, cap
on daily Liquidity Adjustment Facility (LAF)
borrowing and weekly auctions of cash
management bills (CMBs) were some of the
measures carried to drain out liquidity from
the economy.
Credit flow rate to large and medium

sector industries has been lower as compared
to micro and small industries. Improved
macroeconomic outlook besides easing of
liquidity conditions on account of rolling back
of the policy rate corridor, has moderated
the credit growth in line with the indicative
trajectory.
Moderation of exchange rate pressures

from September 2013 onwards and evolving
macroeconomic situations significantly eased
the tight liquidity conditions of Q2 witnessing
ongoing normalisation in exceptional monetary
measures. However, liquidity conditions
altered during the last quarter of 2013-14 as it
started with monetary tightening in the first half
of February 2014 owing to frictional pressures
primarily on account of government cash
balances and a rise in currency in circulation.
The situation was eased later due to injection
of additional liquidity through term repos and
forex swaps.
X.
Inflation
The inflationary pressures experienced

during the financial year started moderating
from December 2013. Both WPI and CPI
inflation showed signs of easing from the
elevated levels recorded during AprilNovember 2013.
The y-o-y WPI inflation was 5.9 percent
in 2013-14 compared to 7.4 percent in 201213. Commodity-wise break-up shows that
inflation on primary articles remained high
at 9.9 percent in 2013-14 compared to 9.8
percent in 2012-13. This was primarily due
to ascending food prices in major part of the
year due to supply-side pressures. The fuel
and power segment inflation was 10.1 percent
in 2013-14 compared to 10.3 percent in 201213. But there was significant moderation in the
inflation of manufactured goods which was
2.9 percent in 2013-14 as against 5.4 percent
in 2012-13. As the manufactured products
constitute 64.97 percent in the WPI, their
impact on the overall moderation in inflation
level in 2013-14 has been significant.
During the year, liquidity injection

through the Open Market Operations
(OMOs) has been to the tune of about `52,000
crore, while injecting an average daily net
liquidity of `90,600 crore through LAF, MSF
and term repos. Further to this, Export Credit
Refinance (ECR) has inducted a liquidity
of `29,400 crore during the year. In 2013-14,
the policy repo rate under the Liquidity
Adjustment Facility (LAF) has been increased
by 25 basis points to stand at 8.0 percent.
IX. Credit Growth
The credit growth decelerated in early
2013-14 owing to slack in macroeconomic
activity and deterioration in asset quality.
However, later during the year, credit
off-take accelerated on account of buildup in credit to services and personal loan
category. Deployment of credit to industries
Retail inflation measured by Consumer

Price Index (CPI) moderated in the current
year and stood at 8.9 percent as end March
2014 compared to 10.4 percent as end March
9
the months to come would lead to a path of

recovery in Indias exports growth.
2013, driven by the sharp disinflation

observed in food prices primarily in last
quarter of the year. Food and beverages
group, which contributes 47.6 percent
weight in CPI, may be held accountable for
the overall CPI inflation as this segment
witnessed double digit inflation during
the year. However, second half of the
year saw moderation in CPI inflation and
the figure stood at 8.3 percent as on end
March 2014. For the Indian economy to be
on a disinflationary path guided by stable
monetary policy, it is intended to maintain
8.0 percent CPI by 2015 and further attaining
a level of 6.0 percent by 2016.
The
foreign
exchange
reserves
replenished during the year and reached
their highest during 2013-14 at USD 303.7
billion on March 28, 2014 indicating a rise of
USD 11.7 billion from the level of USD 292.0
billion at end March 2013 enhancing Indias
capacity to withstand spillovers from the
global economy thereby reducing the macro
instability risks.
XII. Exchange Rate
During the year, exchange rate
movement of rupee in terms of dollar
exhibited varied trends with intense pressure
in the early months and later recovery owing
to various policy reforms and narrowing of
current account deficit. The exchange rate
as on end March 2013 stood at 54.4 per USD
and remained stable in the range of 53-55 per
USD in May 2013. However, after May 2013,
the monthly average exchange rate of the
rupee started depreciating and stood at 68.36
per USD in August 2013. However, rupee
survived the US Fed tapering announcement
in December 2013 vis-a-vis peer emerging
market currencies and the exchange rate
stabilised in a narrow range and stood at 59.9
on March 31, 2014, depreciating 10.1 percent
over the previous year.
XI. Trade Balance

Cumulative value of exports in India
for the current year stood at USD 312.3
billion as against USD 300.4 billion in 201213, registering a growth of 4.0 percent.
Meanwhile, imports for the current year
witnessed a decline of 8.9 percent over the
previous year with a cumulative value of
USD 450.1 billion in 2013-14 as against USD
490.7 billion in 2012-13. Consequently, Indias
trade deficit narrowed to USD 137.8 billion,
much lower than that of USD 190.3 billion in
2012-13.
Import of gold and silver in 2012-13
stood at USD 55.79 billion, which declined
to USD 33.46 billion in 2013-14 mainly due
to depreciation of the rupee and limitations
imposed by the Government on inbound
shipments of the precious metal in order
to minimize the current account deficit in
2013-14. On the contrary, Indias exports
have shown improvement during the
year, however, it could not withhold the
momentum in November 2013 and eventually
turned negative in February 2014 on account
of domestic and global factors. Improvement
in global and domestic growth prospects in
XIII. Capital Markets

The
year
2013-14
reaped
accomplishments for Indian securities
markets with benchmark indices, BSE Sensex
and NSE Nifty registering all-time highs
in the wake of high volatility observed
throughout the year due to global headwinds.
Indian stock markets extended their recordbreaking spree with the Sensex hitting a new
peak and closing 22,386 on March 31, 2014,
breaching the 20,000 mark touched during
10
The turnover in the Equity derivative

segment exhibited an increase of 22.9 percent
and stood at `4,75,75,571 crore in 2013-14.
Amidst the volatile rupee during the year,
the currency derivative segment turnover
registered a decline of 23.9 percent to reach
`69,80,855 crore in 2013-14. The oldest Stock
Exchange, BSE, commenced its operations in
currency derivative segment in November 2013
and recorded `2,44,312 crore turnover during
November 2013 - March 2014. (Table 1.6)
2012-13. Nifty, too, crossed the 6,000 mark

of 2012-13 and logged to a new lifetime high
by closing at 6,704 on March 31, 2014. While
Sensex observed a growth of 18.8 percent,
Nifty recorded a growth of 18.0 percent.
The market capitalisation of BSE stood
at `74,15,296 crore as on last trading day of
March 2014 as against `63,87,887 crore at endMarch 2013 while its ratio to GDP stood at 65.3
percent for 2013-14. The market capitalisation
of NSE was `72,77,720 crore at end-March
2014 compared to `62,39,035 crore as of endMarch 2013 while its ratio to GDP stood at
64.1 percent for 2013-14. The third national
level stock exchange, MCX-SX, recorded a
market captilisation of `72,39,670 crore in
2013-14 and its ratio to GDP at 64.0 percent.
The demat statistics at depositories, NSDL
and CDSL exhibited an accelerating trend in
terms of number of demat accounts and demat
quantity. The number of demat accounts at
CDSL and NSDL witnessed a growth of 5.4
percent and 2.9 percent respectively over
the previous year. Moreover, the number of
listed companies at NSE and BSE continued
to rise. (Table 1.5a and 1.5b)
The introduction of cash settled Interest

rate futures on 10-year GoI security in
January 2014 heralds the beginning of a new
era in the fixed income derivatives market.
This step towards integration of the Indian
Securities Market with the rest of the world
may be seen as a path breaking initiative as
it is expected to pave the way for various
innovations at the derivative front in the time
to come. Interest Rate Derivative segment at
NSE also picked up the momentum in 201314 and the combined turnover of NSE, BSE
and MCX-SX stood at `39,944 crore.
The foreign investments in India
contributed by the FIIs/SAs stood at `15,93,869
crore in 2013-14, an increase of 19.3 percent
over the previous year. On the same lines,
FDI investments also witnessed a rise of 22.5
percent and assets under custody valued at
`2,94,945 crore in 2013-14. (Table 1.7)
The trading activity rebounded slightly

in the global listed derivatives markets in
2013, after suffering the largest decline in
volumes in more than a decade. As per the
Futures Industry Association (FIA) Annual
Survey 2013, the total number of futures
and options traded on exchanges worldwide
reached to a level of 21.6 billion contracts,
up by 2.1 percent compared to the previous
year but still well below the levels seen in
2011 and 2010. Nonetheless, NSEs CNX
Nifty Index options were the worlds most
traded options while, U.S. Dollar/Indian
Rupee Futures at NSE and MCX-SX were
ranked first and second respectively in terms
of foreign exchange futures and options
contracts traded in 2013.
SEBI also succeeded in promoting

and sustaining an efficient and robust
global financial infrastructure with a view
to streamline investor protection and to
make investors confident and aware while
investing in securities market. Various policy
reforms in the area of Investor Grievance
Redressal Mechanism have been embarked
during the financial year. Foreign Portfolio
Investors Regulations were notified in
order to harmonize the different routes
11
of PFMIs, launch of cash settled Interest

Rate Futures, dedicated debt segment and
many such reforms, elaborated in upcoming
sections.
for foreign portfolio investments along

with introduction of Institutional Trading
Platform (ITP) for SME including startups,
adoption of new CPSS-IOSCO standards
Table 1.5 (a): Demat Statistics
NSDL
CDSL
NSDL
CDSL
Year
Quantity
(million shares)
Quantity
(million shares)
Demat Accounts
(in lakh)
Demat Accounts
(in lakh)
2011-12
5,79,801
1,33,570
120.5
79.0
2012-13
6,86,476
1,51,792
126.9
83.3
2013-14
7,95,503
1,77,311
130.6
87.8
Source: NSDL and CDSL
Table 1.5 (b): No. of Listed Companies

NSE
BSE
MCX-SX
No. of Companies Listed
2011-12
1,646
5,133
Na
2012-13
1,666
5,211
2013-14
1,688
5,336
12
Year
Source: NSE, BSE and MCX-SX
Table 1.6 Growth of Turnover in Various Segments of Indian Stock Market

Turnover ( ` crore)
Year
Cash Segment
Equity Derivatives
Currency Derivatives
Interest Rate
Derivatives
2011-12
34,78,391
3,21,58,208
98,96,413
2012-13
32,57,087
3,87,04,572
87,10,504
2013-14
33,41,338
4,75,75,571
69,80,855
39,944
Note: Cash segment of MCX-SX commenced its operations from February 11, 2013
Source: BSE, NSE, MCX-SX and USE
Table 1.7 Value of Assets of Foreign Investors reported by Custodians

Foreign Venture
FIIs/SAs
Foreign Depositories
FDI Investments
Amount (` crore)
Amount (` crore)
Amount (` crore)
Amount (` crore)
2011-12
11,07,399
1,43,370
2,31,841
35,041
2012-13
13,36,557
1,57,159
2,40,731
54,144
2013-14
15,93,869
1,90,529
2,94,945
48,854
Year
Source: SEBI
12
Capital Investments
2.
REVIEW OF POLICIES
PROGRAMMES
AND
Listing Agreement, the stock exchanges have

been advised to put in place appropriate
framework to effectively monitor the
disclosures. The stock exchanges have also
been advised to put in place an appropriate
mechanism for handling complaints related
to inadequate and inaccurate disclosures
and non-compliances. Stock exchanges are
further required to submit exception reports
to SEBI containing details of companies not
responding to the clarifications sought by
them and/or where the response submitted
by the company is not satisfactory. Further,
the stock exchanges have also been advised
to disclose the details of promoters / directors
/ key managerial personnel of defaulting
companies on their websites.
With a view to keep the Indian securities

market integrated with the worldwide
regulatory regime, incessant developments
are essential while in harmony with the
objectives enshrined in the SEBI Act, 1992.
Alike ever year, 2013-14 as well witnessed
various policy reforms initiated by SEBI
which are presented in this section.
The developments are categorized under
seven major heads viz., Primary Securities
Market, Secondary Securities Market,
Mutual Funds, Intermediaries associated
with Securities Market, Foreign Institutional
Investors, Other policies and programmes
having a bearing on the working of securities
market and Assessment and Prospects.
I.
B.
Considering the requests received

from market participants, viz. Investor
Associations and Association of Investment
Bankers of India (AIBI), the recommendation
of the advisory committee of SEBI, and to
align with the principles laid down by the
Financial Stability Board (FSB) on reducing
the reliance on credit rating agencies, the IPO
grading mechanism was made voluntary
as against the earlier provision of the same
being mandatory.
Primary Securities Market
The primary market enables the

government as well corporates in raising
the capital that is required to meet their
requirements of capital expenditure and/
or discharge of other obligations such as
exit opportunities for venture capitalist/PE
firms. A well developed primary market is
fundamental for an economy to prosper. In
order to further refine the primary market
design and boost investor confidence, various
measures have been undertaken by SEBI in
2013-14. This section throws light on the policy
measures initiated during the financial year:
A.
IPO Grading made voluntary
C.
Introduction of General Information

Document
The concept of General Information

Document (GID) has been implemented.
GID shall contain information which is of
generic nature (like issue and allotment
procedure) and not specific to the issuer,
thereby eliminating the repetition of common
information in abridged prospectus. This
is expected to bring down the size of the
abridged prospectus and ultimately reduce
the cost of printing.
Compliance With The Provisions Of

Equity Listing Agreement By Listed
Companies - Monitoring by Stock
Exchanges
In order to improve the effectiveness of

monitoring mechanism of stock exchanges
to ascertain the adequacy and accuracy of
disclosures made in compliance with the
13
D.
Amendments to SEBI (Issue of

Capital and Disclosure Requirements)
Regulations,
2009
relating
to
preferential issue
F.
Clause 24(i) of the Equity Listing

Agreement requires that the company, while
filing for approval of any draft Scheme of
amalgamation / merger / reconstruction,
etc. with the stock exchange under clause
24(f) of the equity listing agreement, shall
also file an auditors certificate to the effect
that the accounting treatment contained
in the scheme is in compliance with all
the accounting standards specified by the
Central Government in section 211(3C) of
the Companies Act, 1956. It was observed
that there is no uniform format for auditors
certificate as required under clause 24(i)
of the equity listing agreement. Auditors
certificate in different formats was being
submitted by the companies with the stock
exchanges. In view of the same, a standard
format for the same has been prescribed to
ensure standardization.
With a view to enhance transparency,

ensure adequate audit trail and apply lock-in
for the shares allotted in preferential issues,
the following amendments were carried
out to SEBI (Issue of Capital and Disclosure
Requirements) Regulations, 2009:
a.
Preferential issue shall be subscribed

only through the allottees own bank
account. Further, the issuing company
shall disclose the natural persons who
are the ultimate beneficial owner of
allotted shares and/or who ultimately
control the allottee, subject to the
condition that if in the ownership chain
there is any listed company, mutual
fund, bank or insurance company, no
further disclosure will be necessary.
b.
Allotments in preferential issues shall

only be made in dematerialized form.
c.
Shares allotted in the preferential issue

shall not be transferred till trading
approval is granted for such shares by
the stock exchanges. Further, the lockin period shall commence on the date of
such trading approval.
E.
Format for Auditors Certificate

required under Clause 24(i) of the
Equity Listing Agreement
G.
Amendments to SEBI (Buy Back

of Securities) Regulations, 1998
governing Buy-Back through Open
Market Purchase
As part of SEBIs constant endeavour

to align regulatory requirements with the
changing market realities as well as to
enhance efficiency of the buy-back process,
the following changes to buyback of shares
or other specified securities from the open
market through stock exchange mechanism
have been carried out vide amendments to
SEBI (Buy Back of Securities) Regulations,
1998:
Revised
illustrative
format
of
Statement of Assets and Liabilities in
SEBI (Issue of Capital and Disclosure
Requirements) Regulations, 2009
The illustrative format of Statement of

Assets and Liabilities in offer document which
is provided under Regulation - (2)(IX)(B)(9)
(f) of Part-A of Schedule VIII of SEBI (Issue
of Capital and Disclosure Requirements)
Regulations, 2009 was updated and brought
in line with the revised Schedule VI of the
Companies Act, 1956 and Schedule III of the
newly enacted Companies Act, 2013.
a.
14
The minimum buy-back has been

mandated as 50 percent of the amount
earmarked for the buy-back, failing
which amount in the escrow account
would be forfeited subject to a maximum
method has been introduced which

includes creation of separate window
in the trading system for tendering the
shares, requirement of PAN/Aadhaar
for verification, etc.
of 2.5 percent of the total amount

earmarked. However, companies may
not be liable for penal action on failure
to comply with this requirement in
specified circumstances.
i.
The companies shall create an

escrow account towards security for
performance with an amount equivalent
to at least 25 percent of the amount
earmarked for buy-back.
The companies shall extinguish shares

bought back during the month, on or
before the fifteenth day of the succeeding
month subject to the last extinguishment
within seven days of the completion of
the offer.
j.
The company shall not raise further

capital for a period of 1 year from
the closure of the buy-back except in
discharge of subsisting obligations as
against the existing 6 months.
The promoters of the company shall

not execute any transaction, either onmarket or off-market, during the buyback period.
H.
Disclosure
of
Non
Undertaking by Promoters
b.
The maximum buy-back period has been

reduced to 6 months from 12 months.
c.
d.
e.
f.
g.
h.
The company shall not make another

buy-back offer within a period of 1 year
from the date of closure of the preceding
offer.
Disposal
It was specified that all types of

Non Disposal Undertakings (NDUs) by
promoters will be covered under the scope
of disclosures of Encumbrances under the
SEBI (Substantial Acquisition of Shares and
Takeovers) Regulations, 2011. These NDUs
may, inter-alia, include undertaking for:
The disclosure requirements have been

rationalized requiring disclosure of the
shares bought back on a cumulative
basis on the website of the company
and the stock exchange, only on a daily
basis instead of the current requirement
of disclosure on daily, fortnightly and
monthly basis.
The companies shall buy-back 15
percent or more of capital (paid-up
capital and free reserves) only by way
of tender offer.
The procedure for buy-back of physical
shares (odd-lot) in open market purchase
15
a.
not encumbering shares to another

party without the prior approval of the
party with whom the shares have been
encumbered;
b.
non-disposal of shares beyond a certain

threshold so as to retain control;
c.
non-disposal of shares entailing risk

of appropriation or invocation by the
party with whom the shares have been
encumbered or for its benefit.
Box 1.1: Compliance with Minimum Public Shareholding Requirement

1.
Government of India, vide notifications dated June 4, 2010 and August 9, 2010, amended the Securities
Contracts (Regulation) Rules, 1957 (SCRR). The amended rule 19(2) and newly introduced rule 19(A) of
SCRR require the listed companies to achieve and maintain minimum public shareholding (MPS) of 25
percent of the total number of issued shares for non-PSUs and 10 percent for PSUs. Further, a time period
of three years has been provided from the date of notifications to companies to achieve minimum public
shareholding in the manner specified by SEBI.
2.
SEBI has specified the following methods for achieving MPS requirement in terms of rules 19(2)(b) and 19A
of SCRR:
a.
Issuance of shares to public through prospectus;
b.
Offer for sale of shares held by promoters to public through prospectus;
c.
Sale of shares held by promoters through the secondary market i.e. OFS through Stock Exchange;
d.
Institutional Placement Programme
e.
Rights Issues to public shareholders, with promoters/promoter group shareholders forgoing their
rights entitlement.
f.
Bonus Issues to public shareholders, with promoters/promoter group shareholders forgoing their
bonus entitlement.
g.
Any other method as may be approved by SEBI, on a case to case basis.
3.
In accordance with the decision of SEBI Board in its meeting held on October 06, 2012, SEBI initiated a
consultative process with the companies which were not meeting the MPS requirement to elicit a concrete
plan of action as regards ensuring compliance with MPS requirement.
4.
As per the shareholding pattern filed by listed companies with the stock exchanges (NSE and BSE), for the
quarter ended June 2012, there were 216 companies in which public shareholding was less than the MPS
requirement. Of these 216 companies, there were 200 non-PSUs and 16 PSUs. Out of these 16 PSUs, one
was a state PSU and the remaining 15 were central PSUs. Amongst the 200 non-PSUs, there were 163 active
companies and 37 companies were suspended. For some of the companies the due date of compliance
extends beyond June 03, 2013.
5.
Non-PSUs not meeting the MPS requirement were segregated into various regions viz. Mumbai, Kolkata,
Ahmedabad, New Delhi, Chennai, Bangalore and Hyderabad, based on the location of their registered
office. As part of the consultative process, since November 2012, SEBI engaged with all the active nonPSUs not meeting the MPS requirement. The need for timely compliance with MPS requirement as well
as the consequential penal actions that might result in case of non-compliance was impressed upon such
companies during the consultative process. Letters were also issued to then non-compliant non-PSUs in
April 2013 advising them to take appropriate steps, immediately, to ensure timely compliance.
6.
For PSUs not meeting MPS requirement, SEBI on several occasions engaged with the Government and the
PSUs, for considering appropriate steps to comply with the MPS requirement within the time as stipulated
in SCRR. As part of the consultative process, SEBI also held meetings with the officials of respective PSUs
to elicit plan of action for compliance. As a result, all the central PSUs achieved compliance with the MPS
requirement within the stipulated time, however, one state PSU did not.
7.
In this context, SEBI vide circular dated August 29, 2012 had prescribed that listed entities desirous of
achieving MPS requirement through other means may approach SEBI with their proposals. It was also
mentioned in the above circular that listed entities desirous of seeking any relaxation from the available
methods may approach SEBI with appropriate details. Accordingly, SEBI on receipt of proposals from
companies has, inter-alia, granted following kinds of approval :
a.
Allowing secondary market sale: SEBI has permitted companies for secondary market sale on the
floor of stock exchange for meeting MPS requirement with condition including that any such sale
will be made in a bonafide manner to unrelated non-promoter entity.
16
b.
Relaxation in the Institutional Placement Programme (IPP) requirements: SEBI has permitted
companies (a) to issue equity shares under IPP in excess of the permissible limits, (b) relaxation on
minimum number of allottees, subject to pricing restrictions as applicable to Qualified Institutions
Placement (QIP). Further, SEBI also permitted few companies for using limited reviewed
consolidated financial statements for the stub-period in the offer document of IPP.
c.
Relaxation in the OFS requirements: Relaxations from (a) the requirement of two week gap between
successive OFS offers, (b) the requirement of restriction on divestment through OFS route during the
twelve weeks cooling off period.
d.
Offer of shares to the employees of companies: Companies were allowed to offer shares to their
employees, subject to certain conditions.
8.
Along the aforesaid lines, SEBI has granted more than 70 approvals on case-to-case basis for various
proposals received from around 47 such companies, while keeping in mind throughout, inter-alia, the
need for ensuring transparency in the methods proposed by the entities. This has also led to rejection of
many proposals. To ensure transparency, the companies were also advised to disclose the contents of the
approval letter to the stock exchanges in accordance with clause 36 of the Listing Agreement.
9.
As a result of the aforesaid measures taken by SEBI, many companies made substantial efforts to achieve
compliance. In respect of the non-compliant companies, SEBI vide orders dated June 04, 2013, July 05, 2013
and October 14, 2013 issued interim directions against the promoters / promoter groups and directors
of 107 listed companies including the one state PSU which had not complied with MPS requirement as
prescribed under SCRR. The directions include the following:
10.
a.
Freezing of voting rights and corporate benefits like dividend, rights, bonus shares, split, etc. with
respect to excess of proportionate promoter / promoter group shareholding in the non-compliant
companies;
b.
Prohibiting the promoters / promoter groups and directors of these non-compliant companies from
buying, selling or otherwise dealing in securities of their respective companies;
c.
Restraining the shareholders forming part of the promoters / promoter groups and directors in the
non-compliant companies from holding any new position as a director in any listed company.
As on March 31, 2014, thirty-seven out of these 107 non-compliant companies have achieved compliance
with MPS requirement. In case of 8 companies, SEBI has granted extension to either complete delisting
process or achieve compliance in accordance with BIFR orders. The remaining 62 companies (of which 31
are suspended) are yet to achieve compliance and the directions in respect of them are in still in force.
I.
Activities of Advisory Committees
audit reports.
a.
Qualified Audit Review Committee
Seven meetings of QARC took place

during the financial year 2013-14 and
around 250 qualified audit report cases
were dealt with in these meetings. The
qualifications were examined in light of the
provisions contained in the SEBI circular
dated August 13, 2012 in this regard.
Accordingly, upon examination of the said
qualified audit reports by QARC and based
on its recommendations, following action
has been taken as on March 31, 2014:
SEBI during the financial year 201213 put in place a mechanism to process
qualified annual audit reports filed by the
listed companies with stock exchanges.
Under the mechanism, a Qualified Audit
Review Committee (QARC) comprising
representatives of ICAI and stock exchanges
has been constituted to review the cases
received from the stock exchanges and guide
SEBI in processing the qualified annual
17
Relevant paragraph
in SEBI circular dated
August 13, 2012
Action
No. of companies in respect of

which action is recommended by
QARC (No. of companies in respect
of which action is already taken)
5(d)(i)
If, prima facie, QARC is of the view that an audit

qualification is not significant, it may suggest
steps for rectification of such qualification;
47 (27)
5(d)(ii)
If, prima facie, QARC is of the view that an audit

qualification is significant and the explanation
given by the listed company concerned / its
Audit Committee is unsatisfactory, the case may
be referred to the Financial Reporting Review
Board of ICAI (ICAI-FRRB) for their opinion on
whether the qualification is justified or requires
restatement of the books of accounts of the listed
company;
65 (25)
5(d)(iii)
If an audit qualification is not quantifiable, QARC

may suggest rectification of the same within a
stipulated period.
138 (67)
Note: In the above table, a single company may be counted in more than one category, since a company may have more than one
qualification and QARC may have recommended different actions for different qualifications.
b.
c.
SEBI Committee on Disclosures and

Accounting Standards

(PMAC) has been constituted with the
objective of advising SEBI on:
Issues related to regulation and

development of primary market in India.
Matters required to be taken up for

changes in legal framework to introduce
simplification and transparency in systems
and procedures in the primary market.
SEBI Committee on Disclosures and

Accounting Standards (SCODA) comprises
of industry representatives, investor
association, government representatives,
ICAI, Merchant Bankers and other
stakeholders. The committee provides a
platform for interaction and deliberation
on the issues related to the continuous
disclosure and accounting related matters.
It acts as a platform for SEBI to place its
various policy proposals for deliberation.
During financial year 2013-14, the

committee met three times on April 25, 2013,
August 7, 2013 and November 27, 2013 under
the Chairmanship of Mr. Ishaat Hussain,
Director-Finance, Tata Sons Ltd. and gave
its valuable recommendations on various
policy issues related to the disclosures and
accounting related matters.
Matters relating to regulation of

intermediaries for ensuring investor
protection in the primary market.
PMAC is constituted of 18 members from

various market participants. The committee
is being chaired by Shri T.V. Mohandas Pai,
Chairman, M/s Manipal Global Education
Services Pvt. Ltd. The committee held 3
meetings in the last financial year to discuss
various proposals.
18
J.
SEBI Group on IFRS Exposure Drafts
SEBI Group on IFRS Exposure Drafts

comprises of industry representatives, ICAI,
auditors and other stakeholders. The Group
attempts to have greater engagement with the
International Accounting Standards Board
(IASB) in the standard-setting process and
to convey the concerns/issues of the Indian
corporate sector for consideration before
finalisation of the International Financial
Reporting Standards (IFRSs).
During Financial Year 2013-14, the

committee met six times on June 25, 2013,
August 19, 2013, October 15, 2013, December
30, 2013, January 10, 2014, February 3,
2014 under the Chairmanship of Mr. Y. H.
Malegam, Former Managing Partner, M/s
S.B. Billimoria & Co. and gave its valuable
comments on 9 Exposure Drafts which were
conveyed to IASB for consideration during
finalization of IFRSs.
Box 1.2: Powers conferred on SEBI vide the Securities Laws (Amendment)
Ordinance, 2014
The Securities Laws (Amendment) Ordinance, 2014 was promulgated by the President of India under Article
123 of the Constitution of India on March 28, 2014 for amending the Securities and Exchange Board of India Act,
1992, the Securities Contracts (Regulation) Act, 1956 and the Depositories Act, 1996. The salient features of the
said Ordinance are as under:
1.
Power to call for information.

The Ordinance empowers SEBI to call for information from any person and not just persons associated with
the securities markets, in relation to any investigation or inquiry by the SEBI in respect of any transaction
in securities.
2.
Power to call for or furnish information to other authorities.

The Ordinance empowers SEBI to obtain or furnish information to other regulators abroad who have similar
functions to those of SEBI in matters relating to prevention, detection, enforcement and investigation of
violations in respect of securities, subject to the stipulation that for the purpose of furnishing any information
to any authority outside India, a memorandum of understanding shall be signed between SEBI and the
overseas regulator with the prior approval of the Central Government.
3.
4.
Collective Investment Scheme (CIS).

a.
Deemed CIS:- As per the amended definition of CIS, any pooling of funds under any scheme or
arrangement, involving a corpus amount of one hundred crore rupees or more which is not registered
with SEBI or otherwise not specifically exempted, is deemed to be a CIS.
b.
Clarification in the definition of CIS:- The Ordinance enabled SEBI to deal with CIS which are made
or offered by any person.
c.
Power to define CIS in regulations:- SEBI has been empowered to define additional parameters by
regulations to bring in any activity within the ambit of CIS on a case to case basis if the said activity
is not regulated either as a CIS or by any other regulator or authority.
d.
Power to exempt CIS:- In view of insertion of the deeming provision, Central Government has been
empowered to exempt any scheme or arrangement, in consultation with SEBI, from the ambit CIS.
Explicit power to disgorge ill-gotten gains and power to credit disgorgement amount to Investor
Protection and Education Fund and utilization of the same.
19
SEBI has been explicitly empowered to disgorge ill-gotten gains and credit the same to the Investor Protection
and Education Fund and utilise the said monies in accordance with the regulations made in this behalf.
5.
Power to conduct search and seizure.

The Ordinance permits conduct of search and seizure with the authorization of Chairman, SEBI.
6.
Explicit powers for settlement.

The Ordinance expressly empowers SEBI to settle administrative and civil proceedings on such terms as
may be determined by SEBI in accordance with procedures specified in the regulations.
7.
Power of review of orders passed by adjudicating officers.

SEBI Board has now been empowered to suo moto review any order passed by the Adjudicating Officer and
impose a higher penalty in cases where it deems fit.
8.
Attachment and recovery.

SEBI has now been empowered to attach and sell movable, immovable property and attach bank accounts
of the defaulters, in pursuance of any order or direction passed by SEBI or to recover fees due to it or
recover penalties which are outstanding.
9.
Special Courts and deemed public prosecutors.

The Ordinance provides for constitution of Special Courts for prosecution of offences under securities laws.
The Ordinance further provides that councils engaged by SEBI in a trial before the special / sessions Court
shall be deemed to be public prosecutors for such prosecution proceedings.
II.
Secondary Securities Market
In order to facilitate capital raising by

small and medium enterprises including
start-up companies which are in their early
stages of growth and to provide for easier
exit options for informed investors like
angel investors, VCFs and PEs etc., from
such companies, it has been decided to
permit listing without an IPO and trading of
specified securities of small and medium
enterprises (SMEs) including start-up
companies on Institutional Trading Platform
(ITP) in SME Exchanges.
Secondary market witnessed volatility

amidst global and domestic factors, but
stock indices, Sensex and Nifty scaled new
heights in 2013-14 as robust FII inflows and
upbeat domestic market sentiment helped to
overcome concerns over slowing economic
growth and high inflation. Secondary
markets, which serve as a barometer of the
financial health of an Indian economy, entail
continuous technological advancements
accompanied by review of existing guidelines
so as to maintain a competitive edge.
Following were the major policy initiatives
taken by SEBI relating to the secondary
market during 2013-14:
A.
The legal framework for such listing

and trading of the specified securities on
the ITP was laid down vide SEBI (Listing
of Specified Securities on Institutional
Trading Platform) Regulations, 2013(ITP
Regulations) vide Gazette notification
No. LAD-NRO/GN/2013-14/27/6720 dated
October 08, 2013. The salient features of the
said amendments are listed below. (Box 1.3)
Listing of Specified Securities of

Small and Medium Enterprises on
the Institutional Trading Platform in
a SME Exchange without making an
Initial Public Offer
20
Box 1.3: Institutional Trading Platform

The Honble Finance Minister announced the following in his budget speech on February 29, 2013:
Small and Medium Enterprises (SMEs), including start-up companies, will be permitted to list on the SME exchange without
being required to make an initial public offer (IPO), but the participation will be restricted to informed investors. This will be in
addition to the existing SME platform in which listing can be done through an IPO and with wider investor participation.
Pursuant to the above, in consultation with Expert Committee constituting of representatives from various
stakeholders including, Ministry of Finance, Ministry of MSME, industry associations, stock exchanges, angel
investors, association of venture capital funds, brokers and trading members, merchant bankers, investor
associations, law firms and consultancy firms, SEBI introduced Institutional Trading Platform (ITP), enabling
start-ups and SMEs to list in SME platform without having to make an IPO.. This platform is in addition to the
SME platform to facilitate capital raising by SMEs including start-up companies which are in their early stages of
growth and to provide for easier exit options for informed investors like angel investors, VCFs and PEs etc.
Start-ups and SMEs can list their securities in ITP and the informed investors can find suitable companies to
invest in. The possible eligibility routes includes a minimum investment of `50 lakh in the equity of the company
by, either by registered venture capital funds, alternate investment funds, merchant banks, qualified institutional
buyers or specialized international multilateral agency or domestic agency like SIDBI, NABARD, or a PFI under
Sec 4A of Companies Act and other approved categories of investors/ lenders, project financing or working
capital financing from scheduled banks.
Companies seeking to list on this platform should not be older than 10 years or having revenues more than `100
crore or paid up capital more than `25 crore. The necessary enabling provisions have been incorporated to SEBI
(ICDR) Regulations, 2009 as Chapter XC and the same has been notified on October 8, 2013.
B.
Allowing Mutual Fund distributors to

use Stock Exchange Infrastructure for
Mutual fund distribution
To streamline the processes and

procedures with regard to actions for noncompliances of certain listing conditions
which have so far been considered as grounds
for suspension of trading by the recognised
stock exchanges, the stock exchanges have
been advised that in case of non compliant
companies they would resort to several other
measures such as imposition of fines, freezing
of shares of the promoter and promoter group,
transferring the trading in the shares of the
company to separate category, etc., before
suspending the shares of the company.
To enable the mutual fund distributors

to leverage the stock exchange platform so
as to improve their reach, SEBI, vide circular
dated October 04, 2013, allowed mutual
fund distributors to use the infrastructure
of recognised stock exchanges to purchase
and redeem mutual fund units directly from
mutual fund/assets management companies
on behalf of their clients. However, to address
the possible risk of default, the mutual fund
distributors are not allowed to handle payin and pay -out of funds as well as units on
behalf of investor.
C.
In order to maintain consistency and

uniformity of approach in this regard, it
has been decided to lay down, in the byelaws of the recognised stock exchanges, the
following:
Amendment
to
Bye-Laws
of
Recognised Stock Exchanges with
Respect to Non-Compliance of Certain
Listing Conditions and adopting
Standard
Operating
Procedure
for Suspension and Revocation of
Trading of Shares of Listed Entities
for such Non Compliances
21
a.
Uniform fine structure for noncompliance of certain clauses of the

listing agreement
b.
Standard Operating Procedure (SOP)

for suspension and revocation of
suspension of trading in the shares of
shares of non-compliant entity

will be available on the Trade for
Trade basis, on the first trading
day of every week for 6 months.
such listed entities. The salient features

of the circular are as follows:
i.
Imposition of fines (on per day

basis) on the company for noncompliance and delay in compliance
with continuous listing conditions
such as submission of shareholding
pattern, financial results, corporate
governance report, etc.
ii.
In case of non-compliance for two

consecutive quarters, moving the
shares of non-compliant company
to Z Category, where the trades
would settle on Trade for Trade
basis.
iii.
In case non-compliance continues,

freezing the shares of the promoter
and promoter group. This would be
carried out before suspension of the
trading of shares of the company.
iv.
In order to provide exit window

for the non-promoters, after 15
days of suspension, trading in the
D.
Exchange
Traded
Cash
Settled
Interest Rate Futures (IRF) on 10-year
Government of India Security
SEBI vide circular no. SEBI/DNPD/Cir46/2009 dated August 28, 2009 permitted
stock exchanges to launch physically settled
futures on 10-Year Government of India
(GoI) Security. In consultation with RBI,
after taking into account feedback from
market participants and stock exchanges,
SEBI decided to permit stock exchanges to
introduce cash settled Interest Rate Futures
on 10-Year Government of India Security.
A detailed framework in this regard was
prescribed by SEBI vide its circular dated
December 05, 2013. The cash settled 10-year
IRF is being introduced on a pilot basis and
the product features would be reviewed
based on the experience gained. (Box 1.4)
Box 1.4: Exchange Traded Cash Settled Interest Rate Futures (IRF) on 10-year
Government of India Security
As Interest Rate Futures (IRFs) have become a fundamental risk management tool for financial markets worldwide,
after consultation with RBI and taking into account feedback from market participants, SEBI, vide circular no.
CIR/MRD/DRMNP/35/2013 dated December 5, 2013 permitted stock exchanges to introduce cash settled IRFs on
10-year GoI security.
Exchanges have been permitted to launch IRF contracts on either one or both of the options - Option A: Coupon
bearing Government of India security as underlying and Option B: Coupon bearing notional 10-year Government
of India security with settlement price based on basket of securities as underlying.
For every IRF contract, stock exchanges shall set an initial price band at three percent of the previous closing price.
However, whenever a trade in any contract is executed at the highest/lowest price of the band, stock exchanges
may expand the price band for that contract by 0.5 percent in that direction after 30 minutes after taking into
account market trend. No more than two expansions in the price band shall be allowed within a day.
Further, Clearing Corporations shall determine appropriate risk management framework for the product and
submit the same to SEBI for approval. The initial margin requirement shall be based on a worst case loss of a
portfolio of an individual client across various scenarios of price changes which would be so computed so as to
cover a 99 percent VaR over a one day horizon. Margins shall be deducted from the liquid assets of the clearing
member on an online, real time basis.
Subsequent to the above, three exchanges have launched IRFs. MCX-SX was the first exchange to launch IRFs
on January 20, 2014 followed by NSE on January 21, 2014 and BSE on January 28, 2014. Further, SEBI has also
prescribed the position limits in Exchange Traded IRFs at various member levels, including for FIIs.
22
SEBI vide circulars dated April 1, 2013 and July 18, 2012 had already put in place mechanism for monitoring and
enforcing limits of FIIs in Government Securities and corporate bonds by directing depositories to disseminate
information regarding the total FII investment values in Government and corporate bonds. Further, in consultation
with RBI, SEBI vide Circular no: CIR/MRD/DRMNP/2/2014 dated January 20, 2014 directed that this monitoring
mechanism shall also incorporate monitoring of gross long positions of FIIs in IRF.
As per the monitoring mechanism, as and when the total of cash and IRF of all FIIs reaches 85 percent of the
permissible limit, NSDL and CDSL shall inform RBI, SEBI and stock exchanges. Once 90 percent of limit is utilized,
NSDL and CDSL shall inform RBI, SEBI and stock exchanges about the same. Stock exchanges shall notify the
same to the market and thereafter FIIs shall not further increase their long position in IRF till the time the overall
long position of FIIs in cash and IRF comes below 85 percent of existing permissible limit.
E.
Introduction of Derivatives on
India VIX
conducted to facilitate the review of inprinciple approval.
SEBI has permitted introduction of

derivatives on India VIX to National Stock
Exchange (NSE) in January 2014. India VIX
is Indias first volatility Index which is a
key measure of market expectations of nearterm volatility. In India, VIX was launched
in April, 2008 by NSE based on the Nifty 50
Index Option prices. NSE launched futures
contracts on India VIX called NVIX on
February 26, 2014. National Securities
Clearing Corporation Limited (NSCCL) has
put in place the necessary risk management
measures such as collection of initial margins,
exposure margins and calendar spread
margins. The methodology of calculating the
VIX index is same as that for Chicago Board
Options Exchange (CBOE) VIX index.
F.
G.
Review
of
investor
grievance
mechanism and the arbitration
mechanism at the stock exchanges
With a view to streamline the investor

grievance mechanism and the arbitration
mechanism at the stock exchanges, SEBI, vide
circulars dated July 5, 2013 and September 26,
2013, has provided for the following measures:a.
Widened Jurisdiction for appealing

before the Courts
Stock exchanges with nation-wide

terminals have been mandated to provide
arbitration and appellate arbitration facilities
at all centres specified by SEBI from time to
time. Further, in cases where investors wish
to proceed to Court u/s 34 of Arbitration and
Conciliation Act, they have been facilitated
to apply at the Competent Court nearest to
their address.
Amendment to Securities Contracts

(Regulation) (Stock Exchanges and
Clearing Corporations) Regulations,
2012
b.
Selection of Arbitrators
Stock exchanges with nation-wide

trading terminals have been advised to
maintain a common pool of arbitrators,
centre-wise. If the client and member fail to
choose the arbitrator(s) from the common
pool, the arbitrator(s) are chosen by an
Automatic Process wherein neither the
parties to arbitration nor the concerned stock
exchanges are directly involved.
Securities Contracts (Regulation) (Stock

Exchanges and Clearing Corporations)
Regulations, 2012 was amended to accord
greater legal certainty to netting, settlement
finality and rights of Clearing Corporations
(CCs) over collaterals in the securities markets.
SEBI granted in-principle recognition to
three CCs - ICCL, MCX-SX CCL and NSCCL
till April 03, 2014. Inspection of CCs was
23
c.
Increase in numbers of investor

service centres facilitating arbitration
from time to time. These facilitation desks

are meant to assist investors in obtaining
documents/details from stock exchanges
wherever so required for making application
to IGRC and filing arbitration.
In respect of stock exchanges with

nation-wide trading terminals, the number of
investor service centres facilitating arbitration
was increased from 8 to 16. Thus, in addition
to the centres at Delhi, Mumbai, Kolkata,
Chennai, Ahmedabad, Hyderabad, Kanpur
and Indore, stock exchanges were advised
to further set up centres at Bangalore, Pune,
Jaipur, Ghaziabad, Lucknow, Gurgaon,
Patna and Vadodara. These centres are to
be set up by the stock exchanges by June 30,
2014. The above measure is with an objective
to reduce the travel expenditure and other
incidental costs to investors while availing
these facilities.
d.
e.
Decrease in fee for appellate arbitration
With a view to unburden investors from

the cost of arbitration mechanism, the fee for
clients filing appeal with claim/counterclaim
value of upto `10 lakh was reduced to `10,000
from `30,000. Further, expenses thus arising
are shared by the stock exchanges and the
Investor Protection Fund of stock exchanges.
f.
Timeline for grievance redressal
With a view to ensure time-bound

redressal of investor grievances, stock
exchanges were advised to resolve all
complaints at their end within 15 days.
Further, the maximum permissible time for
the Investor Grievance Redressal Committee
(IGRC) to amicably resolve all the complaints
was specified as 15 days.
Facilitation desks at all investor service

centres
With a view to assist investors engaged

in dispute resolution process, stock exchanges
were advised to set up facilitation desks at all
investor service centres as specified by SEBI
Box 1.5: Interim Monetary relief from Investor Protection Fund (IPF) for investors
In order to streamline the grievance redressal at the stock exchanges and make it more effective from the angle
of investor protection, stock exchanges have been advised to give interim monetary relief to investors with claim
value upto `10 lakh, during the course of proceedings from the IPF. For this purpose, the following stage-wise
procedure has been specified:a.
Upon conclusion of case at the Investor Grievance Redressal Committee (IGRC), if claim is admissible to
investor, stock exchanges have to block the claim value from members deposit. Stock exchange provides
seven days time to member to inform whether he intends to pursue the next level of resolution i.e.
arbitration. Stock exchange releases the same after seven days, if member does not opt for arbitration.
b.
If member challenges IGRC decision and claim value is less than `10 lakh, lower of 50 percent of claim
value or `0.75 lakh to be released to investor from IPF.
c.
If arbitration award is in favour of investor and member opts for appeal, difference of (lower of 50 percent
of the amount mentioned in award or `1.5 lakh) and (amount released to investor) to be released to investor
from IPF.
d.
If appellate award is in favour of investor and member applies to a Court to set aside the same, difference
of (lower of 75 percent of amount determined in appellate award or `2 lakh) and (amount already released
to the investor), shall be released to investor from IPF.
e.
Total amount released to investor out of IPF capped at `5 lakh per financial year.
f.
If investor loses at any stage of proceedings and decides not to pursue further, he shall refund monies to
IPF.
24
H.
Algorithmic Trading
CISSP. Stock exchanges were advised to

consider imposing suitable penalties in
case of failure of the stock broker to take
satisfactory corrective action to its system
within the specified time-period. Further,
in order to provide sufficient deterrence,
stock exchanges were directed to double
the existing rates of disincentives for high
order-to-trade ratio (Box 1.6).
In order to ensure that the requirements

prescribed by SEBI / stock exchanges with
regard to algorithmic trading are effectively
implemented, stock brokers were directed
to subject their algorithmic trading system
to a system audit every six months, instead
of annually, by a system auditor possessing
certifications like CISA, DISA, CISM,
Box 1.6 : International Research Conference on HFT, Algo and Co-location

The rise of High frequency trading (HFT) has raised concerns with regard to its impact on market quality, financial
stability, information asymmetry and regulatory framework. There is a divide in pool of thoughts over positive
impact of HFT (increased market liquidity, market depth and decreasing bid-ask spread) and associated risks
(high message traffic, technology failure, extreme events, rogue algorithms). Because of its relative novelty and
the uncertainty related to many of the trading strategies being used today, the debate over high frequency trading
is of contemporary relevance.
Therefore, SEBI organised its First International Research Conference during January 27-28, 2014 in Mumbai.
The theme of the Conference was HFT, Algo Trading and Co-location. SEBI invited academicians/market
practitioners/regulators, having experience in the field, from countries such as USA, Spain, Australia, Canada,
Japan, India etc. Chairman, SEBI Shri U. K. Sinha delivered his keynote speech and set the ball rolling for the
next one and a half days of the conference. He stated that the primary aim of the conference would be to initiate a
deeper study and to develop mechanisms to ensure that larger systems are alert and enough safeguards are built
in to avoid any mishaps.
In the conference, the participants discussed issues related to impact of HFT on Market Quality, Financial Stability,
Information asymmetry and retail investors, HFT in developing countries, regulatory mechanism and technology
as an enabler to re-level the field. Research papers were presented by the speakers sharing their studies and
experiences in the international markets as well as lessons to be learnt by India.
Arguments in favour of HFT:
In United States, a CFTC-SEC report concludes that HFTs did not cause the Flash Crash on May 6, 2010. In
times of Market stress, HFTs trade the same as under regular market conditions, HFTs hot potato trading
leads to a spike in trading volume and HFTs exacerbate volatility by aggressively unwinding inventory.
HFTs behaviour does not change in times of stress. In times of stress, aggressive and passive HFTs trade
almost opposite to each other.
A study of NASDAQ 120 stocks calculated in the month of March from 2005 to 2011 indicates that although
increased computer automation of trading and increased speed may have improved some of the traditional
measures of market quality (narrower bid-ask spreads, reduction in volatility), it is not clear whether these
improvements have improved market quality in a more general sense.
In an ASIC study on Australian markets, HFT does not appear to be a key driver for changes seen in the price
formation, liquidity and the execution costs and they display negligible change in their contribution to
depth in the ASX-200.
In Japanese market, HFT contributes to (a) providing liquidity and (b) restraining volatility.
Emerging markets such as Brazil, Russia, India, South Africa, Malaysia, etc., have all experienced significant
bumps in volume, largely due to HFT and other forms of Algorithmic Trading (AT). Overreaching
regulatory attempts in developed markets may drive even more traders to move to less regulated markets
viz. emerging markets.
25
In India, a study based on a sample of NSE data from 2009 to 2013 finds out that stocks having larger market
capitalization moved immediately towards high Algorithmic Trading. Among the stocks having lower
market capitalization, there is significant variation and Algorithmic Trading is good for market quality but
depth visible at the touch, goes down.
Arguments against HFT:
There are apprehensions about Algorithmic Trading relating to increase in the cost of infrastructure for
stock exchanges, increase in the risk to the exchanges and clearing corporations, unfairness to manual/retail
traders etc.
At present, exchanges need to ensure that they have sufficient infrastructure to process orders and penalize
high order-to-trade ratios. Such artificial restriction on high Order to Trade Ratio (OTRs) helps exchanges to
enhance its trade execution speed and reduce its computer technology related costs, as storage requirements
are minimized, which is a short term solution that may hurt the liquidity and spreads in the long term.
Issues to address while going forward
Rogue Algorithm - Dysfunctional/Rogue algorithms could be a consequence of poor programming, flawed

modeling or incomplete planning. Regulation needs to mitigate risk emanating from the same.
Mini flash crashes - There have been multiple instances, e.g., stock market falling by 80 points due to
incorrect public information, a company dropping 5 per cent in recovering seconds. Has the frequency of
such events increased?
Preventing Market Manipulation - Exploring systems that restrict data feeds enough to prevent frontrunning, but enables quick and efficient response to value-relevant information.
Financial Innovation- HFT has differential access and profit implications to different type of investors.
Regulation should ensure that such an innovation should not lead to the detriment and exclusion of longerterm investors from the markets.
Balancing Act - Currently, we are confronted with abstruse problems between economic rationality view
and social welfare view. Since these problems are not easy to solve, we should make constant efforts to
seek appropriate balance between economic rationality and social welfare through the better combination
of cutting-edge technology and existing market framework.
Key Action Points
Systems-Engineered: Regulate automated markets as complex systems composed of software, hardware,

and human personnel; promote best practices in systems design and complexity management.
Safeguards-Heavy: Make risk safeguards consistent with the machine-readable communication protocols
and operational speeds.
Transparency-Rich: Mandate that versions and modifications of the source code that implement each rule
are made available to the regulators and potentially the public.
Cyber-centric: Change regulatory surveillance and enforcement practices to be more cyber-centric rather
than human-centric.
Platform- Neutral: Make regulations neutral with respect to computing technologies.
I.
Principles
of
Financial
Infrastructures (PFMIs)
Market
by SEBI and were directed to comply

with the principles of financial market
infrastructures specified by CPSS-IOSCO
as applicable to them. (Box 1.7)
SEBI adopted Principles of Financial

Market Infrastructures for Depositories
and Clearing Corporations regulated
26
Box 1.7: Principles of Financial Market Infrastructures (PFMIs)

To promote and sustain an efficient and robust global financial infrastructure, the Committee on Payments and
Settlement Systems (CPSS) and the International Organization of Securities Commissions (IOSCO) published
the Principles for Financial Market Infrastructures (PFMIs) on April 2012. All CPSS and IOSCO members are
required to strive to adopt the PFMIs and implement them in their respective jurisdictions. SEBI as a member
of IOSCO is committed to the adoption and implementation of the new CPSS-IOSCO standards of PFMIs in its
regulatory functions of oversight, supervision and governance of the key financial market infrastructures under
its purview.
Accordingly, SEBI vide circular no. CIR/MRD/DRMNP/26/2013 dated September 4, 2013 mandated the systemically
important Clearing Corporations - Indian Clearing Corporation Ltd., MCX-SX Clearing Corporation Ltd. and
National Securities Clearing Corporation Ltd. and Depositories - Central Depository Services Ltd. and National
Securities Depository Ltd., to comply with the PFMIs prescribed by CPSS and IOSCO.
The foundation of an FMIs risk management framework includes its authority, structure, rights, and responsibilities.
The following 24 set of principles provides guidance to help establish a strong foundation for the risk management
of an FMI.
General Organization
Principle 1: Legal basis
An FMI should have a well-founded, clear, transparent, and enforceable legal basis for each material aspect of its
activities in all relevant jurisdictions.
Principle 2: Governance
An FMI should have governance arrangements that are clear and transparent, promote the safety and efficiency
of the FMI, and support the stability of the broader financial system, other relevant public interest considerations,
and the objectives of relevant stakeholders.
Principle 3: Framework for the comprehensive management of risks
An FMI should have a sound risk-management framework for comprehensively managing legal, credit, liquidity,
operational, and other risks.
Credit and liquidity risk management
Principle 4: Credit risk
An FMI should effectively measure, monitor, and manage its credit exposures to participants and those arising
from its payment, clearing, and settlement processes. An FMI should maintain sufficient financial resources to
cover its credit exposure to each participant fully with a high degree of confidence. In addition, a CCP that is
involved in activities with a more-complex risk profile or that is systemically important in multiple jurisdictions
should maintain additional financial resources sufficient to cover a wide range of potential stress scenarios.
Principle 5: Collateral
An FMI that requires collateral to manage its or its participants credit exposure should accept collateral with low
credit, liquidity, and market risks. An FMI should also set and enforce appropriately conservative haircuts and
concentration limits.
Principle 6: Margin
A CCP should cover its credit exposures to its participants for all products through an effective margin system
that is risk-based and regularly reviewed.
Principle 7: Liquidity risk
An FMI should effectively measure, monitor, and manage its liquidity risk. An FMI should maintain sufficient liquid
resources in all relevant currencies to effect same-day and, where appropriate, intraday and multiday settlement of
payment obligations with a high degree of confidence under a wide range of potential stress scenarios.
Settlement
Principle 8: Settlement finality
An FMI should provide clear and certain final settlement, at a minimum by the end of the value date. Where
necessary or preferable, an FMI should provide final settlement intraday or in real time.
27
Principle 9: Money settlements

An FMI should conduct its money settlements in central bank money where practical and available. If central
bank money is not used, an FMI should minimize and strictly control the credit and liquidity risk arising from
the use of commercial bank money.
Principle 10: Physical deliveries
An FMI should clearly state its obligations with respect to the delivery of physical instruments or commodities
and should identify, monitor, and manage the risks associated with such physical deliveries.
Central securities depositories and exchange-of-value settlement systems
Principle 11: Central securities depositories
A CSD should have appropriate rules and procedures to help ensure the integrity of securities issues and minimize
and manage the risks associated with the safekeeping and transfer of securities. A CSD should maintain securities
in an immobilized or dematerialized form for their transfer by book entry.
Principle 12: Exchange-of-value settlement systems
If an FMI settles transactions that involve the settlement of two linked obligations (for example, securities or
foreign exchange transactions), it should eliminate principal risk by conditioning the final settlement of one
obligation upon the final settlement of the other.
Principle 13: Participant-default rules and procedures
An FMI should have effective and clearly defined rules and procedures to manage a participant default. These
rules and procedures should be designed to ensure that the FMI can take timely action to contain losses and
liquidity pressures and continue to meet its obligations.
Principle 14: Segregation and portability
A CCP should have rules and procedures that enable the segregation and portability of positions of a participants
customers and the collateral provided to the CCP with respect to those positions.
General business and operational risk management
Principle 15: General business risk
An FMI should identify, monitor, and manage its general business risk and hold sufficient liquid net assets
funded by equity to cover potential general business losses so that it can continue operations and services as a
going concern if those losses materialize. Further, liquid net assets should at all times be sufficient to ensure a
recovery or orderly wind-down of critical operations and services.
Principle 16: Custody and investment risks
An FMI should safeguard its own and its participants assets and minimize the risk of loss on and delay in access
to these assets. An FMIs investments should be in instruments with minimal credit, market, and liquidity risks.
Principle 17: Operational risk
An FMI should identify the plausible sources of operational risk, both internal and external, and mitigate their
impact through the use of appropriate systems, policies, procedures, and controls. Systems should be designed to
ensure a high degree of security and operational reliability and should have adequate, scalable capacity. Business
continuity management should aim for timely recovery of operations and fulfillment of the FMIs obligations,
including in the event of a wide-scale or major disruption.
Access
Principle 18: Access and participation requirements
An FMI should have objective, risk-based, and publicly disclosed criteria for participation, which permit fair and
open access.
Principle 19: Tiered participation arrangements
An FMI should identify, monitor, and manage the material risks to the FMI arising from tiered participation
arrangements.
Principle 20: FMI links
An FMI that establishes a link with one or more FMIs should identify, monitor, and manage link-related risks.
28
Efficiency
Principle 21: Efficiency and effectiveness
An FMI should be efficient and effective in meeting the requirements of its participants and the markets it
serves.
Principle 22: Communication procedures and standards
An FMI should use, or at a minimum accommodate, relevant internationally accepted communication procedures
and standards in order to facilitate efficient payment, clearing, settlement, and recording.
Transparency
Principle 23: Disclosure of rules, key procedures, and market data
An FMI should have clear and comprehensive rules and procedures and should provide sufficient information
to enable participants to have an accurate understanding of the risks, fees, and other material costs they incur by
participating in the FMI. All relevant rules and key procedures should be publicly disclosed.
Principle 24: Disclosure of market data by trade repositories
A TR should provide timely and accurate data to relevant authorities and the public in line with their respective
needs.
Further, on January 3, 2014, SEBI granted Qualified Central Counterparty status to NSCCL, ICCL and MCX-SX
CL.
J.
Testing of software used in or related

to trading and risk management
Software/system change is a constant

feature in the technology driven securities
market. Such changes are driven by a
combination of market forces, including
the growth of exchanges, the drive for c
ompetitive
advantage,
new
trading
instruments and new compliance and
regulation
requirements.
Technology
mishaps that have recently occurred in
various capital markets across the globe
have underscored the importance of testing
of software before deployment in production
environment. With the view to streamline
and strengthen the process of testing of
software, the following policy decisions were
recently taken by SEBI:
a.
The process of testing would involve (a)

Testing in a simulated test environment
provided by the stock exchange, (b)
Mock testing in close-to-real trading
environment (c) User Acceptance Test
(UAT) by the stock broker and (d)
Submission of System Audit Report to
the stock exchange.
29
b.
Stock exchange would grant approval

to software after ensuring that the
requirements specified by SEBI / stock
exchange with regard to software are
met. A speedy approval process may be
prescribed for certain cases such as the
software which has already been tested
in mock environment, changes which
are due to change in stock exchange
trading system, etc.
c.
Stock exchanges were asked to

implement suitable mechanisms to
ensure that no software is used by stock
broker without requisite approval.
d.
In order to facilitate sufficient liquidity

for the stock brokers who are testing
their systems in the mock session, all
stock brokers that undertake algorithmic
trading were advised to participate in
the mock trading sessions, irrespective
of the algorithm having undergone
change or not.
e.
Stock brokers are required to give an

undertaking to the stock exchanges
that every new software and any
change thereupon to the trading and/
appropriate training with regard to

software usage and maintenance.
or risk management functionalities of

the software will be tested as per the
framework prescribed by SEBI/stock
exchange before deployment of such
new / modified software in securities
market.
f.
K.
With the view to inculcate high

standards
of
technology
risk
management among stock brokers,
stock exchanges were advised to
apply deterrent penalties in form
of fines and suspension to the stock
broker whose system malfunctioned.
Safeguards to avoid trading disruption
in case of failure of software vendor
L.
In view of the risk caused by the inability

on the part of software vendors to provide
software or related services in timely and
continuous manner, it was suggested that
stock exchanges may advise the stock brokers
to consider taking the following measures:
a.
b.
c.
In case of large stock brokers, consider

reducing dependence on a single
software vendor for trading and risk
management systems, by engaging
more than one software vendor
Consider inclusion of the following
clauses in contracts with software
vendors:
ii.
Appropriate penalty clauses for

cases of disruptions to the trading
system of the stock broker on
account of (a) software vendor
failing to provide continuous and
timely services to the stock broker
or (b) glitches to the software
provided by the software vendor.
iv.
Obligation on the part of the

software vendor to cooperate in
case of audit of software including
forensic audit, if required.
Review of the Securities Lending and

Borrowing (SLB) framework
In order to extend the benefits of SLB, the

eligibility criteria of the scrips for introduction
of SLB contracts was expanded to include such
scrips that fulfill the following criteria:
Explore the possibility of establishing

a software escrow arrangement with
their existing software vendors.
i.
iii.
a.
Scrip classified as Group I security,

and
b.
Market Wide Position Limit (MWPL)

of the scrip, shall not be less than `100
crore, and
c.
Average monthly trading turnover in

the scrip in the cash market shall not be
less than `100 crore in the previous six
months.
Stock exchanges were advised to review the

scrips eligible for SLB on a half-yearly basis
and no SLB transactions in the scrip would
be permitted from the next trading day in the
event of scrip failing to meet the eligibility
criteria.
Access to documents related

to design and development
specifications in the event software
vendor fails to provide continuous
and timely services to the stock
broker
Further, in order to facilitate efficient use

of margin collateral, the category of eligible
collateral to meet margin obligations for SLB
transactions was brought at par with the cash
market.
Development of expertise at the

end of the stock broker through
30
M.
Index based market-wide

breaker mechanism
circuit
day. This process has rationalised the number

of scrips that are trading in the periodic call
auction mechanism in the stock exchanges.
The mechanism of translating the 10

percent, 15 percent and 20 percent circuit
breaker limits to absolute points of variation
of market-wide index at the end of each
quarter was reviewed and modified to a daily
fixing of limits based on the previous days
closing level of the index. In addition, it was
advised to resume trading in the cash market
with a fifteen minutes pre-open call auction
session after observing the trading halt.
N.
Q.
With an objective to safeguard the

interest of the investors, it was decided to
strengthen the supervisory and monitoring
role of the depositories and their participants
with respect to issuance and processing of
Delivery Instruction Slips (DIS) and following
major actions were taken:
Individual scrip wise price bands on

non-F&O eligible scrips in Index
Derivatives
a.
Amendment
in
comprehensive
guidelines on Offer For Sale (OFS) of
Shares by Promoters through the Stock
Exchange Mechanism
b.
Rationalization of Periodic
Auction for Illiquid Scrips
Monitoring of DIS
Entry of serial number of DIS in the

depository system for validation was made
mandatory for execution of DIS. This was done
to ensure no instructions accompanied by a
used DIS or unissued DIS are processed.
In order to align OFS with secondary

market trades, it was decided that seller(s) shall
announce the intention of sale of shares at least
on the day prior to the offer for sale, instead of
one clearing day prior to the offer for sale.
P.
Standardization of DIS
Format and size of DIS were standardized

across all DPs to enable system level checks by
the depositories and to facilitate scanning and
easy retrievability of records. It was mandated
that the DIS should bear a pre-printed unique
serial number, DP ID, and a pre-printed/prestamped Beneficial Owner (BO) ID. Usage
of same DIS for giving both market and offmarket instructions was disallowed.
In order to protect against excessive

price movements in scrips on which no
derivatives products are available but which
are part of index derivatives, stock exchanges
were directed to implement appropriate
individual scrip wise price bands up to 20
percent on such scrips.
O.
Issuance and Processing of Delivery

Instruction Slips (DIS)
c.
Scanning of DIS
Scanning of every DIS executed during

a day was made mandatory so that archived
scanned images may be used by depositories
for off site inspection.
Call
Based on the feedback received from

market participants, the periodic call auction
mechanism for illiquid scrips was rationalized
by modifying the criteria for scrips eligible
for periodic call auction mechanism, number
of auction sessions, order placement and
validity of orders throughout the trading
R.
Systems Audit for Stock Brokers
SEBI, vide circular dated November 6,

2013, has specified the guidelines for systems
audit of stock brokers outlining the System
audit process, auditor selection norms and
terms of reference for the same.
31
S.
Information
Technology
Governance for Depositories
(IT)
not a bank, the gross open position limit

across all contracts was capped at 15
percent of the total open interest or 50
million USD whichever is lower.
Based on the recommendations of

Depository System Review Committee
(DSRC), SEBI vide circular dated January
21, 2014 has specified the guidelines to
strengthen the Information Technology
(IT) governance framework of depositories.
Depositories were advised to formulate IT
Strategy and Steering Committees, formulate
IT Strategy document and IT Security policy
as well as create an Office of Information
Security and designate a senior official as
Chief Information Security Officer (CISO).
T.
V.
SEBI vide circular CIR/MRD/DP/03/2013

dated January 24, 2013 and circular CIR/
MRD/DP/27/2013 dated September 12, 2013
prescribed guidelines for providing dedicated
debt segment on stock exchanges. Subsequent
to introduction of debt segment on stock
exchanges, appropriate risk management
framework was implemented for settlement
on DVP-3 basis. It was decided that the trades
settled on DVP-3 basis in debt segment shall
have settlement cycle of T+1. In case of trades
settled on DVP-1 basis, stock exchanges were
given the flexibility to settle trades on T+0
or T+1. Risk management guidelines were
framed by providing details for SGF, initial
margin and extreme loss margin. It was also
advised that the reporting platform made
available by stock exchanges shall be merged
with the negotiated window or facility for
RFQ or other such similar facility provided
by debt segment of exchanges for enabling
reporting of OTC trades or facilitating OTC
trades. This platform shall be available for
reporting of trades by both members and
non-members. Further, SEBI vide Circular
CIR/MRD/DRMNP/37/2013 dated December
19, 2013 prescribed the deposit requirements
for the members of the debt segment viz.: a)
stock broker / proprietary trading member b)
clearing member / self clearing member.
Guidelines for Inspection of Depository

Participants (DPs) by Depositories
SEBI vide circular dated February 07,

2014 has specified the broad guidelines
for inspection of DPs by depositories,
highlighting the inspection areas, sample
size , categorization of DPs and a risk model
for determining frequency of Inspections.
U.
Revised Position Limits for Exchange

Traded Currency Derivatives
In view of extreme volatility in USD-INR

exchange rates, margins requirements and
position limits in exchange traded currency
derivatives were modified in consultation
with RBI as under:
a.
Margins: Initial and extreme loss

margins was increased by 100 percent
of the prevailing market rates for USDINR contracts in currency derivative.
b.
Client level position limits: The gross

open position of a client across all
contracts was capped at 6 percent of the
total open interest or 10 million USD,
whichever is lower.
c.
Dedicated Debt Segment in Stock

Exchanges
W.
Reporting of OTC trades in Corporate

Bonds on Trade Reporting Platforms
of stock Exchanges
Earlier OTC trades in Corporate

Bonds and Securitized Debt instruments
Non-bank Trading Member position

limits: For the trading member who is
32
were reported on platform of BSE, NSE

and FIMMDA. It has been decided that
with effect from April 1, 2014, all OTC
trades in corporate bonds and securitized
debt instruments shall be reported on any
of the reporting platform provided in the
debt segment of stock exchanges viz., NSE,
BSE and MCX-SX within 15 minutes of the
trade.
X.
Activities of Advisory Committees
a.
Secondary
Committee
Marker
Secondary Marker Advisory Committee

(SMAC) is chaired by Prof. Jayanth R. Varma
Professor, IIM Ahmedabad. SMAC has been
constituted to advice SEBI on following
issues:
To review the
secondary market;
developments
To recommend measures for changes

and improvements in market structure
in view of the impending changes;
To recommend measures for improving

market safety, efficiency, transparency
and integrity;
in
To suggest measures for reducing

transaction costs;
To recommend changes if required in

the risk management / margin system;
To recommend changes if required in

the regulatory framework in secondary
market;
To take note of any new development

which may have taken place in the
secondary
market
between
two
consecutive meetings of the Committee
and suggest measures;
Any other matter that Committee

considers relevant or incidental thereto.
b.
Depository Systems Review Committee
The
Depository
System
Review
Committee (DSRC) was constituted on June
25, 2012 under the Chairmanship of Mr.
M. Balachandran (former CMD of Bank of
India) with Prof H. Krishnamurthy (IISc
Bangalore), Mr. R.S. Loona (Ex ED SEBI)
and, Prof Vikram Kuriyan (ISB) as members
to undertake a comprehensive review of the
Indian Depository System and to benchmark
against global best practices. The committee
was set up with the following terms of
reference:
Advisory
To review the investor protection

measures in the stock exchanges and
suggest improvements;
Overall
assessment/adequacy
of
existing depository framework and
identification of areas for review.
Assessment of depository system on

the basis of relevant CPSS-IOSCO
principles, recommendations of CESRECB pertaining to Central Securities
Depositories (CSDs) so as to benchmark
with the global best practices.
Identification of areas for continuous

improvement of systems, procedures
and practices and make recommendations
thereof.
Identification of systemically important

market
infrastructure
providers/
institutions/ depository participants
and their inter-linkages and identify
areas and suggest safeguards to prevent
single point failures and denial of
depository service.
Review of existing system of inspection

by depositories and suggest changes
to strengthen monitoring/oversight of
depository participants.
Based on the recommendations of the

committee, SEBI has issued various guidelines
33
during the last financial year. These pertained

to IT Governance of depositories and
inspection of depository participants (DPs)
by the depositories which emphasised on risk
based inspection including risk rating of DPs.
Also guidelines were issued mandating greater
control measures on Delivery Instruction Slip
(DIS) processing and their issuance which
also included standardisation of DIS and their
scanning to enable off-site inspection.
comprises of academicians, representatives

from
the
stock
exchanges/clearing
corporations and market participants.
c.
Technological advances in the securities

market has necessitated setting up of a forum
for discussing technical issues related to
securities market. In view of this, Technical
Advisory Committee (TAC) has been set up
as an advisory committee of SEBI in order
to take informed decisions in areas that
may have a bearing on the functioning of
the securities market, as far as technology is
concerned.
The committee is also tasked with the

mandate to review the investor protection
measure in the stock exchanges as well
as recommend measures in reducing
transmission of risk between segments.
e.
Committee on Clearing Corporations
SEBI has set up a Committee on

Clearing Corporations with Shri K V Kamath
as Chairman of the Committee to examine
several issues with respect to administration
of clearing corporations including exploring
the viability of introducing a single clearing
corporation (CC) or interoperability between
different CCs. The committee comprises
of academicians and industry experts.
The Committee on Clearing Corporations
has discussed various issues pertaining
to
interoperability
between
clearing
corporations.
The members of TAC comprise of

academicians from technology field and also
have representatives from the Exchanges
and Depositories. Some of the areas where
the expertise of the Committee has been
employed relate to securities trading using
wireless technology, Disaster Recovery Plan
and Business Continuity Plan, Algorithmic
Trading, Application programming Interface
(API), Co-location facility offered by the
Exchanges, Testing of software used in or
related to trading and risk management,
Safeguards to avoid trading disruption in
case of failure of software vendors, etc.
The committee is also tasked with

the mandate to deliberate and recommend
measures related to investment policy of the
recognized CC and the manner of utilisation
of profits of CCs.
d.
Technical Advisory Committee (TAC)
Risk Management Review Committee
SEBI has set up a Risk Management

Review Committee (RMRC) with Prof J R
Varma as Chairman of the Committee, to
undertake a comprehensive review of the
risk management framework of cash and
derivatives segments so as to enable the
participants to keep pace with the dynamic
changes in the markets and meet the present
and future challenges. The committee
Further, examining of the cyber security

framework of the exchanges, clearing
corporation and depositories, capacity
planning and change management, etc., are
some of the issues under consideration.
34
Box 1.8: Third Meeting of the International Advisory Board of SEBI

The third meeting of the International Advisory Board (IAB) of the Securities and Exchange Board of India
(SEBI) was held on December 9 & 10, 2013 at Bangalore. The following major issues were discussed during the
meeting:
i.
Insider Trading: Global best practices and lessons for India.
ii.
REITs & Business Trusts: Proposed framework for India vis--vis global practices.
iii.
SEBIs Consent Mechanism: The global experience and learning for SEBI.
iv.
Cyber Security: Issues and concerns for securities market infrastructure.
v.
Recent macro-economic trends and their impact on securities markets.
vi.
Some potential lessons for India from the development and regulation of the South African securities
markets.
SEBI had constituted the IAB in September, 2011, as part of its measures initiated to respond to the challenges
arising out of the global financial crisis. The role of the IAB is to guide SEBI with its advice on future direction for
the organization, taking into account relevant global experience, emerging challenges and latest developments in
the regulatory space. Meetings of the IAB are organized by SEBI in India. Its previous two meetings were held on
January 27, 2012 at Delhi and on November 3 - 4, 2012 at Mumbai.
Left: Third Meeting of the International Advisory Board of SEBI held at Bangalore
IAB Members have been drawn from amongst former eminent regulators and leading academicians. The
current members of IAB (arranged alphabetically by their surnames), in addition to Chairman, SEBI, are as under
1.
Professor Viral V. Acharya, C.V. Starr Professor of Economics in the Department of Finance at New York
University Stern School of Business.
2.
Ms. Jane Diplock, Former Chairman of the New Zealand Securities Commission and Former Chairman of
the Executive Committee of IOSCO.
3.
Mr. Russell Loubser, Former CEO of the Johannesburg Stock Exchange and Member of the Kings Committee
on Corporate Governance.
4.
Professor Maureen OHara, Robert W. Purcell Professor of Finance at the Johnson Graduate School of
Management, Cornell University.
5.
Professor Arvind Panagariya, Jagdish Bhagwati Professor of Indian Political Economy at Columbia
University.
Dr. Andrew L T Sheng, Former Chairman of the Securities and Futures Commission of Hong Kong.
Mr. Prashant Saran, Mr. Rajeev Kumar Agarwal & Mr. S. Raman - Whole Time Members of SEBI and all the
Executive Directors of SEBI also participated in the two day deliberations.
6.
35
III. Mutual Funds

The mutual fund industry has moved
within the broader markets slipstream,
oscillating
between
exuberance
and
retrenchment with assets under management
approaching to `8,25,240 crore as end March
2014. The previous two years witnessed a slew
of regulatory reforms approaching towards
development and growth of the industry.
Mutual funds manifest huge opportunity for
growth and further penetration, which can
be achieved over the period of time, ushering
various policies and enhancing levels of
investor education to increase presence in
rural areas. The description of steps initiated
during 2013-14 aiming at re-energising
growth and investor protection is as follows:
A.
Circular on Infrastructure Debt Fund
b.
Allowed to raise monies through

private placement of units to less than
fifty persons.
c.
Increase in the universe of strategic

investors to include, Systemically
Important NBFCs registered with RBI
and foreign institutional investors
registered with SEBI which are long
term investors subject to their existing
investment limits
d.
Extension of the maximum new fund

offer period and specified transaction
period to 45 days
e.
Allowed to increase the tenure of the

scheme to two years subject to approval
of two-thirds of the unitholders by value
of their investment in the scheme.
f.
The following categories of FIIs have

been designated as long term investors
for the purpose of IDF:
With regard to Infrastructure Debt Funds

(IDF), the following provisions were
developed:
a.
Increase in the investment universe

i.
Investments of funds received

on account of pre-payment of
principal or regular repayments of
principal were permitted in bonds
of Public Financial Institutions
(PFIs) and Infrastructure Finance
Companies (IFCs), if the AMC
is unable to find core assets for
investment.
ii.
Limit of scheme investments

in sponsor owned assets were
increased from 20 percent to 30
percent with some restrictions.
iii.
Clarity in limits on investments in

unrated /below investment grade
assets (30percent extendable to 50
percent) and limits of investment
in instruments of a single issuer
(30 percent) was provided.
Foreign Central Banks
Governmental Agencies
Sovereign Wealth Funds
International/Multilateral
Organizations/ Agencies
Insurance
Funds
Funds
and
Pension
Further, it was decided that regulated foreign

feeder funds, having at all times, at least 20
percent of their assets under management
held by investors belonging to one of more
of the above categories of FIIs, shall also
be categorized as FIIs which are long term
investors, for the purpose of IDF.
B.
Gold Exchange Traded Fund Scheme

(Gold ETFs) and Gold Deposit Scheme
(GDS) of Banks
Gold certificates issued by banks in

respect of investments made by Gold ETFs in
Gold Deposit Scheme (GDS) can be held by
36
its monthly Average AUM (Monthly

AAUM) of various schemes categories
and various investor types. Mutual
funds/AMCs are also mandated to
disclose contribution to Monthly AAUM
from B-15 and T-15 cities, from sponsor
and its associates and others, along-with
data on State-wise/Union Territory-wise
Monthly AAUM and monthly AAUM
garnered through sponsor group/ nonsponsor group distributors. AMCs have
to disclose this information on its website
within seven working days from the end
of the month and also need to forward
the data to AMFI for consolidation in
order to get holistic picture of the Mutual
Fund industry.
mutual funds in dematerialised or physical

form.
C.
Proprietary Trading Member (PTM)

category
The asset management companies

managing schemes of mutual funds have been
permitted to take membership of debt segment
of stock exchanges under Proprietary Trading
Member (PTM) category. However, this will
be only to undertake trades directly on behalf
of such schemes managed by them.
D.
Conditions laid down for a sponsor to

act as a custodian
It has been decided that the custodian

in which the sponsor of a mutual fund or
its associates, holding 50 percent or more of
the voting rights of the share capital of the
custodian, shall be allowed to act as custodian
subject to fulfilling the following conditions
i.e. (a) the sponsor should have net worth
of at least `20,000 crore at all points of time,
(b) 50 percent or more of the directors of the
custodian shall be those who do not represent
the interests of the sponsor or its associates,
(c) neither the custodian nor the asset
management company of a mutual fund shall
be a subsidiary of each other, (d) no person
shall be a director of both the custodian and
the asset management company of a mutual
fund and (e) the custodian and the asset
management company of a mutual fund
shall sign an undertaking that they will act
independently of each other in their dealings
with the schemes.
E.
Enhancing
disclosures,
investor
education and awareness campaign,
developing alternative distribution
channels for Mutual Fund products, etc.
a.
In order to increase transparency, Mutual

Funds/AMCs are mandated to disclose
37
b.
To increase transparency and encourage

Mutual funds/AMCs to diligently
exercise their voting rights in best interest
of the unitholders, Mutual funds/ AMCs
shall be required to disclose voting data
along with rationale supporting the
decision (for, against or abstain) on a
quarterly basis on websites of mutual
funds. Also, on an annual basis, AMCs
shall be required to obtain auditors
certification on the voting reports being
disclosed by them. Further, the board
of AMCs and trustees of mutual funds
would be required to review and ensure
that AMCs have voted on important
decisions that may affect the interest of
investors and the rationale recorded for
vote decision is prudent and adequate.
c.
To promote financial inclusion, mutual

funds need to make available printed
literature on mutual funds for investor
awareness and education in regional
languages. Further mutual funds also
need to introduce investor awareness
campaign, both in print and electronic
media, in regional languages.
d.
For developing additional distribution

channels, AMCs need to frame a system
for active support to PSU Banks for
distribution of mutual fund products
and also provide online investment
facility to tap the internet savvy users
and the burgeoning mobile-only
internet users for direct investment in
mutual fund products.
e.
Further, in the guidelines issued on

prudential limits for sectoral exposure
in debt oriented mutual funds schemes,
along-with investment in Bank CDs,
CBLO, G-Secs, T-Bills and AAA rated
securities issued by public financial
institutions and public sector banks,
investments in short term deposits of
scheduled commercial banks shall also
be excluded while calculating total
exposure of debt schemes of mutual
funds in a particular sector.
F.
a platform for interaction and deliberation

on the issues related to the mutual fund
industry. It acts as a platform for SEBI to
place its various regulatory development
activities and at the same time the industry
places its agenda before SEBI for further
consideration. During financial year 201314, the committee under the Chairmanship
of Shri Janki Ballabh, former Chairman of
State Bank of India, met twice on September
30, 2013 and November 12, 2013 and gave
its valuable recommendations on various
policy issues encompassing mutual fund
industry.
It has been decided to have a single SRO

for distributors of mutual fund products and
a two stage procedure for grant of recognition
as SRO for distributors of mutual fund
product i.e. grant of in-principle approval
and grant of recognition.
Activities of Advisory Committee
a.
Advisory
Funds
Committee
on
Intermediaries
Associated
Securities Market
A.
Simplification of Procedure
Transmission of Securities
with
for
With a view to make the transmission

process more efficient and investor friendly,
SEBI vide circular dated October 28, 2013,
issued guidelines with a view to avoid
cumbersome court procedures. SEBI reviewed
the process being followed by Share Transfer
Agents (STAs) and Depositories/Issuer
companies (in-house STAs) for effecting
transmission of securities held in physical as
well as dematerialised mode with a view to
make the transmission process more efficient
and investor friendly. In the revised process,
STAs/ issuer companies and the depositories
were directed to adhere to the guidelines,
as applicable to them. Further, to improve
the awareness of nomination facility, all
Registrars to an Issue and Share Transfer Agents
shall publicize nomination as an additional
right available to investors, while sending
communications to the investors. (Box 1.9)
Self Regulatory Organization (SRO)

relating to Mutual Fund Industry
G.
IV.
Mutual
SEBI has an Advisory Committee on

Mutual Funds (MFAC) which comprises
industry
representatives,
investor
association, government representative and
other stakeholders. The committee provides
38
Box 1.9: Standardization and Simplification of Procedures for

Transmission of Securities
SEBI reviewed the process being followed by Share Transfer Agents (STAs) and Depositories / issuer companies
(in-house STAs) for effecting transmission of securities held in physical as well as dematerialized mode with a
view to make the transmission process more efficient and investor friendly. In the revised process, STAs/ issuer
companies and the depositories shall adhere to the following guidelines, as applicable to them:
I.
In case of transmission of securities in dematerialized mode, where the securities are held in a single name
without a nominee, the existing threshold limit of Rs. one lakh per beneficiary owner account has now
been revised to Rs. five lakh, for the purpose of following simplified documentation, as prescribed by the
depositories vide bye-laws / operating instructions.
II.
In case of transmission of securities held in physical mode:
III.
a.
where the securities are held in single name with a nominee, STAs/issuer companies shall follow the
standardized documentary requirement, as mentioned below.
b.
where the securities are held in single name without a nominee, the STAs/issuer companies shall
follow, in the normal course, the simplified documentation (as mentioned below), for a threshold
limit of Rs. two lakh per issuer company. However, the issuer companies, at their discretion, may
enhance the value of such securities.
The timeline for processing the transmission requests for securities held in dematerialized mode and
physical mode shall be seven days and 21 days respectively, after receipt of the prescribed documents.
Documentary requirement for securities held in physical mode:

1.
2.
For securities held in single name with a nominee:

i.
Duly signed transmission request form by the nominee.
ii.
Original or Copy of death certificate duly attested by a Notary Public or by a Gazetted Officer.
iii.
Self attested copy of PAN card of the nominee. (Copy of PAN card may be substituted with ID proof in
case of residents of Sikkim after collecting address proof)
For securities held in single name without a nominee, following additional documents may be sought:
a)
Affidavit made on appropriate non judicial stamp paper to the effect of identification and claim of
legal ownership to the securities
b)
For value of securities upto Rs. two lakh per issuer company as on date of application, one or more
of the following documents:
c)
i.
No objection certificate [NOC] from all legal heir(s) who do not object to such transmission (or)
copy of Family Settlement Deed duly notarized or attested by a Gazetted Officer and executed
by all the legal heirs of the deceased holder.
ii.
Indemnity made on appropriate non judicial stamp paper indemnifying the STA/Issuer
Company.
For value of securities more than Rs.two lakh per issuer company as on date of application:
Succession certificate (or) Probate of will (or) Letter of Administration (or) Court decree.
B.
Rationalization of KYC Process
a.
Rationalization of KYC norms for

eligible foreign investors
Shri K. M. Chandrasekhar, SEBI vide circular

dated September 12, 2013 rationalized KYC
norms for eligible Foreign Investors investing
under Portfolio Investment Scheme (PIS)
route. The intermediaries are now required
to follow risk based Know Your Client norms
depending on category of investors.
Pursuant to the report on Committee

on Rationalization of Investment Routes
and Monitoring of Foreign Portfolio
Investments, under the Chairmanship of
39
b.
KYC form further simplified
C.
SEBI, vide circular dated December

26, 2013, has further simplified Part I of
the Account Opening Form (AOF) which
contains basic KYC details of the client. The
changes would assist in avoiding repeated
modifications in the KRA system and will
facilitate in making the KYC uniform for the
entire financial sector.
c.
SEBI, vide circular dated December

4, 2013, simplified and rationalized the
demat account opening process. This would
standardize the account opening process
across the depositories, harmonize the demat
account opening process with that of trading
account and reduce the cost. In terms of
this circular, the existing Beneficial OwnerDepository Participant agreement has been
replaced with Rights and Obligations
of the Beneficial Owner and Depository
Participant document, which shall be
binding on the depository participant as well
as the investor. The investor will be confident
while signing the document as it is prescribed
by the regulator. This will also result in the
reduction in the number of signatures to be
affixed by the investors while opening demat
account and also in the cost to the investors
due to non-payment of stamp duty which was
earlier payable for entering into agreements.
Amendment to SEBI {KYC (Know

Your Client) Registration Agency}
Regulations, 2011
As per existing KRA Regulations, 2011,

an option was available to the intermediary to
access the centralized KRA system in case of a
client who is already KYC compliant or carry
out fresh KYC process. As the KRA system
has now stabilised and has been working
well, it was felt that there may not be a need
to provide this option in the Regulations.
Accordingly, KRA Regulations were
amended vide notification dated March 13,
2014 and the option of taking fresh KYC has
been done away with. However, as provided
in the Regulations, the intermediary
can undertake enhanced KYC measures
commensurate with the risk profile of its
clients.
d.
Simplification and Reduction in cost

of Demat account opening process
D.
Guidelines for dealing with Conflict

of Interest for investment/ trading by
Credit Rating Agencies, Access Persons
and other employees
With a view to adopt best industry

practices and systems by Credit Rating
Agencies (CRAs) for managing conflict of
interest in case of investment/trading in
securities done by CRAs or their Access
Persons and employees, SEBI vide circular
dated August 28, 2013 issued guidelines for
dealing with conflict of interest in consultation
with the CRAs. These guidelines prescribe
that:
Aadhaar e-KYC service launched by

UIDAI to be considered as a valid
process for KYC verification
E-KYC service launched by UIDAI has

now been accepted as a valid process for
KYC verification, as per SEBI Guidelines. The
information containing relevant client details
and photograph made available from UIDAI
as a result of e-KYC process shall be treated
as sufficient proof of identity and address of
the client.
a.
40
CRAs shall adopt adequate systems,

procedures and policies to ensure that
they address conflict of interest while
making their own investments in
or managing conflict of interest for all

intermediaries, recognized stock exchanges,
recognized clearing corporations and
depositories and their associated persons
in securities markets. The Boards of such
entities have been made responsible for
putting in place systems for implementation
of the requirements specified in the circular,
providing necessary guidance enabling
identification, elimination or management of
conflict of interest situations and reviewing
the compliance of this circular periodically.
securities.
b.
CRAs, their employees and Access

Persons shall not take undue advantage
of any price sensitive information that
they may have about any company.
c.
Access Persons shall seek prior approval

for purchase or sale of securities of the
companies which have been rated or
graded by the CRA or whose securities
/ instruments /facilities have been rated
or graded by the CRA
d.
Disclosures shall be made by all

employees/ access persons of CRAs
while joining the CRA, on purchase or
sale of securities and on annual basis as
applicable.
e.
The members of the Rating Committee

shall upfront declare / disclose their
interest, if any, to the Chief Executive
Officer or Compliance Officer, as per
the policy of the CRA, in the securities
/instruments/
facilities
that
are
considered for rating / grading by the
CRA.
f.
Employees involved in the rating /

grading process shall not have ownership
of the securities of the issuer.
F.
The
Anti-Money
Laundering/
Countering Financing of Terrorism (AML/
CFT) framework prescribed by SEBI for
market intermediaries has been updated
vide circular dated March 12, 2014, to
incorporate the amendments made in the
PML Act and Rules. The major changes to
the framework are with regard to record
keeping requirements, appointment of
designated director to oversee compliance
with AML/CFT obligations, reliance on third
party for carrying out client due diligence
and risk assessment to be carried out by
intermediaries.
The CRAs were advised to devise

their policies and procedures for effective
implementation of these guidelines by
October 01, 2013 and to disclose the policies
adopted by them in this regard on their
websites.
E.
Anti-Money Laundering/Countering
Financing of Terrorism (AML/CFT)
G.
Simplification of registration process

for Stock Brokers
Vide Notification dated September

27, 2013, the SEBI (Stock Brokers and SubBrokers) Regulations, 1992, were amended to
replace the existing requirement of obtaining
multiple registrations for operating in
different segments of a stock exchange /
clearing corporation with a single registration
per stock exchange / clearing corporation.
If an entity is already registered with SEBI
in any segment of a stock exchange, then
for operating in any other segments of that
Guidelines for Conflict of Interest in

Securities Markets
On the lines of Principle 8 of the

International Organisation of Securities
Commissions (IOSCO) Objectives and
Principles of Securities Regulations, SEBI,
vide circular dated August 28, 2013, issued
Guidelines for avoiding or dealing with
41
bring more transparency in the disclosure

of complaint redressal status of the stock
brokers on the website of stock exchange,
SEBI in consultation with stock exchanges
and market participants modified the format
by including the following details:
stock exchange/clearing corporation, the

entity is only required to obtain approval
of the concerned stock exchange or clearing
corporation as the case may be.
H.
Strengthening
the
compliance
mechanism of Stock Brokers-Internal
Audit
Stock Brokers are required to conduct

internal audit of their operations on a
half yearly basis to be conducted by an
independent auditor. The format of audit
report and sample size is prescribed by the
stock exchange. In consultation with SEBI,
the stock exchanges have reviewed and
increased the audit sample size to be covered
under internal audit for stock brokers with
effect from the half year ended March 31,
2014. Further, the auditor shall verify the
compliance of SEBI / exchange inspection
findings/observations by the stock broker
during internal audit process. These changes
are intended to strengthen the compliance
mechanism of stock brokers.
a.
Number of active clients of stock

broker
b.
Percentage of number of complaints

received as against number of active
clients of stock broker
c.
Percentage of complaints resolved as

against complaints received by the stock
broker
The stock exchanges are also now

required to separately disclose total number
of complaints received against all stock
brokers, their active clients and percentage
and also overall market redressal rate. Stock
exchanges have implemented the new system
with effect from January 2014.
The duration of continuing professional

education (CPE), for certification of
associated persons in the securities markets,
has been reduced to one day from the
earlier requirement of two days without
compromising on the contents of examination.
This will help all the intermediaries in
complying with the requirement of CPE and
improving their professional standards.
The above modifications will result

in disclosure of complaint redressal rate
of individual stock broker and also overall
redressal rate at stock exchange level. As the
information is available in public domain, this
will encourage the stock brokers to redress
the complaints expeditiously. Further, as
each stock exchange shall also disclose the
overall redressal rate of the exchange, this
will help them in monitoring and taking steps
to improve their performance by regular
follow-up with stock brokers. All this will
result in expeditious redressal of complaints
of the investors.
J.
K.
I.
Rationalisation
of
continuing
professional education (CPE) process
Transparency in Redressal of Investor

Complaints
SEBI had earlier prescribed the format

for disclosing details of complaints lodged
by clients/investors against stock brokers on
the website of stock exchanges. In order to
Strengthening the Disciplinary Process

of Stock Exchanges
Stock exchanges are empowered under

their bye-laws to impose monetary penalties
on their stock brokers for violations/noncompliances based on findings of their
42
and across stock exchanges for a particular

client. This will benefit the client as well
as the stock brokers as the client account
across stock exchanges will be netted for
the purpose of settlement and debit balance
in one exchange will get offset to the extent
of the credit available in another exchange.
In addition to this, certain other changes
have been made to remove administrative/
operational difficulties of stock brokers.
inspections and regular monitoring. With

a view to make the penalty structure more
stringent so as to commensurate with
the seriousness and/or repetitive nature
of violations, the penalty structure was
strengthened in consultation with stock
exchanges, which came into effect from
April 2013. This will help in improving the
compliance standards for the stock brokers.
L.
Periodical settlement of running

accounts
M.
With a view to instill greater

transparency and discipline in the dealings
between the clients and the stock brokers,
SEBI had mandated, in 2009, that stock
brokers shall compulsorily settle client
running accounts on monthly/quarterly
basis as desired by the clients and send
them a statement of account to that effect.
This regulatory directive has helped in
reduction of investor grievances pertaining
to unauthorized trading. With an objective
to address the administrative and practical
difficulties, SEBI has further streamlined the
process of settling running accounts after
receiving feedback from stock exchanges and
stock brokers. As per the revised process,
for the purpose of settlement, the stock
broker is allowed to settle across segments
Limited Liability Partnership to become

members of the stock exchange
Securities Contract (Regulation) Rules,

1957 (SCRR) were amended vide notification
dated October 24, 2013 and rules were
liberalised by allowing Limited Liability
Partnerships (LLPs) to become eligible for
seeking membership of a stock exchange.
V.
Foreign Institutional Investment
A.
SEBI (Foreign Portfolio Investors)

Regulations, 2014 were notified on
January 07, 2014.

Regulations, 2014 (the Regulations) were
framed and the same were notified on
January 7, 2014. The salient features of the
Regulations are explained in Box 1.10
Box 1.10: Foreign Portfolio Investor (FPI) Regime

Background
SEBI constituted a Committee on Rationalization of Investment Routes and Monitoring of Foreign
Portfolio Investments (the Committee), under the Chairmanship of Shri K. M. Chandrasekhar, comprising
of representatives from GoI, RBI and various market participants. The Committee made recommendations
regarding harmonization of different routes for foreign portfolio investments i.e. Foreign Institutional
Investors (FIIs), Sub Accounts and Qualified Foreign Investors, uniform entry norms, adoption of risk based
KYC norms etc. The Board, in its meeting held on June 25, 2013 accepted the recommendations of the Shri K.M.
Chandrasekhar Committee.
SEBI (Foreign Portfolio Investors) Regulations, 2014
In order to implement the recommendations of the Committee, the SEBI (Foreign Portfolio Investors) Regulations,
2014 (the Regulations) have been framed and the same have been notified on January 07, 2014. The FPI regime
shall commence from June 01, 2014. Salient features of the Regulations are as under:
43
A.
B.
Foreign Portfolio Investors (FPIs):

1.
Existing FIIs, Sub Accounts and QFIs shall be merged into a new investor class termed as FPIs.
2.
SEBI approved Designated Depository Participants (DDPs) shall register FPIs on behalf of SEBI
subject to compliance with KYC requirements.
3.
FPI shall be required to seek registration in any one of the following categories:
a)
Category I Foreign Portfolio Investor which shall include Government and Government
related foreign investors etc;
b)
Category II Foreign Portfolio Investor which shall include appropriately regulated broad
based funds, broad based funds whose investment manager is appropriately regulated,
university funds, university related endowments, pension funds etc;
c)
Category III Foreign Portfolio Investor which shall include all others not eligible under
Category I and II foreign portfolio investors.
4.
All existing FIIs and Sub Accounts may continue to buy, sell or otherwise deal in securities under
the FPI regime.
5.
All existing QFIs may continue to buy, sell or otherwise deal in securities till the period of one year
from the date of notification of this regulation. In the meantime, they may obtain FPI registration
through DDPs.
6.
The registration granted to FPIs by the DDPs on behalf of SEBI shall be permanent unless suspended
or cancelled by SEBI.
7.
FPIs shall be allowed to invest in all those securities, wherein FIIs are allowed to invest.
8.
Category I and Category II FPIs shall be allowed to issue, or otherwise deal in offshore derivative
instruments (ODIs), directly or indirectly. However, unregulated broad based funds, which are
classified as Category II FPI by virtue of their investment manager being appropriately regulated
and category III FPIs are not allowed to issue, subscribe to or otherwise deal in offshore derivatives
instruments directly or indirectly. However, the FPI needs to be satisfied that such ODIs are
issued only to persons who are regulated by an appropriate foreign regulatory authority after
ensuring compliance with know your client norms.
Designated Depository Participants (DDPs):

1.
DDP shall be an Authorized Dealer Category-1 bank authorized by Reserve Bank of India,
Depository Participant and Custodian of Securities registered with SEBI.
2.
Depository shall forward the application of DDP along with its recommendation to SEBI for grant
of approval.
3.
SEBI registered Custodian of Securities shall be deemed to be DDP subject to payment of fees as
prescribed in the regulations.
4.
SEBI approved QDPs having QFI accounts as on date of notification of SEBI (FPI) Regulations, 2014
shall be deemed to have been granted approval as DDP subject to the payment of fees. However,
such QDPs will be allowed to register new FPIs after obtaining registration as a custodian of
securities from SEBI.
5.
DDPs shall carry out necessary due diligence and obtain appropriate declarations and undertakings
before registering FPIs.
44
B.
F.
Rationalization of debt limits
Utilisation period for Government

Debt limits
The framework of FII debt limits

was simplified and existing debt limits
were merged into two broad categories:
Government securities of USD 25 billion by
merging Government Debt Old of USD 10
billion and Government Debt Long Term of
USD 15 billion) and corporate bonds of USD
51 billion (by merging USD 1 billion for QFIs,
USD 25 billion for FIIs and USD 25 billion for
FIIs in long term infra bonds).
In order to ensure that the unutilised

government debt limits are put up for auction
without delay, SEBI vide circular dated July
31, 2013, permitted to utilise the debt limits
allocated to them in each monthly auction
till the 17th day of the succeeding month.
Any unutilised limit as on the 18th of each
month would get auctioned on the 20th of
that month.
C.
G.
Corporate Debt limit put on tap
FIIs have been permitted to invest in

Government Debt without purchasing debt
limits till the overall investment reaches 90
percent after which the auction mechanism
shall be initiated for allocation of the
remaining limits, as currently in place for FII
investments in corporate debt.
Beginning April 1, 2013, FIIs have

been permitted to invest in corporate debt
without purchasing debt limits till the overall
investment reaches 90 percent after which
the auction mechanism would be initiated
for allocation of the remaining limits.
D.
Additional Government Debt limits

on tap for Long Term Investors
H.
With effect from June 12, 2013, the

unutilized Government debt limits along
with an additional USD 5 billion limit for
Government debt has been made available
for investment on tap for FIIs which are
registered with SEBI under the categories of
Sovereign Wealth Funds (SWFs), multilateral
agencies, endowment funds, insurance funds,
pension funds and foreign central banks.
E.
Government Debt Limits on Tap
Permission to invest
Enhanced INR Bonds
in
Credit
Foreign Institutional Investors (FIIs)

and Qualified Foreign Investors have been
permitted to invest in Credit Enhanced INR
Bonds up to an equivalent of USD 5 billion
within the overall corporate bond limit of
USD 51 billion.
I.
Security Receipts under Corporate

Debt Limits
Reduction in sub-limit for Commercial

Paper
With effect from February 14, 2014,

the sub-limit for FII/QFI investment in
commercial papers was reduced from USD
3.5 billion to USD 2 billion.
Beginning July 9, 2013, investments in

security receipts issued by Asset Reconstruction
Companies by FIIs are being reckoned against
the extant corporate debt limits.
Accordingly, FIIs and QFIs can invest in the

following debt limits:
45
S. No.
Type of Instrument
Cap
(USD Billion)
Remarks
Government Debt
20
Available on demand for both FIIs and QFIs

Eligible investors (FIIs and QFIs) may invest in Treasury
Bills only up to USD 5.5 billion.
10
Available on demand for FIIs registered with SEBI

as Sovereign Wealth Funds, Multilateral Agencies,
Endowment funds, Insurance funds, pension funds and
Foreign Central banks
Corporate Debt
51
Available on demand for both FIIs and QFIs

Eligible investors may invest in Commercial Papers only
up to USD 2 billion and up to USD 5 billion in Credit
Enhanced Bonds within the limit of USD 51 billion
Total
81
J.
Government Debt
Change in FII Debt Investment Limits
VI. Other Policies and Programmes having

a bearing on the working of Securities
Market
With effect from January 29, 2014 the

sub-limit for long term investors under the
Government Debt category was enhanced
from USD 5 billion to USD 10 billion within
the overall Government debt limit of USD 30
billion. Long term investors are FIIs which are
registered with SEBI under the categories of
Sovereign Wealth Funds (SWFs), multilateral
agencies, endowment funds, insurance funds,
pension funds and foreign central banks.
K.
A.
A well developed corporate bond market

supports economic development and is likely
to be more beneficial for business having longer
term cash flows, where investors may be wary
of risk associated with equity market. The
current year witnessed `2,76,054 crore raised
through 1,924 issues by the way of private
placement listed at BSE and NSE while there
were 35 public debt issues worth `42,383 crore
in 2013-14, depicting a manifold increase from
the previous year. Furthermore, a framework
for Regulations on Research Analyst and Real
Estate Investment Trust (REIT) was proposed
in 2013-14. The potential of the market can be
realised on the back of policy and regulatory
reforms accompanied by ways to penetrate
retail investors. Following are the slew of
measures undertaken by SEBI in 2013-14:
Declaration
and
Undertaking
regarding PCC, MCV or equivalent
structure by FIIs
On December 19, 2013, it was clarified

by SEBI that if any applicant was required by
its regulator or under any law to ring fence
its assets and liabilities from other funds/ sub
funds, such applicant shall not be treated as
having opaque structure, provided:
i.
the applicant is regulated in its

home jurisdiction
ii.
each fund/ sub fund in the applicant

satisfies broad based criteria, and
iii.
the applicant gives an undertaking

to provide information regarding
its beneficial owners as and when
SEBI seeks this information
CORPORATE DEBT MARKET
a.
SEBI (Issue and Listing of Nonconvertible Redeemable Preference

Shares) Regulations, 2013
SEBI notified the SEBI (Issue and

Listing of Non-Convertible Redeemable
Preference Shares), Regulations, 2013 on
46
agencies and debenture trustees. The database

can be accessed by the public or any other
users without paying any kind of fees or
charges. This has been done in view of the
fact that the historical data on all corporate
bonds issued is very crucial for an investor to
take informed investment decision.
June 12, 2013. The said regulations provide

a regulatory framework for public issuance
of Non-convertible Redeemable Preference
shares and also for listing of privately placed
redeemable preference shares. Considering
the risks involved in the instrument, certain
requirements like minimum tenure of the
instruments (three years), minimum rating
(AA- or equivalent) etc. have been specified
in case of public issuances. For listing of
privately placed non-convertible redeemable
preference shares, minimum application size
for each investor is fixed at `10 lakh.
c.
SEBI had mandated that the day count

convention for calculation of interest payments
for listed corporate debt securities shall be
actual. It has been pointed out by the market
participants that the disclosures can further
be improved, if cash flows concerning interest
payment and redemption of debt securities
are given by way of illustration in the offer
document. Taking the same into account, SEBI
issued a circular on October 29, 2013 stating
that the cash outflows (interest payments
and redemption of maturity) concerning
debt securities, are to be explained by way of
illustrations in the offer document.
As per Basel III norms, banks can issue

non-equity instruments such as perpetual
non-cumulative preference shares and
innovative perpetual debt instruments, which
are in compliance with the specified criteria
for inclusion in Additional Tier I Capital.
SEBI (Issue and Listing of Non-Convertible
Redeemable Preference Shares), Regulations,
2013 was also made applicable to the nonequity instruments such as perpetual noncumulative preference shares and innovative
perpetual debt instruments, issued by
banks (as per Basel III norms), which are in
compliance with the criteria specified by RBI
for inclusion in Additional Tier I Capital.
b.
Issues pertaining to Primary Issuance

of Debt Securities
Further,
for
the
purpose
of
standardisation and in line with the dated
government securities, it was also stated
that if the coupon payment date of the debt
securities, falls on a Sunday or a holiday the
coupon payment shall be made on the next
working day. If the maturity date of the debt
securities, falls on a Sunday or a holiday, the
redemption proceeds shall be paid on the
previous working day.
Centralized Database for Corporate

Bonds/ Debentures
Considering the need to have

comprehensive database on corporate
bonds at a single place and taking into
account the recommendations of Dr. R.H.
Patil Committee, SEBI mandated both the
depositories viz. NSDL and CDSL to jointly
create, host, maintain and disseminate the
centralized database of corporate bonds/
debentures, which are available in demat
form. The depositories shall obtain requisite
information regarding the bonds/debentures
from issuers, stock exchanges, credit rating
Further, vide the said circular, a

flexibility has also been given to the listed
debt issuers (who have already listed their
equity shares or debentures) , who are in
compliance with the listing agreement, to
disclose their unaudited financials with a
limited review report in their offer document,
instead of giving audited financials for the
sub period.
47
d.
Amendment
to
SEBI
(Issue
and Listing of Debt Securities)
Regulations, 2008
07, 2014, has directed that all trades in

SDIs (listed or unlisted) by mutual funds,
foreign institutional investors/sub-accounts/
qualified foreign investors/foreign portfolio
investors, alternative investment funds,
foreign venture capital investors and
portfolio managers shall be reported on the
trade reporting platform of either NSE, BSE
or MCX-SX, within fifteen minutes of the
trade. All trades in SDIs (listed or unlisted)
done between above specified entities shall
necessarily be cleared and settled through
the National Securities Clearing Corporation
Limited (NSCCL) or the Indian Clearing
Corporation Limited (ICCL) or MCX-SX
Clearing Corporation Limited (MCX-SX CCL).
To ensure that the data is not duplicated, it
has also advised that the reporting for a trade
must be done by the buyer and the seller on
the same platform to ensure matching of both
sides of the trades.
Companies Act, 2013 enables SEBI to

specify the class of the companies which can
be allowed to file shelf prospectus. To specify
the class of companies eligible to file shelf
prospectus, SEBI (Issue and Listing of Debt
Securities) Regulations, 2008 was amended.
Following class of entities are allowed to file
Shelf Prospectus for public issuance of nonconvertible debt securities:
i.
Public financial institutions and

scheduled banks;
ii.
Issuers authorised by the notification

of CBDT to make public issue tax
free secured bonds;
iii.
Infrastructure
NBFCs;
iv.
NBFCs, registered with RBI,

Housing
Finance
Companies
registered with National Housing
Bank (NHB) and entities which
have listed their shares/debentures
in the stock exchanges for at
least three years complying with
prescribed criteria.
debt
funds
The meeting of Corporate Bonds

Securitization
Advisory
Committee
(CoBoSAC) was held on October 23, 2014 to
discuss on the various policy issues pertaining
to the corporate debt market and securitized
debt instruments.
f.
The regulations also prescribe other

formalities such as filing of an information
memorandum, limits on number of issues
through a single shelf prospectus, etc.
e.
Activities of the Advisory Committee
Corporate Bonds and Securitization

Advisory Committee (CoBoSAC), is an
advisory committee of SEBI, constituted to
review the progress of implementation of
plans for the creation of a unified exchange
traded market for corporate bonds. It
suggests measures to hasten the process of
the implementation of the project on one hand
and removal of the bottlenecks on the other.
The committee is chaired by Smt. Shyamala
Gopinath, former Deputy Governor, RBI
and currently the chairperson of Clearing
Corporation of India Limited. In the year
2013-14, two meetings of the committee
Reporting of Trades in Securitised

Debt Instruments in Trade Reporting
Platforms
and
Clearing
and
Settlement of trades in Securitised
Debt Instruments through Clearing
Corporations
With a view to develop the Securitised

Debt Instruments (SDIs) market and to
improve transparency in the dealings of
SDIs, SEBI vide circular dated January
48
may be carried forward to SEBI ILDS

Regulations.
have been convened on October 23, 2013 and

March 28, 2014.
The
Committee
gave
various
recommendations to develop the
market for Securitized product,
including the additional continuous
disclosure requirements that may
be specified for Non-convertible
Redeemable Preference Shares
The
committee
suggested
that
Depositories would be suitable to act as
a single repository for hosting primary
as well as secondary market data
regarding corporate bonds.
The committee also specified the

entities that may be allowed to file shelf
prospectus, under the Companies Act,
2013.
The committee recommended to

constitute a sub-committee to discuss
the issues pertaining to improving the
secondary market liquidity in corporate
bonds.
B.
Collective Investment Schemes
The Committee deliberated on the

nature of the Covered Bonds.
The committee recommended the

formation of a sub-committee, to specify
disclosure and other requirements for
Municipal Bonds.
The committee recommended the

formation of a sub-committee, for
specifying
disclosure
and
other
requirements for bonds issued by cooperative societies
The committee has pointed out that the

entities coming out with public issue of
NCDs shall provide granular disclosures
in their offer document, with regards
to the Object of the Issue. Further,
the amount earmarked for General
Corporate Purposes, shall not exceed
25 percent of the amount raised by the
issuer in the proposed issue.
NBFCs who are the most frequent

users of the debt channel, shall have
to disclose in their offer document, the
details with regards to the lending done
by them, out of the issue proceeds of
previous public issues.
The disclosure requirements in the

Companies Act, 1956, which are not
replicated in the Companies Act, 2013
The Securities Laws (Amendment)

Ordinance, 2013, has, inter alia, amended
the SEBI Act, 1992 by way of insertion of a
proviso to sub-section (1) of section 11AA of
SEBI Act to prescribe that: any pooling of
funds under any scheme or arrangement, which
is not registered with the Board or is not covered
under sub-section (3), involving a corpus amount
of one hundred crore rupees or more shall be
deemed to be a collective investment scheme.
Certain activities as listed under subsection (3) of section 11AA, viz., Schemes
offered by Cooperative Society, Deposits
accepted by NBFCs, Contract of Insurance,
Pension Scheme or Insurance Scheme,
Deposits accepted under 58A of Companies
Act, Nidhi or mutual benefit society, chit
fund business, mutual fund and any scheme/
arrangement specifically exempted by the
Central Government in consultation with
SEBI, are outside the ambit of CIS. Therefore,
any scheme falling under these sectors/
domains shall not be deemed to be a CIS
irrespective of the quantum of the amount
mobilised.
Also, any mobilisation of funds under
any scheme or arrangement which is
registered under any other Act and regulated
49
Education Fund with contribution from

SEBIs General Fund to be used for taking
measures for investor education.
by any other authority or otherwise banned

under any prevailing law in the country shall
not be deemed to be a CIS. Subsequent to
the Ordinance, SEBI notified SEBI (Collective
Investment
Schemes)
(Amendment)
Regulations, 2014 on January 09, 2014.
C.
Further, the SEBI (Investor Protection

and Education Fund) Regulations, 2009 came
into effect, which required for establishment
of a fund called Investor Protection and
Education Fund or IPEF. The Fund was
deemed to have been established on July 23,
2007, by the order made by the Board under
section 11 of the SEBI Act, 1992 with an initial
corpus of `10 crore from the SEBI General
Fund.
Investor Assistance and Education
SEBI has been taking various regulatory

measures to expedite the redressal of
investor grievances. The grievances lodged
by investors are taken up with the respective
listed company/intermediary and are
continuously monitored. Investor assistance
provided by SEBI through various modes
viz. e-mails, letters, telephonic calls received
on toll free helpline etc. are being executed
in a proficient manner. The SCORES system
has been working satisfactorily and has
helped in making the complaint handling
and redressal mechanism more efficient.
Alike every year, this year too witnessed
various investor awareness and education
programs with wider reach being conducted
by SEBI with the help of exchanges,
depositories and various trade bodies like
AMFI etc, increasing the total number of
such programs in 2013-14.
a.
Amounts to be credited to the IPEF

includes contribution by SEBI; Grants,
donation by Central and state governments or
any other entity approved by SEBI; Investor
Protection Fund, Investor Services Fund,
one percent security deposit available with
the exchange in the event of de-recognition
of stock exchange; interest or other income
received from investment made from the
fund etc; and any other amount as SEBI may
specify in interest of investors.
Recent amendment to the SEBI Act 1992
through the Securities Laws (Amendment)
Ordinance, 2013 has provided for crediting the
disgorged amount pursuant to a direction issued
under section 11B or section 12A of the Securities
Contracts (Regulation) Act, 1956 or section 19 of
the Depositories Act, 1996, as the case may be, to
the Investor Protection and Education Fund.
Advisory Committee for SEBI Investor

Protection and Education Fund (IPEF)
In Budget speech of Finance Minister

while presenting the budget for FY 200607, Finance Minister proposed To set up
an Investor Protection Fund under the aegis of
SEBI, funded by fines and penalties recovered
by SEBI. This will bolster confidence among
retail investors who should be the key drivers of
the capital market. Also, SEBI was to issue
guidelines in this regard.
Utilisation of funds from IPEF

includes various educational and awareness
activities, funding investor education and
awareness activities of investor associations,
aiding recognised investor associations to
undertake legal proceedings in interest of
investors; refund of securities deposit held
by stock exchanges and transferred to IPEF
consequent to de-recognition, after fulfilling
condition for release of deposit etc.
Accordingly, the Board in its meeting

held on June 30, 2007, approved the
establishment of an Investor Protection and
50
below 2.5 percent of GDP due to slackening

of gold imports and moderate pick-up in
exports. The actual gross fiscal deficit declined
to 4.5 percent of the GDP riding on the back
of revenue push and expenditure cuts as also
due to phased subsidy reduction of diesel
prices. Liquidity conditions which remained
tight till first half of the year, eased gradually
with normalisation of exceptional monetary
measures. Credit growth decelerated on the
back of sluggish macroeconomic activity and
deterioration in asset quality.
IPEF Advisory committee has been

constituted (as prescribed by SEBI (IPEF)
Regulations 2009) for recommending investor
education and protection activities that may
be undertaken directly by the Board or
through any other agency, for utilisation of
the funds from IPEF for the above purposes.
VII. Assessment and Prospects
A.
Assessment
Indian economy suffered bouts of

market turmoil in early 2013-14 on account
of US Fed tapering concerns but the policy
actions undertaken in the latter half of the
year built buffers to withstand the economy
against possible spillovers. While these
defensive buffers facilitated in narrowing the
statistics, the growth concerns still remain
dominant with GDP growth estimated at 4.9
percent for FY14 while Index of Industrial
Production (IIP) statistics stagnated for two
successive years followed by contraction of
0.1 percent in 2013-14. While the previous
year witnessed all the three sectors (services,
agriculture and industry) losing their
momentum, the current year bore a testimony
to the revival in agriculture activity. While
Services sector registered a sluggish growth,
the Industry recorded a fall in growth in the
financial year.
In addition to the containment of

current account deficit within a sustainable
level, efforts were made to stabilise the rupee
exchange rate which in conjunction with
improvements in global trade, contracted
Indias trade deficit and also strengthened
foreign exchange reserves during the year.
The securities market, which observed
gains during the early part of the year, got
disrupted owing to global headwinds.
However, as normalcy returned, the Indian
stock markets recovered with benchmark
indices, BSE Sensex and NSE Nifty registering
their all-time high. The BSE Sensex knocked a
new peak to close at 22,386 on March 31, 2014,
breaching the 20,000 mark touched during
2012-13. Nifty, too, crossed the 6,000 mark of
2012-13 and logged to a new lifetime high by
closing at 6,704 on March 31, 2014. On a point
to point basis, Sensex observed a growth of
18.8 percent, while Nifty recorded a growth
of 18.0 percent over the previous year. The
SX40 index of MCX-SX closed at 13,298 on
March 31, 2014. As per World Federation of
Exchanges (WFE) statistics, NSE retained its
number one position in the category of largest
exchange by Electronic Order Book (EOB)
number of trades in 2013 and stood at third
position among top 5 exchanges by number
of single stock futures traded in 2013.
Savings rate as a percentage of GDP

meanwhile fell further from 31.3 percent
to 30.1 percent on the back of decline in
Household Savings. While savings in financial
assets remained constant, savings in physical
assets registered a marginal decrease over
the previous year. The investment dwindled
during the year, while the saving-investment
gap widened to 4.7 percent of the GDP at
market prices, propagating heavy reliance
on capital inflows. Following a lower trade
deficit, coupled with rise in net invisible
receipts, Indias full-year CAD is likely to be
51
over the previous year and reached `42,383

crore. Amount of resource mobilisation
taking place through the private placement
of corporate debt stood at `2,76,054 crore.
Resource mobilisation of equity through
Preferential Allotment is approximately
similar to the previous year and stood at
`46,463 crore while the QIP route registered a
decline and mobilised `13,663 crore. The new
platforms for small and medium enterprises
(SMEs) by BSE and NSE, witnessed resource
mobilisation of `317 crore through 37
issues compared to `239 crore raised by 24
issues in the previous year, reflecting high
entrepreneurial potential of the economy.
The market capitalisation of benchmark

indices replicated an upward trend with a rise
of 16.1 percent at BSE and 16.6 percent at NSE
over the previous financial year. The turnover
at BSE declined by 4.9 percent whereas at NSE
it increased by 3.7 percent over the previous
year. The market capitalisation to GDP (at
market prices) ratio of BSE stood at 65.3
percent and for NSE the ratio was 64.1 percent.
MCX-SX, recorded a market captilisation of
`72,39,670 crore in 2013-14 and its ratio to
GDP at 64.0 percent. While the turnover in
the equity derivative segment exhibited an
increase of 22.9 percent in 2013-14, amidst the
volatile rupee during the year, the currency
derivative segment turnover registered a
decline of 23.9 percent over the previous year.
Meanwhile, markets witnessed introduction
of new segments and platforms with BSE
going live in the currency derivative segment
and introduction of trading in interest rate
futures at NSE and BSE.
In its endeavour to give a further impetus

to the primary market, SEBI made grading
mechanism voluntary for initial public offers
(IPOs). In order to facilitate capital raising by
small and medium enterprises (SMEs), SEBI
decided to permit listing without an IPO
and trading of specified securities of SMEs
including start-up companies on Institutional
Trading Platform (ITP) in SME Exchanges.
Exchanges were permitted to launch

IRF contracts on either one or both of the
options - Coupon bearing Government of
India security as underlying and/or Coupon
bearing notional 10-year Government of
India security with settlement price based on
basket of securities as underlying. SEBI also
permitted derivatives on Indias first volatility
Index, India VIX, which is a key measure of
market expectations of near-term volatility,
which was launched in January 2014 by NSE.
The measures have been largely aimed at
expansion and development of our securities
market.
FII investments also witnessed a revival

as confidence returned to the markets. In the
early part of 2013-14, foreign institutional
investors were net sellers in the debt segment
while they turned net buyers from December
2013 onwards. The cumulative net investment
of FIIs in Indian markets amounted to USD
180,405 million as at the end of March 2014
compared to USD 171,529 million in 201213, depicting a rise of 5.2 percent. The assets
under the custody of custodians under
different asset classes stood at `46,00,247
crore as end March 31, 2014. Mutual funds
saw a net inflow of `53,783 crore in 2013-14.
The persistent efforts of SEBI to promote and
regulate the Indian securities market on the
back of vigorous policy reforms were evident
by growing statistics of the market.
The financial year 2013-14 also saw

elevated levels in primary equity and debt
market with a total resource mobilisation to
the tune of `55,652 crore as against `32,455
crore raised in the previous year. Public
Issue of debt reached more than doubled
52
of market activity further emboldened the

regulatory infrastructure and reposed the
investor confidence.
SEBI
notified
Foreign
Portfolio
Investors Regulations, 2014 with a view to
harmonization of different routes of foreign
portfolio investments. PSU divestment
through ETF route, a first in Indian markets
has also garnered market attention and
appreciation visible in the record amount
being mobilised. The year also witnessed
the setting up of a dedicated debt segment
on the stock exchanges with an objective
to develop debt markets and encourage
transition of trading in debt instruments
from OTC markets to stock exchanges.
With a committed approach to investor
protection and empowerment, SEBI decided
to give monetary relief to investors having
claims upto `10 lakh, during the course of
proceedings from the Investor Protection
Fund of Stock Exchange.
B.
Prospects
SEBI completed its 25 year journey

in 2013. During these eventful years, it has
successfully not only modernised Indian
capital markets bringing in line the best
international practices and standards but
has taken initiatives that were subsequently
adopted by other countries. However the
challenges to regulation persist induced by
advances of technology driving innovations
and complexities in market, products and
platforms. SEBI aims to continuously upgrade
and improve its human and technological
capabilities so that it can fulfill its mandate
of delivering strong enforcement, protection
of investors and development of markets.
The year 2013-14 saw SEBI being

compliant of international good practices
as specified by Financial Stability oversight
body, constitution of Early Warning Group
for monitoring early warning signals and
monitoring of financial conglomerates as
published in the IOSCO report of Thematic
Review of the implementation of Principles 6
and 7 of the IOSCO. India is the only country
that has a systemic risk monitoring template,
developed by SEBI which covers the entire
market, participants and product spectrum.
The Indian securities market continues

to evolve with various policy measures
aimed to preserve and maintain a safe and
fair market to protect the interest of investors.
actions especially those pertaining to CIS to
make Indian securities market more secure
and regulated. Over the years, SEBI has built
the reputation of a credible enforcement
agency. The enforcement action taken by
SEBI is designed to be appropriate in a
holistic sense. SEBI has used warnings and
letters of deficiency to address findings
from inspection reports, while in other cases
harder measures, such as disgorgement and
payment of money under adjudication or
consent proceedings, have been imposed. In
order to make the market a safe and fair place
to investors, SEBI reviewed the extant insider
trading regulatory regime so as to align with
the best practices globally. The High level
committee on Insider trading has proposed
draft Insider trading regulation which has
The incessant endeavours of SEBI in

setting up a credible regulatory framework
were lauded by IMF and World Bank in the
FSAP report for India. The Report recognised
that the regulatory and supervisory regime
for Indian securities market is well developed
and largely in compliance with international
standards.
While the market fundamentals
strengthened as the year progressed, steadfast
policy measures encompassing all spheres
53
implementation of the recommendations

shall be taken up across various classes of
intermediaries.
been placed in public for comments.

Integrated and continuous market
surveillance is the crucial mechanism
to ensure market integrity and investor
confidence. The upgraded surveillance
mechanism implemented by SEBI is
effectively supervising the market activities
to ensure seamless trading. The dynamic
contours of market, entails capacity building
for effective integrated surveillance with
special focus on enhancing skill sets for
using analytical and statistical tools for
monitoring derivative and HFT trades.
World-wide, regulators are reviewing the
regulatory frameworks on Algorithmic
and HFT for its potential impact on market
stability. Profiling of major clients in various
segments may help to understand the pattern
of market participation and their impact with
special emphasis on algorithmic trading,
HFT etc. This will necessitate upgradation
of resources for understanding and effective
surveillance specific to algorithmic trading
and HFT. Systemic approach is a requisite
to establish a mechanism for risk profiling
of companies/ stock brokers so as to
understand the associated risks. Process
for comprehensive upgradation of DWBIS
infrastructure to ensure data storage and
processing requirement for next five years is
also initiated.
The Companies Act, 2013 was enacted

on August 30, 2013 which provides for a
major overhaul in the corporate governance
norms for all companies. SEBI has also
revised the existing Corporate Governance
framework (Clause 49 of Listing agreement)
which would be applicable with effect from
October 01, 2014 to align with the provisions
of the Companies Act, 2013, adopt best
practices on corporate governance and to
make the corporate governance framework
more effective.
The FSAP report for India had
recommended
that
enforcement
of
compliance of companies with listing
obligations by stock exchanges should be
strengthened. Also SEBI along with the
stock exchanges should review whether
current arrangements to analyse material
events should be strengthened. Accordingly,
a Committee was formed for drafting an all
encompassing Listing Regulations providing
listing conditions and disclosure requirements
for various categories of securities. In order
to maintain a single document in line with
the Listing Agreement and to address the
concerns of excessive delegation in the
garb of flexibility with respect to certain
areas, such as, disclosure requirements, an
approach paper has been prepared enlisting
listing agreement provisions, modifying
existing and proposing new provisions and
incorporating the changes in consonance
with the Companies Act, 2013.
To enhance the existing supervisory

mechanisms, a Risk Based Supervision Task
Force has been set up and assigned the task
of understanding the objective of supervision
for each class of SEBI registered intermediary,
to identify and define various risk metrics,
both quantitative and qualitative, to explore
and lay down the methodology for assigning
rating of various risk metrics. The Task
Force will be submitting its report in the
early part of FY 2014-15 and thereafter, the
In addition to aligning the regulations,

SEBI also strives to cover all the market
participants within the ambit of its regulatory
purview. With a view to regulate entities
that offer investors analytical or evaluative
54
an objective to make learning of securities

market and financial education easy and
entertainment based, SEBI is looking forward
to explore ways to employ modern technology
and social media to achieve the same.
services and to avoid conflicts of interest,

SEBI is proposing to regulate research
analysts in Indian securities market through
an exclusive and comprehensive regulation.
The final regulations on the same is under
preparation.
Various investor centric initiatives such

as these may require deployment of more
resources both financial as well as human.
Hence it was felt to undertake a comprehensive
analysis so as to harmonize the resources
with the evolving market structure and
review the expenditures so as to align them
with organisational objectives. Towards this,
a comprehensive review was undertaken by
an internal committee for augmentation and
rationalization of the financial resources viz.
Committee on Rationalization of Financial
Resources of SEBI. Implementation of the
recommendations of the consultant appointed
to revisit the structural and organizational
issues, re-prioritize areas of focus and to look
at the technological and manpower needs of
SEBI is also in progress.
Infrastructure is the cornerstone of

Indias development and infrastructure
financing is a bottleneck in countrys
progress. To enable, setting up of a
framework for investment in infrastructure,
SEBI
has
proposed
Infrastructure
Investment Trusts(InvITs) in the country.
InvITs, as an investment vehicle, is aimed to
provide wider and long-term re-finance for
existing infrastructure projects, to free up
current developer capital for reinvestment
into new infrastructure projects and to
refinance/takeout existing high cost debt
with long-term low-cost capital.
SEBI has taken several steps to reenergize mutual fund industry to increase
product penetration especially in smaller
cities/towns, regulation of distributors and
issues concerning investor protection, develop
a long-term policy for the sustainable growth
of the industry and increase household
savings through mutual funds.
In the international arena, SEBI

continues to contribute towards the
substantive projects and issues, and plays a
pivotal role in many areas: at the bilateral,
Asia-Pacific regional and international
levels. SEBI continued to play a key role at
the various meetings and committees of the
IOSCO and, thus, strengthened its position
in the global space.
SEBI has been setting up local offices

across the country with the primary aim to
provide investor assistance and education to
nooks and corners of the country. In order
to help in achieving financial inclusion and
to enhance the investors confidence and
awareness, SEBI continues to evolve various
initiatives like conducting workshops, visit
to SEBI and introducing financial concepts
in CBSE curriculum. SEBI initiated National
Financial Literacy Assessment Test (NFLAT)
under National Strategy for Financial
Education with a vision of a financially aware
and empowered India. In addition, with
As the new financial year commences,

the journey of SEBI continues with new
challenges
moulded
by
innovations,
technologies, manipulators and systemically
important institutions. Notwithstanding
these, SEBI would incessantly strive to
make Indian securities market world-class
by pursuing its mandatory objectives,
Protection of interests of investors, promote
the regulation and development of market.
55
PART TWO: REVIEW OF WORKING AND OPERATIONS OF THE

SECURITIES AND EXCHANGE BOARD OF INDIA
IN THE SECURITIES MARKET
1.
PRIMARY SECURITIES MARKET
help investors were some measures aimed at

bolstering the primary market activities.
In 2013-14, primary markets rebounded

with enhanced figures in resource
mobilisation. The upbeat sentiment is
consistent with the encouraging global cues
and improving macroeconomic factors back
at home. A host of factors like economic
recovery, containment of twin deficits,
adjustment of rupee exchange rate, fall in
interest rates have all been influential in
shaping the markets. While the first half of
the financial year grappled with volatility
emanating from international headwinds
and domestic uncertainty, the second half
saw a growth in external demand on the
back of currency appreciation. Policy actions
in India have strengthened the buffers and
prevented Indian economy from the possible
spillovers of the US Fed tapering and the
Ukraine crisis. Investor confidence and
optimism restored during the year mainly on
account of performance of financial markets
and facilitative policy actions by SEBI. Listing
without an Initial Public Offer and trading
of specified securities of small and medium
enterprises (SMEs) including start-up
companies on Institutional Trading Platform
(ITP) in SME Exchanges, modifications in the
formats for disclosures under regulation 29 (1),
29 (2) and 31 of SEBI (Substantial Acquisition
of Shares and Takeovers) Regulations, 2011
to ensure adequate disclosures are made to
I.
Resource Mobilisation through Public

and Rights Issues
During 2013-14, 90 companies accessed

the primary market and raised `55,652 crore
through public (75) and rights issues (15) as
against 69 companies which raised `32,455
crore in 2012-13 through public (53) and
rights issues (16) (Table 2.1). Primary market
activities in 2013-14 were on a resurgent
mode as compared to 2012-13. The number
of IPOs in 2013-14 stood at 38 as compared
to 33 in the year 2012-13. Of the 38 IPOs, 37
have been listed at the SME platform. The
amount raised through IPOs in 2013-14 was
lower at `1,236 crore as compared to `6,528
crore during 2012-13. During the year, offer
for sale by existing shareholders mobilised
`3,096 crore through four IPOs and FPOs.
There were two FPOs worth ` 7,457 crore in
2013-14 as compared to none in 2012-13. The
share of public issues in the total resource
mobilisation increased to 91.8 percent during
2013-14 from 72.4 percent during 2012-13 and
the share of rights issues decreased from 27.6
percent in 2012-13 to 8.2 percent in 2013-14
(Chart 2.1). Of the public issues, the share of
debt issues in the total resource mobilisation
was the largest at 76.2 percent and that of
equity issues was 23.8 percent in 2013-14.
56
Part Two: Review of Working and Operations of SEBI in the Securities Market
Table 2.1: Resource Mobilisation through Public and Rights Issues

Particulars
1
Public Issues (i)+(ii)
(i) Public Issues
(Equity/ PCD /FCD) of which
IPOs
FPOs
(ii) Public Issues (Bond / NCD)
2. Rights Issues
Total Equity Issues (1(i)+2)
Total Equity and Bond (1+2)
Memo Items: Offer for Sale
1.
2012-13
2013-14
No. of
issues
2
53
Amount
(` crore)
3
23,510
No. of
issues
4
75
Amount
(` crore)
5
51,075
33
6,528
40
33
0
20
16
49
69
4
6,528
0
16,982
8,945
15,473
32,455
1,589
38
2
35
15
55
90
4
Percentage share in
total amount
2012-13
2013-14
6
7
72.4
91.8
8,692
20.1
15.6
1,236
7,457
42,383
4,576
13,269
55,652
3,096
20.1
0
52.3
27.6
47.7
100
4.9
2.2
13.4
76.2
8.2
23.8
100
5.6
Notes: 1) The primary market resource mobilisation is inclusive of the amount raised in the SME platform.
2) All offers for sale have been included under the head of IPOs/FPOs
Chart 2.1: Share of Broad Category of Issues in Resource Mobilisation
A.
Resource
Platform
Mobilisation
via
SME
whose post issue paid up capital shall be

less than or equal to `25 crore. In 2013-14,
37 companies have been listed in the SME
platform raising a total amount of `317 crore
as compared to `239 crore raised through 24
issues in the 2012-13, indicating an increase
in resource mobilisation to the tune of 32.6
percent. (Table 2.2)
SEBI permitted the setting up of a

separate dedicated platform for the listing
and trading of SME securities in the last
financial year. The SME platform of the
exchange is intended for small and medium
sized companies with high growth potential,
57
Table 2.2: SME Platform

Year/Month
Total
No. of issue
Amount
(` crore)
2012-13
24
239
2013-14
37
317
Apr-13
May-13
Jun-13
16
Jul-13
11
Aug-13
67
Sep-13
36
Oct-13
84
Nov-13
Dec-13
18
Jan-14
10
Feb-14
39
Mar-14
21
B.
Sector-wise Resource Mobilisation
Sector-wise
classification
of
the
resource mobilisation shows that 70 private
sector issues and 20 public sector issues were
mobilised through primary market in 2013-14
as compared to 55 private sector issues and 14
public sector issues in 2012-13. Private sector
issues mobilised `11,681 crore compared
to `43,970 crore mobilised by the public
sector companies (Table 2.3). Private sector

contributed 21.0 percent in the total resource
mobilisation in 2013-14 as compared to 54.5
percent in 2012-13 (Chart 2.2). The amount
raised through public sector issues was 79.0
percent of the total resource mobilisation
comparing with 45.5 percent during the year
2012-13.
Table 2.3: Sector-wise Resource Mobilisation

Sector
2012-13
2013-14
Percentage share in total

amount
No.of issues
Amount
(` crore)
No.of issues
Amount
(` crore)
2012-13
2013-14
Private
55
17,690
70
11,681
54.5
21.0
Public
14
14,765
20
43,970
45.5
79.0
Total
69
32,455
90
55,652
100.0
100.0
58
Chart 2.2: Sector-wise Resource Mobilisation
C.
Size-wise Resource Mobilisation

in 2013-14. In 2013-14, the mean public
issue size was `681 crore compared to `444
crore in 2012-13. However, the mean IPO
size declined from `198 crore in 2012-13 to
`33 crore in 2013-14. (Table 2.4)
The average size of an issue (including

public and rights) which accessed the primary
market in 2013-14 increased to `618 crore
as compared to `470 crore in 2012-13.The
average issue size of public issues increased
Table 2.4: Size-wise Resource Mobilisation
Issue Size
2012-13
1
< `5 crore
2013-14
Percentage share in
total amount
No.of
issues
Amount
(` crore)
No.of
issues
Amount
(` crore)
2012-13
2013-14
14
41
0.1
`5 crore & < ` 10 crore
12
79
17
122
0.2
0.2
`10 crore & < `50 crore
16
297
10
174
0.9
0.3
440
221
1.4
0.4
18
4,416
19
4,261
13.6
7.7
` 500 crore
15
27,216
27
50,832
83.9
91.3
Total
69
32,455
90
55,652
100.0
100.0
the equity FPO issue of M/s. Power Grid

Corporation of India Ltd (`6,959 crore) which
was followed by the debt issues of M/s. Indian
Railways Finance Corporation Limited (`4,083
crore), M/s. Power Finance Corporation
Limited (`3,876 crore) and M/s. National
Highways Authority of India (`3,698 crore).
There were 30 mega issues in 2013-14 as

compared to 19 mega issues in 2012-13 (Table
2.5). The mega issues mobilised `52,112 crore
which amounts to 93.6 percent of the `55,652
crore worth of total resource mobilisation
during the year (Table 2.5).
The largest issue during 2013-14 was
59
Table 2.5: Mega Issues in 2013-14*

No.
Name of the entity
Type of
issue
Type of
instrument
3
IPO
Rights
Rights
Rights
4
Equity
Equity
Equity
Equity
Date of
opening of
issue
5
20-May-13
3-Jun-13
6-Aug-13
28-Aug-13
Offer size
(` crore)
1
1
2
3
4
2
Just Dial Ltd
Kesoram Industries Ltd
Reliance Mediaworks Ltd
Godrej Properties Ltd
Power Grid Corporation of India Ltd
FPO
Equity
3-Dec-13
6,959
13.35
6
7
Engineers India Ltd

The Tata Power Company Limited
Shriram Transport Finance Company
Limited
Rural Electrification Corporation
Limited
India Infoline Finance Limited
Housing and Urban Development
Corporation Limited
India Infrastructure Finance
Company Limited
Shriram Transport Finance Company
Limited
Power Finance Corporation Limited
NHPC Limited
Housing and Urban Development
Corporation Limited
NTPC Limited
Company Limited
India Infoline Housing Finance
Limited
Muthoot Finance Limited
Indian Railways Finance Corporation
Limited
National Highways Authority of
India
ECL Finance Limited
Indian Renewable Energy
Development Agency Limited
Company Limited
Kamarajar Port Limited
Indian Railway Finance Corporation
Limited
Rural Electrification Corporation
Limited
Total
FPO
Rights
Equity
Equity
6-Feb-14
31-Mar-14
498
1,993
0.96
3.83
Public
Bond
16-Jul-13
736
1.41
Public
Bond
30-Aug-13
3,441
6.60
Public
Bond
17-Sep-13
1,050
2.01
Public
Bond
17-Sep-13
2,370
4.55
Public
Bond
3-Oct-13
1,213
2.33
Public
Bond
7-Oct-13
500
0.96
Public
Public
Bond
Bond
14-Oct-13
18-Oct-13
3,876
1,000
7.44
1.92
Public
Bond
2-Dec-13
2,153
4.13
Public
Bond
3-Dec-13
1,750
3.36
Public
Bond
9-Dec-13
3,000
5.76
Public
Bond
12-Dec-13
500
0.96
Public
Public
Bond
Bond
27-Dec-13
30-Dec-13
500
2,100
0.96
4.03
Public
Bond
6-Jan-14
4,083
7.84
Public
Bond
15-Jan-14
3,698
7.10
Public
Bond
16-Jan-14
500
0.96
Public
Bond
17-Feb-14
722
1.38
Public
Bond
17-Feb-14
2,665
5.11
Public
Bond
18-Feb-14
365
0.70
Public
Bond
28-Feb-14
1,745
3.35
Public
Bond
28-Feb-14
1,059
2.03
Public
Bond
7-Mar-14
1,000
52,112
1.92
100
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Note: *Mega issues include issues above ` 300 crore
60
Percentage
share in
total amount
7
1.76
0.80
1.15
1.34
919
416
600
700
D.
Industry-wise Resource Mobilisation
During
2013-14,
Banks/Financial
Institutions raised the largest amount in
the industry-wise classification of resource
mobilisation. 14 issues from the industry
contributed 53.3 percent to the total resource
mobilisation (Table 2.6). Power sector with

four issues mobilised 21 percent of the total
resource mobilisation. Finance sector had
relatively lesser share of 10.9 percent in 201314 as compared to the preceding years.
Table 2.6: Industry-wise Resource Mobilisation

Industry
2012-13
2013-14
Percentage share in
total amount
No. of
issues
Amount
(` crore)
No. of
issues
Amount
(` crore)
2012-13
2013-14
Banks/Fls
2,475
14
29,700
7.6
53.3
Cement & Construction
731
1.3
Chemical
Electronics
Engineering
74
591
0.2
1.1
Entertainment
12
602
1.1
16
16,536
26
6,058
51
10.9
Food Processing
19
0.1
Healthcare
210
0.6
Information Technology
19
Paper & Pulp
28
Plastic
18
Power
11,702
21
Printing
Telecom
4,173
12.9
Textile
582
14
1.8
Miscellaneous
31
8,352
26
6,184
25.7
11.1
Total
69
32,455
90
55,652
100.0
100.0
Finance
II.
Resource Mobilisation through QIP

and IPP
A.
QIP and IPP
any securities other than warrants which are

convertible to equity shares to a Qualified
Institutional Buyer (QIB).
IPP route was introduced by SEBI under
Chapter VIII-A of SEBI (ICDR) Regulations,
2009 during the financial year 2011-12, for
the purpose of achieving minimum public
shareholding in terms of Rule 19(2)(b) and
19A of the Securities Contracts (Regulation)
Rules, 1957. IPP route applies to issuance of
fresh shares and/or offer for sale of shares in
Qualified
institutions
placement
(QIP) has been in place in Indian securities
market in addition to the public and rights
issues as a means for easing the process of
fund raising in domestic market. In a QIP,
a listed company can issue equity shares,
fully and partly convertible debentures, or
61
which was a decline of 14.6 percent from the

`15,996 crore raised in 2012-13. (Table 2.7)
a listed issue. It has been prescribed that this

can be implemented by way of fresh issue of
capital by such companies. Under Chapter
VIII-A of the ICDR Regulations, any offer,
allocation and allotment of securities under
the IPP route shall be made only to QIBs.
There were ten IPP issues in 2013-14 as

compared to two in 2012-13. The total amount
raised through the IPP issues in 2013-14 was
`4,101 crore as compared to two IPP issues
which raised `941 crore in 2012-13.
During 2013-14, 17 issues raised a total of

`13,663 crore through the QIP and IPP route,
Table 2.7: Resource Mobilisation through QIP and Conforming to MPS through IPP
Year/Month
NSE
No. of
issues
BSE
Amount
(` crore)
3
No. of
issues
4
Common
Amount
(` crore)
5
No. of
issues
6
Total
Amount
(` crore)
7
No. of
issues
8
Amount
(` crore)
9
2010-11
10
2,802
90
46
22,959
59
25,850
2011-12
40
14
2,114
16
2,163
2012-13
950
160
43
14,885
45
15,996
2013-14
160
16
13,503
17
13,663
Apr-13
160
227
387
May-13
2,833
2,833
Jun-13
1,066
1,066
Jul-13
918
918
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
280
280
Jan-14
67
67
Feb-14
8,113
8,113
Mar-14
Source: BSE, NSE
B.
Offer for Sale through Stock Exchange

Mechanism
the public shareholding norms as compared

to 33 companies in 2012-13. However the
amount mobilised through offers for sale
reduced from `28,026 crore to `6,993 crore.
M/s. Oracle Financial Services Software
Limited mobilised the highest amount of
`1,227 crore during the year followed by
M/s. L&T Finance Holdings Limited (`595
crore) and M/s. MMTC Limited (`572 crore)
(Table 2.8).
Yet
another
mechanism
made
available for companies to comply with
MPS requirement is the offer for sale
through stock exchange mechanism which
was introduced in February 2012. It is the
more widely used mechanism compared
to IPP. In 2013-14, 71 companies used this
route through BSE and NSE to conform to
62
Table 2.8: Offer for Sale through Stock Exchange Mechanism to conform to MPS
Year
No. of Companies
Total Resource Mobilised (in `crore)
1
2011-12
13,518
2012-13
33
28,026
2013-14
71
6,993
Source: BSE, NSE
III. Resource
Mobilisation
Preferential Allotment
through
Companies Act, 1956. The issuer is required

to take the permission of shareholders and
should comply with various provisions
which inter-alia include pricing, disclosures
in the notice, lock-in, etc, in addition to the
requirements specified in the Companies
Act, 1956.
The mode of preferential allotment

is utilised by a listed company to issues
equity shares / fully convertible debentures/
partly convertible debentures or any other
financial instruments which would be
converted into or exchanged with equity
shares at a later date. The allotments are
done on private placement basis to select
group of persons under section 81 (1A) of
During 2013-14, 411 preferential

issues raised `46,463 crore compared to 420
preferential issues which raised `46,939 crore
in 2012-13 (Table 2.9).
Table 2.9: Resource Mobilisation through Preferential Allotment

Year/
Month
NSE
BSE
Common
Total
No. of
issues
Amount
(` crore)
No. of
issues
Amount
(` crore)
No. of
issues
Amount
(` crore)
No. of
issues
Amount
(` crore)
1
2010-11
83
1,393
156
12,072
134
17,046
373
30,511
2011-12
133
2,820
88
4,166
90
18,723
311
25,709
2012-13
188
7,442
87
12,729
145
26,768
420
46,939
2013-14
222
3,789
24
1,029
165
41,645
411
46,463
Apr-13
21
659
42
13
11,143
37
11,844
May-13
24
403
32
3,767
56
4,170
Jun-13
20
179
13
11,699
33
11,878
Jul-13
15
371
88
10
1,147
27
1,605
Aug-13
24
178
431
453
35
1,062
Sep-13
17
323
71
11
532
32
926
Oct-13
20
367
63
2935
31
3366
Nov-13
14
132
622
24
756
Dec-13
10
414
17
14
6512
27
6943
Jan-14
16
33
316
31
460
49
809
Feb-14
15
152
534
21
686
Mar-14
26
577
12
1,841
39
2,418
Source: BSE, NSE
63
were made and a total of `2,76,054 crore was

raised through private placement which
is 23.6 percent lower when compared to
`3,61,462 crore raised through 2,489 issues
in 2012-13. (Table 2.10)
IV. Resource Mobilisation through Private

Placement of Corporate Debt
Resource mobilisation through private
placement of corporate debt has been
increasingly used by the corporate entities
in the recent years. In 2013-14, 1,924 issues
Table 2.10: Private Placement of Corporate Bonds Reported to BSE and NSE
Year/
Month
NSE
BSE
Common
Total
No. of
Issues
Amount
(` crore)
No. of
Issues
Amount
(` crore)
No. of
Issues
Amount
(` crore)
No. of
Issues
Amount
(` crore)
2008-09
699
1,24,810
285
17,045
57
31,426
1,041
1,73,281
2009-10
647
1,43,286
597
49,739
34
19,610
1,278
2,12,635
2010-11
774
1,53,370
591
52,591
39
12,825
1,404
2,18,785
2011-12
1,152
1,89,803
783
56,974
18
14,505
1,953
2,61,283
2012-13
1,295
2,06,187
1,094
72,474
100
82,801
2,489
3,61,462
2013-14
837
1,40,713
997
78,805
90
56,536
1,924
2,76,054
Apr-13
78
19,134
114
11,298
14
11,380
206
41,812
May-13
112
17,651
113
8,788
11
7,320
236
33,759
Jun-13
149
20,145
67
10,282
4,787
222
35,214
Jul-13
48
4,549
84
7,273
360
141
12,182
Aug-13
15
595
37
1,344
150
55
2,089
Sep-13
44
7,800
81
7,614
2,350
128
17,763
Oct-13
61
13,533
81
5,315
4,720
150
23,567
Nov-13
36
3,127
50
2,070
5,978
92
11,175
Dec-13
38
12,175
95
8,000
10
4,102
143
24,277
Jan-14
51
8,813
84
3,864
10
8,105
145
20,782
Feb-14
81
11,784
78
5,647
2,740
162
20,171
Mar-14
124
21,408
113
7,311
4,544
244
33,263
Source: BSE, NSE
64
2.
SECONDARY SECURITIES MARKET
I.
Equity Markets
A.
India
fundamentals have cushioned the Indian

markets of any spillover from the events
around the globe. The dampening factors
still persist in the form of low industrial
activity and high inflation numbers but are
expected to be on an improvement path with
corrective actions being in place.
During the year 2013-14, Indian equity

markets surged to a new high resulting from
an improved scenario of global financial
markets and strengthening of domestic
macroeconomic factors. Markets have picked
up in the second half of 2013-14 guided by
exchange rate adjustments, decisive policy
measures and anticipation of electoral
outcomes. The onset of 2014 has seen the
increasing flow of capital, increased activity
in secondary markets, new pinnacles for
benchmark indices and market capitalisation
which has carved out an investment inducing
and investor assuring climate.
The financial year began on a low

note for equity markets but soon picked up
and has been rising since. The benchmark
indices BSE Sensex and CNX Nifty crossed
the mark of 22,386 and 6,704 respectively.
The FII inflows strengthened during the
last quarter of the year reposing the faith in
Indian markets while policy actions aimed at
easing the process of investment for FIIs was
welcomed. Hence with a slew of measures
taken and favourable turn of concurrent
global events, the markets performed well
during the financial year.
The economic recovery supported by

global growth and improved macroeconomic
Chart 2.3: Movements of Benchmark Stock Indices
65
2013. Both the indices observed the highest

fall of the financial year on August 16, 2013
when BSE Sensex fell by 4.0 percent while
CNX Nifty fell by 4.1 percent.
During 2013-14, the benchmark indices

BSE Sensex and CNX Nifty increased by 18.8
percent and 18.0 percent respectively, over
March 31, 2013 (Chart 2.3). BSE Sensex closed
at 22,386 on March 31, 2014 registering an
increase of 3,550 points over 18,836 as on
March 31, 2013. The CNX Nifty increased
by 1,021 points and closed at 6,704 at the
end of March 2014 over 5,683 at the end of
March 2013.
In the cash segment, while the turnover

at BSE declined by 4.9 percent, the turnover at
NSE increased by 3.7 percent during 2013-14
as compared to a fall of 17.8 percent and 3.7
percent, respectively during 2012-13 (Table
2.11). The derivative segment witnessed a
surge in turnover to the extent of 22.9 percent
in 2013-14.
BSE Sensex and CNX Nifty both reached

their highest levels on March 31, 2014, when
the respective indices touched the levels of
22,386 and 6,704 which is also the all time
maximum level that these indices have ever
attained. BSE Sensex attained the lowest
point of 17,906 on August 21, 2013 during
the financial year while CNX Nifty touched
a low of 5,285 on August 28, 2013 during the
year. BSE Sensex and CNX Nifty recorded a
highest gain of 3.8 percent on September 10,
The instrument-wise composition of

the value traded in the secondary market is
shown in Chart 2.4. In the Indian secondary
market, in terms of traded turnover, the
equity derivative lead with a dominant
share of 80.7 percent followed by currency
derivatives (11.9 percent), cash segment (5.7
percent) and corporate bonds (1.7 percent).
Chart 2.4 Value traded in Secondary Market (percent)
Source: BSE, NSE, MCX-SX,USE
was witnessed in previous year. Volatility,

measured by annualised standard deviation,
increased substantially in 2013-14 compared
to the previous year.
The market capitalisation of BSE and

NSE scaled new highs in the financial year
with an increase of 16.1 and 16.6 percent
respectively. P/E ratios increased during the
year contrary to the moderation in trend as
66
Table 2.11: Major Indicators of Indian Securities Markets

Item
2012-13
2013-14
Percentage Variation over the

Previous Year
2012-13
2013-14
4
5
A.
Indices
BSE Sensex
Year-end
Average
18,836
18,202
22,386
20,120
8.2
4.5
18.8
10.5
Year-end
Average
5,683
5,520
6,704
6,010
7.3
5.3
18
8.9
NA
NA
13,298
11,960
NA
NA
NA
NA
12.5
12.9
NA
17.5
18.1
16.5
NA
NA
NA
NA
NA
NA
32,57,086
33,41,337
-6.4
2.6
5,48,774
27,08,279
33
3,87,04,572
5,21,664
28,08,488
11,185
4,75,75,571
-17.8
-3.7
NA
20.4
-4.9
3.7
33793*
22.9
71,63,519
3,15,33,004
8,049
87,10,505
92,19,434
3,82,11,408
1,44,729
69,80,855
786.1
0.6
NA
-12.0
28.7
21.2
1698*
-19.9
Na
52,74,465
33,03,179
1,32,861
0
2,44,312
40,12,513
24,22,410
3,01,620
39,944
NA
12.8
-11.5
-91.1
NA
NA
-23.9
-26.7
127.0
NA
Na
0
Na
7,191
30,173
2,580
NA
NA
NA
NA
NA
NA
63,87,887
62,39,035
61,96,199
74,15,296
72,77,720
72,39,670
2.8
2.3
NA
16.1
16.6
16.8
5,211
1,666
NA
5,336
1,688
12
1.5
1.2
1.2
2.4
1.3
NA
16.9
17.6
NA
18.3
18.9
20.3
NA
NA
NA
NA
NA
NA
CNX Niy
SX40
Year-end
Average
B.
Annualised Volatility (percent)
BSE Sensex
CNX Niy
SX40
C.
Total Turnover (`crore)
Cash Segment (All-India)
of which
BSE
NSE
MCX-SX
Equity Derivatives Segment
of which
BSE
NSE
MCX-SX
Currency Derivatives Segment
of which
BSE
NSE
MCX-SX
USE
Interest Rate Derivatives Segment
of which
BSE
NSE
MCX-SX
D.
Market Capitalisation (`crore)
BSE
NSE
MCX-SX
E.
No. of Listed Companies
BSE
NSE
MCX-SX
E.
P/E Ratio
BSE Sensex
CNX Niy
SX40
Notes: 1. All India cash segment turnover includes BSE, NSE, CSE and MCX-SX.
2. * indicates incremental turnover on a low base as MCX-SX commenced operations in Feb13
Source: BSE, NSE, MCX-SX and USE
67
B.
International Comparison
from strong external demand from advanced

economies and are expected to further grow.
Global markets while being tumultuous

during the first half of the year, recovered
in the second half. While the global activity
strengthened and is expected to strengthen
further, the downside risks which have
overall moderated still persist arising from
the ongoing tapering of quantitative easing
in the US, weaker balance sheets in Euro
area and inflationary pressures in emerging
economies. Certain downside risks to the
world economy as outlined by IMF have
been a yet-greater general slowdown in
emerging market economies, risks to activity
from lower than expected inflation rates in
advanced economies and rising geopolitical
tensions. While US is moving from recovery
to growth and Euro area from recession to
recovery, Japan and China are absorbed with
the tackling of domestic economic issues.
Other Emerging Market and Developing
Economies (EMDEs) have been benefitting
The second half of the financial year

saw easing of tensions and remarkable
improvements in the global financial
conditions. The US Fed QE tapering boosted
the global market sentiments. The turn of
events in Ukraine and Syria however didnt
affect the financial market health. Most
of the emerging and developed markets
witnessed rebound during 2013-14. Among
the emerging markets the annual return on
a point-to-point basis was the highest in
Argentina (56.1 percent) followed by Egypt
(53.0 percent) and South Africa (19.3 percent).
(Chart 2.5)
Among the developed equity markets,
the yearly returns were highest in US (29.6
percent) followed by Japan (22.2 percent) and
Germany (20.3 percent). The declines were
the maximum for Russia (16.2 percent), Chile
(14.6 percent) and Thailand (11.2 percent).
Chart 2.5: Year-on-Year Return of International Indices (in Percent)
Source: Bloomberg Services
68
II.
Performance of Major Stock Indices

and Sectoral Indices
percent and 16.4 percent respectively over

the previous year. The BSE Small-cap index
recorded an increase of 19.1 percent during
2013-14. Similarly, among the NSE indices,
while the CNX 500, CNX Nifty Junior and
the CNX Mid-cap improved by 17.7 percent,
18.9 percent and 15.0 percent respectively in
2013-14.
Along with the benchmark indices, the

sectoral and other indices have also shown a
surge in trends as revealed in Tables 2.12 and
2.13 and Charts 2.6 and 2.7. Among the broadbased BSE indices, BSE 100, BSE 200 and BSE
500 recorded growth of 18.1 percent, 16.7
Table 2.12: Major Stock Indices and their Percentage Variation

Year/
Month
BSE Percentage
Sensex Variation
3
BSE
100
Percentage
Variation
CNX
Nifty
Percentage
Variation
CNX
500
Percentage
Variation
SX40
Percentage
Variation
10
11
2008-09
9,709
-37.9
2,867
-40
3,021
-36.2
2,295
-40
Na
Na
2009-10
17,528
80.5
5,394
88.2
5,249
73.8
4,313
87.9
Na
Na
2010-11
19,445
10.9
5,856
8.6
5,834
11.1
4,626
7.3
Na
Na
2011-12
17,404
-10.5
5,315
-9.2
5,296
-9.2
4,222
-4.1
Na
Na
2012-13
18,836
8.2
5,679
6.8
5,683
7.3
4,438
5.1
Na
Na
2013-14
22,386
18.8
6,707
18.1
6,704
18.0
5,225
17.7
13,298
Na
Apr-13
19,504
3.5
5,941
4.6
5,930
4.4
4,642
4.6
11,523
Na
May-13
19,760
1.3
5,991
0.8
5,986
0.9
4,681
0.9
11,732
1.8
Jun-13
19,396
-1.8
5,802
-3.2
5,842
-2.4
4,511
-3.6
11,494
-2.0
Jul-13
19,346
-0.3
5,707
-1.6
5,742
-1.7
4,380
-2.9
11,506
0.1
Aug-13
18,620
-3.8
5,447
-4.6
5,472
-4.7
4,176
-4.7
10,938
-4.9
Sep-13
19,380
4.1
5,723
5.1
5,735
4.8
4,392
5.2
11,567
5.7
Oct-13
21,165
9.2
6,271
9.6
6,299
9.8
4,805
9.4
12,545
8.5
Nov-13
20,792
-1.8
6,178
-1.5
6,176
-2.0
4,770
-0.7
12,344
-1.6
Dec-13
21,171
1.8
6,327
2.4
6,304
2.1
4,915
3.0
12,583
1.9
Jan-14
20,514
-3.1
6,071
-4.0
6,090
-3.4
4,709
-4.2
12,265
-2.5
Feb-14
21,120
3.0
6,236
2.7
6,277
3.1
4,850
3.0
12,651
3.1
Mar-14
22,386
6.0
6,707
7.6
6,704
6.8
5,225
7.7
13,298
5.1
Source: BSE, NSE, MCX-SX
In NSE, among the sectoral indices

highest growth was registered in CNX IT
index (28.8 percent), followed by CNX MNC
Index (26.1 percent), CNX Pharma Index (25.4
percent) and CNX FMCG Index (18.0 percent)
(Chart 2.7). Among the NSE sectoral indices,
only CNX Petrochemicals Index recorded a
negative growth of 1.1 percent.
Mixed trend prevailed in the return

generated by sectoral indices. The highest
increase among sectoral indices during 201314 was registered by BSE Auto index (33.9
percent) followed by BSE Capital Goods
index (31.0 percent) and BSE IT index (27.2
percent). Only BSE Realty index declined
during the year by 21.7 percent.
69
Chart 2.6: Movement of Sectoral Indices of BSE
Source: BSE
Table 2.13: Sectoral Stock Indices and their Returns

Year/
Month
CNX
IT
Percentage
Variation
CNX
Bank
Percentage
Variation
CNX
PSE
Percentage BSE Oil Percentage BSE Percentage

Variation and Gas Variation FMCG Variation
2008-09
2,319
-55.3
4,133
-22.2
2,454
-1.2
7,053
9.9
2,036
17.1
2009-10
5,856
152.6
9,460
128.9
3,766
53.5
10,159
44
2,831
39.1
2010-11
7,148
22.1
11,705
23.7
3,567
-5.3
10,241
0.8
3,596
27
10
11
2011-12
6,516
-8.8
10,213
-12.8
2,900
-18.7
8,088
-21
4,493
24.9
2012-13
7,219
10.8
11,362
11.3
2,748
-5.2
8,327
3.0
5,919
3.0
2013-14
9,298
28.8
12,742
12.1
2,843
3.4
9,486
13.9
6,971
17.8
Apr-13
6,048
-16.2
12,562
10.6
2,917
6.2
8,711
4.6
6,549
10.6
May-13
6,472
7.0
12,476
-0.7
2,861
-1.9
8,655
-0.6
6,772
3.4
Jun-13
6,634
2.5
11,617
-6.9
2,716
-5.0
8,900
2.8
6,458
-4.6
Jul-13
7,787
17.4
10,016
-13.8
2,424
-10.8
8,579
-3.6
6,792
5.2
Aug-13
8,382
7.6
9,049
-9.7
2,254
-7.0
8,149
-5.0
6,342
-6.6
Sep-13
8,168
-2.6
9,618
6.3
2,469
9.6
8,216
0.8
6,838
7.8
Oct-13
8,853
8.4
11,473
19.3
2,605
5.5
8,936
8.8
6,814
-0.3
Nov-13
8,821
-0.4
11,154
-2.8
2,616
0.4
8,651
-3.2
6,562
-3.7
Dec-13
9,518
7.9
11,385
2.1
2,643
1.0
8,834
2.1
6,567
0.1
Jan-14
9,957
4.6
10,238
-10.1
2,539
-3.9
8,453
-4.3
6,518
-0.7
Feb-14
10,339
3.8
10,765
5.1
2,535
-0.2
8,426
-0.3
6,484
-0.5
Mar-14
9,298
-10.1
12,742
18.4
2,843
12.1
9,486
12.6
6,971
7.5
Source: BSE, NSE
70
Chart 2.7: Movement of Sectoral Indices of NSE
Source: NSE
III. Turnover in Indian Stock Market

total turnover. MCX-SX and Calcutta Stock
Exchange were the only other stock exchanges
which recorded turnover during 2013-14. The
turnover at other stock exchanges was nil. The
turnover at BSE declined by 4.9 percent while
that at NSE increased by 3.7 percent in 201314 over the previous year. On a month-wise
basis, both BSE and NSE recorded the highest
turnover in March 2014 followed by January
2014 (Table 2.15).
The trading volumes picked up in 201314 consistent with the uptrend witnessed in
the current year. The turnover of all stock
exchanges in the cash segment increased by
2.4 percent to `33,41,416 crore in 2013-14 from
`32,61,701 crore in 2012-13 (Table 2.14). BSE
and NSE together contributed 99.7 percent of
the turnover, of which NSE accounted for 84.1
percent in the total turnover in cash market
whereas BSE accounted for 15.6 percent of the
71
Table 2.14: Exchange-wise Cash Segment Turnover (` crore)

Stock Exchange
2011-12
2012-13
2013-14
Percentage Share
Recognized Stock Exchanges

Ahmedabad
Na
Na
Na
Na
6,67,498
5,48,774
5,21,664
15.6
Bangalore
Na
Na
Na
Na
Bhubaneswar
Na
Na
Na
Na
Cochin
Na
Na
Na
Na
Coimbatore
Na
Na
Na
Na
Delhi
Na
Na
Na
Na
Gauhati
Na
Na
Na
Na
ISE
Na
Na
Na
Na
Jaipur
Na
Na
Na
Na
5,991
4,614
79
0.0
Ludhiana
Na
Na
Na
Na
Madras
Na
Na
Na
Na
MCX
Na
33
11,185
0.3
MPSE
Na
Na
Na
Na
28,10,892
27,08,279
28,08,488
84.1
OTCEI
Na
Na
Na
Na
Pune
Na
Na
Na
Na
UPSE
Na
Na
Na
Na
Vadodara
Na
Na
Na
Na
34,84,381
32,61,700
33,41,416
100.0
BSE
Calcua
NSE
Total
Note: Coimbatore Stock Exchange has been granted exit by SEBI vide order dated April 03, 2013.
Source: Various Stock Exchanges
72
Table 2.15: Turnover at BSE, NSE and MCX-SX: Cash Segment

Year /
Month
BSE
NSE
MCX-SX
Turnover
(` crore)
Percentage
Variation
Turnover
(` crore)
Percentage
Variation
Turnover
(` crore)
Percentage
Variation
Total
Turnover
(` crore)
8
2008-09
11,00,074
-30.3
27,52,023
-22.5
Na
Na
38,52,097
2009-10
13,78,809
25.3
41,38,023
50.4
Na
Na
55,16,833
2010-11
11,05,027
-19.9
35,77,410
-13.5
Na
Na
46,82,437
2011-12
6,67,498
-39.6
28,10,893
-21.4
Na
Na
34,78,390
2012-13
5,48,774
-17.8
27,08,279
-3.7
Na
Na
32,57,054
2013-14
5,21,664
-4.9
28,08,488
3.7
11,185
Na
33,41,337
Apr-13
40,980
3.1
2,10,799
-0.8
33
Na
2,51,812
May-13
49,996
22.0
2,44,392
15.9
2,135
6,290.0
2,96,523
Jun-13
36,377
-27.2
2,07,944
-14.9
2,972
39.2
2,47,294
Jul-13
41,535
14.2
2,43,390
17.0
1,041
-65.0
2,85,967
Aug-13
40,876
-1.6
2,50,758
3.0
1,086
4.3
2,92,719
Sep-13
39,898
-2.4
2,43,576
-2.9
990
-8.8
2,84,464
Oct-13
41,018
2.8
2,37,908
-2.3
1,119
13.0
2,80,045
Nov-13
40,768
-0.6
2,17,782
-8.5
624
-44.2
2,59,174
Dec-13
43,566
6.9
2,30,817
6.0
251
-59.7
2,74,635
Jan-14
49,673
14.0
2,55,630
10.8
268
6.5
3,05,571
Feb-14
34,852
-29.8
1,88,751
-26.2
249
-7.0
2,23,852
Mar-14
62,125
78.3
2,76,741
46.6
416
66.9
3,39,281
Calcutta /Howrah accounted for 7.4 percent

of the turnover. On the other hand at BSE,
Calcutta and Ahmedabad accounted for 6.8
percent and 5.5 percent of the total turnover
respectively. The top five cities accounted for
83.9 percent of the turnover at NSE during
2013-14 compared to 86.3 percent in 201213. At BSE, 78.2 percent of the turnover is
contributed by top five cities during 2013-14.
At MCX-SX, Hyderabad accounted for the
maximum share in turnover at 41.5 percent
while the top five cities contributed 86.9
percent of the turnover at MCX-SX.
Widening the geographical reach of

capital markets is one of the important aspect
of development of securities markets in
India (Table 2.16). On-line trading facilities,
dematerialised securities and electronic IPO
application system are a few of the features
that catalyse the penetration of equity
investment culture into the farthest corners
of a diverse nation like India. About 56.9
percent of the total turnover of BSE and 59.5
percent of the total turnover at NSE was
concentrated in Mumbai and Thane. At NSE,
Delhi/Ghaziabad contributed 9.0 percent and
73
Table 2.16: City-wise Turnover of Top 20 Cities in Cash Segment during 2013-14
BSE
NSE
Turnover Percentage
(` crore) Share in Cash
Turnover
City
City
Mumbai
2,96,675
56.9
Calcua
35,444
6.8
Ahmedabad
28,690
Other
Mumbai /
Thane
MCX-SX
Turnover Percentage
Turnover
5
City
Turnover Percentage
Turnover
8
Hyderabad/
Secunderabad/Kukatpally
4,643
41.5
16,71,461
59.5
Delhi/Ghaziabad
2,53,000
9.0
Mumbai /
Thane
4,404
39.4
5.5
Calcua /
Howrah
2,08,161
7.4
Calcua /
Howrah
291
2.6
24,452
4.7
Hyderabad/
Secunderabad/Kukatpally
1,16,840
4.2
Ahmedabad
219
2.0
New Delhi
22,822
4.4
Ahmedabad
1,06,206
3.8
Delhi/Ghaziabad
164
1.5
Rajkot
17,104
3.3
Gurgaon
50,130
1.8
Ghaziabad
77
0.7
Ghaziabad/
Dadri
6,213
1.2
Bangalore
44,899
1.6
Rajkot
36
0.3
Surat
4,763
0.9
Cochin/
Ernakulam/
Parur/Kalamserry/
Alwaye
39,465
1.4
Gurgaon
29
0.3
Jaipur
4,539
0.9
Chennai
37,069
1.3
Baroda
18
0.2
Kanpur
3,686
0.7
Rajkot
29,289
1.0
Noida
0.1
Vadodara
3,655
0.7
Chandigarh/
Mohali/
Panchkula
14,097
0.5
Cochin/
Ernakulam/
Parur/Kalamserry/Alwaye
0.0
Chennai
3,173
0.6
Indore
13,875
0.5
Chandigarh/
Mohali/
Panchkula
0.0
Pune
2,748
0.5
Baroda
11,830
0.4
Ludhiana
0.0
Indore
2,356
0.5
Jaipur
11,640
0.4
Bangalore
0.0
Jodhpur
2,304
0.4
Coimbatore
5,956
0.2
Gajuwaka/
Vishakhapatnam
0.0
Hyderabad
1,736
0.3
Ghaziabad
5,915
0.2
Chennai
0.0
Girwa
1,623
0.3
Gajuwaka/
Vishakhapatnam
5,233
0.2
Pune
0.0
Banguluru
1,378
0.3
Pune
5,218
0.2
Jaipur
0.0
Nagpur
1,305
0.3
Ludhiana
2,312
0.1
Indore
0.0
Jamnagar
1,219
0.2
Noida
0.0
Coimbatore
0.0
4,65,881
89.3
26,32,593
93.7
9,894
88.5
Total
Source: BSE,NSE and MCX-SX
74
IV. Market Capitalisation
In BSE, the market capitalisation of the

Sensex scrips appreciated by 21.7 percent in
2013-14. Market capitalisation of BSE Teck
index rose highest by 31.7 percent followed
by BSE Sensex in 2013-14 over the previous
year.
Market capitalisation figures are

reflective of the expanding stock market
activities. The market capitalisation of BSE
has been higher than that of NSE in India
reflecting large number of shares being listed
in BSE. The market capitalisation of BSE rose
by 16.1 percent to `74,15,296 crore in 201314 from `63,87,887 crore in 2012-13 (Table
2.17). On the other hand, at NSE market
capitalisation increased by 16.6 percent to
`72,77,720 crore in 2013-14 from `62,39,035
crore in 2012-13. The growth at both BSE
and NSE was strongest in March 2014. The
year saw some months of decline while
experiencing mostly an uptrend.
Market capitalisation of the shares

included in CNX Nifty index increased by
21.0 percent during the financial year. (Table
2.18). The market capitalisation increased
for all the indices analysed for NSE in 201314 compared to the previous year. At NSE,
among sectoral indices analysed, rise in
market capitalisation was the highest for
CNX Midcap (51.0 percent) followed by CNX
IT (36.6 percent).
Table 2.17: Market Capitalisation at BSE (` crore)

Year/
Month
All List- Percented Com- age Variation

panies
3
BSE
Sensex
4
Percent- BSE Teck Percentage Variage Variation

ation
5
2008-09
30,86,075
-39.9
15,07,742
-32.2
4,10,923
-39.7
2,33,895
-38.0
9,49,211
-17.7
2009-10
61,65,619
99.8
26,17,900
73.6
7,40,817
80.3
5,54,127
136.9
17,33,662
82.6
2010-11
68,39,084
10.9
29,44,451
12.5
8,69,794
17.4
6,89,751
24.5
19,48,555
12.4
2011-12
62,14,941
-9.1
14,59,141
-50.4
3,45,958
-60.2
3,90,614
-43.4
16,03,085
-17.7
2012-13
63,87,887
2.8
16,07,224
10.1
3,91,259
13.1
4,40,395
12.7
14,38,155
-10.3
2013-14
74,15,296
16.1
19,55,490
21.7
5,15,301
31.7
5,07,014
15.1
14,27,356
-0.8
Apr-13
66,45,785
4.0
16,65,038
3.6
3,48,477
-10.9
4,85,969
10.3
15,27,857
6.2
May-13
66,78,737
0.5
16,85,820
1.2
3,61,616
3.8
4,92,193
1.3
14,88,047
-2.6
Jun-13
64,05,118
-4.1
16,55,225
-1.8
3,74,824
3.7
4,55,541
-7.4
13,77,860
-7.4
Jul-13
62,63,106
-2.2
16,55,287
0.0
4,43,120
18.2
3,93,474
-13.6
12,18,421
-11.6
Aug-13
60,30,078
-3.7
15,84,253
-4.3
4,62,977
4.5
3,52,227
-10.5
11,15,578
-8.4
Sep-13
63,86,134
5.9
16,66,323
5.2
4,60,356
-0.6
3,74,881
6.4
12,17,571
9.1
Oct-13
68,44,233
7.2
18,00,318
8.0
4,99,594
8.5
4,47,555
19.4
12,97,647
6.6
Nov-13
68,10,475
-0.5
17,75,253
-1.4
4,91,905
-1.5
4,35,437
-2.7
12,98,792
0.1
Dec-13
70,44,258
3.4
18,39,438
3.6
5,28,571
7.5
4,41,470
1.4
13,26,067
2.1
Jan-14
67,44,398
-4.3
17,80,806
-3.2
5,40,780
2.3
3,97,461
-10.0
12,36,069
-6.8
Feb-14
68,93,083
2.2
18,43,256
3.5
5,52,703
2.2
4,27,321
7.5
12,38,390
0.2
Mar-14
74,15,296
7.6
19,55,490
6.1
5,15,301
-6.8
5,07,014
18.6
14,27,356
15.3
75
Percent- BSE PSU Percentage Variage Variation

ation
Source: BSE
Bankex
10
11
Table 2.18: Market Capitalisation at NSE (` crore)

Year/
Month
All listed PercentCompa- age Variation

nies
3
CNX
Nifty
4
Percent- CNX Mid Percent- CNX IT Percentage VariCap

age Variage Variation
ation
ation
5
CNX
Bank
Percentage Variation
10
11
2008-09
28,96,194
-40.4
18,92,629
-33.6
2,73,627
-40.9
2,01,810
-37.5
2,24,132
-36.1
2009-10
60,09,173
107.5
33,00,069
74.4
6,95,714
154.3
5,17,626
156.5
5,20,665
132.3
2010-11
67,02,616
11.5
42,06,042
27.5
10,53,214
51.4
10,47,434
102.4
6,10,563
17.3
2011-12
60,96,518
-9
35,16,863
-16.4
8,58,665
-18.5
6,04,581
-42.3
5,84,359
-4.3
2012-13
62,39,035
2.3
37,46,177
6.5
7,84,403
-8.6
7,10,397
17.5
6,52,629
11.7
2013-14
72,77,720
16.6
45,34,597
21.0
11,84,322
51.0
9,70,460
36.6
7,29,345
11.8
Apr-13
64,90,373
4.0
38,46,019
2.7
9,84,691
25.5
5,22,279
-26.5
7,20,637
10.4
May-13
65,18,227
0.4
38,72,310
0.7
9,83,689
-0.1
5,59,973
7.2
7,12,778
-1.1
Jun-13
62,48,442
-4.1
37,84,042
-2.3
9,22,987
-6.2
5,70,606
1.9
6,63,248
-6.9
Jul-13
60,98,779
-2.4
37,49,870
-0.9
8,70,449
-5.7
6,83,401
19.8
5,72,719
-13.6
Aug-13
58,46,627
-4.1
35,99,664
-4.0
8,39,181
-3.6
7,45,348
9.1
5,13,848
-10.3
Sep-13
61,91,626
5.9
39,17,459
8.8
9,59,260
14.3
8,41,095
12.8
5,46,125
6.3
Oct-13
66,91,531
8.1
42,46,394
8.4
10,29,564
7.3
9,05,226
7.6
6,44,459
18.0
Nov-13
66,44,844
-0.7
41,46,727
-2.3
10,50,144
2.0
8,88,472
-1.9
6,31,548
-2.0
Dec-13
68,84,167
3.6
42,59,658
2.7
10,96,688
4.4
9,72,117
9.4
6,44,297
2.0
Jan-14
65,90,785
-4.3
41,10,730
-3.5
10,28,462
-6.2
10,12,901
4.2
5,75,455
-10.7
Feb-14
67,25,934
2.1
42,06,042
2.3
10,53,214
2.4
10,47,434
3.4
6,10,563
6.1
Mar-14
72,77,720
8.2
45,34,597
7.8
11,84,322
12.4
9,70,460
-7.3
7,29,345
19.5
Source: NSE
V.
Stock Market Indicators
The ratios such as market capitalisation

to GDP (m-cap ratio), traded value to GDP
(traded value ratio) and price to earnings per
share (P/E ratio) are monitored to gauge the
extent of development of stock market. After
declining for three successive years the market
capitalisation ratios have improved during
2013-14. The BSE market capitalisation to
GDP ratio has increased from 63.2 percent in
2012-13 to 65.3 percent in 2013-14. Similarly,
at NSE also the ratio has increased from

61.7 percent in 2012-13 to 64.1 percent in
2013-14 (Table 2.19). The all-India cash
turnover to GDP ratio however declined
further in 2013-14 to 29.5 percent from
32.2 percent in 2012-13. In the derivative
segment, there was a substantial increase in
the turnover-GDP ratio from 382.6 percent in
2012-13 to 417.7 percent in 2013-14.
76
Table 2.19: Select Ratios Relating to Stock Market (Percent)

Total Turnover to GDP Ratio
BSE Market
Capitalisation to GDP
Ratio
NSE Market
Capitalisation to GDP
Ratio
Cash Segment
(All-India)
Derivatives Segment
(BSE+NSE)
2003-04
43.4
40.5
58.7
77.6
2004-05
54.3
50.7
53.4
82.1
2005-06
84.4
78.6
66.8
134.7
2006-07
85.5
81.2
70.0
178.9
2007-08
109.5
103.5
109.3
284.1
2008-09
55.3
51.9
69.0
197.4
2009-10
95.5
93.1
85.4
273.5
2010-11
87.7
86.0
60.1
375.2
2011-12
69.2
67.9
38.8
358.3
2012-13
63.2
61.7
32.2
382.6
2013-14
65.3
64.1
29.5
417.7
Year
Source: Various Stock Exchanges, Central Statistical Office
Table 2.20: Price to Earnings Ratio

Year/
Month
1
BSE
Sensex
BSE 100
CNX
Nifty
CNX Mid
Cap
5
CNX IT
CNX
Bank
CNX PSE
SX40
2008-09
13.7
15.3
14.3
9.8
11.5
7.7
18.1
Na
2009-10
21.3
21.1
22.3
15
23.5
17.7
15.3
Na
2010-11
21.2
20.7
22.1
17.7
26.6
18.5
15
Na
2011-12
17.8
18.8
18.7
18.1
20.9
15.3
15.4
Na
2012-13
16.9
16.0
17.6
16.7
19.3
13.6
9.9
Na
2013-14
18.3
17.8
18.9
14.3
21.3
14.3
9.6
20.3
Apr-13
17.5
18.6
17.9
17.3
15.8
14.8
10.5
19.2
May-13
17.6
16.7
18.0
17.8
16.9
14.6
10.1
19.6
Jun-13
17.2
16.2
17.8
16.3
17.6
13.7
9.3
19.2
Jul-13
17.2
15.9
17.1
15.8
20.3
11.6
8.4
18.8
Aug-13
17.0
14.4
15.8
12.7
21.6
10.3
6.4
17.2
Sep-13
16.8
15.9
16.8
12.9
21.7
11.0
6.9
18.2
Oct-13
18.3
17.3
18.2
13.8
22.4
12.9
7.3
19.1
Nov-13
17.6
16.9
18.4
14.0
21.9
12.9
8.4
19.4
Dec-13
18.2
17.3
18.7
14.8
23.7
13.2
8.7
20.5
Jan-14
17.1
16.3
17.7
14.0
23.2
11.7
8.2
19.3
Feb-14
17.2
16.4
17.7
14.1
23.6
12.0
8.6
19.3
Mar-14
18.3
17.8
18.9
14.3
21.3
14.3
9.6
20.3
77
was lowest in September 2013 while that of

CNX Nifty was lowest in August 2013. During
2013-14, except CNX Mid Cap and CNX PSE,
there was an increase in the P/E ratios of all
the indices analysed. P/E ratio of CNX IT was
high as compared to other sectoral and midcap indices.
Price-earnings ratio (P/E) is reflective

of the valuation of shares (Table 2.20). At
the end of March 2014, the P/E ratio of BSE
Sensex and S&P CNX Nifty were 18.3 and
18.9 respectively as compared to 16.9 and 17.6
respectively as of end March 2013. Monthwise data indicate P/E ratios of BSE Sensex
Table 2.21: Price to Book-Value Ratio
Year/
Month
BSE
Sensex
BSE 100
CNX
Nifty
CNX Mid
Cap
CNX IT
CNX
Bank
CNX PSE
SX40
2008-09
2.7
2.5
2.5
1.3
3.5
1.2
2.2
Na
2009-10
3.9
3.7
2.7
7.2
2.5
3.1
Na
2010-11
3.7
3.7
3.7
2.3
7.4
2.8
2.8
Na
2011-12
3.5
3.1
1.9
5.9
2.3
2.1
Na
2012-13
2.9
2.5
1.7
5.8
2.3
1.8
Na
2013-14
2.7
2.4
3.2
2.0
6.6
2.2
1.7
3.6
Apr-13
3.0
2.6
3.1
1.8
4.9
2.6
1.9
3.4
May-13
3.0
2.6
3.2
1.7
5.3
2.6
1.9
3.5
Jun-13
3.0
2.6
3.0
1.6
5.3
2.3
1.8
3.2
Jul-13
3.0
2.5
2.8
1.5
5.5
1.8
1.6
3.2
Aug-13
2.9
2.5
2.7
1.5
6.0
1.7
1.5
2.9
Sep-13
2.6
2.3
2.8
1.5
5.8
1.7
1.5
3.1
Oct-13
2.8
2.4
3.0
1.7
6.2
2.0
1.6
3.3
Nov-13
2.6
2.3
2.9
1.6
6.2
1.9
1.6
3.3
Dec-13
2.7
2.4
3.0
1.7
6.6
2.0
1.6
3.4
Jan-14
2.5
2.2
2.9
1.6
6.8
1.8
1.5
3.3
Feb-14
2.6
2.3
3.0
1.7
7.1
1.9
1.5
3.4
Mar-14
2.7
2.4
3.2
2.0
6.6
2.2
1.7
3.6
P/B ratio at the end of 2013-14 was the highest

for the CNX IT index at 6.6, followed by CNX
Nifty at 3.2, BSE Sensex at 2.7, and BSE 100 at
2.4 (Table 2.21).
The price to book value (P/B) ratio is

another important indicator which measures
the returns left for the shareholders after
providing for liabilities of a company. The
78
Chart 2.8: P/E ratio of International Stock Market Indices
consumer confidence slumped in September

to a four-month low, further influenced the
market sentiment. Expectations that the
US governments partial shutdown and
US political impasse could lead to the US
Federal Reserve postponing tapering of
monetary stimulus to the US economy also
contributed to the volatility.
International comparison of P/E ratios

indicates that Indian markets are reasonably
priced compared to emerging and developed
markets. Among the developed markets
NASDAQ index of USA, Nikkei index of
Japan and CAC index of France had the
highest P/E ratios. In the emerging markets
category, Hermes index of Egypt, BUX index
of Hungary and MEXBOL index of Mexico
had the highest P/E ratios (Chart 2.8).
The annualised volatility of BSE Sensex,

measured by standard deviation of log
returns, increased to 17.5 percent in 2013-14
from 12.5 percent in 2012-13. Similar trend was
also observed for CNX Nifty which moved
to 18.1 percent from 12.9 percent during the
same period. Month-wise analysis of the
volatility of benchmark and other indices
show that September 2013 has been the most
volatile month in 2013-14 (Table 2.22). The
lowest volatility in the benchmark indices
was seen in March 2014. BSE Small cap index
and CNX Nifty Junior witnessed the highest
volatility in August 2013. Compared to other
indices, volatility in CNX Bank index was
high throughout the year.
VI. Volatility in Stock Markets

The Indian Equity markets boomed
back in 2013-14 to not only surpass the
previous year benchmarks but also reach
an all time high in terms of benchmark
indices and market capitalisation in
secondary markets. A host of domestic and
global factors have facilitated this revival
that includes various politico-economic
indicators as well. While lower trade deficit,
lower CAD and lower inflation fuelled the
buoyancy outlining the investor optimism.
Mixed cues from overseas markets after US
79
Table 2.22: Average Daily Volatility of Benchmark Indices (in Percent)

Month
BSE
Sensex
CNX
Nifty
BSE 100
BSE
Small
Cap
CNX
500
CNX
Nifty
Junior
CNX
BANK
SX40
Apr-13
1.03
0.99
0.98
0.97
0.91
0.90
1.40
0.89
May-13
1.12
1.15
1.11
0.88
1.07
0.93
1.53
1.02
Jun-13
1.24
1.23
1.23
0.89
1.18
1.30
1.60
1.17
Jul-13
0.97
1.03
1.08
0.88
1.01
1.20
1.87
0.92
Aug-13
1.71
1.71
1.75
1.16
1.62
1.76
2.39
1.71
Sep-13
1.80
1.90
1.78
0.74
1.68
1.52
3.43
1.78
Oct-13
0.84
0.91
0.87
0.54
0.83
0.86
1.77
0.77
Nov-13
1.07
1.10
1.08
0.79
1.01
1.02
1.80
1.02
Dec-13
0.81
1.25
0.80
0.62
1.16
1.19
1.63
0.71
Jan-14
0.80
0.79
0.82
1.09
0.81
1.12
1.40
0.72
Feb-14
0.68
0.70
0.66
0.44
0.64
0.63
1.06
0.53
Mar-14
0.66
0.72
0.66
0.52
0.59
0.67
1.45
0.60
Annualised Volatility
17.5
18.1
17.6
13.1
16.9
17.9
30.5
16.5
Note: Average Daily Volatility is computed as the standard deviation of the logarithmic returns of the closing levels of the
indices.
Chart 2.9: Annualised Volatility of International Stock Market Indices in 2013-14 (in Percent)
Note: Annualised volatility is calculated as Daily Volatility for the financial year multiplied by the square root of number of
trading days during the period
80
Indian benchmark indices was a tad higher

than the comparative emerging markets.
Among the developed markets, the
annualised volatility was highest in Japan
(26.9 percent) followed by Hong Kong (15.9
percent) and Euro region (15.9 percent).
A comparison of volatility of indices

across the developed and emerging market
indices is shown in Table 2.23 and Chart
2.9. Among the emerging markets, Russia
depicted the highest volatility (25.8 percent),
followed by Argentina (25.5 percent) and
Indonesia (21.8 percent). The volatility in
Country
Index
Apr.
May.
Jun.
USA
USA
UK
Europe
France
Germany
Australia
Japan
Hong Kong
Singapore
DJIA
Nasdaq
FTSE 100
DJ Stoxx
CAC
DAX
AS30
NKY
HIS
STI
0.7
1.1
0.8
1.3
1.4
1.2
0.9
1.5
1.1
0.4
0.6
0.7
0.9
0.9
0.9
0.9
0.7
2.6
1.0
0.7
Taiwan
Russia
Malaysia
South Korea
Thailand
China
S. Africa
Brazil
Colombia
Hungary
Egypt
Indonesia
Argentina
Chile
Mexico
India
India
TWSE
CRTX
KLCI
KOSPI
SET
SHCOMP
JALSH
IBOV
IGBC
BUX
HERMES
JCI
IBG
IPSA
MEXBOL
BSE Sensex
CNX Nifty
0.9
1.3
0.4
0.8
1.1
1.0
1.1
1.5
1.0
0.9
0.7
0.6
1.2
0.8
1.0
1.1
1.1
0.7
1.6
0.9
0.7
0.9
0.8
1.1
1.0
0.6
0.6
0.9
1.1
2.0
0.6
0.9
1.1
1.2
Jul.
Aug.
Sep.
Oct.
6
7
8
9
DEVELOPED MARKETS
1.1
0.4
0.5
0.6
0.8
1.0
0.5
0.8
0.5
0.9
1.2
0.9
0.8
0.5
0.6
1.4
1.0
0.9
0.8
0.8
1.4
1.0
0.9
0.8
0.8
1.3
1.0
0.9
0.7
0.6
1.1
0.9
0.7
0.6
0.7
2.8
1.5
1.8
1.3
1.3
1.4
1.2
1.0
0.9
0.8
1.0
0.7
0.7
0.9
0.4
EMERGING MARKETS
1.1
1.0
0.8
0.6
0.6
1.6
1.4
1.1
1.4
0.9
0.7
0.4
0.8
0.4
0.3
1.2
0.9
0.9
0.5
0.6
1.7
1.6
1.3
1.8
1.0
1.6
1.3
0.9
1.2
1.1
1.6
1.1
0.9
0.8
0.6
1.7
1.6
1.5
1.5
1.1
1.2
1.0
0.6
0.4
0.4
1.1
1.5
1.1
0.8
0.7
1.8
2.2
1.5
0.9
0.9
2.3
1.5
2.2
2.1
0.8
1.1
1.3
1.1
1.6
2.0
1.3
1.1
1.3
1.5
0.7
1.6
1.0
1.0
1.3
1.1
1.2
1.0
1.7
1.8
0.8
1.3
1.0
1.8
1.9
0.9
Nov.
Dec.
Jan.
Feb.
Mar.
Annualised
Volatility
Table 2.23: Trends in Daily Volatility of International Stock Market Indices during 2013-14 (in Percent)
10
11
12
13
14
15
0.5
0.8
0.5
0.6
0.6
0.4
0.6
1.1
1.0
0.4
0.7
0.6
0.7
1.1
1.1
1.0
0.8
1.2
0.6
0.6
0.7
1.0
0.6
1.0
0.9
0.9
0.7
1.7
0.9
0.6
0.8
0.9
0.6
0.7
0.6
0.8
0.7
1.9
1.1
0.6
0.7
0.9
0.8
1.3
1.2
1.4
0.6
1.4
1.0
0.6
10.8
13.1
12.2
15.9
15.5
15.3
11.8
26.9
15.9
10.5
0.7
1.2
0.4
0.8
1.2
1.0
0.8
1.2
1.1
1.0
1.0
1.0
2.2
1.0
0.9
1.1
1.1
0.5
0.8
0.4
0.6
0.8
0.9
1.0
1.1
0.8
0.9
0.8
1.0
1.4
0.6
0.6
0.8
0.8
0.5
1.2
0.5
0.8
1.6
0.9
0.7
1.1
0.6
1.0
1.0
1.3
1.7
1.0
0.8
0.8
0.8
0.8
1.3
0.5
0.7
0.8
1.1
0.7
1.5
1.0
1.2
0.8
0.7
1.8
0.8
1.0
0.7
0.7
0.6
3.9
0.4
0.7
0.6
1.1
0.8
1.3
0.9
1.8
1.4
1.1
1.1
0.9
0.9
0.7
0.7
11.6
25.8
8.7
12.5
21.1
16.9
14.9
21.4
13.4
17.3
19.7
21.8
25.5
15.7
16.4
17.5
18.1
Notes: 1) Daily volatility is computed as the standard deviation of daily returns on closing values of indices for the respective
months.
2) Annualised volatility is calculated as Daily Volatility for the financial year multiplied by the square root of number of
trading days during the period.
81
VII. Trading Frequency

Stock market liquidity is reflected in
the trading frequency of the stocks at NSE
and BSE. The number of companies listed
at BSE at the end of March 2014 was 5,336.
At NSE, the number of companies listed
was 1,688 as of end March 2014. Trading
frequency improved marginally at both
the stock exchanges in 2013-14 over the
previous financial year. During 2013-14,
the number of securities traded in BSE was
4,333 as compared to 4,146 in 2012-13 (Table
2.24). Similarly, the number of securities

traded in NSE was higher at 1,648 in 201314 as compared to 1,637 in 2012-13. The
percentage share of securities traded at BSE
above 100 days decreased from 78.0 percent
in 2012-13 to 66.8 percent in 2013-14. At
NSE, this percentage decreased from 95.4
percent in 2012-13 to 89.1 percent in 201314. The percentage share of securities traded
for less than 10 days was 11.0 percent at BSE
and 2.1 percent at NSE in 2013-14.
Table 2.24: Trading Frequency of Listed Stocks

Trading
Frequency
(Range of
Days)
1
Above 100
2012-13
2013-14
BSE
NSE
BSE
NSE
No. of
Shares
Traded
Percentage
of Total
No. of
Shares
Traded
Percentage
of Total
No. of
Shares
Traded
Percentage
of Total
No. of
Shares
Traded
Percentage
of Total
3,232
78.0
1,561
95.4
2,893
66.8
1,469
89.1
91-100
48
1.2
0.2
93
2.2
17
1.0
81-90
46
1.1
0.4
77
1.8
15
0.9
71-80
67
1.6
0.3
89
2.1
15
0.9
61-70
72
1.7
0.3
108
2.5
25
1.5
51-60
55
1.3
0.5
98
2.3
15
0.9
41-50
73
1.8
0.2
97
2.2
17
1.0
31-40
65
1.6
0.2
113
2.6
13
0.8
21-30
58
1.4
0.4
126
2.9
14
0.8
11-20
70
1.7
0.2
162
3.7
13
0.8
0-10
360
8.7
32
2.0
477
11.0
35
2.1
Total
4,146
100
1,637
100
4,333
100
1,648
100
Note : MCX-SX data not significant, therefore not included

Source: BSE, NSE
82
Table 2.25: Share of Brokers, Securities and Participants in Cash Market Turnover (2013-14)
S.
No.
Particulars
Percentage Share
BSE
NSE
MCX-SX
Share of Top 10 Brokers in annual cash market turnover
24.6
24.9
93.7
Share of Top 10 Scrips/securities in annual cash market turnover
21.9
26.2
55.0
Share of participants in annual cash market turnover

20.5
22.7
35.7
14.4
5.4
0.0
iii) FIIs
4.8
22.9
0.0
iv) MFs
0.9
4.1
0.0
59.4
44.9
64.3
100.0
100.0
100.0
i)
Proprietary trades
ii) Domestic Institutions (excluding MFs)
v) Others
Total of (i) to (v)
Notes: 1) Domestic Institutions (excluding mutual funds) includes banks, DFIs, insurance companies and New
Pension Scheme.
2) Others Include Retail, NRI and QFI.
market turnover at MCX-SX for 2013-14 show

that proprietary trades and others (including
individuals, partnership firms, HUFs, Trusts,
NRIs, etc) contributed 35.7 percent and 64.3
percent respectively while other categories
had nil share. (Table 2.25)
Share of top 10 brokers in annual cash

market turnover in 2013-14 at NSE and BSE
was 24.9 and 24.6 percent respectively. For
MCX-SX, the respective figure stood at 93.7
percent. Share of top 10 securities in annual
cash market turnover in 2013-14 at NSE,
BSE, MCX-SX was 26.2, 21.9 percent and
55.0 percent respectively. At NSE, share of
participants in annual cash market turnover
in 2013-14 shows that proprietary trades,
domestic institutions (excluding mutual
funds), FIIs, and mutual funds contributed
22.7 percent, 5.4 percent, 22.9 percent and 4.1
percent respectively whereas others (including
NRIs, etc) contributed 44.9 percent. Similarly,
the data for BSE annual cash market turnover
for 2013-14 shows that proprietary trades,
domestic institutions (excluding mutual
funds), FIIs, and mutual funds contributed
20.5 percent,14.4 percent, 4.8 percent and 0.9
percent respectively whereas others (including
NRIs, etc) contributed 59.4 percent. The
data for share of participants in annual cash
VIII. Activities of Stock Exchanges

Over the years, NSE and BSE have
emerged as the nation-wide stock exchanges
of the country contributing more than 99
percent of the total turnover. During the
year 2013-14, only Calcutta Stock Exchange
and MCX-SX were the exchanges apart from
NSE and BSE which recorded some turnover
(Table 2.26).
During 2013-14, the all India turnover
at the stock exchanges in terms of number
of shares traded declined by 10.1 percent
on the top of decline of 6.4 percent during
2012-13. While the number of shares traded
and delivered at both BSE and NSE declined,
the value of shares delivered increased over
the previous year. In the Calcutta stock
83
NSE had a share of 64.7 percent in the

quantity of shares delivered followed by BSE
(35.3 percent). In the total value of shares
delivered, share of NSE was 82.0 percent,
followed by BSE at 18.0 percent.
exchange, shares traded and delivered along

with the value of shares delivered fell during
the financial year. Of the total quantity of
shares traded, NSE had the largest share of
75.7 percent, followed by BSE (24.2 percent).
Table 2.26: Trading Statistics of Stock Exchanges in Cash Segment

Shares
Stock Exchange
Traded (lakh)
Value of Shares Delivered

(` crore)
Delivered (lakh)
2012-13
2013-14
2012-13
2013-14
2012-13
2013-14
Recognized Stock Exchanges

Ahmedabad
Na
Na
Na
Na
Na
Na
5,63,883
4,79,951
2,43,217
2,31,247
1,68,490
1,80,243
(25.5)
(24.2)
(34.5)
(35.3)
(17.4)
(18.0)
Bangalore
Na
Na
Na
Na
Na
Na
Bhubaneswar
Na
Na
Na
Na
Na
Na
1,776
37
1,628
35
2,876
52
BSE
Calcua
(0.08)
(0.00)
(0.23)
(0.01)
(0.3)
(0.01)
Cochin
Na
Na
Na
Na
Na
Na
Coimbatore
Na
Na
Na
Na
Na
Na
Delhi
Na
Na
Na
Na
Na
Na
Gauhati
Na
Na
Na
Na
Na
Na
ISE
Na
Na
Na
Na
Na
Na
Jaipur
Na
Na
Na
Na
Na
Na
Ludhiana
Na
Na
Na
Na
Na
Na
Madras
Na
Na
Na
Na
Na
Na
17.1
1,971
0.3
48.2
205
267
(0)
(0.10)
(0)
(0.01)
(0)
(0.03)
Na
Na
Na
Na
Na
Na
16,44,259
15,05,133
4,59,349
4,23,330
7,96,784
8,22,386
(74.4)
(75.7)
(65.23)
(64.7)
(82.3)
(82.0)
OTCEI
Na
Na
Na
Na
Na
Na
Pune
Na
Na
Na
Na
Na
Na
UPSE
Na
Na
Na
Na
Na
Na
Vadodara
Na
Na
Na
Na
Na
Na
22,09,936
19,87,092
7,04,194
6,54,661
9,68,355
10,02,948
MCX
MPSE
NSE
Total
Notes: 1) Figures in parentheses indicate percentage share to total.

2) Coimbatore Stock Exchange has been granted exit by SEBI vide order dated April 03, 2013
84
percent to `1,58,646 crore during 2013-14

from `2,22,019 crore during 2012-13 (Table
2.27). Many of the subsidiaries including M/s
ISE Securities and Services Ltd., M/s OTCEI
Securities Ltd. and M/s. DSE Financial
Services Ltd. recorded a decline in turnover
of over 50 percent.
As many of the Regional Stock

Exchanges (RSE) are dormant, their activities
are mainly routed through the subsidiaries
which have taken up trading membership of
BSE and NSE. During 2013-14, approximately
all of the subsidiaries recorded decline in the
volume of transaction. The total turnover of
all the subsidiaries recorded a decline of 28.5
Table 2.27: Turnover of Subsidiaries of Stock Exchanges

Stock
Exchange
No. of
Subsidiary/ies
Name of the Subsidiary
Turnover of Subsidiary
(`crore)
2012-13
2013-14
Percentage
Variation
Recognised Stock Exchanges

Ahmedabad
ASE Capital Markets Ltd.
18,801
NA
NA
Bangalore
BGSE Financials Ltd.
34,369
31,350
-8.8
Bhubaneswar
Bhubaneswar Stock Exchange
Calcutta
Calcutta Stock Exchange
Cochin
Cochin Stock Brokers Ltd.
3,334
3,905
17.1
Delhi
DSE Financial Services Ltd.
4,655
2,148
-53.9
ISE
ISE Securities and Services Ltd.
64,781
23,132
-64.3
Jaipur
JSEL Securities Ltd.
2,994
2,661
-11.1
Ludhiana
LSE Securities Ltd.
77,176
81,702
5.9
Madras
MSE Financial Services Ltd.
599
468
-21.9
MPSE
MPSE Securities Ltd.
OTCEI
OTCEI Securities Ltd.
97
42
-56.2
Pune
PSE Securities Ltd.
2,120
1,831
-13.6
UPSE
UPSE Securities Ltd.
3,537
2,872
-18.8
Vadodara
VSE Stock Services Ltd.
9,558
8,535
-10.7
2,22,021
1,58,646
-28.5
Total
85
Box 2.1: Testing of soware used in or related to trading and risk management
Soware / system change is a constant feature in the technology driven securities market. Such changes
are driven by a combination of market forces, including the growth of exchanges, the drive for competitive
advantage, new trading instruments and new compliance and regulation requirements.
Requirement of frequent system changes have brought to fore various risks associated with a poorly
developed / tested soware. Technology mishaps that have recently occurred in various capital markets across the
globe have underscored the importance of testing of soware before deployment in production environment.
With the view to streamline and strengthen the process of testing of soware, the following policy decisions
were recently taken by SEBI:
(a)
The process of testing would involve (a) Testing in a simulated test environment provided by the stock
exchange, (b) Mock testing in close-to-real trading environment (c) User Acceptance Test (UAT) by the
stock broker and (d) Submission of System Audit Report to the stock exchange.
(b)
Stock exchange would grant approval to soware aer ensuring that the requirements specied by SEBI /
stock exchange with regard to soware are met. A speedy approval process may be prescribed for certain
cases such as the soware which has already been tested in mock environment, changes which are due to
change in stock exchange trading system, etc.
(c)
Stock exchanges were asked to implement suitable mechanisms to ensure that no soware is used by stock
broker without requisite approval.
(d)
In order to facilitate sucient liquidity for the stock brokers who are testing their systems in the mock
session, all stock brokers that undertake algorithmic trading were advised to participate in the mock trading
sessions, irrespective of the algorithm having undergone change or not.
(e)
Stock brokers are required to give an undertaking to the stock exchanges that every new so ware and any
change thereupon to the trading and/or risk management functionalities of the soware will be tested as
per the framework prescribed by SEBI / stock exchange before deployment of such new / modied soware
in securities market.
(f)
With the view to inculcate high standards of technology risk management among stock brokers, stock
exchanges were advised to apply deterrent penalties in form of nes and suspension to the stock broker
whose system malfunctioned.
IX. Dematerialisation
too, the quantity of dematerialised securities

increased by 16.8 percent from 15,17,926 lakh
in 2012-13 to 17,73,105 lakh in 2013-14. The
quantity of dematerialised shares increased
at the CDSL but both the quantity and value
of shares settled in demat declined. On the
other hand at NSDL, the value of shares
settled in demat increased but the quantity
of shares settled in demat decreased. The
total value of demat settled shares increased
by 6.2 percent from `12,72,531 crore in 201213 to `13,51,886 crore in 2013-14 at NSDL.
However, at CDSL the value of shares settled
in demat decreased by 2.8 percent from
`3,18,559 crore in 2012-13 to `3,09,767 crore
in 2013-14. The ratio of dematerialised equity
shares to total outstanding shares of listed
companies was 83.8 percent at NSDL and
13.8 percent at CDSL at the end of 2013-14.
The enactment of Depositories Act

in August 1996 ushered in the wave of
dematerialisation by the establishment of
depositories. Dematerialisation has been the
bedrock of capital market reforms since then as
it paved the way for successive technological
advancements and simplified the trading,
settlement and record preservation.
At the end of March 2014, there are
130.6 lakh demat accounts at NSDL and
87.8 lakh demat accounts at CDSL. As on
March 31, 2014, 12,210 companies have
signed up for dematerialisation at NSDL and
8,630 at CDSL (Table 2.28). The quantity of
dematerialised securities increased by 15.9
percent to 79,55,034 lakh in 2013-14 from
68,64,758 lakh in 2012-13 at NSDL. At CDSL
86
Table 2.28: Depository Statistics

Particulars
NSDL
CDSL
2012-13
2013-14
2012-13
2013-14
126.9
130.6
83.3
87.8
No. of Companies Signed up (listed and unlisted)
10,844
12,210
8,062
8,630
No. of Companies Available for Demat (listed and unlisted)
10,844
12,210
8,062
8,630
Quantity of Securities in demat form (lakh) [at the end of period]
68,64,758
79,55,034
15,17,926
17,73,105
Value of Securities in demat form (` crore) [at the end of period]
76,79,027
89,39,900
9,85,038
10,87,603
7,37,773
6,71,893
4,27,356
4,00,159
Value of Shares Settled in Demat (` crore) [during the year]
12,72,531
13,51,886
3,18,559
3,09,767
Market Capitalisation of Companies in Demat ( ` crore)
64,39,115
75,32,989
65,21,762
74,54,885
82.5
83.8
14.5
13.8
1
No. of Investor Accounts (lakh)
No. of Shares Settled in Demat (lakh) [during the year]
Ratio of dematerialized equity shares to total outstanding shares

(listed)
Notes: 1) Securities includes common equity shares, preferential shares, mutual fund units, debentures and
commercial paper.
2) Securities include those of both listed and unlisted companies.
Source: NSDL, CDSL
to `1,10,214 crore in 2013-14. However, the

dematerialised value of commercial paper
at CDSL declined from `703 crore in 201213 to `143 crore in 2013-14. The number of
active instruments and dematerialised value
of debentures/bonds increased at NSDL and
CDSL in 2013-14 over 2012-13.
Dematerialisation facility is also

extended to instruments like commercial
paper and bonds apart from the equity
shares. The total dematerialised value of
the commercial papers increased at NSDL
but declined at CDSL (Table 2.29). At
NSDL, dematerialised value of commercial
paper rose from `1,08,758 crore in 2012-13
Table 2.29: Depository Statistics: Debentures / Bonds and Commercial Paper

Particulars
Debentures / Bonds
2012-13
1
No. of Issuers
No. of Active Instruments
Demat Value ( ` crore)
Commercial Papers
2013-14
2012-13
2013-14
NSDL
CDSL
NSDL
CDSL
NSDL
CDSL
NSDL
CDSL
742
476
878
519
186
11
165
15
8,993
6,557
9,503
6,807
1,167
83
1,108
82
36,236 14,56,175
38,734
1,08,758
703
1,10,214
143
12,74,193
Source: NSDL, CDSL
The geographical coverage of depository

participants (DPs) of CDSL widened in 201314 while that of NSDL declined marginally.
The DP locations for NSDL were available at
1,565 cities in 2013-14 as compared to 1,581

cities in 2012-13 (Table 2.30). The number of
DP locations improved for CDSL from 1,594
in 2012-13 to 1,714 in 2013-14.
87
Table 2.30: Cities according to Number of DP Locations: Geographical Spread

No. of DP Locations
1
NSDL
CDSL
2012-13
2013-14
2012-13
2013-14
0 > 10
1,386
1,385
1,424
1,541
10-20
87
78
78
72
21-50
67
66
56
62
51-100
23
17
21
20
> 100
18
19
15
19
Total
1,581
1,565
1,594
1,714
Note: The number of DP locations at CDSL, includes locations that have back office connected centres of the DPs.
Source: NSDL, CDSL
X.
DERIVATIVES SEGMENT
(WFE). NSE ranks 3rd in terms of number of

single stock futures traded in 2013 as against
the 4th position in 2012. NSE is the topmost
exchange by number of index options traded
in 2013 from 2nd in 2012 while BSE ranks
number five in the same category, retaining
its position since 2012. The total turnover
in 2013-14 in the derivatives segment was
approximately 14 times of the turnover in
the cash market. NSE had the majority share
in the trading volumes at 80.3 percent while
BSE contributed 19.4 percent and MCX-SX
had a minor share of 0.3 percent.
Financial derivatives have grossed

a central place in the financial markets
worldwide. The activity in derivatives
market has surpassed the growth in other
spheres. The emergence and growth of
Indian derivatives market since its inception
in 2000 has been phenomenal. Within the
given span of time, Indian Exchanges and
Indian Derivative products feature in the
Global rankings.
Globally, derivative products on
volatility indices are widely used by market
participants as tools for risk management
and to hedge against market volatility. SEBI
has permitted introduction of derivatives
on India VIX to National Stock Exchange
(NSE) in January 2014, which is Indias first
volatility Index and is a key measure of
market expectations of near-term volatility.
A.
The total number of contracts traded in

the derivative segment of NSE increased by
13.5 percent to 128.4 crore in 2013-14 from
113.1crore in 2012-13, whereas, at BSE, the
number of contracts traded increased by 15.1
percent from 26.2 crore in 2012-13 to 30.2 crore
in 2013-14. The value of the contracts traded
in the derivative segment of NSE increased
by 21.2 percent to `3.82 crore in 2013-14 from
`3.15 crore in 2012-13, whereas the turnover
at the derivatives segment of BSE increased
by 28.7 percent to `92,19,434 crore in 201314 from `71,63,519 crore in 2012-13. The open
interest in the derivative segment of NSE
increased by 44.7 percent to `1,24,378 crore
at the end of 2013-14 from `85,952 crore at
the end of 2012-13.
Equity Derivatives Segment
The equity derivatives segment has been

effervescent with activity during recent years.
Along with NSE and BSE, MCX-SX which
started trading in equity derivatives in Feb
2013 registered significant volumes in 201314. Indian Exchanges stand out in the list of top
five exchanges on a number of parameters in
2013 report of World Federation of Exchanges
88
Chart 2.10: Derivatives Turnover vis--vis Cash Market Turnover
Source: BSE, NSE
Table 2.31: Trends in Turnover and Open Interest in Equity Derivatives Segment
Year /
Month
No. of Contracts
No. of Contracts
NSE
Open Interest at the End of the Year/Month
Turnover (`crore)
BSE
MCX-SX
NSE
BSE
MCX-SX
NSE
Value (`crore)
BSE MCX-SX
9
10
2008-09
65,73,90,497
4,96,502
Na 1,10,10,482
11,775
Na 32,27,759
22
Na
2009-10
NSE
11
BSE MCX-SX
12
13
57,705
Na
67,92,93,922
9,026
Na 1,76,63,665
234
Na 34,89,790
Na
97,978
Na
2010-11 1,03,42,12,062
5,623
Na 2,92,48,221
154
Na 36,90,373
Na
1,01,816
Na
2011-12 1,20,50,45,464
3,22,22,825
Na 3,13,49,732
8,08,476
Na 33,44,473 28,176
Na
89,049
736
Na
2,75,569 3,15,33,004 71,63,519
8,049 30,41,192 90,075
2,450
85,952
2,299
76
2013-14 1,28,44,24,321 30,19,42,441 50,30,177 3,82,11,408 92,19,434 1,44,729 36,88,003 18,692
2,916
1,24,378
603
97
2012-13 1,13,14,67,418 26,24,43,366
Apr-13
10,38,48,783
1,10,27,434
2,49,154
30,10,163
3,13,950
6,607 39,76,671 85,011
1,084
1,16,182
2,502
31
May-13
11,55,22,180
2,03,57,869
3,97,710
35,03,801
6,26,216
11,054 36,71,328 67,969
1,192
1,07,372
2,009
35
Jun-13
11,07,13,211
2,31,18,783
5,64,956
31,90,887
6,73,225
15,484 35,96,977 43,310
583
1,02,791
1,242
17
Jul-13
10,81,55,866
4,82,34,613 11,41,558
31,80,393 14,39,535
32,686 41,54,447 38,665
13,502
1,14,454
1,086
402
Aug-13
14,22,23,874
2,98,86,385
38,13,921
23,105 41,09,324 34,494
2,656
1,08,286
951
72
8,61,262
8,35,189
Sep-13
11,89,12,167
1,34,49,268
2,57,294
33,81,558
4,03,591
7,133 37,03,280 26,347
1,221
1,02,738
748
31
Oct-13
10,65,10,406
2,20,26,770
3,57,563
32,06,066
6,84,660
10,968 34,96,547 35,073
10,234
1,06,976
1,007
300
Nov-13
9,66,99,791
2,07,32,245
2,81,036
28,98,504
6,38,687
8,765 38,43,205 28,532
2,815
1,13,911
867
87
Dec-13
9,00,90,785
1,81,68,718
3,75,395
27,87,962
5,69,439
11,841 34,65,265 32,801
3,660
1,10,212
1,011
116
Jan-14
10,57,13,940
3,59,06,428
3,13,484
33,24,374 11,47,050
9,883 35,21,647 28,470
4,342
1,05,890
849
134
Feb-14
8,47,36,822
2,50,27,627
1,91,216
25,86,398
7,68,378
5,923 34,85,510 29,143
3,155
1,07,934
877
100
Mar-14
10,12,96,496
3,40,06,301
39,549
33,27,382 11,19,514
1,280 36,88,003 18,692
2,916
1,24,378
603
97
89
experienced considerable shifts in the

product shares in the recent years (Table
2.32). The total derivatives turnover has
expanded many a times over the period.
While at NSE all the segments seem to have
expanded over the decade, BSE seems to be
picking up the momentum in Stock Futures
and Stock Options.
The monthly turnover in the derivatives

segment at NSE recorded a mixed trend
during 2013-14 (Table 2.31). The highest
turnover was recorded in August 2013
(`38,13,921 crore) followed by May 2013
(`35,03,801 crore) and September 2013
(`33,81,558 crore). Growth in the derivates
turnover at NSE was the highest in March
2014 when turnover rose by 28.6 percent,
followed by August 2013 (19.9 percent) and
January 2014 (19.2 percent). The average
daily turnover at NSE in 2013-14 increased
by 20.2 percent to `1,52,237 crore from
`1,26,639 crore in 2012-13.
During 2013-14, Index Options accounted

for the largest share in the total derivatives
turnover with 77.5 percent. Share of single
stock futures has declined marginally over
the previous year constituting 10.6 percent
in 2013-14. Index futures share constituted
6.7 percent of the turnover of derivatives
market in 2013-14. The share of stock options
has remained constant at 5.2 percent. (Chart
2.11). Table 2.33, Table 2.34 , Table 2.35,
Table 2.36 covers the trends in all derivative
instruments mentioned.
MCX-SX which commenced its

operations in the equity derivative segment
on February 11, 2013 registered a trading
of 50.3 lakh contracts with a turnover of
`1,44,729 crore.
The equity derivatives markets have
Table 2.32: Product-wise Derivatives Turnover at NSE, BSE and MCX-SX (Percent)
Year / Month
1
Index Futures
Index Options
Single Stock
Options
4
Single Stock
Futures
2008-09
32.4
33.9
2.1
31.6
2009-10
22.3
45.5
2.9
29.4
2010-11
14.9
62.8
3.5
18.8
2011-12
11.7
72.6
3.0
12.7
2012-13
6.8
77.0
5.2
10.9
2013-14
6.7
77.5
5.2
10.6
Apr-13
6.5
74.8
7.3
11.3
May-13
6.2
78.1
5.5
10.2
Jun-13
6.8
79.9
4.2
9.1
Jul-13
6.0
79.2
5.3
9.5
Aug-13
7.4
79.9
3.8
8.9
Sep-13
8.6
77.0
4.0
10.4
Oct-13
7.8
75.9
5.4
10.8
Nov-13
7.3
76.7
4.7
11.3
Dec-13
7.0
75.4
4.9
12.7
Jan-14
6.0
77.3
5.8
10.9
Feb-14
5.5
78.5
5.1
10.8
Mar-14
5.9
76.3
6.0
11.8
90
Chart 2.11: Product-wise Share in Derivatives Turnover at NSE, BSE and MCX-SX (in Percent)
Table 2.33: Trends in Index Futures at NSE, BSE and MCX-SX

Year /
Month
No. of Contracts
Open Interest at the End of the Year/Month

No. of Contracts
NSE
1
Notional Turnover (`crore)
BSE
MCX-SX
NSE
5
2008-09
21,04,28,103
4,95,830
Na
35,70,111
2009-10
1,783,06,889
3,744
Na
2010-11
16,50,23,653
5,613
Na
2011-12
14,61,88,740
70,73,334
2012-13
9,61,00,385
47,04,602
2013-14
10,52,70,529
BSE
MCX-SX
Value (`crore)
NSE
BSE
MCX-SX
10
NSE
11
BSE MCX-SX
12
13
11,757
Na
8,28,369
22
Na
12,060
0.3
Na
39,34,389
96
Na
5,81,510
Na
14,979
Na
43,56,755
154
Na
6,18,576
Na
16,941
0.1
Na
Na
35,77,998
1,78,449
Na
5,71,933 11,693
Na
14,341
305
Na
Na
25,27,131
1,22,374
Na
2,97,198
2,080
Na
8,503
59
Na
21,36,269 17,73,025
30,85,297
63,494
51,595
4,35,684
8,518
2,916
14,585
286
97
Apr-13
72,22,107
2,56,417
Na
2,08,590
7,269
Na
4,20,459 42,985
Na
12,631 1,261
Na
May-13
79,91,561
2,33,780
1,09,816
2,45,783
7,055
3,257
3,80,496 35,041
508
11,510 1,042
15
Jun-13
85,01,380
2,26,988
3,66,727
2,46,351
6,521
10,428
3,60,141 15,478
157
10,539
450
Jul-13
87,04,083
3,40,324
5,35,551
2,53,644
10,045
15,779
4,49,205
7,346
1,624
12,615
210
47
1,24,33,264
1,94,752
3,94,793
3,27,735
5,339
10,921
4,70,572
9,805
115
12,495
267
Aug-13
Sep-13
1,12,86,692
1,89,538
77,122
3,17,154
5,508
2,217
4,37,480
6,720
168
12,248
192
Oct-13
1,00,51,520
1,99,519
67,699
2,97,026
6,076
2,067
5,63,436
761
2,788
17,577
24
88
Nov-13
84,91,211
79,335
51,369
2,54,056
2,481
1,582
4,73,603
8,932
2,635
14,497
279
82
Dec-13
76,21,855
59,655
45,826
2,33,973
1,890
1,437
4,86,422
9,086
3,517
15,219
289
112
Jan-14
87,86,901
1,15,500
50,769
2,63,691
3,637
1,582
4,26,659
8,652
4,193
12,667
266
129
Feb-14
62,05,265
1,12,391
37,571
1,81,724
3,465
1,161
3,64,478
9,031
2,967
11,228
286
94
Mar-14
79,74,690
1,28,070
35,782
2,55,570
4,206
1,163
4,35,684
8,518
2,916
14,585
286
97
91
On an average, for 2013-14, Nifty futures

and options accounted for around 90 percent
of the turnover when classified instrumentwise. Bank Nifty shared a distant second
position with a share ranging from 6.4 percent
to 12.1 percent. At BSE, however, the share of
derivatives on BSE Sensex fluctuated widely
between 0.02 percent to 100 percent. Turnover
of derivatives on BSE 100 also fluctuated
similarly from 0.0 percent to 99.9 percent.
In the index derivatives segment of

NSE, derivatives are offered on the following
indices- Nifty, Nifty Midcap 50, Bank Nifty,
CNX Infra, CNX IT and CNX PSE. Index
derivatives are also allowed in three foreign
indices viz., Dow Jones index, S&P 500 and
UK FTSE 100 index. In BSE also futures are
available on foreign indices, viz., HSI index,
MICEX index, FTSE/JSE top40 and Bovespa
index.
Table 2.34: Trends in Single Stock Futures at NSE, BSE and MCX-SX
Year /
Month
No. of Stocks
Traded
No. of Contracts
NSE BSE MCXSX

1
Notional Turnover
(`crore)
Open Interest at the End of the Year / Month

No. of Contracts
NSE
BSE
MCXSX
NSE
BSE
MCXSX
NSE
10
11
Value (` crore)
BSE MCXSX
12
13
NSE
14
BSE MCXSX
15
16
2008-09
250
Na 22,15,77,980
299
Na 34,79,642
Na
5,11,334
Na
15,722
Na
2009-10
190
Na 14,55,91,240
Na 51,95,247
Na
9,90,917
Na
32,053
Na
2010-11
223
Na 18,60,41,459
Na 54,95,757
Na 11,26,190
Na
28,354
Na
2011-12
217
219
Na 15,83,44,617 3,26,342
2012-13
146
122
Na 14,77,11,691 1,16,933 2,74,168 42,23,872
2013-14
136
Apr-13
Na 40,74,671 10,216
Na
8,86,326
19
Na
24,663
Na
8,007
7,90,886
417
NA
22,168
12
NA
136
15 17,04,14,186 19,01,877 11,86,079 49,49,282 54,609 30,189 10,50,412 3,584
36,117
105
144
152
58
1,22,51,753 2,35,350 2,46,174
3,65,064
6,417
6,517
9,32,324 1,658
961
25,989
46
27
May-13
143
150
57
1,40,19,161 2,47,629 2,85,150
4,09,851
6,762
7,716 1,022,104 3,752
530
28,473
95
16
Jun-13
143
149
56
1,27,19,906 1,49,512 1,83,859
3,43,493
3,854
4,648
9,27,187 3,743
382
25,216
92
11
Jul-13
142
149
55
1,52,23,466 2,78,544 2,08,409
4,28,504
6,945
5,055 10,68,265 2,473
549
27,490
58
14
Aug-13
142
145
53
1,69,77,082 1,24,342 1,66,546
4,10,088
3,567
3,779 10,81,056 3,878
323
26,543
112
Sep-13
140
142
51
1,48,61,402 1,40,209
69,326
3,87,799
4,403
1,726
9,37,967 4,646
750
24,483
128
18
Oct-13
141
145
51
1,46,28,837 1,54,157
15,007
4,16,432
5,217
406
9,72,270 5,275
2,771
28,054
166
74
Nov-13
135
145
50
1,44,28,865
93,566
2,567
3,97,676
2,701
69 11,88,726 7,177
79
32,712
201
Dec-13
135
147
51
1,41,44,654
109,378
3,025
4,24,128
3,302
89 10,75,641 7,554
78
35,012
217
Jan-14
135
145
47
1,47,31,248 1,41,257
3,039
4,85,233
4,279
100 10,69,174 7,358
40
32,148
205
Feb-14
134
141
49
1,13,47,588
87,960
2,537
3,59,910
2,637
74 10,39,375 7,733
49
31,932
214
Mar-14
136
136
15
1,50,80,224 1,39,973
440
5,21,103
4,526
10 10,50,412 3,584
36,117
105
92
3,418
Table 2.35: Trends in Index Options at NSE, BSE and MCX-SX

Year/
Month
No. of Contracts
Notional Turnover (` crore)
No. of Contracts
NSE
BSE
MCX-SX
NSE
BSE
MCX-SX
NSE
Notional Turnover
(` crore)
BSE MCX-SX
9
18,09,483
NSE
BSE MCX-SX
11
12
13
2008-09
21,20,88,444
373
Na
2009-10
34,13,79,523
5,276
Na
80,27,964
138
Na
18,19,841
Na
47,808
2010-11
65,06,38,557
Na 1,83,65,366
Na
18,90,463
Na
55,022
Na
2011-12
86,40,17,736
2,47,75,644
Na 2,27,20,032
6,18,342
Na
17,96,546 16,464
Na
47,540
430
Na
2012-13
82,08,77,149 25,72,33,961
Na 2,27,81,574 70,27,481
Na
18,48,581 34,729
Na
2013-14
92,85,65,175 29,63,59,575 20,63,446 2,77,67,341 90,55,201
62,719
37,31,502
Na
10
20,00,930
Na
27,402
Na
Na
Na
52,523
981
5,544
66,909
186
Apr-13
7,63,21,333
1,05,30,589
Na
21,92,470
3,00,126
Na
23,55,633 40,150
Na
70,003
1189
Na
May-13
8,59,26,564
1,98,59,564
36
26,21,647
6,11,953
20,92,729 29,176
Na
62,696
872
Na
Jun-13
8,36,78,819
2,27,15,217
12,670
24,37,937
6,62,221
358
21,43,110 23,954
44
62,595
695
Jul-13
7,59,50,920
4,75,88,676
3,97,445
22,51,414 14,21,855
11,848
23,80,051 27,701
11,327
67,689
794
341
61
Aug-13
10,58,00,393
2,95,30,529
2,99,868
29,00,978
8,25,463
8,404
23,97,196 20,672
2,218
65,250
568
Sep-13
8,70,51,331
1,30,48,103
1,10,815
25,24,746
3,92,185
3,189
21,55,085 14,039
303
61,487
408
Oct-13
7,49,72,417
2,16,07,463
2,74,857
22,81,809
6,71,772
8,495
18,64,304 16,380
4,675
58,583
520
139
Nov-13
6,78,36,722
2,05,04,939
2,27,100
20,79,938
6,32,140
7,113
20,42,150 12,415
101
62,889
387
Dec-13
6,29,53,644
1,79,06,457
3,26,544
19,68,622
5,61,975
10,315
17,27,990 13,813
65
54,264
439
Jan-14
7,48,43,717
3,54,78,013
2,59,676
23,20,692 11,33,492
8,201
18,49,355 11,546
109
55,781
355
Feb-14
6,20,38,894
2,45,67,911
1,51,108
18,80,093
7,54,429
4,688
19,12,609 10,414
139
59,620
326
Mar-14
7,11,90,421
3,30,22,114
3,327
23,06,996 10,87,590
107
66,909
186
20,00,930
5,544
Table 2.36: Trends in Stock Options at NSE and BSE

Year /
Month
1
No. of Stocks
No. of Contracts
Notional Turnover
(` crore)

No. of Contracts
Value (` crore)
NSE
BSE
NSE
BSE
NSE
BSE
NSE
BSE
NSE
BSE
10
11
2008-09
250
115
1,32,95,970
2,29,227
78,573
2,521
2009-10
190
98
1,40,16,270
5,06,065
97,522
3,137
2010-11
223
89
3,25,08,393
10,30,344
55,144
1,499
2011-12
216
217
3,64,94,371
47,505
9,77,031
1,469
89,668
2,504
2012-13
146
146
6,67,78,193
3,87,870
20,00,427
10,246
1,04,527
52,849
2,758
1,247
2013-14
136
136
8,01,74,431
15,44,720
24,09,489
46,131
2,00,977
1,046
6,767
26
Apr-13
144
152
80,53,590
5,078
2,44,039
138
2,68,255
218
7,559
May-13
143
150
75,84,894
16,896
2,26,521
446
1,75,999
4,692
Jun-13
143
149
58,13,106
27,066
1,63,105
629
1,66,539
135
4,440
Jul-13
142
149
82,77,397
27,069
2,46,830
691
2,56,926
1,065
6,659
23
Aug-13
142
145
70,13,135
36,762
1,75,120
819
1,60,500
139
3,998
Sep-13
140
142
57,12,742
71,418
1,51,859
1,495
1,72,748
942
4,521
19
Oct-13
141
145
68,57,632
65,631
2,10,799
1,595
96,537
12,548
2,762
298
Nov-13
135
145
59,42,993
54,405
1,66,834
1,364
1,38,726
3,813
Dec-13
135
147
53,70,632
93,228
1,61,240
2,272
1,75,212
2,348
5,717
67
Jan-14
135
145
73,52,074
1,71,658
2,54,757
5,642
1,76,459
914
5,295
23
Feb-14
134
141
51,45,075
2,59,365
1,64,671
7,848
1,69,048
1,965
5,153
51
Mar-14
136
136
70,51,161
7,16,144
2,43,713
23,191
2,00,977
1,046
6,767
26
Note: MCX-SX data not significant, therefore not included

Source: NSE and BSE
93
Among the various classes of derivative

members, the transactions undertaken by
trading-cum clearing members contributed
43.6 percent of the total turnover of the F&O
segment in 2013-14. The percentage share
in the traded value by trading-cum-self
clearing members and trading members was
27.3 percent and 29.1 percent, respectively
(Table 2.37).
Product-wise share in the open interest

shows that the notional value of outstanding
contracts was the highest for Index Options
(`67,095 crore) followed by single Stock
Futures (`36,222 crore), Index Futures
(`14,968 crore), and Stock Options (`6,793
crore). The tables 2.33 to 2.36 show the
product-wise trends in the derivative market
in India during the recent years.
Table 2.37: Shares of Various Classes of Members in Derivative Turnover at NSE, BSE and
MCX-SX
Year/
Month
Turnover ( `crore)
Trading
Members
2
Percentage Share
Trading cum Trading cum

Self Clearing
Clearing
Members
Members
3
Total
Trading
Members
Trading cum Trading cum

Self Clearing
Clearing
Members
Members
7
2008-09
33,99,848
1,24,60,554
61,84,083
2,20,44,486
15.4
56.5
28.1
2009-10
48,99,892
2,02,12,013
1,02,15,902
3,53,27,807
13.9
57.2
28.9
2010-11
75,50,080
3,35,63,069
1,74,04,062
5,85,17,211
12.9
57.4
29.7
2011-12
79,81,555
3,45,47,595
2,05,54,043
6,30,83,193
12.7
54.8
32.6
2012-13
96,14,647
2,08,51,487
3,25,99,875
6,30,66,008
15.2
33.1
51.7
2013-14
2,76,69,006
4,14,70,627
2,60,11,510
9,51,51,143
29.1
43.6
27.3
Apr-13
14,47,671
31,92,177
20,21,592
66,61,439
21.7
47.9
30.3
May-13
19,78,775
39,96,772
23,06,597
82,82,144
23.9
48.3
27.9
Jun-13
19,78,410
36,52,744
21,28,036
77,59,190
25.5
47.1
27.4
Jul-13
32,77,250
39,29,633
20,98,344
93,05,227
35.2
42.2
22.6
Aug-13
26,27,674
41,90,989
25,25,766
93,44,429
28.1
44.9
27.0
Sep-13
17,06,553
36,26,675
22,51,336
75,84,564
22.5
47.8
29.7
Oct-13
22,50,652
33,20,315
22,32,420
78,03,388
28.8
42.5
28.6
Nov-13
20,87,828
30,12,295
19,91,788
70,91,912
29.4
42.5
28.1
Dec-13
18,81,313
29,14,351
19,42,818
67,38,483
27.9
43.2
28.8
Jan-14
30,12,381
35,81,521
23,68,712
89,62,614
33.6
40.0
26.4
Feb-14
22,35,010
26,71,125
18,15,266
67,21,400
33.3
39.7
27.0
Mar-14
31,85,488
33,82,031
23,28,834
88,96,353
35.8
38.0
26.2
94
had an average share of 37.1 percent in the

total turnover and mutual funds constituted
a miniscule share of 0.1 percent. In the BSE
F &O turnover, proprietary trades accounted
for 80.8 percent share followed by others at
19.2 percent.
Participant-wise share in NSE F&O

turnover for 2013-14 shows that proprietary
trades accounted for an average 47.6 percent
share in the total turnover (Chart 2.12). While
FIIs accounted for a share of 15.2 percent in the
total turnover , others category comprising
retail, HNIs, private and public companies
Chart 2.12: Participant-wise average share in F&O equity turnover in 2013-14 (in percent)
Source: BSE, NSE
The participant-wise share in notional

value outstanding at NSE for the period
ending March 2014 is shown in the Chart

2.13 below:
Chart 2.13: Participant-wise share in equity derivative open interest at NSE at end of the
period (percent)
Source: NSE
95
B.
Trend in Currency Derivatives Market

turnover in the currency segment turnover
followed by MCX-SX (34.7 percent), USE (4.3
percent) and BSE (3.5 percent).
Currency futures trading commenced

in India on August 29, 2008 at NSE. Later,
MCX-SX and BSE were also granted
permission on October 7, 2008 and October 8,
2008 respectively to start trading in currency
derivatives. USE started the currency futures
trading on September 20, 2010. BSE resumed
the trading in currency futures in November
2013. During 2013-14, total turnover was
the highest at NSE (`40,12,513 crore)
followed by MCX-SX (`24,22,410 crore), USE
(`3,01,620 crore) and BSE (`2,44,312 crore).
NSE accounted for 57.5 percent of the total
Even though initially only USD-INR

futures were traded, currency futures
segment was expanded with the introduction
of EURO-INR, GBP-INR and JPY-INR. A new
product, currency options was introduced at
NSE and USE from October 29, 2010. MCXSX commenced trading in currency options
from August 10, 2012. The currency option
was introduced on only USD-INR pair.
(Table 2.38)
Table 2.38: Trends in the Currency Derivatives Segment

Month/
Year
MCX-SX
NSE
USE
BSE
No. of
TurnOpen
No. of
TurnOpen
No. of
TurnContracts
over
interest Contracts
over
interest Contracts
over
Traded (` crore) at the
Traded (` crore) at the
Traded (` crore)
end of
end of
Month
Month
(` crore)
(` crore)
2008-09
2,98,47,569
1,48,826
5
990 3,27,38,566
6
1,62,563
1,313
Na
1,964
Open
No. of
interest
Conat the
tracts
end of Traded
Month
(` crore)
10
Na
11
TurnOpen
over
interest
(` crore) at the
end of
Month
(` crore)
12
13
Na
Na
Na
Na
2009-10 40,81,66,278 19,44,654
1,951 37,86,06,983 17,82,608
Na
Na
Na
Na
Na
Na
2010-11 90,31,85,639 41,94,017
3,706 74,96,02,075 34,49,788
13,690 16,77,72,367
7,62,501
109
Na
Na
Na
2011-12 77,03,25,229 37,32,446
4,494 97,33,44,132 46,74,990
15,328 31,53,95,543 14,88,978
125
Na
Na
Na
2012-13 59,73,10,766 33,03,179
7,389 95,92,43,448 52,74,465
20,101 2,37,66,846
1,32,861
292
Na
Na
Na
2013-14 39,85,84,890 24,22,410
2,156 66,01,92,530 40,12,513
6,409 4,74,79,296
3,01,620
217 3,91,57,195
2,44,312
253
Apr-13
5,14,94,254
2,84,076
9,284 8,02,73,119
4,41,682
25,188
30,96,185
17,033
53
Na
Na
Na
May-13
6,83,13,953
3,82,441
11,431 10,37,42,010
5,78,460
30,349
43,51,414
24,074
81
Na
Na
Na
Jun-13
8,11,83,735
4,82,880
9,989 13,10,90,225
7,75,313
28,247
38,86,362
22,587
69
Na
Na
Na
Jul-13
5,06,74,763
3,10,899
8,263 6,70,30,359
4,09,739
11,360
35,80,282
21,896
84
Na
Na
Na
Aug-13
3,53,29,558
2,33,007
3,886 5,17,55,070
3,40,807
10,494
35,31,621
22,989
162
Na
Na
Na
Sep-13
2,68,29,214
1,78,614
2,619 4,56,46,963
3,03,632
7,568
28,26,503
19,791
147
Na
Na
Na
Oct-13
1,84,62,194
1,18,610
2,349 3,48,04,567
2,21,371
6,866
32,24,454
21,242
106
Na
Na
Na
Nov-13
1,35,17,561
88,360
2,340 3,05,70,173
1,97,909
7,537
25,58,671
16,757
74
51,711
325
Dec-13
1,34,90,960
87,641
2,624 2,88,21,389
1,86,064
7,493
28,83,814
19,016
142
27,62,867
17,227
133
Jan-14
1,53,09,487
1,00,374
2,646 3,21,22,699
2,08,564
7,385
31,81,817
21,669
140
67,84,708
42,396
212
Feb-14
1,09,40,130
72,031
2,772 2,48,80,915
1,61,726
6,780
37,51,200
24,440
200 1,19,81,783
74,944
387
Mar-14
1,30,39,081
83,477
2,156 2,94,55,041
1,87,245
6,409 1,06,06,973
70,126
217 1,75,76,126
1,09,420
253
Source: MCX-SX, NSE, USE, BSE
96
The share of futures on EUR-INR was 3.5

percent followed by GBP-INR futures at 3.2
percent and JPY-INR futures at 1.5 percent
(Table 2.39).
The product-wise share in currency

derivatives volume shows that USDINR futures dominated with 68.9 percent
followed by USD-INR options (22.9 percent).
Table 2.39: Product-wise market share in Currency Derivatives Volume (Percent)

USD-INR
Futures
EURO-INR
Futures
GBP-INR
Futures
JPY-INR
Futures
USD-INR
Options
2011-12
82.0
2.7
0.9
0.7
13.7
2012-13
76.4
1.7
0.8
0.9
20.2
2013-14
68.9
3.5
3.2
1.5
22.9
Apr-13
67.0
2.0
1.2
2.0
27.8
May-13
65.7
2.0
1.3
1.4
29.6
Jun-13
64.8
1.7
1.3
1.0
31.2
Jul-13
68.6
3.6
2.5
1.1
24.2
Aug-13
74.0
5.9
4.8
1.9
13.4
Sep-13
75.3
5.4
5.5
2.0
11.7
Oct-13
73.6
5.0
4.4
1.9
15.1
Nov-13
70.8
4.8
4.6
1.5
18.2
Dec-13
70.3
5.4
5.7
1.6
16.9
Jan-14
72.2
5.0
6.4
1.6
14.7
Feb-14
73.0
4.4
5.3
1.6
15.7
Mar-14
65.0
3.9
4.2
1.2
25.7
Source: MCX-SX, NSE, USE, BSE
C.
Trends in Interest Rates Derivatives

The trends in turnover and open
interest in Interest Rate Derivatives (10 Year
Notional coupon and 91 day T-bill bearing
GoI bond futures) at NSE and BSE is depicted
in Table 2.40. During 2013-14, the turnover
in the interest rate derivative segment has
registered a phenomenal increase. NSE
witnessed a turnover of `30,173 crore while
BSE saw a turnover of `7,191 crore. NSE
contributed a major share to the turnover at
92.1 percent while BSEs contribution during
the year was 7.9 percent.
Trading in ten year notional coupon

bearing Government of India (GoI) bond futures
started at NSE on August 31, 2009. Further,
interest rate futures on 91 day Government
of India (GoI) treasury bills (T-bills) started at
NSE on July 4, 2011. Interest Rate Derivatives
started trading at BSE on November 29, 2013.
Currently BSEs Interest Rate Derivative
Segment offers 91-day Government of India
(GoI) Treasury Bill Futures which started on
November 29,2013 and 10 Year Government
of India (GoI) Futures which started from
January 28, 2014.
97
Table 2.40: Trends in Interest Rate Derivatives at NSE, BSE and MCX-SX
Year/
Month
Total
No. of contracts
Open Interest at the end of the year/ month

No. of Contracts
Turnover (` crore)
Value (` crore)
NSE
BSE
MCX-SX
NSE
BSE
MCX-SX
NSE
BSE
2009-10
1,60,894
Na
Na
2,975
Na
Na
758
Na
Na
14
Na
Na
2010-11
3,348
Na
Na
62
Na
Na
Na
Na
Na
Na
2011-12
2,15,200
Na
Na
3,959
Na
Na
Na
Na
Na
Na
2012-13
12
Na
Na
Na
Na
Na
Na
Na
Na
15,02,148 1,28,549 3,56,555
30,173
7,191
2,580
55,710
9,829
2,596
1,113
197
52
2013-14
MCX-SX NSE
10
11
BSE MCX-SX
12
13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Jan-14
4,36,836
54,134 2,00,101
8,832
4,055
1,085
24,662
310
11,103
494
222
Feb-14
4,56,591
56,933
97,752
9,146
1,960
1,144
33,138
958
2,722
661
19
54
Mar-14
6,08,721
17,482
58,702
12,194
1,175
350
55,710
9,829
2,596
1,113
197
52
3.
MUTUAL FUNDS
Over the years, SEBI has been taking

several steps to re-energise the mutual fund
industry. Some of the measures include
the penetration of mutual fund products,
improving the reach of MF products in
smaller cities and towns beyond the top
15 cities, alignment of interest of investors,
etc. In 2013-14, SEBI has framed a long term
policy for mutual funds in India which
inter alia includes enhancing the reach of
mutual fund products, promoting financial
inclusion, tax treatment, obligation of various
stakeholders, increasing transparency etc.
SEBI endeavours to constantly revisit the
regulations so that the mutual fund industry

mobilises a larger chunk of the domestic
savings of Indian household.
The future of the mutual fund industry
is dependent on increasing the financial
literacy and showcasing the suitability of
mutual funds in an investors portfolio. AMCs
and product distributors must work closely
to achieve the target of higher penetration of
mutual funds and household savings. There
is a very important role of independent
financial institutions apart from banks in the
growth and stability of the economy and the
capital markets.
98
Table 2.41: Mobilisation of Resources by Mutual Funds ( `crore)

Year
Gross Mobilisation
Redemption
Net Inflow
Assets at the end of

period
2007-08
44,64,376
43,10,575
1,53,802
5,05,152
2008-09
54,26,353
54,54,650
-28,296
4,17,300
2009-10
1,00,19,022
99,35,942
83,080
6,13,979
2010-11
88,59,515
89,08,921
-49,406
5,92,250
2011-12
68,19,678
68,41,702
-22,024
5,87,217
2012-13
72,67,885
71,91,346
76,539
7,01,443
2013-14
97,68,100
97,14,318
53,782
8,25,240
fund industry with 82.4 percent share in

the gross resource mobilisation and 90.8
percent in the net resource mobilisation. The
corresponding shares of UTI mutual fund
and other public sector mutual funds was 8.2
percent and 9.4 percent in the gross resource
mobilisation and 0.7 percent and 8.4 percent
in the net resource mobilisation.
Mutual fund industry continued to

exhibit positive growth in assets under
management in 2013-14. The gross
mobilisation of resources by all mutual
funds during 2013-14 was at `97,68,100 crore
compared to `72,67,885 crore during the
previous year indicating an increase of 34.4
percent over the previous year (Table 2.41).
Correspondingly, redemption also increased
by 35.1 percent to `97,14,318 crore in 201314 from `71,91,346 crore in 2012-13. The
net resources mobilised by all the mutual
funds aggregated to `53,782 crore in 2013-14
compared to net inflow of `76,539 crore in
2012-13.
In absolute terms, the gross resource

mobilisation by private sector mutual funds
rose by 35.8 percent to `80,49,397 crore in
2013-14 from `59,27,947 crore in 2012-13
(Table 2.42). Due to the heavy redemptions
in the last three quarters of 2013-14, the
net resource mobilisation by private sector
mutual funds declined by 25.0 percent to
`48,838 crore in 2013-14 compared to `65,102
crore in 2012-13. The net resources raised
by UTI mutual fund and other public sector
mutual funds was much lesser at `401 crore
and `4,542 crore respectively in 2013-14 and
represented a decline of 91.3 percent and
33.3 percent respectively over the previous
financial year.
As of at the end of March 2014, the

cumulative net assets managed by all the
mutual funds totaled to `8,25,240 crore as
against `7,01,443 crore at the end of March
2013, representing a rise 17.6 percent.
Sector-wise Resource Mobilisation
The private sector mutual funds
retained the dominant place in the mutual
99
Table 2.42: Sector-wise Resource Mobilisation by Mutual Funds during 2013-14 (`crore)
Month/
Year
Private Sector MFs

Openended
2
Close- Interval
ended
3
Public Sector MFs

Total
Openended
Close- Interval
ended
7
UTI MF
Total
Openended
10
Close- Interval
ended
11
12
Total
Grand
Total
13
14
Mobilisation of Funds
2012-13
58,62,749
58,175
7,022 59,27,947 6,98,358
8,230
NA 7,06,589 6,26,821
5,641
888 6,33,350 72,67,885
2013-14
79,12,853 1,21,634
14,909 80,49,397 9,01,807
14,377
166 9,16,351 7,92,865
8,356
1,130 8,02,352 97,68,100
Repurchases / Redemption
2012-13
57,76,161
80,387
6,297 58,62,845 6,86,483
13,131
166 6,99,781 6,21,562
5,067
2,092 6,28,720 71,91,346
2013-14
79,19,832
70,564
10,161 80,00,559 9,02,818
8,925
64 9,11,808 7,95,328
5,136
1,486 8,01,950 97,14,318
Net Inflow / Outflow of Funds

2012-13
86,588
-22,212
725
65,102
11,875
-4,901
-166
6,808
5,259
574
-1,204
4,629
76,539
2013-14
-6,979
51,069
4,748
48,838
-1,011
5,452
101
4,542
-2,463
3,220
-355
401
53,782
During 2013-14, while open-ended

schemes witnessed net outflows, the close
ended schemes recorded positive net
inflows.
The highest percentage rise in the

net resource mobilisation was in Fund of
Funds investing overseas schemes which
witnessed a net inflow of `1,101 crore in
2013-14 registering an increase in AUM of
55.3 percent. Liquid/Money market inflows
have increased manifold to `24,098 crore in
2013-14 from `3,226 crore in 2012-13. Even as
gold continues to emerge as a popular asset
since 2008, Gold ETF schemes experienced an
outflow of `2,293 crore on top of the decline
of 61.2 percent observed in previous year.
The AUM of Gold ETFs in 2013-14 declined
to the extent of 25.5 percent in 2013-14 over
the previous financial year.
Scheme-wise pattern reveals that net

inflows were positive for all the scheme
categories except growth/equity oriented
schemes, balanced, gold ETF and Gilt Funds.
The huge redemption pressure in growth
schemes had resulted in largest net outflows
amounting to `9,268 crore during the year
(Table 2.43). Fixed income schemes registered
the highest net inflows amounting to `63,339
crore in 2013-14.
100
Table 2.43: Scheme-wise Resource Mobilisation and Assets under Management by Mutual
Funds as on March 31, 2014
No. of Gross Funds Repurchase/ Net Inflow/ Assets Un- Percentage
Schemes Mobilised Redemption Outflow der Manage- Variation
ment as on over March
of Funds
(`crore)
(`crore)
31, 2013
Mar 31, 2014
(`crore)
(`crore)
1
2
3
4
5
6
7
A. Income/ Debt Oriented Schemes
i)
Liquid/Money Market
53
90,98,547
90,74,448
24,098
1,33,280
42.7
ii) Gilt
44
9,917
11,785
-1,868
6,114
-24.2
iii) Debt (other than assured
1,077
6,00,736
5,60,189
40,547
4,60,672
16.3
returns)
iv) Infrastructure Debt Fund
4
562
0
562
879
Na
(IDF)
Subtotal (i to iv)
1,178
97,09,762
96,46,422
63,339
6,00,945
20.8
B. Growth/ Equity Oriented Schemes
i)
ELSS
52
2,661
4,303
-1,642
25,547
12.3
ii) Others
311
43,432
51,059
-7,626
1,65,560
10.5
Subtotal (i+ii)
363
46,093
55,362
-9,268
1,91,107
9.7
C. Balanced Schemes
Balanced schemes
30
3,435
5,421
-1,986
16,793
3.0
D. Exchange Traded Funds
i)
Gold ETF
14
403
2,697
-2,293
8,676
-25.5
ii) Other ETFs
26
6,466
3,576
2889
4,528
206.0
Subtotal (i+ii)
40
6,869
6,273
596
13,204
0.6
E. Fund of Funds Investing Overseas
Fund of Funds investing overseas
27
1,941
840
1,101
3,191
55.3
TOTAL (A+B+C+D+E)
1,638
97,68,100
97,14,318
53,782
8,25,240
17.6
Schemes
Notes: 1) Net Assets of ` 5,726.20 crore pertaining to 40 Fund of Funds (domestic) schemes as on March 31, 2014 is not included in
the above data.
2) No data in 2012-13 regarding IDF
As on March 31, 2014, there were 1,638

mutual fund schemes of which, 1,178 were
income/debt oriented schemes, 363 were
growth/equity oriented schemes and 30 were
balanced schemes (Table 2.44). In addition,
there were 40 Exchange Traded Funds, of
which 14 were Gold ETFs and 26 other ETFs.
Also, there were 27 schemes operating as Fund
of Funds which invested in overseas securities.
Maturity-wise there were 777 open-ended
schemes and 796 close-ended schemes as on
March 31, 2014. For the income/debt oriented
schemes category, the number of close-ended
schemes exceeded open-ended schemes.
The assets under management (AUM)

increased by 17.6 percent to `8,25,240 crore
at the end of March 2014 from `7,01,443 crore
a year ago. The AUM was the highest for
income/debt oriented schemes at `6,00,945
crore while the AUM under growth/equity
oriented schemes was `1,91,107 crore. In
terms of growth in AUM, Other ETF schemes
(206 percent) achieved the highest increase
followed by FOF schemes (55.3 percent) and
Liquid/money market schemes (42.7 percent)
during the year. The highest decline in AUM
was registered for the Gold ETF schemes at
25.5 percent.
101
Table 2.44: Number of Schemes by Investment Objective as on March 31, 2014

Schemes
1
A. Income/ Debt Oriented Schemes
i)
Liquid/ Money Market
ii) Gilt
iii) Debt (other than assured returns)
iv) Debt ( assured returns)
v) Infrastructure Debt Fund (IDF)
Subtotal (i to v)
B. Growth/ Equity Oriented Schemes
i)
ELSS
ii) Others
Subtotal (i+ii)
C. Balanced Schemes
Balanced schemes
D. Exchange Traded Funds
i)
Gold ETF
ii) Other ETFs
Subtotal (i+ii)
E. Fund of Funds Investing Overseas
Fund of Funds investing overseas
TOTAL (A+B+C+D+E)
Open-ended
2
Close-ended
3
Interval
4
Total
5
53(55)
44(42)
259(237)
0(0)
0
356(334)
0(0)
0(0)
753(481)
0(0)
4
757(481)
0(0)
0(0)
65(42)
0(0)
0
65(42)
53(55)
44(42)
1,077(760)
0(0)
4
1,178(857)
38(36)
287(292)
325(328)
14(14)
24(5)
38(19)
0(0)
0(0)
0(0)
52(50)
311(297)
363(347)
29(31)
1(1)
0(0)
30(32)
14(14)
26(23)
40(37)
0(0)
0(0)
0(0)
0(0)
0(0)
0 (0)
14(14)
26(23)
40(37)
27(21)
777(751)
0 (0)
796(501)
0 (0)
65(42)
27(21)
1,638(1,294)
Notes: 1) 40 schemes in the nature of fund of funds (domestic) as on March 31, 2014 is not included in the above data
2) Figures in parentheses indicate corresponding figures for 2012-13
Table 2.45: Trends in Transactions on Stock Exchanges by Mutual Funds

(` crore)
Year/
Month
1
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Jan-14
Feb-14
Mar-14
Gross
Purchase
2
1,44,069
1,95,662
1,54,217
1,32,137
1,13,758
1,12,131
6,321
9,067
9,582
10,485
13,109
8,173
7,157
8,067
10,051
9,349
8,469
12,301
Equity
Gross
Sales
3
1,37,085
2,06,173
1,74,018
1,33,494
1,36,507
1,33,356
7,744
12,575
9,851
12,654
11,502
10,974
11,175
8,549
10,462
11,864
9,814
16,191
Gross
Net
Purchase/ Purchase
Sales
4
5
6,985
3,27,744
-10,512
6,24,314
-19,802
7,62,644
-1,358 11,16,760
-22,749 15,23,393
-21,224 15,38,087
-1,423
1,51,371
-3,508
1,38,989
-269
1,57,883
-2,169
1,12,008
1,607
65,168
-2,801
1,22,606
-4,018
91,637
-482
97,156
-411
1,25,320
-2,515
1,43,614
-1,345
1,18,153
-3,890
2,14,183
102
Debt
Gross
Sales
6
2,45,942
4,43,728
5,13,493
7,81,940
10,49,934
9,94,842
99,516
1,12,149
92,936
1,35,748
61,417
40,636
54,466
55,533
73,378
98,198
56,138
1,14,727
Gross
Net
Purchase/ Purchase
Sales
7
8
81,803
4,71,814
1,80,588
8,19,976
2,49,153
9,16,861
3,34,820 12,48,897
4,73,460 1,637,150
5,43,247 16,50,219
51,855
1,57,692
26,840
1,48,056
64,948
1,67,466
-23,740
1,22,493
3,752
78,277
81,970
1,30,779
37,171
98,794
41,624
1,05,223
51,942
1,35,371
45,415
1,52,963
62,015
1,26,622
99,457
2,26,485
Total
Gross
Sales
9
3,83,026
6,49,901
6,87,511
9,15,434
11,86,440
11,28,197
1,07,260
1,24,725
1,02,787
1,48,401
72,919
51,610
65,641
64,082
83,840
1,10,063
65,952
1,30,918
Net
Purchase/
Sales
10
88,787
1,70,076
2,29,352
3,33,463
4,50,711
5,22,023
50,432
23,332
64,679
-25,909
5,359
79,169
33,153
41,141
51,531
42,900
60,669
95,567
folios had declined but share in net assets

had increased. NRIs/OCBs with 1.7 percent
share in folios had 3.8 percent share in total
net assets.
Mutual Funds have historically been

investing more in debt than equity. During
2013-14, the combined net investments by
the mutual funds in debt and equity was
`5,22,023 crore compared to `4,50,711 crore
in 2012-13, accounting an increase of 15.8
percent (Table 2.45). Mutual Funds were
net sellers in equity segment to the tune of
`21,224 crore, whereas, their net investments
in the debt segment rose to `5,43,247 crore
during the same period. Since 2009-10, on
an yearly basis there has been offloading of
investments by mutual funds from the equity
market. Investments in the debt segment was
the highest in March 2014 (`99,457 crore)
followed by September 2013 (`81,970 crore).
While the net investments of mutual funds
in the debt segment were positive for all the
months during the year, that in the equity
segment were negative for all months except
August 2013.
Table 2.46: Unit holding pattern of all

mutual funds as on March 31, 2014
CATEGORY
1
Individuals
NRIs/OCBs
FIIs
Corporates/
Institutions/Others
TOTAL
Percentage to Percentage to
Total Folios Total Net Assets
2
3
97.4
45.1
(96.9)
(45.7)
1.7
3.8
(1.8)
(4.7)
0.0
0.9
(0.0)
(1.0)
0.9
50.2
(1.2)
(48.6)
100.0
100.0
Note: Figures in parenthesis corresponds to 2012-13
Unit holding pattern
Private sector mutual funds dominated

with a high percentage to total folios and
total net assets. While the private sector
mutual funds had 63.9 percent share in total
folios, the corresponding share of public
sector mutual funds was 36.1 percent as at
the end of March 2014 (Table 2.47). The share
of private sector mutual funds in total net
assets was 83.2 percent as compared to 16.8
percent for public sector mutual funds.
As on March 31, 2014, while individuals

subscribed 97.4 percent of the total folios,
their share in the total net assets was 45.1
percent (Table 2.46). On the other hand,
corporate/institutions had a miniscule
share of 0.9 percent in the total number of
folios, their share in the total net assets was
a sizeable 50.2 percent. In comparison to
2012-13, the share of corporate in the total
103
Table 2.47: Unit holding pattern of private sector and public sector mutual funds as on
March 31, 2014
S.No
Category
Percentage to Total
Folios
Percentage to Total
Net Assets
Private Sector Mutual Fund
63.9
83.2
Individuals
62.2
37.5
NRIs/OCBs
1.1
3.2
FIIs
0.0
0.8
Corporates/Institutions/Others
0.6
41.8
Public Sector Mutual Funds (including UTI Mutual Fund)
36.1
16.8
Individuals
35.2
7.6
NRIs/OCBs
0.6
0.6
FIIs
0.0
0.2
Corporates/Institutions/Others
0.3
8.4
100.0
100.0
Total (1+2)
4.
INTERMEDIARIES ASSOCIATED
WITH SECURITIES MARKET
I.
Portfolio Managers
taking discretionary services who constitute

74.4 percent of the total number of clients.
Meanwhile
the
assets
under
management of the portfolio management
industry have risen by 26.8 percent to
`7,68,326 crore in 2013-14 from `6,05,990
crore in 2012-13. The discretionary services
provided to EPFO/PFs constituted 70.5
percent of the total assets under management
of the portfolio managers, followed by
advisory services at 18.6 percent. The AUM
of
discretionary
portfolio
managers
managing EPFO/PF funds increased by 8.4
percent in 2013-14 over the previous year.
The AUM/GDP ratio of portfolio managers
was 6.8 percent in 2013-14 while that of
mutual fund of industry was 7.3 percent,
indicating the near comparable levels of
assets managed by both sectors.
Despite the slowdown in growth, the

number of high networth individuals (HNIs)
and their collective wealth grew the secondmost among countries in the Asia Pacific
region, according to the Asia-Pacific Wealth
Report 2013.
While the total number of clients has
declined to 57,477 in 2013-14 from 66,585
in 2012-13, the assets under management
(AUM) has increased (Table 2.48). While the
number of clients utilising discretionary and
advisory services declined, the number of
clients opting for non-discretionary services
increased marginally in 2013-14. Among the
clientele base, the dominant group is those
104
Table 2.48: Assets Managed by Portfolio Managers

Year
No. of Clients
Discretionary
AUM (` crore)
Non-Dis- Advisory
cretionary
Total
Discretionary
(EPFO/
PFs)
2009-10
54,520
3,771
5,734
64,025
2010-11
69,691
3,748
8,770
2011-12
65,600
5,712
9,296
2012-13
50,937
4,461
2013-14
42,771
4,932
II.
Discre- Non-Dis- Advisory

tionary cretionary
(Non
EPFO/PFs)
7
Total
10
Na
2,73,420
9,301
Na
82,209
Na
2,84,980
10,456
86,016
Na
80,608
3,86,410
37,365
18,759
73,914
5,16,448
11,187
66,585
4,99,851
36,864
26,298
79,841
6,05,990
9,774
57,477
5,41,655
43,939
39,728
1,43,004
7,68,326
Alternative Investment Funds
Na
shall not undertake leverage

other than to meet day-to-day
operational requirements. This
includes Private Equity Funds and
Debt Funds;
SEBI has notified the SEBI (AIF

regulations) on May 21, 2012 providing for
three categories of AIFs which subsumes
the existing VCFs and FVCIs. The broad
categories are as follows:
A.
Category I AIF which would

have positive spillover effects
on economy and which are
socially desirable like VCFs ,SME
Funds, Social Venture Funds and
Infrastructure Funds;
Category III AIF which may

employ leverage or complex
trading
strategies
and
are
generally believed to have negative
externalities such as exacerbating
systemic risk and which shall
include hedge funds.
B.
Category II AIF for which no

specific regulatory incentives or
concessions are given and which
The cumulative amount mobilised

by AIFs as at the end of 31st March 2014 is
shown in Table 2.49
C.
Table 2.49: Cumulative amount mobilised by AIFs (as at the end of 31st March 2014)
Category
Commitments raised
Funds raised
Investments made
(` crore)
1
Category I
Infrastructure Fund
5,619
608
170
Social Venture Fund
428
78
39
Venture Capital Fund
264
71
15
SME Fund
Category I Total
6,312
757
224
Category II
6,059
2,907
2,480
Category III
1,095
906
645
Grand Total
13,465
4,569
3,348
Note : The above report is compiled on the basis of quarterly/monthly information submitted to SEBI by registered Alternative
Investment Funds
105
Table 2.50: Cumulative Net Investments

by VCFs and FVCIs (` crore) (at the end of
the period)
Since the implementation of regulations,

101 AIFs have registered with SEBI as on
March 31, 2014. Meanwhile, the existing
VCFs/FVCIs continue to be regulated as per
the SEBI (VCF) Regulations, 1996 and SEBI
(FVCI) Regulations, 2000. The investment
details of these VCFs/FVCIs are given in
Table 2.50.
Year
1
The cumulative net investment of

VCFs increased by 14.0 percent in 2013-14 to
`35,987 crore from `31,556 crore in 2012-13.
The net investments by FVCIs also increased
by 34.0 percent to `45,262 crore in 2013-14
from `33,773 crore in 2012-13 (Table 2.50).
VCFs
FVCIs
Total (*)
2006-07
11,270
7,856
17,621
2007-08
19,955
16,705
31,682
2008-09
22,771
23,047
37,578
2009-10
18,273
28,894
39,051
2010-11
25,576
35,593
52,688
2011-12
28,839
39,492
58,936
2012-13
31,556
33,773
55,542
2013-14
35,987
45,262
70,054
* Exclude investments by FVCIs through VCFs
Table 2.51: Category-wise Investors in VCFs

Category
Number of
investors
Percentage to
total investors
Cumulative
Investments
(`crore)
Percentage
to total
investments
Corporate/ Institutions/ Others

FVCIs
Individuals
NRIs
TOTAL
4,675
10.2
25,130
46.8
28
0.1
16,437
30.6
40,955
89.6
12,073
22.5
47
0.1
25
0.0
45,705
100.0
53,665
100.0
5.
The investor profile shows that 89.6

percent of the total numbers of investors
in existing VCFs are individuals (Table
2.51). However, cumulative investments by
individuals comprise 22.5 percent of the total
cumulative investments. On the other hand,
corporate which accounted for 10.2 percent
of the total number of investors contributed
46.8 percent of the total cumulative
investments. Though FVCIs only comprised
a miniscule percent of the total number, their
corresponding investments accounted for
significant 30.6 percent of the cumulative
investment.
FOREIGN
INSTITUTIONAL
INVESTMENT
Capital flows into emerging markets

are influenced more by global than domestic
forces. The global cues with the likes of
the US Fed tapering maneuver the capital
flows to a large extent. While the domestic
macroeconomic policy actions have ensured
resumption of capital flows into the country,
specific measures undertaken by SEBI to
smoothen the process of investment have
been instrumental in encouraging the flows.
With the economy on its road to recovery
and investor optimism at a new high acting
106
as enablers, the conditions seem encouraging

for the flow of foreign capital.
equity by FIIs increased by 12.8 percent to

`10,21,010 crore in 2013-14 from `9,04,845
crore in 2012-13 (Table 2.52). The combined
gross sales by FIIs increased by 31.6 percent
to `9,69,361 crore from `7,36,481 crore
during the same period in previous year. The
cumulative net investment of FIIs in Indian
markets amounted to USD 180,405 million as
at the end of March 2014 compared to USD
171,529 million in 2012-13, registering an
increase of 5.2 percent.
FII investments into India have grown

remarkably since 2009-10. India received
a total FII net investments of `51,649 crore
during 2013-14 compared to `1,68,367 crore
in 2012-13, showing a decline of 69.3 percent.
In US dollar terms, the net investments
amounted to USD 8,876 million in 2013-14.
The combined gross purchases of debt and
Table 2.52: Investment by Foreign Institutional lnvestors

Year
Gross Purchase
(` crore)
Gross Sales
(` crore)
Net Investment
(` crore)
Net Investment
(USD mn.)
Cumulative
Investment (USD mn.)
1992-93
18
1993-94
1994-95
13
5,593
467
5,127
1,634
1,638
7,631
2,835
4,796
1,528
3,167
1995-96
9,694
2,752
6,942
2,036
5,202
1996-97
15,554
6,980
8,575
2,432
7,635
1997-98
18,695
12,737
5,958
1,650
9,285
1998-99
16,116
17,699
-1,584
-386
8,899
1999-00
56,857
46,735
10,122
2,474
11,373
2000-01
74,051
64,118
9,933
2,160
13,532
2001-02
50,071
41,308
8,763
1,839
15,372
2002-03
47,062
44,372
2,689
566
15,937
2003-04
1,44,855
99,091
45,764
10,005
25,943
2004-05
2,16,951
1,71,071
45,880
10,352
36,294
2005-06
3,46,976
3,05,509
41,467
9,363
45,657
2006-07
5,20,506
4,89,665
30,841
6,820
52,477
2007-08
9,48,018
8,81,839
66,179
16,442
68,919
2008-09
6,14,576
6,60,386
-45,811
-9,837
59,081
2009-10
8,46,438
7,03,780
1,42,658
30,251
89,333
2010-11
9,92,599
8,46,161
1,46,438
32,226
121,559
2011-12
9,21,285
8,27,562
93,725
18,923
140,482
2012-13
9,04,845
7,36,481
1,68,367
31,047
171,529
2013-14
10,21,010
9,69,361
51,649
8,876
180,405
to `79,708 crore from `1,40,033 crore in 201213 (Table 2.53). In the debt segment, the FII
net investments was {`28,061} crore in 201314 as compared to `28,334 crore in 2012-13.
An analysis of the FII net investments

reveal that the majority is invested in equity.
This has been the trend over the years except
2011-12. In 2013-14, the FII net investments
into equity segment declined by 43.1 percent
107
Table 2.53: Investments by Foreign Institutional lnvestors (Equity and Debt) (` crore)
Year / Month
Net Investment by Flls

Equity
Debt
Total
2008-09
-47,706
1,895
-45,811
2009-10
1,10,220
32,438
1,42,658
2010-11
1,10,121
36,317
1,46,438
2011-12
43,738
49,988
93,725
2012-13
1,40,033
28,334
1,68,367
2013-14
79,708
-28,061
51,649
Apr-13
5,414
5,334
10,748
May-13
22,169
5,969
28,138
Jun-13
-11,027
-33,135
-44,162
Jul-13
-6,086
-12,038
-18,124
Aug-13
-5,923
-9,773
-15,695
Sep-13
13,058
-5,678
7,380
Oct-13
15,706
-13,578
2,128
Nov-13
8,116
-5,984
2,133
Dec-13
16,086
5,290
21,376
Jan-14
714
12,609
13,323
Feb-14
1,404
11,337
12,741
Mar-14
20,077
11,586
31,663
Similar to the previous year, the net

FII investment was the highest in the last
quarter of the financial year. The highest net
investment was registered for the month of
March 2014 (`31,663 crore) followed by May
2013 (`28,138 crore) and December 2013
(`21,376 crore). All these months were led by
a dominant share of FII investment in equity
markets viz., 63.4 percent, 78.8 percent and
75.3 percent respectively. In the debt segment
too, net investments were the highest in the
last quarter of 2013-14. Month wise trends
of the net investments into the debt segment
show that the investment was the highest
in January 2014 (`12,609 core) followed by
March 2014 (`11,586 crore), and February
2014 (`11,337 crore) (Table 2.52)

Regulations, 2014 have been notified
on January 07, 2014 to provide for an
easier registration process and operating
framework for the foreign entities. The new
class of investors, FPIs, would encompass all
FIIs, their sub-accounts and qualified foreign
investors (QFIs).
The total net investment of QFIs in
equity and corporate debt, was `583 crore
and `1,520 crore respectively in 2013-14. In
USD million terms, this corresponds to USD
97 million and USD 253 million respectively
(Table 2.54).
108
Table 2.54: QFI Investments during 2013-14

Year
Instrument
2
Equity
Gross
Purchase
Gross Sales
Net
Investment
(` crore)
(` crore)
(` crore)
Net
Investment
(USD mn.) *
Cumulative
Investment
(USD mn.)
685
102
583
97
218
1,925
404
1,520
253
333
2013-14
Corporate Debt
Note:* RBI reference rate as on March 31, 2013 from RBI website. (1 USD = ` 54.3893).
The debt investment limits prescribed for

FIIs and subaccounts for 2013-14 is given in
Table 2.55:
The framework of FII debt limits

was simplified and existing debt limits
were merged into two broad categories:
Government securities of USD 25 billion (by
merging Government Debt Old of USD 10
billion and Government Debt Long Term of
USD 15 billion) and Corporate bonds of USD
51 billion (by merging USD 1 billion for QFIs,
USD 25 billion for FIIs and USD 25 billion for
FIIs in long term infra bonds).
Table 2.55: Allocation of Debt Investment

limits to FIIs and Sub-accounts during
2013-14 (` crore)
Date
Govt. Debt
April 22, 2013
29,108
May 20, 2013
5,533
June 20, 2013
39,171
July 22, 2013
23,661
August 20, 2013
58,264
The following Table 2.56 provides a

glimpse of the debt utilisation status as on
March 31, 2014.
109
Table 2.56: Debt Utilisation Status as on March 31, 2014

Debt Utilisation Status as on March 31, 2014
S. No
Type of Instrument
% of
Free LimUpper
Upper
UnutiTotal
InvestCap
Cap
lised
Invest- limits exit (INR
ment as
(in USD (INR Cr.) reported
hausted cr) (F) =
Limit
ments
bn)
* (A)
by Cus- available including (E) = (D)/ (A)-(D)
(A)
limits
todians with the
(INR Cr.) entity acquired
acquiring by the
(B)
limits
entity
(INR Cr) (INR Cr)
(C)
(D) = (B)
+(C)
3
Government Debt (auction) ***
20
99,546
75,581
Na
75,581
75.9
23,965
Government Debt (on tap) ^^ ,***
10
54,023
9,138
Na
9,138
16.9
44,885
5.5 #
25,416
22,153
Na
22,153
87.2
3,264
51
2,44,323
84,002
Na
84,002
34.4
1,60,321
1(a)
Treasury Bills
Corporate Debt **
2 (a)
Commercial Papers
2 ##
9,978
11,443
Na
11,443
114.7
-1,465
2(b)
Credit Enhanced Bonds
5 ###
23,953
NA
NA
23,953
81
3,97,892
1,68,721
Na
1,68,721
42.4
2,29,171
Grand Total
Notes: 1) # (USD 5.5 billion within the limit of USD 30 billion for Government Debt)
2) ##(USD 2 billion within the limit of USD 51 billion for Corporate Debt)
3) ###(USD 5 billion within the limit of USD 51 billion for Corporate Debt)
4) The data displayed above is updated as on and upto March 28, 2014 i.e., the date of last transaction as reported by Custodians
5) * While the government announces the limits on debt investments to FIIs & QFIs in USD terms, for allocation and monitoring
purposes, these limits are converted into INR terms using the RBI reference rate as on the date of the announcements/eective dates.
Increase/Decrease in sub limits are computed proportionately on basis of debt limits announced by Government of India.
6) ** Beginning April 01, 2013, FIIs can invest in Corporate Debt without purchasing debt limits till the overall investment reaches
90 percent aer which the auction mechanism would be initiated for allocation of the remaining limits. For sub limits of Treasury
Bills (TB), Commercial Paper (CP) and Credit Enhanced Bonds (CR), when the overall investment reaches 95 percent aer which the
approval of depositories is required for allocation of the remaining limits for TB, CP and CR.
7) ^^ Investments by FIIs registered with SEBI under the categories of Sovereign Wealth Funds, Multilateral Agencies, Endowment
funds, Insurance funds, pension funds and Foreign Central banks as per SEBI circular ref. no. CIR/IMD/FIIC/3/2014 dated
January 29, 2014.
8) *** Includes investment in Interest Rate Futures by FIIs registered with SEBI inclusive of investment as per SEBI circular ref. no.
CIR/MRD/DRMNP/2/2014 dated January 20, 2014.
Source: NSDL
110
options was the highest at `38,634 crore by

end-March 2014, followed by Stock futures
(`35,899 crore), Index futures (`12,405 crore)
and Stock options (`683 crore) (Table 2.57).
The FIIs were permitted to trade in the

derivatives market since February 2002. The
notional value of open interest held by FIIs in
derivatives was `87,621 crore as on March 31,
2014. Open interest position of FIIs in index
Table 2.57: Notional Value of Open Interest of Foreign Institutional investors in Derivatives
during 2013-14 (`crore)
Items
Apr.
May.
Jun.
Jul.
Aug.
Sep.
Oct.
Nov.
Dec.
Jan.
Feb.
Mar.
10
11
12
13
Index Futures
10,138 10,304
Index Options
42,068 37,927 37,771 43,918 40,672 41,954 67,640 39,163 29,949 29,651 30,597 38,634
Stock Futures
23,255 27,732 23,618 24,687 23,690 24,278 31,730 28,347 30,172 29,088 30,765 35,899
Stock Options
Interest rate
7,248 11,559
8,953 12,955 20,751 11,829 13,426 11,356
9,039 12,405
1,357
124
43
1,166
275
622
3,135
106
445
110
139
683
Futures
Total
76,818 76,088 68,681 81,330 73,590 79,809 123,256 79,445 73,993 70,205 70,539 87,621
Change in open -28,450
-730
-7,407 12,649
-7,740
6,219 43,447 -43,812
-5,452
-3,788
-6.86
-5.12
334 17,082
position
% Change
-27.03
-0.95
-9.73
18.42
-9.52
8.45
54.44
-35.55
0.48
24.22
at end March 2014 compared to `1,47,905

crore as at end March 2013 (Table 2.58).
In 2013-14, the value of PNs inclusive of
derivatives stood at 13.0 percent of AUC of
FIIs. Excluding derivatives as underlying,
value of PNs as proportion of AUC of FIIs
increased to 8.5 percent in 2013-14.
Participatory Notes are the instruments

issued by registered foreign institutional
investors (FIIs) to overseas investors,
wishing to invest in the Indian securities
markets. The total value of investment in
PNs inclusive of equity, debt and derivative
as underlying stood at `2,07,639 crore as
111
Table 2.58: Notional Value of Participatory Notes (PNs) Vs Assets under Management of FIIs
Year/Month
Total value
of PNs on
Equity & Debt
including PNs
on derivatives
(` crore)
Total value
of PNs on
Equity & Debt
excluding PNs
on derivatives
(` crore)
Assets Under
Custody of
FIIs
(` crore)
Total value
of PNs on
Equity & Debt
including PNs
on derivatives
as % of (4)
Total value
of PNs on
Equity & Debt
excluding PNs
on derivatives
as % of (4)
2008-09
69,445
55,640
3,91,954
17.7
14.2
2009-10
1,45,037
1,32,557
9,00,869
16.1
14.7
2010-11
1,75,097
1,33,098
11,06,550
15.8
12.0
2011-12
1,65,832
1,15,332
11,07,399
15.0
10.4
2012-13
1,47,905
1,04,229
13,36,557
11.1
7.8
2013-14
2,07,639
1,35,821
15,93,869
13.0
8.5
Apr-13
1,57,578
1,11,486
13,91,619
11.3
8.0
May-13
1,68,263
1,10,904
14,38,980
11.7
7.7
Jun-13
1,47,498
99,763
13,49,184
10.9
7.4
Jul-13
1,48,118
94,814
12,93,687
11.5
7.3
Aug-13
1,64,817
1,02,224
12,42,154
13.3
8.2
Sep-13
1,71,154
1,06,527
13,10,194
13.1
8.1
Oct-13
1,83,862
1,11,847
14,16,560
13.0
7.9
Nov-13
1,83,237
1,11,567
14,06,462
13.0
7.9
Dec-13
1,67,566
1,15,181
14,64,355
11.4
7.9
Jan-14
1,63,348
1,11,646
14,26,875
11.5
7.8
Feb-14
1,72,738
1,13,600
14,73,802
11.7
7.7
Mar-14
2,07,639
1,35,821
15,93,869
13.0
8.5
6.
OTHER ACTIVITIES HAVING A

BEARING ON THE WORKING
OF THE SECURITIES MARKET
I.
Corporate Bond Market
At present, Indian corporate debt market

is dominated by privately placed securities
which are subsequently listed at exchanges.
Private Placement is the preferred route
for its obvious advantages like operational
ease, minimal disclosures and lower costs.
Further, Indian corporate bond market is
characterised by dominance of government
owned companies, and quasi government
entities.
The corporate bond market in India

represents about 3.8 percent of Indias Gross
Domestic Product (GDP). Equity markets
stand way ahead of the bond markets in
terms of issuances and as a proportion of
GDP. A developed bond market is conducive
to cheaper fund raising by any entity as
compared to syndicated bank finance.
The reporting platforms for corporate

bonds have been set up and maintained
by BSE, NSE and FIMMDA to capture
112
number of trades reported at FIMMDA had

risen in 2013-14 to 39,891 and the value of
trades reported also rose by 33.1 percent to
`5,92,071 crore over the previous financial
year. During 2013-14, there was a substantial
rise in the total value of the corporate bond
trades at BSE to the extent of 99.6 percent to
`1,03,027 crore from `51,622 crore in 201213. The number of trades at BSE increased
by 17.9 percent in 2013-14 over the previous
financial year. At NSE, while the number of
trades declined by 1.6 percent, the value of
trades increased by 13.9 percent in 2013-14
over the previous financial year. At MCX-SX,
the trading in corporate bond started in July
2013 and recorded 758 trades with a value of
`28,139 crore during 2013-14 (Table 2.59).
information related to trading in corporate

bonds. While the secondary market trading
of corporate bonds issued under a public
issue takes place in the exchanges along with
equities, trading of privately placed corporate
bonds in the secondary market happens in
OTC category. The deals with value of more
than one lakh rupees are reported over NSE,
BSE and FIMMDA platforms within thirty
minutes of the closing of the deal .
FIMMDA is the largest reporting
platform for the OTC deals in the corporate
bond market. The share of FIMMDA in
the total reporting has increased from 41.5
percent in 2008-09 to 59.3 percent in 201314 due to reporting by the RBI regulated
entities over the FIMMDA platform. The
Table 2.59: Secondary Market: Corporate Bond Trades

Month/
Year
BSE
NSE
FIMMDA
MCX-SX
No. of
Trades
Amount
(` crore)
No. of
Trades
Amount
(` crore)
No. of
Trades
Amount
(` crore)
No. of
Trades
Amount
(` crore)
2008-09
8,327
37,320
4,902
49,505
9,501
61,535
Na
Na
2009-10
7,408
53,323
12,522
1,51,920
18,300
1,95,955
Na
Na
2010-11
4,465
39,581
8,006
1,55,951
31,589
4,09,742
Na
Na
2011-12
6,424
49,842
11,973
1,93,435
33,136
3,50,506
Na
Na
2012-13
8,639
51,622
21,141
2,42,105
36,603
4,44,904
Na
Na
2013-14
10,187
1,03,027
20,809
2,75,701
39,891
5,92,071
758
28,139
Apr-13
986
9,493
2,422
29,911
4,440
71,452
Na
Na
May-13
1,070
11,048
2,299
35,031
4,699
75,788
Na
Na
Jun-13
708
5,251
1,934
30,309
3,199
51,666
Na
Na
Jul-13
1,057
11,731
2,264
36,061
4,049
62,891
15
660
Aug-13
830
7,331
1,541
20,817
2,989
41,058
144
2,436
Sep-13
619
6,707
1,390
17,616
2,705
38,254
82
1,964
Oct-13
919
12,791
1,551
19,020
3,097
47,131
72
2,040
Nov-13
578
5,199
1,324
19,085
2,535
35,623
50
2,345
Dec-13
718
6,548
1,300
13,244
2,887
37,090
131
4,370
Jan-14
880
11,404
1,901
24,768
3,498
52,496
63
3,889
Feb-14
733
6,171
1,187
11,811
2,349
27,773
84
2,890
Mar-14
1089
9,352
1,696
18,029
3,444
50,850
117
7,545
Source: BSE, NSE, FIMMDA, MCX-SX
113
Limited (MCX-SX CCL) This provision is

applicable to all corporate bonds traded
over the counter or on the debt segment of
stock exchanges on or after December 01,
2009. Insurance Regulatory Development
Authority (IRDA) has also issued similar
guidelines for its regulated entities. The value
of corporate bond trades settled through the
clearing corporations has increased by 35.2
percent to `6,46,288 crore in 2013-14 from
`4,78,090 crore in 2012-13 (Table 2.60).
Since 2009, all trades in corporate

bonds between specified entities, namely,
mutual funds, foreign institutional investors,
venture capital funds, foreign venture
capital investors, portfolio managers, and
RBI regulated entities as specified by RBI
have mandatorily been cleared and settled
through the National Securities Clearing
Corporation Limited (NSCCL) or the Indian
Clearing Corporation Limited (ICCL) and
now the MCX-SX Clearing Corporation
Table 2.60: Settlement of Corporate Bonds
Month
NSE
BSE
MCX-SX
No. of Trades
Settled
Settled Value
(` crore)
No. of Trades
Settled
Settled Value
(` crore)
No. of Trades
Settled
Settled Value
(` crore)
2009-10
8,922
1,20,006
464
5,482
Na
Na
2010-11
30,948
4,32,632
1,714
17,492
Na
Na
2011-12
34,697
3,91,120
2,916
10,680
Na
Na
2012-13
36,902
4,35,114
7,415
42,977
Na
Na
2013-14
39,695
5,54,682
7,440
64,218
736
27,389
Apr-13
4,513
64,980
621
6,971
Na
Na
May-13
4,807
72,647
772
7,864
Na
Na
Jun-13
3,306
51,361
573
4,134
Na
Na
Jul-13
4,067
61,771
686
6,349
15
660
Aug-13
2,741
36,998
715
5,909
140
2,341
Sep-13
2,696
34,199
556
5,741
80
1,959
Oct-13
3,008
43,286
470
4,494
71
2,014
Nov-13
2,520
33,101
501
3,618
47
2,324
Dec-13
2,838
34,184
489
3,938
127
4,328
Jan-14
3,609
50,073
583
4,467
62
3,673
Feb-14
2,189
25,724
527
2,607
81
2,754
Mar-14
3,401
46,357
947
8,126
113
7,336
Source: NSE,BSE,MCX-SX
114
II.
Wholesale Debt Market
During 2013-14, turnover in the

Wholesale Debt Market (WDM) segment
increased to `8,51,434 crore from `7,92,214
crore in 2012-13, showing a rise of 7.5
percent in the financial year. The net traded
value and number of trades was higher in
the first quarter of the financial year. At
NSE, the highest turnover was recorded in
May 2013 (`97,976 crore) followed by April
2013 (`93,397 crore) and June 2013 (`83,565

crore). As against the net traded value, the
number of trades at the WDM segment of
NSE witnessed a decline 2013-14 vis-a vis
2012-13. The number of trades declined to
21,143 in 2013-14 from 39,280 in 2012-13.
At BSE, the turnover for 2013-14 stood at
`2,52,559 crore with the number of trades at
8,189. (Table 2.61)
Table 2.61: Business Growth on the Wholesale Debt Market Segment of NSE and BSE
Month/Year
No. of Trades
Net Traded
Value
(` crore)
Average
Daily Traded
Value
(` crore)
No. of Trades
NSE
1
Net Traded
Value
(` crore)
Average
Daily Traded
Value
(` crore)
BSE
4
2008-09
16,129
3,35,950
1,419
Na
Na
Na
2009-10
24,069
5,63,816
2,359
Na
Na
Na
2010-11
20,383
5,59,447
2,256
Na
Na
Na
2011-12
23,447
6,33,179
2,649
Na
Na
Na
2012-13
39,280
7,92,214
2,248
Na
Na
Na
2013-14
21,143
8,51,434
2,424
8,189
2,52,559
2,533
Apr-13
2,355
93,397
5,189
770
20,092
1,005
May-13
2,632
97,976
4,453
879
16,079
731
Jun-13
2,004
83,565
4,178
449
12,045
602
Jul-13
1,908
66,188
2,878
758
17,691
769
Aug-13
1,646
66,561
3,328
541
9,966
498
Sep-13
1,675
77,058
3,853
266
14,087
704
Oct-13
1,848
67,338
3,207
853
16,169
770
Nov-13
1,353
51,927
2,733
459
11,408
570
Dec-13
1,439
62,489
2,976
620
15,568
741
Jan-14
1,689
79,035
3,593
836
43,567
1,894
Feb-14
1,248
59,848
3,325
712
27,754
1,542
Mar-14
1,346
46,053
2,424
1,046
48,133
2,533
Note: Data for BSE is available from 2013-14 onwards as the segment went operational in the same period
Source: NSE and BSE
115
in 2013-14 from 8.9 percent in 2008-09 and

others which include mainly corporate
debt securities, rose to 7.5 percent in 201314 from 4.4 percent in 2008-09.
The trend in the instrument-wise

share of securities traded in the WDM
segment at NSE shows that share of G-secs
has declined prominently over the years.
The share of G-Sec has declined from 69.7
percent in 2008-09 to 40.3 percent in 2013-14
(Table 2.62). On the other hand, the share of
Treasury bills increased from 16.9 percent
in 2008-09 to 34.2 percent in 2013-14. While
there has been a significant rise in the share
of PSU/ institutional bonds to 18.0 percent
At BSE, the instrument-wise share of

securities traded reveal that PSU/Institutional
Bonds contributed the maximum at 81.0
percent while Treasury Bills accounted for a
share of 11.2 percent followed by G-Secs at
7.8 percent.
Table 2.62: Instrument-wise Share of Securities Traded in the Wholesale Debt Market
Segment of NSE and BSE (Percent)
Month/
Year
Govt. Dated Securities
Treasury
Bills
PSU / Institutional
Bonds
Others
Govt. Dated Securities
Treasury
Bills
NSE
1
PSU / Institutional
Bonds
Others
BSE
4
2008-09
69.7
16.9
8.9
4.4
Na
Na
Na
Na
2009-10
58.2
16.5
15.4
10.0
Na
Na
Na
Na
2010-11
54.5
17.6
19.6
8.3
Na
Na
Na
Na
2011-12
50.4
22.0
19.6
8.0
Na
Na
Na
Na
2012-13
51.6
23.7
16.3
8.3
Na
Na
Na
Na
2013-14
40.3
34.2
18.0
7.5
7.8
11.2
81.0
0.0
Apr-13
50.7
23.5
18.0
7.8
3.7
1.1
95.3
0.0
May-13
57.8
10.4
22.3
9.4
0.6
0.8
98.5
0.0
Jun-13
48.2
21.4
21.8
8.7
9.5
0.0
90.5
0.0
Jul-13
28.5
29.6
31.0
10.9
3.2
2.2
94.6
0.0
Aug-13
21.9
53.0
18.1
6.9
1.6
1.2
97.2
0.0
Sep-13
39.9
41.1
13.8
5.1
1.1
0.0
98.9
0.0
Oct-13
43.4
32.6
17.6
6.5
0.6
0.0
99.4
0.0
Nov-13
43.6
28.6
17.9
9.9
8.7
3.0
88.2
0.0
Dec-13
36.7
49.4
10.3
3.6
0.9
1.2
97.9
0.0
Jan-14
36.1
39.8
15.2
9.0
22.4
36.9
40.7
0.0
Feb-14
42.1
43.6
9.5
4.8
17.8
45.7
36.4
0.0
Mar-14
35.2
37.0
20.2
7.7
23.1
42.1
34.7
0.0
Note: Data for BSE is available from 2013-14 onwards as the segment went operational in the same period
Source: NSE, BSE
116
13, the share of financial institutions/mutual

funds/corporate declined to 3.3 percent in
2013-14 from 4.3 percent in 2012-13. The
foreign banks have a share of 22.0 percent
in 2013-14 as compared to 22.1 percent in
2012-13.
Trading members dominated the WDM

segment at NSE with a share of 62.8 percent in
total turnover in 2013-14 as compared to 53.4
percent in 2012-13 (Table 2.63). While share
of Indian banks declined to almost half to 8.1
percent in 2013-14 from 16.5 percent in 2012-
Table 2.63: Share of Participants in Turnover of Wholesale Debt Market Segment of NSE
(Percent)
Month/ Year
1
Trading
Members
Fls / MFs /
Corporates
Primary Dealers
Indian Banks
Foreign Banks
2008-09
44.7
3.4
6.6
18.1
27.3
2009-10
49.2
2.6
4.6
19.8
23.7
2010-11
53.5
2.4
4.2
13.1
26.8
2011-12
53.3
4.2
3.7
16.4
22.5
2012-13
53.4
4.3
3.7
16.5
22.1
2013-14
62.8
3.3
3.7
8.1
22.0
Apr-13
52.3
3.8
3.7
20.2
20.0
May-13
56.1
4.0
4.3
15.5
20.1
Jun-13
63.4
2.4
5.1
8.7
20.4
Jul-13
65.2
4.9
1.9
8.2
19.9
Aug-13
68.9
4.0
4.4
1.5
21.1
Sep-13
61.8
1.8
5.7
4.1
26.5
Oct-13
64.3
5.0
3.4
5.8
21.6
Nov-13
63.6
2.0
2.7
7.9
23.8
Dec-13
61.0
2.0
3.6
7.0
26.3
Jan-14
67.7
2.4
3.4
7.1
19.4
Feb-14
65.2
3.7
2.0
6.7
22.5
Mar-14
64.2
3.9
4.0
4.9
22.9
Note: Category-wise classification not available for BSE

Source: NSE
117
PART THREE: FUNCTIONS OF THE SECURITIES AND EXCHANGE

BOARD OF INDIA IN RESPECT OF MATTERS
SPECIFIED IN SECTION 11 OF SEBI ACT, 1992
1.
REGULATION OF BUSINESS IN
STOCK EXCHANGES
Securities Contracts (Regulation) Act, 1956.

There are 20 stock exchanges, of which
eight stock exchanges have permanent
recognition, nine stock exchanges have been
granted renewal of recognition (Table 3.1
and Table 3.2). The remaining three stock
exchanges have not been granted renewal of
recognition, since they have applied for exit.
Further, Bangalore stock exchange which
has also applied for exit has a permanent
recognition.
The primary function of a stock

exchange is facilitation of trading
through electronic platforms. It regulates
trading by enforcing trading rules and
undertaking market surveillance. Besides,
it enables listing of companies, monitors
the compliance of listed companies and
disclosures, regulates the trading members
by undertaking periodic inspections and
enforcement actions. Stock exchanges play
a role in investor protection by facilitating
dispute resolution and grievance redressal
and also maintain an investor protection
fund. These functions are performed by the
exchanges within the regulatory framework
prescribed by SEBI.
I.
Among the 20 stock exchanges, Bombay

Stock Exchange (BSE), National Stock
Exchange (NSE) and MCX-SX Exchange
(MCX-SX) have been granted permission
for carrying out trade in four segments viz.,
equity segment, equity derivatives segment,
currency derivatives segment and interest rate
derivatives segment. USE has been granted
permission solely for trading in currency
derivatives segment. The remaining sixteen
are non-functional stock exchanges.
Recognition of Stock Exchanges
The stock exchanges are granted

recognition for operation in securities
markets by SEBI under Section 4 of the
Table 3.1: Stock Exchanges with Permanent Recognition

Sr. No.
Exchanges
Recognition
Ahmedabad Stock Exchange
Permanent
Bangalore Stock Exchange
Permanent
Bombay Stock Exchange
Permanent
Calcua Stock Exchange
Permanent
Delhi Stock Exchange
Permanent
Madhya Pradesh Stock Exchange
Permanent
Madras Stock Exchange
Permanent
National Stock Exchange
Permanent
Note: Bangalore Stock Exchange has made application for exit under SEBI circular dated May 30, 2012.
118
Part Three: Functions of SEBI in Respect of Maers Specied in Section 11 of SEBI Act, 1992
Table 3.2: Renewal of Recognition Granted to Stock Exchanges during 2013-14

Sr. No.
Exchanges
Date of Notication
Period
Uar Pradesh Stock Exchange
June 03, 2013
Jun 03,2013 - Jun 02, 2014
Bhubaneswar Stock Exchange
May 22, 2013
Jun 05, 2013- Jun 04, 2014
OTC Exchange
Aug 19, 2013
Aug 23, 2013- Aug 22, 2014
Pune Stock Exchange
Aug 30, 2013
Sept 02, 2013- Sept 01, 2014
MCX Stock Exchange
Sept 12, 2013
Sept 16, 2013- Sept 15, 2014
Interconnected Stock Exchange
Nov 14, 2013
Nov 18, 2013 Nov 17, 2014
Vadodara Stock Exchange
Dec 30, 2013
Jan 04, 2014 Jan 03, 2015
Jaipur Stock Exchange
Dec 30, 2013
Jan 09, 2014- Jan 08, 2015
United Stock Exchange
Mar 11, 2014
Mar 22, 2014 - Mar 21, 2015
Note: Gauhati Stock Exchange, Cochin Stock Exchange, and Ludhiana Stock Exchange have made application for exit under
SEBI circular dated May 30, 2012.
II.
cycles. All the securities are being traded and

settled under T+2 rolling settlement. In case of
institutional trades, the CC noties the relevant
trade details to clearing members (CMs)/
custodians on the trade day (T), which needs
to be confirmed by T+1 to CC. Subsequently,
the CC determines the obligations of
counterparties and sends the obligations to
members. A CM has to pay-in/pay-out funds
and/or securities. The obligations are netted
for a member across all securities to determine
his fund and securities obligations and he has
to either pay or receive funds and securities.
Members pay-in/pay-out obligations are
determined latest by T+1 and are forwarded to
them on the same day, so that they can settle
their obligations on T+2. The securities and
funds are paid-in and paid-out on T+2 day to
the members and the settlement is complete
in two days from the trading day. In case of
shortage of securities, auction takes place on
T+2 day and then settled on T+3 days.
Trading and Settlement Practices at

Stock Exchanges
Stock exchanges offer online, fully

automated, anonymous, order driven, screenbased trading system to the investors through
their members. In this system, members can
enter the quantities of securities and the
prices at which they would like to transact,
and the transaction is executed as soon as it
finds a matching sale for the buy order for a
counterparty from the order book.
The clearing and settlement process
involves three main activities clearing,
settlement, and risk management. The
clearing process involves determining what
the counterparties owe and what they are due
to receive on the settlement date, after which
the obligations are discharged by settlement.
A.
Cash Segment
The core processes involved in clearing

and settlement include (a) Determination of
Obligation, (b) Pay-in of Funds and Securities,
and (c) Pay-out of Funds and Securities. The
clearing corporation (CC) clears and settles
trades as per the well-dened settlement
B.
F&O Segment
The positions in the futures contracts for

each member is marked-to-market to the daily
settlement price of the futures contracts at the
119
end of each trade day. The profits/ losses are

computed as the difference between the trade
price or the previous days settlement price,
as the case may be, and the current days
settlement price. Further, on the expiry of
the futures contracts, CC marks all positions
of a CM to the final settlement price and the
resulting profit / loss is settled in cash. The final
settlement of the futures contracts is similar
to the daily settlement process except for the
method of computation of final settlement
price. The final settlement of profit / loss is
computed as the difference between trade
price or the previous days settlement price,
as the case may be, and the final settlement
price of the relevant futures contract. In case
of options, the premium settlement is cash
settled and settlement style is premium style.
The premium payable position and premium
receivable positions are netted across all
option contracts for each CM at the client
level to determine the net premium payable
or receivable amount, at the end of each day.
Final exercise settlement is effected for option
positions at in-the-money strike prices existing
at the close of trading hours, on the expiration
day of an option contract.
C.
to the requisite margins on the positions taken.

Margins/liquid assets deposited by members
are in the form of cash and cash equivalent
(cash, fixed deposits, bank guarantees etc)
and other liquid assets (Group I liquid eligible
securities after appropriate hair-cuts etc) with
cash equivalents required to be at least 50
percent of liquid assets.
III. Memorandum of Understanding (MoU)
between Stock Exchanges
Pursuant to Section 13 of Securities
Contracts (Regulation) Act, 1956, stock
exchanges can enter into a MoU with any
recognised stock exchange outside its area
of operation to enable the investors to buy
and sell securities through such trading floor
under the regulatory framework of that stock
exchange. Vide the same provisions, Madhya
Pradesh Stock Exchange operationalised
trading under such MoU with NSE and BSE.
Further, Madras Stock Exchange and Calcutta
Stock Exchange have operationalised trading
with NSE.
IV. Steps taken by SEBI to ring-fence
MCX-SX
The recognition of MCX-SX was renewed
vide gazette notification dated September 12,
2013, for the period September 16, 2013 to
September 15, 2014. In view of developments
in M/s. National Spot Exchange Ltd. (NSEL),
which is regulated by Forward Markets
Commission (FMC) and promoted by
M/s. Financial Technologies (India) Ltd.
(FTIL), while renewing recognition of MCXSX for a period of one year in September 2013,
certain conditions were imposed to ring-fence
MCX-SX from the NSEL crisis. The said
conditions were as under:
Risk Management
A sound risk management system is

integral to an efficient settlement system.
Membership of exchanges and their clearing
corporations are granted only after satisfying
minimum net-worth requirements and
depositing base minimum capital with
exchanges and liquid net-worth with CC.
Further, members have to deposit collateral
with exchanges/CC which can be used for
margins for trading positions. As soon as
trade is executed, capital adequacy check is
carried out by the CC and portion of collateral
deposited by broker is blocked commensurate
a.
120
A committee comprising of two Public

Interest Directors and three nominees
with SEBI directions issued vide letter

dated September 12, 2013.
from institutional investors in MCX-SX

shall be constituted within two days of
renewal of recognition to oversee the
following functions of the exchange:
All financial transactions related

to
investment,
lending,
and
borrowing of funds and related
party transactions as defined in
Accounting Standards 18;
Appointment of key management

personnel;
All facility / infrastructure sharing

arrangements;
All major capital expenditure;
and advise the board on all the major

policy matters.
c.
Before the commencement of the EGM,

MD and CEO, a then existing shareholder
director were made to resign from the
Board of Directors with immediate
effect.
e.
A comprehensive audit has been initiated

with a focus on related party transactions,
major board decisions, agreements with
related parties, etc. since inception of the
exchange in 2008.
Further, FMC vide an order dated

December 17, 2013, inter-alia declared FTIL as
not fit and proper to continue to hold shares
in Multi-Commodity Exchange of India Ltd.
(MCX). Accordingly a Show Cause Notice was
issued to FTIL on December 20, 2013, and an
opportunity of hearing was provided to FTIL.
Subsequently, vide order dated March 19, 2014,
SEBI has issued directions to FTIL to divest all
the shares/warrants held directly or indirectly
in MCX-SX, MCX-SX CCL, NSEIL, DSE and
VSE by declaring them not fit and proper
person in terms of SECC (Regulations), 2012.
The board will consider the advice and

maintain a record of the proceedings. A
committee on the same lines may also
be constituted by MCX-SX CCL which
is the subsidiary of MCX-SX. The said
committee shall oversee the clearing and
settlement function in addition to the
functions listed above.
b.
d.
V.
In order to further secure the management

of the exchange and clearing corporation,
shareholders of MCX-SX and MCX-SX
CCL in AGM / EGM would examine
conflict of interest and compliance
with SECC (Regulations), 2012 by the
directors and the key management
personnel including managing director,
and take appropriate action including
reconstitution of board, reappointment
of any key management personnel and
will report to SEBI within 30 days from
the date of renewal of recognition.
Exit of Stock Exchanges
SEBI issued the circular CIR/MRD/

DSA/14/2012 dated May 30, 2012, regarding
the Exit Policy for de-recognised/nonoperational stock exchanges. As on March
31, 2014, four exchanges namely Hyderabad
Stock Exchange, Coimbatore Stock Exchange,
Saurashtra Kutch Stock Exchange and
Mangalore Stock Exchange have been granted
exit by SEBI vide orders dated January 25,
2013, April 3, 2013, April 5, 2013 and March
3, 2014 respectively. Further, Gauhati Stock
Exchange, Cochin Stock Exchange, Bangalore
Stock Exchange and Ludhiana Stock Exchange
have made application for exit in terms of SEBI
circular dated May 30, 2012.
Thereafter, MCX-SX and MCX-SX CCL

held an EGM on October 9, 2013 to
discuss and decide on the compliance
121
VI. Measures adopted for regulation of

Stock Exchanges
and procedures with regard to actions for

non-compliances of certain listing conditions
which have so far been considered as grounds
for suspension of trading by the recognised
stock exchanges (Box 3.1).
During 2013-14, in order to improve

the effectiveness of monitoring mechanism
of stock exchanges to ascertain the adequacy
and accuracy of disclosures made in
compliance with the Listing Agreement,
the stock exchanges were advised to put in
place appropriate framework to effectively
monitor the disclosure and for handling
complaints related to inadequate and
inaccurate disclosures and non-compliances.
SEBI also decided to streamline the processes
With a view to streamline the investor

grievance mechanism and the arbitration
mechanism at the stock exchanges, various
measures were adopted during 2013-14 like
widened jurisdiction for appealing before the
courts, increase in number of investor service
centers facilitating arbitration, facilitation
desks at all investor service centers etc.
Box 3.1 : Standard Operating Procedure for stock exchanges for suspension and revocation of
trading of shares of listed entities for non-compliance of certain listing conditions
For non-compliance with listing conditions, exchanges have been suspending the trading of the shares of the listed
companies, which aected the interest of non-promoters much more than the promoters, as the exit route used
to be closed for such investors aer suspension of trading. Therefore, it was decided that the exchange, in case of
non compliant companies, would resort to several other measures such as imposition of nes, freezing of shares of
the promoter and promoter group, transferring the trading in the shares of the company to separate category, etc.,
before suspending the shares of the company.
Accordingly, to maintain consistency and uniformity of approach by the stock exchanges for taking action against
the listed entities for non-compliance with certain important listing conditions, SEBI vide circular dated September
30, 2013 has prescribed Standard Operating Procedure (SOP) for suspension and revocation of suspension of trading
in the shares.
The salient features of the circular are as follows:
Imposition of nes (on per day basis) on the company for non-compliance and delay in compliance with
continuous listing conditions such as submission of shareholding paern, nancial results, corporate
governance report, etc.
In case of non-compliance for two consecutive quarters, moving the shares of non-compliant company to "Z"
category, where the trades would be seled on Trade for Trade basis.
In case non-compliance continues, freezing the shares of the promoter and promoter group. This would be
carried out before suspension of the trading of shares of the company.
In order to provide exit window for the non-promoters, aer 15 days of suspension, trading in the shares of
non-compliant entity will be available on the "Trade for Trade" basis, on the rst trading day of every week
for six months.
2.
REGISTRATION
AND
REGULATION OF WORKING OF
INTERMEDIARIES ASSOCIATED
WITH THE SECURITIES MARKET
all market intermediaries. Under these Acts,

the Government and SEBI issue notifications,
guidelines and circulars that the market
intermediaries need to comply with. There are
a large variety and number of intermediaries
who operate in Indian securities markets under
the respective regulations. SEBI ensures the
SEBI has framed regulations under

the SEBI Act, 1992 and the Depositories Act,
1996 for the registration and regulation of
122
to rationalize the time taken, documentation

involved and to avoid duplication of efforts,
SEBI (Stock Brokers and Sub Brokers)
Regulations, 1992 were amended and notified
on September 27, 2013. The primary objective
of the amendment was to replace the existing
requirement of obtaining multiple registrations
for operating in different segments of a stock
exchange with a single registration per stock
exchange (Box 3.2).
standard and quality of service provided by

intermediaries to the clients and investors, fair
and sound conduct and compliance practices.
I.
Streamlining the Process of Initial /

Permanent Registration of Intermediaries
The process for streamlining the

registration of intermediaries and approvals
by enhancing the levels of transparency
continued during the year 2013-14. With a view
Box 3.2: Simplification of Registration Requirements for Stock Brokers

In 2011, SEBI dispensed with the requirement of intermediaries to obtain prior approval from SEBI for change in
status or constitution. The intermediaries now require to take prior approval from SEBI only for change in control
as against a number of approvals required earlier. Also, if the applicant holds multiple registrations with SEBI,
it is required to make only one application to SEBI for prior approval in case of change in control. Subsequently,
permanent registration was introduced for merchant bankers, registrars to an issue and share transfer agents,
depository participants, credit rating agencies and debenture trustees. Vide amendment dated July 5, 2011 to the
regulations the aforesaid intermediaries were granted initial registration for a period of five years. Thereafter,
they could apply for permanent registration instead of earlier requirement of periodical renewal of certificate of
registration.
One registration per Stock Exchange for Stock Brokers
In continuation to the simplification of prior approval and permanent registration requirements, concept of single
registration per stock exchange has now been introduced for stock brokers. Initially, applicants were required to
obtain multiple certificates of registration from SEBI while operating in each segment viz. equity, equity derivative,
currency derivative, debt of a stock exchange/ clearing corporation, and for each category viz. Trading Member,
Trading Cum Self Clearing Member, Trading Cum Clearing Member and Professional Clearing Member. These
applications were processed at stock exchange/ clearing corporation level and then submitted to SEBI for final
approval i.e. issuing certification of registration.
With a view to rationalize the time taken, documentation involved and to avoid duplication of efforts, the registration
requirements for stock broker/ clearing member were simplified by amendment to the SEBI (Stock Brokers and Sub
Brokers) Regulations, 1992, notified on September 27, 2013.
Revised registration procedure
If a new entity intends to register as a stock broker/ clearing member in any segment(s) of a stock exchange/
clearing corporation, the entity shall apply to SEBI through the respective stock exchange/ clearing corporation
in the manner prescribed in the SEBI (Stock Brokers and Sub Brokers) Regulations, 1992 in any one segment.
The entity shall be issued a certificate with a unique registration number for each stock exchange/clearing
corporation, as the case may be, irrespective of number of segments.
If an entity is already registered with SEBI in any segment of a stock exchange/ clearing corporation, then for
operating in any other segment of that stock exchange/ clearing corporation (promoted by that stock exchange),
the entity need not apply to SEBI. The entity can directly seek approval from the concerned stock exchange or
clearing corporation as per the procedure prescribed in the SEBI (Stock Brokers and Sub Brokers) Regulations,
1992 for the same.
The stock exchange or clearing corporation shall grant approval for any additional segment to the stock broker,
self-clearing member or clearing member, as the case may be, after exercising due diligence and on being
satisfied about the compliance of all relevant eligibility requirements and shall inform the Board about such
grant of approval.
123
issued guidelines for avoiding or dealing with

conflict of interest for all intermediaries, stock
exchanges, clearing corporations, depositories
and their associated persons in securities
market. While the compliance mechanism
of stock brokers was strengthened through
internal audit process, steps were also taken to
make the penalty structure for violations of SEBI
(Stock Broker and Sub Broker) Regulations,
1992 more stringent.
The policy of sending response to the

applicants, in a time-bound manner i.e.,
within 30 days was adhered to in case of initial
as well as permanent registrations. The status
of processing of each application for initial/
permanent registration of intermediaries
clearly indicating the reasons for pendency
and also whether pending with SEBI or with
the intermediary, was displayed on SEBI
website on a monthly basis. With a view
to ensure higher level of transparency and
accountability within SEBI, it is also mentioned
on the website that in case any application
remains unattended, the applicant should not
hesitate to approach the concerned Division
Chief or the Executive Director of the Market
Intermediaries Regulation and Supervision
Department.
III. Registration of Stock Brokers

A.
During 2013-14, 217 new stock brokers

were registered with SEBI in cash segment
compared to 1,081 in 2012-13. Further, there
were 934 cases of reconciliation/ cancellation/
surrender of brokers in 2013-14 compared to
260 in 2012-13. The total number of registered
stock brokers as on March 31, 2014, decreased
to 9,411 from 10,128 in 2012-13 (Table 3.3).
The practice of seeking details of

corrective measures taken by the applicants
where administrative and quasi-judicial
actions have been initiated by SEBI against
them or their associate companies, before
granting registrations or other approvals,
has greatly improved the compliance culture
among the intermediaries.
II.
Measures
for
Intermediaries
Regulation
Cash Segment
Table 3.3: Registered Stock Brokers
of
SEBI simplified the transmission process

followed by STAs and RTIs to make it more
efficient and investor friendly. The KYC norms
were rationalised for eligible foreign investors
investing under the Portfolio Investment
Scheme (PIS) route to risk based KYC norms
depending on investor categories. Aadhar
e-KYC service launched by UIDAI was
notified as a valid process for KYC verification.
Guidelines were issued for dealing with conflict
of interest for investment /trading by CRAs,
or their access persons and other employees.
In consonance with IOSCO Principle 8, SEBI
Details
2012-13
2013-14
Registered Stock Brokers in the

beginning of the year
9,307
10,128
Addition during the Year
1,081
217
260
934
10,128
9,411
Reconciliation / Cancellation/
Surrender of Memberships
Registered Stock Brokers as on
March 31 of respective year
The wide disparity reflected in the new

registrations between 2012-13 and 2013-14 can
be attributed partly to the higher number of
registrations granted in 2012-13 to the stock
brokers for trading on the new stock exchange,
MCX-SX. In 2012-13, 529 registration certificates
were issued to the stock brokers for trading in
MCX-SX. Another reason for the decline is the
124
new policy adopted in the year 2013-14 of

granting single registration per stock exchange
instead of multiple registrations. Applications
of brokers and sub-brokers in the process of
registration are given in Table 3.4.
At the end of 2013-14, number of

registered brokers was the highest in NSE
(1,316) and BSE (1,316), Calcutta Stock
Exchange (CSE) (853) and Inter-Connected
Stock Exchange (ISE) (835). The number of
corporate brokers was highest in NSE (1,167)
followed by BSE (1,120), MCX-SX (493) and
OTCEI (471). In the major stock exchanges,
corporate brokers dominated the trading
segment. Corporate brokers constituted 93.2
percent of the total stock brokers at MCXSX whereas at NSE, BSE and OTCEI, their
share was 88.7 percent, 85.1 percent and 76.5
percent respectively. Highest number of stock
brokers in proprietorship category was at
CSE (603), followed by ISE (507). Stock brokers
in partnership category were the highest in
NSE (79), followed by CSE (43) (Table 3.5).
Table 3.4: Applications under the Process of

Registration in Cash Segment
Category of
Application
Number of Applications
under Process
Brokers
17
Sub-brokers
35
Total
52
Note: These applications are pending at different stages

viz. stock exchanges/stock brokers for want of documents/
clarifications or under process in SEBI.
Table 3.5: Classification of Stock Brokers in Cash Segment on the Basis of Ownership
Stock Exchange
Proprietorship
2012-13
Partnership
2013-14
2012-13
Corporate
2013-14
No. Percent No. Percent No. Percent No. Percent

1
2012-13
Total
2013-14
2012-13 2013-14
No.
Percent
No.
Percent
No.
No.
10
11
12
13
14
15
336
Ahmedabad
137
40.4
136
40.5
22
6.5
22
6.5
180
53.1
178
53.0
339
Bangalore
127
48.7
125
48.4
2.3
2.3
128
49.0
127
49.2
261
258
BSE
171
12.6
167
12.7
28
2.1
29
2.2
1,162
85.4
1,120
85.1 1,361
1,316
Bhubaneswar
185
91.6
183
92.0
0.0
17
8.4
16
8.0
202
199
Calcua
616
70.9
603
70.7
43
5.0
43
5.0
210
24.2
207
24.3
869
853
Cochin
320
78.6
309
78.2
2.2
2.3
78
19.2
77
19.5
407
395
87
64.4
Na
Na
0.0
Na
Na
48
35.6
Na
Na
135
Na
183
37.8
179
37.8
30
6.2
30
6.3
271
56.0
264
55.8
484
473
59
95.2
33
91.7
1.6
2.8
3.2
5.6
62
36
ISE
537
60.8
507
60.7
27
3.1
24
2.9
319
36.1
304
36.4
883
835
Jaipur
434
94.8
415
94.5
1.3
1.4
18
3.9
18
4.1
458
439
Ludhiana
213
70.1
215
71.0
0.7
0.7
89
29.3
86
28.4
304
303
Madras
104
52.5
89
50.3
13
6.6
12
6.8
81
40.9
76
42.9
198
177
MCX-SX
20
4.4
22
4.2
10
2.2
14
2.6
428
93.5
493
93.2
458
529
187
73.1
201
71.3
0.4
0.4
68
26.6
80
28.4
256
282
88.7 1,416
1,316
Coimbatore
Delhi
Gauhati
MPSE
NSE
74
5.2
70
5.3
81
5.7
79
6.0
1,261
89.1
1,167
OTCEI
135
20.9
132
21.4
16
2.5
13
2.1
496
76.7
471
76.5
647
616
Pune
117
67.6
115
68.0
4.1
4.1
49
28.3
47
27.8
173
169
UPSE
210
75.0
149
72.0
1.1
1.4
67
23.9
55
26.6
280
207
Vadodara
242
78.1
243
78.1
1.0
1.0
65
21.0
65
20.9
310
311
Notes: 1. The categories of financial institutions and composite corporate are clubbed within the category of corporate broker.
2. Coimbatore Stock Exchange has been granted exit by SEBI vide order dated April 03, 2013.
3. Percent ownership represents category-wise percent share for a particular exchange.
125
B.
Equity and
Segment
Currency
Derivative
members and ten self clearing members were

granted registration at F&O segment of MCXSX during the same period. In addition, two
trading members were granted registration
at Madras Stock Exchange (MSE), 30 trading
members were granted registration at Madhya
Pradesh Stock Exchange (MPSE) and 13
trading members were granted registration at
Calcutta Stock Exchange (CSE) during 201314 (Table 3.6).
In equity derivative segment, 22 trading

members (TM), two clearing members (CM)
and five self-clearing members (SCM) were
granted registration at NSE Futures and
Options (F&O) segment during 2013-14. In
case of BSE F&O segment, the corresponding
figures were 23, two and four respectively.
Further, 61 trading members, seven clearing
Table 3.6: Number of Registered Members in Equity Derivatives Segment

Type of Member
Registrations granted during 2013-14

NSE
BSE
Trading Member
22
23
61
Clearing Member
5
29
Total
MCX- MSE MPSE

SX
Registered Member as on March 31, 2014
CSE
NSE
BSE
30
13
1,315
Na
Na
Na
10
Na
Na
29
78
30
MCX- MSE MPSE

SX
CSE
10
11
12
13
983
529
31
116
30
226
136
72
Na
359
40
72
13
1,900
1,159
673
31
116
30
Note: Madhya Pradesh Stock Exchange operationalised trading under MoU with NSE and BSE. Further, Madras Stock Exchange and
Calcutta Stock Exchange have operationalised trading with NSE.
for trading/clearing at NSE, BSE, MCX-SX

and USE in various categories were 1,088, 187,
1,029 and 471 respectively at the end of March
31, 2014 (Table 3.7).
The trading of currency derivatives

segment at BSE started in November 2013.
In the currency derivatives segment, total
number of certificates of registration issued
Table 3.7: Number of Registered Members in Currency Derivatives Segment

Type of Member
Registrations granted during 2013-14
Registered Member as on March 31, 2014
NSE
BSE
MCX-SX
USE
NSE
BSE
MCX-SX
USE
10
11
Trading Member
21
20
11
898
160
895
412
Clearing Member
Na
Na
Na
173
27
119
55
Na
Na
17
15
27
21
11
1,088
187
1,029
471
Total
126
The number of applications under the process

of registration in the derivatives segment is
given in Table 3.8
has declined by 26.1 percent (from 70,178 as on

March 31, 2013 to 51,885 as on March 31, 2014).
However, the number of Authorised Persons
(APs) as approved by the stock exchanges
in accordance with SEBI Guidelines has
increased substantially by 29.9 percent during
the year (from 1,25,273 as on March 31, 2013 to
1,62,679 as on March 31, 2014). Stock brokers
were allowed to provide market access to
clients through APs, in addition to subbrokers, with a view to expand the reach of the
markets for exchange traded products, vide
SEBI circular dated November 6, 2009. Thus,
while number of sub-brokers has declined,
the increased presence of APs has ensured
the reach of the markets for exchange traded
products, as intended while introducing the
concept of APs (Table 3.9).
Table 3.8: Applications under the Process of

Registration
in
Derivative
Segment
Category of Application
Number of Applications
under Process
Brokers in Equity
Derivatives Segment
20
Brokers in Currency
Derivatives Segment
22
Total
42
IV. Registration of Sub-brokers

The number of registered sub-brokers
Table 3.9: Registered Sub-brokers
Stock Exchange
1
Ahmedabad
Bangalore
Bhubaneswar
BSE
Calcua
2012-13
2013-14
Number
Percentage of Total
Number
Percentage of Total
77
0.1
71
0.1
158
0.2
158
0.3
14
0.0
14
0.0
31,635
45.1
22,652
43.7
71
0.1
47
0.1
Cochin
41
0.1
41
0.1
Coimbatore
20
0.0
Na
Na
200
0.3
186
0.4
0.0
0.0
Delhi
Gauhati
ISE
0.0
0.0
Jaipur
30
0.0
29
0.1
Ludhiana
21
0.0
21
0.0
0.0
0.0
103
0.1
103
0.2
37,600
53.6
28,362
54.7
14
0.0
14
0.0
156
0.2
152
0.3
0.0
0.0
Madhya Pradesh
Madras
NSE
OTCEI
Pune
Uar Pradesh
Vadodara
Total
27
0.0
24
0.0
70,178
100.0
51,885
100.0
Note: Coimbatore Stock Exchange has been granted exit by SEBI vide order dated April 03, 2013.
127
V.
Registration of Other Intermediaries
NSDL), six Credit rating Agencies, 59 Bankers

to an Issue, 31 Debenture Trustees and five
KRAs were registered with SEBI (Table 3.10).
As per SEBI (Foreign Portfolio Investors)
Regulations, 2014 and vide circular regarding
the implementation of Foreign Portfolio
Investor (FPI) regime, SEBI approved
Designated Depository Participants (DDPs)
would grant registration to FPIs on behalf of
SEBI and also carry out other allied activities.
As per the regulation, FPI should engage a
DDP before making investment in Indian
securities market. As on March 31, 2014, a
total 14 DDP registrations have been done.
Pursuant to the amendments to the

Regulations in 2011-12, applicants found
eligible are granted initial registration valid
for a period of five years from the date of issue
of certificate of registration to the applicant.
Before the expiry of their initial registration, if
they so desire, they may apply for permanent
registration in order to continue their
business. As on March 31, 2014, 71 Registrars
to an Issue and Share Transfer Agents, 197
Merchant Bankers, three Underwriters, 857
Depository Participants (both at CDSL and
Table 3.10: Registered Intermediaries other than Stock Brokers and Sub-Brokers
Type of Intermediary
2012-13
2013-14
72
71
199
197
Underwriter
DPs - NSDL
288
281
DPs - CDSL
577
576
Bankers to an Issue
57
59
Debenture Trustee
32
31
Na
14
Registrar to Issue and Share Transfer Agent

Merchant Banker
Credit Rating Agency
KYC (Know Your Client) Registration Agency (KRA)

Designated Depository Participants (DDPs)
Participants, 31 Merchant bankers, 14

Registrars to an Issue and Share Transfer
Agents and two Underwriters were granted
permanent registration. Thus, overall 43 new
entities were granted initial registration and
184 existing entities were given permanent
registration (Table 3.11).
During 2013-14, four Bankers to

an Issue, 26 Depository Participants, 11
Merchant Bankers, two Registrars to an Issue
and Share Transfer Agents were granted
new/ initial registration. Further, 14 Bankers
to an Issue, one Credit Rating Agency,
eight Debenture Trustees, 114 Depository
128
Table 3.11: Process of Registration of Other Intermediaries

Type of Intermediary
Application received
during 2013-14
Registration Granted
during 2013-14*
Pending as on March
31, 2014
Initial
Permanent
Initial
Permanent
Initial
Permanent
Registrar to Issue and Share Transfer Agent
11
14
12
41
11
31
18
Depository Participant
35
148
26
114
17
63
Credit Rating Agency
Bankers to an Issue
14
Debenture Trustee
51
212
43
184
27
93
Merchant Banker
Underwriter
Total
Note: * Including those applications received in previous year.
Table 3.12: Number of Registered FIIs,

Sub-accounts and Custodians
As on March 31, 2014, while 27

applications received for initial registration
are pending across various classes of
intermediaries, 93 applications are awaiting
clearance for permanent registration.
VI. Registration of Foreign Institutional
Investors,
Sub-Accounts
and
Custodians
Particulars
2012-13
2013-14
Number of FIIs
1,757
1,710
Number of Sub-accounts
6,335
6,344
19
19
Number of Custodians
During 2013-14, 106 fresh FII registrations

were granted and 529 registrations were
renewed. Further, 607 fresh sub-accounts were
registered with SEBI during same period.
FIIs from 51 different jurisdictions have been
registered with SEBI , out of which USA has
the maximum number of 573, followed by
UK (231), Luxembourg (128), Mauritius (99),
Canada (77), Ireland (72) and Singapore (71).
(Table 3.13)
During 2013-14, there was a fall in the

number of Foreign Institutional Investors
(FIIs) registered with SEBI. As on March
31, 2014, the number of FIIs registered with
SEBI were 1,710 compared to 1,757 a year
ago. However, the number of registered subaccounts has increased marginally to 6,344 as
on March 31, 2014 compared to 6,335 as on
March 31, 2013 (Table 3.12).
129
Table 3.13: Status of Registration of FII, Sub-accounts and Custodians during 2013-14
Particulars
FII
Sub-account
Custodian
Fresh
Renewal Total
Fresh
Renewal Total
Fresh
Renewal Total
Registration
Registration
Registration
1
10
Application received for

fresh registration / renewal
122
632
754
696
2,796
3,492
a. Applications registered/
renewed
106
529
635
607
2,470
3,077
b. Applications pending#
15
103
118
84
326
410
c. Application rejected/
returned*
Na
Notes: 1. *Some of the applications that were returned due to various reasons may have been resubmitted and would have got
subsequently registered or rejected.
2. # Represents total cumulative number of pending applications as on March 31, 2014. The figure also contains those
applications which were received before 2013-14.
Table 3.14: Registered Venture Capital

Funds
and
Alternative
Investment Funds
The FPI Regulations were notified by

SEBI on January 7, 2014 and accordingly ,the
foreign portfolio investor regime revamping
the existing FII and sub-account structure
would commence from June 2014. As per the
new regime, FPIs would be classified into
three categories and all existing FIIs, subaccounts and QFIs would be merged into the
three categories.
Particular
2012-13
2013-14
VCFs
211
207
FVCIs
182
192
42
101
AIFs
SEBI notified Alternative Investment

Funds (AIFs) Regulations, 2012 on May
21, 2012 (Box 3.3). AIFs are basically funds
established or incorporated in India for the
purpose of pooling in capital from Indian and
foreign investors for investing. As on March
31 , 2014, 101 AIFs have been registered with
SEBI compared to 42 registered AIFs as on
March 31, 2013.
VII. Registration of Venture Capital Funds

and Alternative Investment Funds
There were 207 domestic and 192 foreign
venture capital funds registered with SEBI as
on March 31, 2014 compared to 211 domestic
and 182 foreign funds respectively as on
March 31, 2013 (Table 3.14).
Box 3.3 : SEBI (Alternative Investment Funds) Regulations, 2012

SEBI (Alternative Investment Funds) Regulations, 2012 (AIF Regulations) were notied on May 21, 2012
thereby providing a framework for registration and regulation of Alternative Investment Funds (AIF). AIF
Regulations endeavour to extend the perimeter of regulation to unregulated funds with a view to systemic stability,
increasing market eciency, encouraging formation of new capital and consumer protection. Salient features of the
AIF Regulations, inter alia, include the following:
Scope of the Regulations and applicability to existing funds
All AIFs whether operating as private equity funds, real estate funds, hedge funds, etc. must register with
SEBI under the AIF Regulations.
130
SEBI (Venture Capital Funds) Regulations, 1996 (VCF Regulations) have been repealed. However, existing
VCFs shall continue to be regulated by the VCF Regulations till the existing fund or scheme managed by the
fund is wound up. Existing VCFs, however, shall not increase the targeted corpus of the fund or scheme as
it stands on the day of notication of these Regulations. Such VCFs may also seek re-registration under AIF
regulations subject to approval of 66.67 percent of their investors by value.
Existing funds not registered under the VCF Regulations will not be allowed to oat any new scheme without
registration under AIF Regulations. However, schemes oated by such funds before coming into force of AIF
Regulations, shall be allowed to continue to be governed till maturity by the contractual terms, except that no
rollover/ extension or raising of any fresh funds shall be allowed.
Existing funds not registered under the VCF Regulations which seek registration but are not able to comply
with all provisions of AIF Regulations may seek exemption from the Board from strict compliance with the
AIF Regulations.
Categories of funds
The Regulation seeks to cover all types of funds broadly under three categories. An application can be made
to SEBI for registration as an AIF under one of the following three categories:i.
Category I AIFs are those AIFs with positive spillover eects on the economy, for which certain incentives
or concessions might be considered by SEBI or Government of India or other regulators in India. Category I
consists of four sub-categories under which registration is given:
a.
Venture Capital Fund (Including Angel Fund)
b.
Social Venture Fund
c.
SME Fund
d.
Infrastructure Fund
These funds shall be close ended, shall not engage in leverage and shall follow investment restrictions as
prescribed for each category. Investment restrictions for VCFs are similar to restrictions in the existing VCF
Regulations.
ii.
Category II AIFs are those AIFs for which no specic incentives or concessions are given by the government
or any other Regulator; which shall not undertake leverage other than to meet day-to-day operational
requirements as permied in these Regulations; and which shall include Private Equity Funds, Debt Funds,
Fund of Funds and such other funds that are not classied as category I or III. These funds shall be close
ended, shall not engage in leverage and have no other investment restrictions.
iii.
Category III AIFs are those AIFs including hedge funds which trade with a view to make short term returns;
which employs diverse or complex trading strategies and may employ leverage including through investment
in listed or unlisted derivatives. These funds can be open ended or close ended. Category III funds shall be
regulated through issuance of directions regarding areas such as operational standards, conduct of business
rules, prudential requirements, and restrictions on redemption, conict of interest as may be specied by the
Board.
Other salient features
The AIF (other than angel fund) shall have a minimum corpus of `20 crore.
No scheme of an AIF (other than angel fund) shall have more than 1000 investors.
The AIF (other than angel fund) shall not accept from an investor, an investment of value less than rupees
one crore.
The manager or sponsor for a Category I and II AIF(other than angel fund) shall have a continuing interest
in the AIF of not less than 2.5 percent of the initial corpus or rupees ve crore whichever is lower and such
interest shall not be through the waiver of management fees.
For Category III AIF, the continuing interest shall be not less than ve percent of the corpus or `10 crore,
whichever is lower.
Category I and II AIFs shall be close-ended and shall have a minimum tenure of three years. However,
Category III AIF may either be close-ended or open-ended.
131
Schemes may be launched under an AIF subject to ling of information memorandum with the Board
along with applicable fees.
Units of AIF may be listed on stock exchange subject to a minimum tradable lot of rupees one crore.
However, AIF shall not raise funds through stock exchange mechanism.
Category I and II AIFs shall not be permied to invest more than 25 percent of the investible funds in one
investee company. Category III AIFs shall invest not more than 10 percent of the corpus in one investee
company.
AIF (other than angel fund) shall not invest in associates except with the approval of 75 percent of investors
by value of their investment in the AIF.
All AIFs shall have QIB status as per SEBI (Issue of Capital and Disclosure Requirements) Regulations,
2009.
The Regulations provide for transparency and disclosures and mechanism for avoidance of conict of
interest.
Angel Funds
Angel fund is a sub-category of Venture Capital Fund under Category I- AIF that raises funds from angel
investors and invests in accordance with the provisions of Chapter III-A of AIF Regulations. The Angel Fund shall
only raise funds by way of issue of units to angel investors. Angel investor means any person who proposes to
invest in an angel fund and satises one of the following conditions, namely,
(a)
an individual investor who has net tangible assets of at least two crore rupees excluding value of his principal
residence, and who:
(i)
has early stage investment experience, or
(ii)
has experience as a serial entrepreneur, or
(iii) is a senior management professional with at least ten years of experience;
(Early stage investment experience shall mean prior experience in investing in start-up or emerging or early-stage
ventures and serial entrepreneur shall mean a person who has promoted or co-promoted more than one start-up
venture.)
(b)
a body corporate with a net worth of at least ten crore rupees; or
(c)
an AIF registered under these regulations or a VCF registered under the SEBI (Venture Capital Funds)
Regulations, 1996.
Salient features
The Angel Fund shall have a minimum corpus of rupees ten crore.
No scheme of the Angel Fund shall have more than forty-nine angel investors.
The Angel fund shall accept, up to a maximum period of three years, an investment of not less than 25 lakh
rupees from an angel investor.
The manager or sponsor of the Angel Fund shall have the continuing interest in the Angel Fund of not less
than two and half percent of the corpus or y lakh rupees, whichever is lower and such interest shall not
be through the waiver of management fees.
The Angel Fund shall be close ended.
Units of angel funds shall not be listed on any recognised stock exchange.
Angel funds shall invest only in venture capital undertakings which:
i)
have been incorporated during the preceding three years from the date of such investment;
ii)
have a turnover of less than twenty ve crore rupees;
iii)
are not promoted or sponsored by or related to an industrial group whose group turnover exceeds
300 crore rupees; and
iv)
are not companies with family connection with any of the angel investors who are investing in
the company.
Investment by an angel fund in any venture capital undertaking shall not be less than 50 lakh rupees and
shall not exceed ve crore rupees.
Investment by an angel fund in the venture capital undertaking shall be locked-in for a period of three
years.
Angel funds shall not invest in associates.
Angel funds shall not invest more than 25 percent of the total investments under all its schemes in one
venture capital undertaking.
132
VIII. Registration of Portfolio Managers and

Investment Advisers
and other documents are being maintained in

the specified manner including the compliance
in respect of AML/CFT and KYC norms.
As on March 31, 2014, 212 Portfolio

Managers have been registered with SEBI
compared to 241 in 2012-13. SEBI notified
Investment Advisers Regulations, 2013 on
January 21, 2013 (Box 3.4). Investment Adviser
refers to any person, who for consideration,
is engaged in the business of providing
investment advice to clients or other persons
or group of persons and includes any person
who holds out himself as an investment
adviser. As on March 31, 2014, 129 investment
advisers have been registered with SEBI
(Table 3.15).
It may be noted that, a pre registration

/renewal visit is being conducted before
granting registration/ renewal of registration to
Portfolio Manager. During the visit, compliance
in respect of KYC norms is being verified.
During FY 2013-14, SEBI carried out
inspections against two Portfolio managers
namely M/s. Geojit BNP Paribas Financial
Services Ltd and M/s. Allegro Capital Advisors
Pvt Ltd.
Table 3.15: Registered Portfolio Managers
and Investment Advisers
Inspection of Portfolio managers
Particulars
An inspection of books of accounts,

records and other documents pertaining to
the Portfolio Manager has been carried out to
verify whether the books of accounts, records
2012-13
2013-14
Portfolio Managers
241
212
Investment Advisers
Na
129
Box 3.4: SEBI (Investment Advisers) Regulations, 2013

The SEBI (Investment Advisers) Regulations, 2013 (IA Regulations) were notied on January 21, 2013 and
have come into eect from April 21, 2013. In terms of the IA Regulations, no person shall act as an investment
adviser or hold itself out as an investment adviser unless he has obtained a certicate of registration from the Board
or he is specically exempt.
Investment adviser means any person, who for consideration, is engaged in the business of providing
investment advice to clients or other persons or group of persons and includes any person who holds out himself as
an investment adviser, by whatever name called. Under the Regulations, it is proposed to register and regulate:
Individuals
Companies
Partnership rms
LLPs
Any other body corporate

who provide investment advice and are not exempted from registration under the IA Regulations.
Investment advice is an advice relating to investing in, purchasing, selling or otherwise dealing in
securities or investment products, and advice on investment portfolio containing securities or investment products,
whether wrien, oral or through any other means of communication for the benet of the client and shall include
nancial planning. Investment advice given through newspaper, magazines, any electronic or broadcasting or
telecommunications medium, which is widely available to the public shall not be considered as investment advice
for the purpose of IA regulations.
Salient features of the Regulations
The banks/ body corporate which also oer distribution or execution will be required to oer investment
advisory services through a subsidiary or a Separately Identiable Department or Division (SIDD). Such a
SIDD will be required to be clearly segregated from other activities.
Financial planners will be required to be registered as investment advisers.
Only the act of giving advice will be regulated under this regulation, whereas the regulation of selling of
products, if any, would be solely under the purview of the product regulators.
133
3.
I.
The investment adviser shall not obtain any remuneration or compensation from any person other than from
the client being advised.
For a bank or body corporate having a distribution or execution business, it would be necessary to keep the
investment advisory services segregated from such activities and to make disclosures to the clients being
advised about any remuneration or compensation received by it and any of its associates for the distribution
or execution services.
The investment advisers registered under the regulations shall use the words investment adviser in their
name.
Individual investment adviser/ partner/ representative of a body corporate offering investment advice shall:
have a professional qualification or post graduate degree or diploma in finance, accountancy, business
management, commerce, economics, capital market, banking, insurance or actuarial science or any state
government from a university or an institution recognised by the central government or a recognised
foreign university or institution or association or a graduate in any discipline with an experience of at
least five years in activities relating to advice in financial products or securities fund or asset or portfolio
management.
obtain a certification accredited by NISM from NISM/FPSB/exchange on Financial Planning or fund or

asset management or investment advisory services.
Investment advisers who are body corporate shall have a minimum net worth of `25 lakh.
Investment advisers who are individuals or partnership firms shall have minimum net tangible assets rupees
one lakh.
The applicant needs to be a fit and proper person.
The regulations provide for code of conduct, fiduciary duties, record keeping, risk profiling of the clients and
also deal with the issue of suitability and appropriateness of the advice.
carrying out CIS activities without obtaining

registration from SEBI:
REGISTRATION AND REGULATION

OF WORKING OF COLLECTIVE
INVESTMENT SCHEMES INCLUDING
MUTUAL FUNDS
A.
The company was found to be carrying

out CIS activities without obtaining
registration from SEBI and hence, an interim
order u/s 11B of the SEBI Act, 1992 was issued
on April 10, 2013 whereby the company was
inter-alia directed not to raise any further
money from investors and not to dispose off
any assets/ properties related to its schemes.
Subsequently, vide final order dated July 9,
2013, SEBI directed M/s. Sumangal Industries
Ltd. to wind up its existing collective
investment schemes and refund the money
collected by it under the schemes with returns
which are due to the investors as per the
terms of offer within a period of three months.
Further, the company and directors have been
debarred from accessing the capital market
till all its schemes are wound up and all the
money mobilized are refunded to investors.
Registration of Collective Investment

Schemes
As on March 31, 2014, there was only

one registered CIS, viz. M/s. Gift Collective
Investment Management Company Ltd.
which was registered during 2008-09.
II.
M/s. Sumangal Industries Ltd.
Inspection of Collective Investment

Schemes
During FY 2013-14, SEBI carried out

inspections against three entities, subsequent
to the interim orders against them, to ascertain
their compliance with the directions in the
interim orders.
III. Regulatory actions against Collective
Investment Schemes
During financial year 2013-14, the
following orders were passed against entities
134
B.
M/s. Osians Connoisseurs of Art Private

Ltd.
Managing Director, Mr. Sudipta Sen, to wind

up its existing collective investment schemes
and refund the money collected by it under
the schemes with returns which are due to
the investors as per the terms of offer within
a period of three months from the date of the
order and submit a winding up and repayment
report to SEBI. Also the company and its
Managing Director have been directed not to
access the capital market and have been further
restrained and prohibited them from buying,
selling or otherwise dealing in the securities
market till all its collective investment schemes
are wound up and all the monies mobilized
through them are refunded to the investors.
SEBI passed an order dated April 15,

2013 in the matter of Art Fund sponsored
by M/s. Osians Connoisseurs of Art Private
Ltd (the company) in the nature of CIS and
directed it to wind up its existing collective
investment scheme and refund the monies,
collected by it under its scheme but remaining
unpaid, to all the investors within a period
of three months from the date of the order.
In addition, the company was also directed
to pay the amount of profits/income earned,
if any, that is due to the investors as per the
terms of its offer or pay interest at the rate
of 10 percent per annum from the date of
investment till the date of refund, whichever is
higher. Further, the company was also directed
not to access the capital market and was further
restrained and prohibited from buying, selling
or otherwise dealing in the securities market till
its collective investment scheme/s is/are wound
up and all the monies mobilized through them
are refunded to the investors.
D.

out CIS activities without obtaining registration
from SEBI and hence an ex- parte interim Order
cum show cause notice u/s 11B of the SEBI
Act, 1992 was issued on June 18, 2013 whereby
the company and its promoters and directors
were inter-alia directed not to raise any further
money from investors and not to dispose off
any assets/ properties related to its schemes.
The company had sponsored an Art Fund

namely Osian Art Fund which in turn floated
a close-ended scheme Contemporary-1 which
involved pooling of investments from investors
with the objective to generate income and
capital growth from a portfolio of investment
and management in the art works. The company
also acted as an Asset Management Company
and Oseta Investments Trustee Company
Private Ltd was appointed as Trustee for the
Osian Art Fund. The company was found to be
engaged in the fund mobilizing activity from
investors by sponsoring/ launching or cause
to be sponsored/ launched CIS as defined in
Section 11AA of the SEBI Act, 1992.
C.
M/s. Ken Infratech Ltd.
E.
M/s. Alchemist Infra Reality Ltd.
An order u/s 11B of the SEBI Act, 1992

was issued on June 21, 2013 directing the
company to wind up its existing collective
investment scheme and refund the monies,
collected by it under its scheme to all the
investors within a period of three months.
F.
M/s. Rose Valley

Entertainments Ltd.
Hotels
and

out CIS activities without obtaining registration
from SEBI and hence an interim order u/s 11B
of the SEBI Act, 1992 was issued on July 10,
2013 whereby the company has been, inter-alia,
directed not to collect any further money from
investors and not to dispose off any assets/
properties related to its schemes.
M/s. Saradha Realty India Ltd.
SEBI passed an order dated April 23, 2013

directing M/s. Saradha Realty India Ltd. and its
135
G.
M/s. HBN Dairies and Allied Ltd.
to launch any new schemes or plans, not to

dispose of or alienate any of the properties or
assets owned or acquired in respect of or in
pursuance of the schemes and not to divert
any funds raised from public at large which
are kept in bank account(s) and/or in the
custody of the company.
Vide order dated July 12, 2013, M/s.

HBN and its directors were inter-alia directed
not to solicit or collect any further money/
investments from investors/ customers into
its schemes or launch or carry out any money
collection schemes. Further, M/s. HBN and
its directors were directed to submit to SEBI,
a reasonable proposal including firm time
lines with regard to the manner in which it
proposes to wind up its schemes and make
payments along with the returns which are
due to its investors, within a period of 30 days
from the date of the order.
H.
M/s. Sai Prasad Foods Ltd was prima

facie found to be engaged in fund mobilising
activity from public by floating collective
investment schemes as defined in Section
11AA of the SEBI Act, 1992.
J.
M/s. Sai Prasad Foods Ltd.
SEBI passed an order on August 30, 2013

under sections 11(1), 11B and 11(4) of SEBI
Act, 1992 read with Regulation 65 of the SEBI
(CIS) Regulations, 1999 in the matter of M/s.
Maitreya Plotters and Structures Pvt. Ltd. The
order directed the company and its directors
viz. Mrs. Varsha Madhusudan Satpalkar and
Mr. Janardan Arvind Parulekar not to collect
any more money from investors including
under the existing schemes, not to launch
any new schemes, not to dispose of any of
the properties or alienate any of the assets
of the schemes and not to divert any funds
raised from public at large which are kept in
bank account(s) and/or in the custody of the
company.
SEBI passed an interim order on July 17,

2013 in the matter of M/s. Sai Prasad Foods
Ltd. directing the company and its directors
viz. Mr. Balasaheb K. Bhapkar, Mrs. Vandana
B. Bhapkar and Mr. Shashank B. Bhapkar not
to collect any more money from investors
including under the existing schemes, not to
launch any new schemes, not to dispose of
any of the properties or alienate any of the
assets of the schemes and not to divert any
funds raised from public at large which are
kept in bank account(s) and/or in the custody
of the company.
M/s. Sai Prasad Foods Ltd was prima
facie found to be engaged in fund mobilising
I.
M/s. Maitreya Plotters & Structures

Pvt. Ltd.
M/s. Maitreya Plotters and Structures Pvt.

Ltd. was prima facie found to be engaged in
fund mobilising activity from public by floating
collective investment schemes as defined in
M/s. Sai Prasad Properties Ltd.
K.
SEBI passed an interim order on July

17, 2013 in the matter of M/s. Sai Prasad
Properties Ltd. directing the company and its
directors/promoters, including Mr. Balasaheb
K. Bhapkar and Mrs. Vandana B. Bhapkar
not to collect any more money from investors
including under the existing schemes, not
M/s. KBCL India Ltd.
SEBI passed an order on September 12,

2013 under Sections 11(1), 11(4) and 11B of
SEBI Act, 1992 read with Regulation 65 of the
SEBI (CIS) Regulations, 1999 in the matter of
M/s. KBCL India Ltd. The order directed the
company and its directors viz. Mr. Rakesh
136
India Ltd was prima facie found to be engaged

in fund mobilising activity from public by
floating collective investment schemes as
defined in Section 11AA of the SEBI Act, 1992.
Kumar, Mr. Vishvnath Pratap Singh and Mr.

Shashi Kant Mishra not to collect any more
money from investors including under the
existing schemes, not to launch any new
schemes, not to dispose of any of the properties
or alienate any of the assets of the schemes
and not to divert any funds raised from public
at large which are kept in bank account(s) and/
or in the custody of M/s. KBCL India Ltd.
N.
Vide an interim order dated October 31,

SEBI inter-alia directed M/s. Servehit Housing
& Infrastructure India Ltd. and its directors
not to collect any money from investors under
the existing schemes; not to launch any new
schemes or plans; not to dispose of or alienate
any of the properties or assets owned or
acquired in respect of or in pursuance of the
plans or schemes or earmarked / allotted to
the investors under the plans / schemes; not
to divert any fund raised from public at large
of the company and to immediately submit
the full inventory of the assets owned by the
company out of the amounts collected from
the customers/ investors under its various
schemes.
M/s. KBCL India Ltd was prima facie

found to be engaged in fund mobilising
L.
M/s. MVL Ltd.
Vide an interim order dated September

26, 2013 by SEBI, M/s. MVL Ltd. and its
directors were inter-alia directed not to collect
any money from investors including under
the existing India Business Centre (IBC)
project, not to launch any new scheme, not
to dispose of any of the properties or alienate
any assets of the IBC project and not to divert
any funds raised from public under the IBC
project which are kept in bank accounts and/
or in the custody of the company.
M.
M/s. Servehit Housing & Infrastructure

India Ltd.
O.
M/s. Orient Resorts (India) Pvt. Ltd.
Vide order dated November 26, 2013, SEBI

directed M/s. Orient Resorts (India) Pvt. Ltd.
to wind up its existing collective investment
schemes and refund the money collected by it
under the schemes with returns which are due
to the investors as per the terms of offer within
a period of three months. Further, the company
and directors were debarred from accessing the
capital market till all its schemes are wound
up and all the money mobilized is refunded to
investors.
M/s. Samruddha Jeevan Foods India

Ltd.
SEBI passed an interim order on October

31, 2013 in the matter of M/s. Samruddha
Jeevan Foods India Ltd. directing the company
and its directors viz. Mr. Mahesh Kisan
Motewar, Mrs. Vaishali Mahesh Motewar and
Mr. Ghanshyam Jashbhai Patel not to collect
any more money from investors including
under the existing schemes, not to launch
any new schemes, not to dispose of any of
the properties or alienate any of the assets
of the schemes and not to divert any funds
raised from public at large which are kept
in bank account(s) and/or in the custody of
the company. M/s. Samruddha Jeevan Foods
P.
M/s. Kim Infrastructure and Developers

Ltd.
Vide interim order dated December

5, 2013 SEBI inter-alia directed M/s. KIM
Infrastructure and Developers Ltd. not to
collect any more money from investors
including under the existing schemes; not
to launch any new schemes; to give a full
137
directors, Mr. Suresh L Srivastav, Ms. Laxmi S

Shrivastav, Mr. Ritesh K Shrivastav, Mr. Vivek
Kumar Suresh Srivastav and Mr. Rajkumar
Laxman Konde not to collect any money from
investors from its existing project/scheme,
not to launch any new project /scheme, not to
dispose of or alienate any of the properties or
assets owned or acquired in respect of or in
pursuance of the schemes and not to divert
any funds raised from public at large which
are kept in bank account(s) and/or in the
custody of the company.
inventory of the assets owned by the company

to SEBI; not to dispose of any of the properties
or alienate any of the assets of the schemes;
not to divert any funds raised from public at
large which are kept in bank account(s) and/
or in the custody of M/s. Kim Infrastructure
and Developers Ltd.
Q.
M/s. Sun-Plant Agro Ltd. (SPAL)
Vide order dated May 03, 2011, SEBI

directed M/s. SPAL to repay the mobilized
funds to the investors within a period of three
months. Since M/s. SPAL failed to confirm
compliance of the directions issued to it vide
the order dated May 3, 2011, SEBI issued a
Show Cause Notice (SCN) dated January 3,
2013 to M/s. SPAL and its directors/ persons in
charge of business of its scheme(s){hereinafter
referred to as the noticees} calling upon them
to show cause as to why appropriate actions,
as contemplated in the SCN, in terms of SEBI
Act and CIS Regulations should not be taken
against the noticees for failure to comply with
the said order. Subsequently, vide order dated
December 30, 2013, SEBI inter-alia restrained
and debarred M/s. SPAL and its directors,
namely, Mr. Awdesh Kumar Singh, Mr. Girija
Shankar Kumar and Mr. Sant Kumar from
accessing the securities market for a period
of five years, and prohibited the said entities/
persons from mobilizing funds under any
schemes or arrangement, existing or future,
as defined under section 11AA of the SEBI
Act, 1992. Further, it was clarified that the
directions passed in this order shall not be
construed to absolve the M/s. SPAL and other
noticees from the obligations to wind up all its
collective investment schemes and repay the
investors to the satisfaction of SEBI.
R.
M/s. Shree Sai Spaces and Creations Ltd

was prima facie found to be engaged in fund
mobilising activity from public by floating
collective investment schemes as defined in
S.
M/s. Green Ray International Ltd.
SEBI passed an order dated February

3, 2014 inter-alia directing M/s. Green Ray
International Ltd and its directors/promoters
to wind up the existing collective investment
schemes and refund the money collected by
the said company under the schemes with
returns which are due to its investors as per
the terms of offer within a period of three
months from the date of the order and submit
a winding up and repayment report to SEBI.
T.
M/s. Royal Twinke Star Club Private

Ltd.
SEBI passed an interim order on March

7, 2014 in the matter of M/s. Royal Twinkle
Star Club Private Ltd. directing the company
and its directors viz. Mr. Omprakash Basantlal
Goenka, Mr.Prakash Ganpat Utekar, Mr.
Venkatraman Natrajan and Mr.Narayan
Shivram Kotnis not to collect any more money
from investors including under the existing
schemes, not to launch any new schemes, not
to dispose of any of the properties or alienate
any of the assets of the schemes and not to
divert any funds raised from public at large
M/s. Shree Sai Spaces Creations Ltd.
SEBI passed an interim order on Jan 23,

2014 in the matter of M/s. Shree Sai Spaces and
Creations Ltd. directing the company and its
138
plans; not to dispose of any of the properties or

alienate the assets of the existing scheme; not
to divert any funds raised from public at large,
of the company, to immediately submit the full
inventory of the assets owned by the company
out of the amounts collected from the
customers/ investors under
its existing
schemes and to furnish all the information
sought by SEBI.
which are kept in bank account(s) and/or in the

custody of the company. M/s. Royal Twinkle
Star Club Private Ltd was prima facie found
to be engaged in fund mobilising activity
from public by floating collective investment
schemes as defined in Section 11AA of the
SEBI Act, 1992.
U.
M/s. Bajaj Capital Ltd.
Vide order dated March 11, 2014, SEBI

disposed off the Show Cause Notice dated
June 14, 2007 issued to M/s. Bajaj Capital
Ltd. The said Show Cause Notice issued to
the entity alleged violation of provisions of
Section 12 read with Sections 11 and 11AA of
the SEBI Act, 1992 and the provisions of SEBI
(CIS) Regulations, 1999.
V.
IV. Registration and Regulation of Mutual

Funds
As on March 31, 2014, 50 mutual funds
were registered with SEBI, of which 43 were
in the private sector and seven (including
UTI) were in public sector. During 2013-14,
Daiwa Mutual Fund was acquired by SBI
Mutual Fund following which Daiwa Mutual
Fund was deregistered. ICICI Securities Fund
was deregistered during this period. The
name of Religare Mutual Fund was changed
to Religare Invesco Mutual Fund (Table 3.16).
M/s.
RR Investors Capital Services
Private Ltd.

June 14, 2007 issued to M/s. RR Investors
Capital Services Private Ltd. The said Show
Cause Notice issued to the entity alleged
violation of provisions of Section 12 read with
Sections 11 and 11AA of the SEBI Act, 1992 and
the provisions of SEBI (CIS) Regulations, 1999.
W.
Table 3.16: Mutual Funds Registered with

SEBI
M/s. Marwahs Fine Art Dealers

June 14, 2007 issued to M/s. Marwahs Fine Art
Dealers. The said Show Cause Notice issued
to the entity alleged violation of provisions of
Section 12 read with Sections 11 and 11AA of
the SEBI Act, 1992 and the provisions of SEBI
(CIS) Regulations, 1999.
X.
Sector
2012-13
2013-14
Public Sector (including UTI)
Private Sector
45
43
Total
52
50
A.
Inspection of Mutual Funds
As per the policy of SEBI regarding

inspection of Mutual Funds, a risk based
approach has been adopted. The inspections
are undertaken based on assets under
management and other factors including
number of complaints received against MF.
During 2013-14, inspection of 21 Mutual
Funds and 2 Registrars (executing Mutual
Fund transactions) was conducted.
M/s. Ecogreen Real Estate (India) Ltd.
Vide an interim order dated March 26,

2014, SEBI directed M/s. Ecogreen Real Estate
(India) Ltd. and its directors not to collect
any money from investors under the existing
schemes; not to launch any new schemes or
139
B.
Regulatory Actions against Mutual Funds
and to promote a fair and orderly securities

market, SEBI ensures the integrity of markets
by detecting market frauds on a proactive
basis, investigating abusive, manipulative
or illegal trading practices in the securities
markets and taking punitive steps to punish
the manipulators. Market surveillance helps
in ensuring integrity of markets by enabling a
safe and sound environment where buyers and
sellers are willing to participate confidently.
During 2013-14, 48 warning leers

and 19 deciency leers were issued to
mutual funds on account of violations of
SEBI Regulations / guidelines observed in
Compliance Test Reports, inspection reports, etc.
4.
PROMOTION AND REGULATION

OF
SELF
REGULATORY
ORGANISATIONS
SEBI (Self Regulatory Organisations),

2004 was notified on February 19, 2004
with the objective to promote organisation
of intermediaries representing a particular
segment of the securities market as a self
regulated entity / organisation. To enable
the setting up of an SRO for distributors,
the SEBI (Self Regulatory Organisations)
(Amendment) Regulations, 2013 were
notified on January 7, 2013 which stated that
distributors shall be deemed as intermediaries.
A public notice was issued on March 21,
2013 inviting applications from any group
or association of intermediaries which
are desirous of being recognized as a Self
Regulatory Organisation in terms of SEBI
(Self Regulatory Organisations) Regulations,
2004 for distributors of mutual fund products,
by making an application as prescribed in the
said Regulations.
During 2013-14, SEBI decided to have
a single SRO for distributors of mutual fund
products and a two stage procedure for grant
of recognition as SRO for distributors of
mutual fund product i.e. grant of in-principle
approval and grant of recognition. SEBI
received three applications for recognition
as SRO and in the matter regarding selection
of SRO, a case has been filed and the same is
pending before Securities Appelate Tribunal.
5.
FRAUDULENT AND
TRADE PRACTICES
UNFAIR
To protect the interest of investors

140
I.
Types of fraudulent and unfair trade

practices
A.
Entering into synchronized trades /

reversal of trades / circular trades within
the group and entering into repeated self
trades resulting in no change in beneficial
ownership, artificial volumes and price
rise.
B.
Certain connected entities contributed to

price rise by placing orders for one share
for each buy order in several instances.
C.
Transferring shares in off market and

then reversing the trade and buying the
same back in the market, resulting in
artificial volumes.
D.
Increasing the price of the scrips in the

last few minutes of trading hours
affecting the closing price of the scrip
on the day. Subsequently, significant
quantity of call options is exercised after
closing of the market, resulting in profits.
E.
Using front entities and creating

false or misleading appearance of
trading in the securities market, entering
into transactions in securities without
the intention of performing it or without
intention of change of ownership of
security and manipulating the price of
scrip.
F.
Increasing the price of the scrip by

executing repeated self trades and
profiting from it.
II.
Fraudulent and unfair trade practices

cases during 2013-14
A.
Order in the matter of M/s Brooks

Laboratories Ltd against M/s. Konark
Commerce & Industries Ltd & 24 other
entities.
was alleged that Mr. V. P. Patel along with

GRD group entities and Korp group entities,
indulged in structured / synchronized / circular
trades, so as to create artificial volumes in the
scrip and give exit to the allottees of IPO of
BGIL viz. Anoop Jain HUF, Mr. Anoop Vimal
Jain, Mrs. Ritu Jain, Ms Shikha Somani and
Mr. Nimit Jayendra Shah along with other
allottees at a pre-determined price by misusing
the stock exchange trading mechanism. It
was further alleged that the trading was also
instrumental in giving misleading appearance
of trading in the scrip of BGI and it was
alleged that Mr. V. P. Patel and Mr. Vanraj
Singh Kahor had executed self trades.
SEBI conducted investigations into the

alleged irregularities in the IPO of M/s. Brooks
Laboratories Ltd. (Brooks) for siphoning of
funds from the IPO proceeds, by promoters
of Brooks, along with M/s. Konark Commerce
& Industries Ltd, M/s. Shardaraj Tradefin
Ltd, M/s. Suryamukhi Projects Pvt. Ltd and
22 other entities. The investigation inter-alia
revealed that an amount of ` 8.25 crore were
round tripped by the entities with Brooks in the
guise of ICDs through fictitious transactions.
M/s. Suryamukhi Projects Pvt. Ltd also
received ` 15.30 crore under agreement with
Brooks, which was alleged to be not-genuine.
It was also alleged that out of IPO proceeds,
` 2.50 crore was transferred to M/s. Overall
Financial Consultants Pvt. Ltd. through layers
of many entities in complicit with promoters
of Brooks which was misutilised by Overall
Financial in trading in the shares of Brooks.
Adjudicating Officer passed an order

imposing a total penalty of `42.50 crore on 21
entities for violation of Section 12A(a), (b) and
(c) of the SEBI Act and Regulation 3(a), (b), (c)
& (d) and 4(1) & 4(2)(a) (e) and (g) of the SEBI
(PFUTP) Regulations, 2003, under Section 15
HA and 15 HB of the SEBI Act, 1992.
C.
SEBI conducted an investigation into the

trading in the scrip of M/s. Sumeet Industries
Ltd. listed at BSE and NSE during the period
from October 1, 2006 to March 12, 2007. It was
observed that the price of the scrip increased
from `4.81 (opening price on December 05,
2006) to `34.25 (opening price on February 21,
2007- a rise of 612 percent) along with volume
spurt, and decreased to `26.30 on March 12,
2007. On the basis of investigation it was
alleged that M/s. Sumeet Industries Ltd. in
collusion with stock broker M/s SIC Stocks
and Services Pvt. Ltd. manipulated its order
book, created buying pressure in its scrip and
paid the consideration to M/s SIC Stocks and
Services Pvt. Ltd.
Adjudicating Officer passed an order

dated December 31, 2013 imposing total
penalty of ` 53.50 crore on 25 entities for
violations of section 12 A (b) & (c) of the SEBI
Act, 1992 and Regulation 3 (c) & (d) and 4 (1)
of the SEBI (PFUTP) Regulations, 2003, under
Section 15 HA of the SEBI Act, 1992.
B.
Order in the matter of M/s Sumeet

industries Limited against M/s Sumeet
industries Ltd. and 13 other entities.
Order in the matter of M/s. Bharatiya

Global Infomedia Limited (BGIL)
against Mr. V. P. Patel & 20 other
entities.
BGIL had come out with an IPO through

book building route in July 2011. On the basis
of investigation it was alleged that M/s. GRD
group and M/s. Korp group had entered into
synchronized / structured trades. Further it
141
Agro Oils Limited (SAOL) for the period from

February 01, 2009 to February 26, 2010. The
investigation, inter-alia, had revealed that the
company SAOL, in which Mr. Anil Agrawal
was a Whole Time Director had allegedly
transferred money to connected companies
namely viz. M/s. Unique Ways Realtors Pvt.
Ltd. and other entities (collectively referred to
as the Uni group) who were controlled by
Mr. Anil Agrawal and Mr. Rajesh Kapoor.
Adjudicating Officer imposed a total

penalty of `17,92,00,000/- on M/s Sumeet
industries Ltd. and 13 other entities for the
violation of Regulations 3 (b),(c),(d) and 4(1),
4(2) (a),(d),(e),(f) and (r) of SEBI (PFUTP)
Regulations, 2003 read with Section 12A(a),(b)
& (c) of the SEBI Act, 1992, under Section 15
HA of the SEBI Act, 1992.
D.
Order in the matter of trading activity

in the scrips of M/s. Nakoda Textiles
India Ltd, M/s. Gayatri Projects Ltd.,
M/s. Nandan Exim Ltd. and M/s.
Trimurthi Drugs and Pharmaceuticals
Ltd. against Mr. Rameshbhai V Shah &
9 other entities.
The Uni group in turn allegedly

transferred money to Mr. Rajesh Kapoor
who placed orders at price higher than the
last traded price and had impacted the price
of the scrip and contributed significantly to
the price rise in the scrip of SAOL during the
investigation period ranging from ` 22.95 on
February 02, 2009 to the high of ` 98 on July
08, 2009 and closing at ` 31.45 on February 26,
2010.
The investigation into the trading activity

of Sanghvi Group in four scrips M/s. Nakoda
Textiles India Ltd, M/s. Gayatri Projects Ltd.,
M/s. Nandan Exim Ltd. and M/s. Trimurthi
Drugs and Pharmaceuticals Ltd. revealed that
10 connected entities of M/s. Sanghvi Group
had allegedly indulged in fictitious / artificial
trading activities such as self trades, intra-day
trades, multiple first trades and synchronised
trades by contributing significantly to the
increase in price of the four scrips. It was
also revealed by investigation that the
counterparties to many of such trades were
the entities only.
Adjudicating Officer imposed a total

penalty of `4.5 crore on the nine noticees for
the violation of Regulation 3(a), (b), (c), (d),
4(1), 4(2)(d) and (e) of the SEBI (PFUTP)
Regulations, 2003, under Section 15 HA of the
SEBI Act, 1992.
F.
Adjudicating
Officer
imposed
a
consolidated monetary penalty of `5 crore
on all the entities jointly and severally for the
violation of Section 12A(a),(b) and (c) of the
SEBI Act,1992 read with Regulation 3(a), (b),
(c) and (d) and 4(1), (2)(a) of SEBI (PFUTP)
Regulations, 2003, under Section 15 HA of the
SEBI Act, 1992.
E.
Order in the matter of IPO of M/s RDB

Rasayans Ltd. against Mr. Dave Harihar
Kiritbhai.
SEBI conducted an investigation into the

Initial Public Offer (IPO) of M/s RDB Rasayans
Ltd. and its subsequent trading on and
around the listing day, as the scrip witnessed
wide fluctuations in the price on BSE. It was
observed that the scrip on listing day witnessed
huge volumes. The scrip opened at a price of
`85 and traded in the range of `72.90 to `93.15
and thereafter it started falling sharply and
reached its intraday low of `19.80 and closed
at `26.50. Further, the major buy transactions
on the listing day was seen to have been
executed by Mr. Dave Harihar Kiritbhai,
Order in the matter of M/s. Sanwaria

Agro Oils Limited against Mr. Anil
Agrawal & 8 other entities
SEBI carried out an investigation into

the dealings in the scrip of M/s Sanwaria
142
Mr. Jitendrabhai Ramanbhai Patel and Shri

Madhavlal Bechardas Patel have regularly
borrowed funds inter-alia from M/s. Sardhav
Investment and Finance Pvt. Ltd. and repaid
the same, pursuant to an agreement between
M/s. Sardhav Investment and Finance Pvt.
Ltd., but the loan agreement entered between
them was not duly witnessed by any third
party. It was therefore alleged that IPO money
was routed by RDB through a web of interconnected entities to make the transaction
look complex and hide the actual source of
the money in order to enable BMD to make
payments to its stock broker on time i.e. as per
T+2 settlement mechanism.
before the market price of the shares began to

fall and he had incurred huge loss on account
of his trading on the listing day. From the bank
statements, it was alleged that few transactions
took place through inter-connected entities
and M/s Sardhav Investment and Finance Pvt.
Ltd., one of the inter-connected entities, had
transferred money to four major loss making
trading clients who had dealt in RDB shares
and one of the loss making trading clients was
Mr. Dave Harihar Kiritbhai.
Further on the basis of investigations it
was alleged that IPO money was routed by
M/s RDB Rasayans Ltd. through a web of interconnected entities to make the transaction
look complex and hide the actual source of the
money in order to enable Mr. Dave Harihar
Kiritbhai to make payments to his stock broker
on time i.e. as per T+2 settlement mechanism.
Adjudicating
Officer
imposed
a
consolidated penalty of ` 2 crore on M/s.
BMD Exports Pvt. Ltd. and its Directors,
Mr. Jitendrabhai Ramanbhai Patel and
Mr. Madhavlal B. Patel for violation of Sections
12A (a), (b) and (c) of the SEBI Act read with
Regulations 3 (a), (b), (c), (d), 4 (1), 4 (2) (a),
(d) and (e) of SEBI (PFUTP) Regulations, 2003
under Section 15 HA of the SEBI Act, 1992.
Adjudicating Officer imposed a penalty

of `2,00,00,000 /- on Mr. Dave Harihar
Kiritbhai for the violation of Sections 12A
(a), (b) and (c) of the SEBI Act read with
Regulations 3 (a), (b), (c), (d), 4 (1), 4 (2) (a),
(d) and (e) of the SEBI (PFUTP) Regulations,
2003, under Section 15 HA of the SEBI Act,
1992.
G.
H.
Order in the matter of IPO of M/s RDB

Rasayans Ltd. against M/s BMD Exports
Pvt. Ltd. and its Directors.
Order in the matter of M/s. RDB

Rasayans
Ltd.
against
M/s.
Shreyanshnath Shares and Financial
Services Pvt. Limited & its Directors.
SEBI conducted an investigation into

the IPO of M/s. RDB Rasayans Ltd and
its subsequent trading on and around the
listing day as the scrip of RDB witnessed
wide fluctuations in the price on BSE. The
investigation alleged that IPO money was
routed by RDB through a web of interconnected entities to make the transaction
look complex and hide the actual source of the
money in order to enable M/s. Shreyanshnath
Shares and Financial Services Pvt. Ltd. to
make payments to its stock broker on time i.e.
as per T+2 settlement mechanism.
M/s. RDB Rasayans Ltd. came out with

an IPO on September 2011. On the basis of
investigation it was found that a large portion
of the allottees of RDB IPO had sold their
shares on the day of listing. M/s BMD Exports
Pvt. Ltd. which traded in the scrip on its
listing day incurred huge losses on account of
the trading. It was alleged that a part of IPO
proceeds flowed in from M/s. RDB Rasayans
Ltd. to four loss making trading clients
including M/s BMD Exports Pvt. Ltd. Further,
M/s. BMD Exports Pvt. Ltd. and its directors
This fraud was alleged to have been

committed by M/s. Shreyanshnath Shares and
143
Financial Services Pvt. Ltd and its directors,

Mr. Patel Kirtikumar Gopalbhai and Mr.
Chauhan Vijaykumar Babubhai.
violated regulation 4(2)(f) of SEBI (PFUTP)

Regulations, 2003.
Adjudicating
Officer
imposed
a
consolidated penalty of `1,25,00,000/- on
M/s. GHCL Ltd. for the violation of Clause
35 of the Listing Agreement and Regulations
3(d), 4(2)(f) of SEBI (PFUTP) Regulations,
2003, under Section 23Eof SCRA Act, 1956 &
Section 15 HA of the SEBI Act, 1992.
Adjudicating
Officer
imposed
a
consolidated penalty of Rupees one crore
on M/s. Shreyanshnath Shares and Financial
Services Pvt. Ltd., Mr. Patel Kirtikumar
Gopalbhai and Mr. Chauhan Vijaykumar
Babubhai under Section 15HA of the SEBI Act
1992 for the violation of Sections 12A (a), (b)
and (c) of the SEBI Act read with Regulations
3 (a), (b), (c), (d), 4 (1), 4 (2) (a), (d) and (e) of
the SEBI (PFUTP) Regulations, 2003.
I.
J.
Order in the matter of M/s. Golden

Tobacco Ltd against M/s. Golden
Tobacco Limited.
Nine promoter entities of M/s. Golden

Tobacco Ltd. (GTL), by an arbitration order
dated July 23, 2009, were restrained from
selling, transferring or creating third party
interest in any manner in 32,93,000 shares
of M/s. Golden Tobacco Ltd, while quarterly
disclosure made for quarters ending March
31, 2009, June 30, 2009, September 30, 2009,
December 31, 2009, March 31, 2010, and June
30, 2010 made by GTL stated that only 5,28,000
shares were encumbered for the promoter
entities. Thus GTL had allegedly failed to
provide the correct details with respect to
shares encumbered and thus failed to comply
with Clause 35 of the Listing Agreement.
Order in the matter of M/s. GHCL Ltd

against M/s. GHCL Ltd.
Nine promoter entities of M/s. GHCL

Ltd., by an arbitration order dated July 23,
2009, were restrained from selling, transferring
or creating third party interest in any manner
in 86,70,800 shares of M/s. GHCL Ltd., while
M/s. GHCL Ltd. disclosed only 15,60,000
shares were encumbered for promoter group
entities, for the quarters ending March 31, 2009
and 16,05,000 for the quarter ending June 2009,
September 2009, December 2009, March 2010
and June 2010. Thus it was alleged that M/s.
GHCL Ltd. had failed to provide the correct
details with respect to shares encumbered and
thus failed to comply with Clause 35 of the
Listing Agreement.
It was also alleged that GTL by the

omission and concealment of the vital
information regarding encumbrance of
around 80 percent of shares held by promoters
and promoter group of GTL, has committed
fraud on the investors as per regulation
3(d) of SEBI PFUTP Regulations, 2003. It
was further alleged that its act of causing to
publish information which was not true i.e. by
providing incorrect number of encumbered
shares has also violated regulation 4(2)(f) of
SEBI (PFUTP) Regulations, 2003.
It was also alleged that M/s. GHCL

Ltd. by the omission and concealment of the
vital information regarding encumbrance of
around 48 percent of shares held by promoters
and promoter group of M/s. GHCL Ltd, has
committed fraud on the investors as per
regulation 3(d) of SEBI (PFUTP) Regulations,
2003. It was further alleged that M/s. GHCL
Ltd. by its act of causing to publish information
which was not true i.e. by providing incorrect
number of encumbered shares has also
Adjudicating
Officer
imposed
a
consolidated penalty of `1,00,00,000/- on
144
be it an intermediary or any other person for

that reasons. Therefore, it would like to give
a liberal interpretation to the concept of front
running and would hold that any person,
who is connected with the capital market,
and indulges in front running is guilty of a
fraudulent market practice as such liable to be
punished as per law by SEBI. The definition
of front running, therefore, cannot be put in a
straight-jacket formula.
M/s. GTL for the violation of Clause 35 of the

Listing Agreement and Regulations 3(d), 4(2)
(f) of SEBI (PFUTP) Regulations, 2003, under
Section 23Eof SCRA Act, 1956 & Section 15
HA of the SEBI Act, 1992.
K.
Order in respect of Mrs. Vibha Sharma,

Mr. Jitendra Kumar Sharma in the
matter of Central Bank of India
One Mrs. Vibha Sharma was observed to

be front running the orders of Central Bank of
India. Investigations revealed that Mr. Jitendra
Sharma, husband of Mrs. Vibha Sharma,
was an employee of Central Bank of India
working as an equity dealer. Investigations
also revealed that Mrs. Vibha Sharma bought
shares in the morning at around the last
traded price (LTP) and placed sell orders at a
price which was much higher (around three
percent or more above LTP) but just below the
buy order price of the trades of Central Bank
of India. Thus there was 100 percent matching
of her sell orders with the buy orders of
Central Bank of India on 14 trading days.
Accordingly, Adjudication proceedings was
initiated against (1) Mr. Jitendra Sharma for
passing on confidential information related
to trading by Central Bank of India to his
wife and (2) Mrs. Vibha Sharma for obtaining
confidential information related to trading by
Central Bank of India in connivance with her
husband and for front running the trades of
Central Bank of India using her own trading
account.
L.
Interim order in the matter of M/s.

PM Telelinks Ltd and M/s. 8K Miles
Software Solutions Ltd.
SEBI, suo moto, carried out an examination

in the scrip of M/s. P.M. Telelinks Ltd. (PMTL)
and M/s. 8K Miles Software Solutions Ltd.
(8KMILES) in view of surveillance alerts
regarding variation in price.
Examination, prima facie, revealed
that promoters of PMTL transferred funds
to related/connected entities. The related/
connected entities were observed to be trading
in the scrip of PMTL immediately after credit of
funds in their accounts. These connected entities
indulged in creating artificial volumes in the
scrip of PMTL and 8KMILES through trading
amongst themselves , executing synchronised
trades and placed orders at a price higher than
the last traded price (LTP), thereby contributing
to the rise in price. Once the price of the
scrip reached its peak, the aforesaid entities
offloaded their shares, thereby resulting in fall
in the price of the scrip.
Adjudicating Officer imposed a penalty

of `25 lakh, jointly and severally, on Mr.
Jitendra Sharma and Mrs. Vibha Sharma.
Pursuant to the appeal filed by Mr. Jitendra
Sharma and Mrs. Vibha Sharma before
Honble Securities Appellate Tribunal (SAT),
SAT upheld the SEBI order. Further, on the
question of law, SAT observed that the act of
front running is always considered injurious
SEBI, passed an ad interim ex -parte order

dated April 18, 2013 restraining 13 entities
including the promoters of M/s. P.M. Telelinks
Ltd. (PMTL), from accessing securities market
and prohibiting them from buying, selling or
dealing in securities in any manner whatsoever,
till further directions in the matter of dealing
in the scrip of M/s. P.M. Telelinnks Ltd.
(PMTL) and M/s. 8K Miles Software Solutions
145
in the scrip of M/s. ZSL in view of surveillance

alerts regarding variation in price.
Ltd. (8KMILES). Pursuant to the above, after

considering the submissions made by these
13 entities, SEBI has confirmed its directions
against 13 entities.
M.
Examination, prima facie, revealed that

ZSL provided misleading information
to the stock exchanges wherein it stated
that its promoters have been buying and
increasing their stake while actually the
promoters were net sellers and their
shareholding declined due to invocation
of pledge by financiers. Similar
misleading clarification was also given
by the promoter of ZSL, to the media.
b.
ZSL disclosed incorrect and false

information in the quarterly shareholding
pattern for the four quarters in the
year 2012 to the stock exchanges by
overstating the holding of the promoters
and understating the quantum of shares
pledged by the promoters.
c.
Various instances of non-adherences

to accounting standards and listing
agreement in the annual report by ZSL
have also been observed.
d.
There have been repeated instances

of false, incorrect and misleading
disclosures and concealment of material
information by the ZSL and its promoters/
directors to the stock exchanges with
respect to their on-market and off-market
transactions in the scrip and their pledge
related transactions.
e.
ZSL has provided funds on several

occasions to the promoter related entity
for dealing in shares of ZSL.
f.
The promoters of ZSL along with related

entity, acting in concert have acquired
shares in ZSL beyond the threshold
stipulated under regulation 3(2) of the
SEBI(Substantial Acquisition of Shares
and Takeovers) Regulations 2011
without complying with the obligation
of making open offer.
Interim order in the matter of Jigar group

of entities in the matter of M/s. Polytex
India Ltd., M/s. KGN Enterprises Ltd.
and M/s. Gemstone Investments Ltd.

in the scrip of M/s. Polytex India Ltd.,
M/s. KGN Enterprises Ltd. and M/s. Gemstone
Investments Ltd. in view of surveillance alerts
regarding variation in price. Examination,
prima facie, revealed that certain entities have
received funds from Pabari - Parikh Group
entities who have been barred from accessing
securities market by SEBI vide its order no.
-WTM/KMA/ISD/353/02/2011 dated February
2, 2011. These, aforesaid, entities created
artificial volumes in the scrips of M/s. Polytex
India Ltd., M/s. KGN Enterprises Ltd. and
M/s. Gemstone Investments Ltd., substantially
traded amongst themselves and placed orders
at a price higher than the last traded price and
thereby contributed to the rise in price of M/s.
Polytex India Ltd., M/s. KGN Enterprises Ltd.
and M/s. Gemstone Investments Ltd.
dated May 10, 2013 restraining 11 entities,
from accessing securities market and
prohibiting them from buying, selling or dealing
in securities in any manner whatsoever, till
further directions in the matter of M/s. Polytex
India Ltd., M/s. KGN Enterprises Ltd. and
M/s. Gemstone Investments Ltd. Pursuant to
the above, after considering the submissions
made by these 11 entities, SEBI has confirmed
its directions against 11 entities.
N.
a.
Interim order in the matter

M/s. Zylog Systems Ltd (ZSL)
of

146

dated June 13, 2013 restraining six entities,
from accessing securities market and
prohibiting them from buying, selling or
dealing in securities in any manner whatsoever,
till further directions in the matter of ZSL.
O.
entities from buying, selling or dealing in the

securities market, either directly or indirectly,
in any manner whatsoever till further orders.
Further, the above entities including their
proprietary concerns were directed to
a.
to cease and desist from acting as

investment advisers and portfolio
managers and not to solicit or undertake
such activities or any other unregistered
activity in the securities market, directly
or indirectly, in any manner whatsoever;
b.
immediately withdraw and remove

all advertisements, representations,
literatures,
brochures,
materials,
publications, documents, websites, etc.
in relation to their investment advisory
and portfolio management activities or
any unregistered activity in the securities
market.
Interim order in the matter of entities

engaged in Unregistered Investment
Advisory and Portfolio Management
Activities through Short Message
Services (SMSs)
SEBI had noticed that Mr. Imtiyaz

Hanif Khanda (proprietor of M/s Right Trade
and M/s Sai Traders) and Mr. Vali Mamad
Habib Ghaniwala (proprietor of M/s Bull
Trader and M/s Laxmi Traders) were offering
intraday tips and stock advisory services to
investors through Short Message Services
(SMSs) via mobile phones. SEBI, as part
of its investigation, obtained details of the
call data records of the telephone numbers
used for sending such SMSs. It was primafacie observed that the entities through
their proprietary concerns were providing
investment advice and had solicited business
of portfolio management services from the
general public without being registered as
a portfolio manager with SEBI. The entities
had also made misrepresentations by making
unrealistic claims, false statements such as
having office in various countries, FII based
calls, jackpot calls, etc., and they also made
representation in reckless and careless manner
in their messages and website suggesting facts
which are not true. By their acts and omissions
they have prima-facie solicited, enticed and
induced investors to deal in securities on the
basis of their investment advices, stock trade
tips, etc.
Pursuant to the above, after considering

the submissions made by these two entities,
SEBI has confirmed its directions against two
entities.
P.
Interim order in the matter of M/s. SMS

Techsoft (India ) Ltd.

in the scrip of M/s. SMS Techsoft in view
of various SMSs circulating in the market
mentioning therein buy recommendation for
the scrip of M/s. SMS Techsoft.
Examination, prima facie, revealed that :
a.
SEBI passed an ad-interim ex-parte order

dated August 20, 2013 debarring these two
147
The company issued ` 3,00,00,000

equity shares to 31 entities including
three promoters of the company, who
are related to one Mr. Rajesh Ranka,
who was restrained from buying, selling
or dealing in securities market in any
manner whatsoever for a period of two
years vide SEBI order No. WTM/PS/28/
IVD/ID-06/JULY/10 dated July 28, 2010.
b.
c.
d.
Q.
The preferential allotment was designed

merely as a book entry wherein Mr.
Rajesh Ranka circulated ` 1,99,50,000
back and forth between the company,
other allottees in the purported
preferential allotment by the company.
The scheme/plan was a camouflage
to give misleading impression that
many people had subscribed to the
shares of M/s. SMS Tech by paying the
consideration to the company. The entire
allotment money funded by Mr.Rajesh
Ranka had been returned to him in the
whole plan without the company getting
the proceeds of preferential allotment.
Effectively, 3,00,00,000 new equity
shares have been issued in the names
of 31 allottees without receipt of any
consideration for the shares allotted in
the purported preferential allotment.
Final Order in respect of Jayesh P

Khandwala HUF, proprietor of M/s.
Zealous Trading Company Ltd in the
matter of Initial Public Offers of M/s.
IDFC Ltd, M/s. Sasken Communication
Technologies Ltd and M/s. Suzlon
Energy Ltd.
SEBI, passed disgorgement order on

August 12, 2013 in the matter of Initial
Public Offering (IPO) in respect of Jayesh
P. Khandwala-HUF, who was identified
as financier to key operators namely Ms.
Roopalben Panchal, M/s. Sugandh Estates and
Investment Pvt. Ltd. and Mr. Biren Kantilal
Shah. The directions passed are as follows:
The company had misrepresented

annual reports for the financial years
2011-12 and 2012-13 that the proceeds
of the purported preferential allotment
has been utilised to purchase land worth
` 30,00,00,000/-.
Once the lock-in period for the shares
allotted under purported preferential
allotment expired on March 12, 2013,
the entities related to Shri Rajesh Ranka
started creating artificial volume in the
scrip by trading amongst themselves
and, thereafter, offloading these shares
to common investors.

dated November 5, 2013 M/s. SMS Techsoft
(India) Ltd, its three promoters (including
MD of company), and 29 other entities, from
accessing securities market and prohibiting
them from buying, selling or dealing in
securities in any manner.
148
a.
Jayesh P. Khandwala - HUF and

Mr. Jayesh P. Khandwala shall not buy,
sell or deal in the securities market in
any manner whatsoever or access the
securities market, directly or indirectly,
for a period of three months from the
date of this order;
b.
Jayesh P. Khandwala-HUF shall disgorge

the unlawful gain of `3,88,08,783/-. It
shall also pay `3,74,70,356, being the
simple interest at the rate of 12 percent
per annum for eight years (2005-13) on
the unlawful gain of ` 3,88,08,783. Thus, it
shall pay a total amount of `7,62,79,139.
c.
Jayesh P. Khandwala-HUF shall pay the

above amount within 45 (forty five) days
from the date of this order by way of
crossed demand draft drawn in favour
of Securities and Exchange Board of
India, payable at Mumbai
d.
In case the aforesaid amount ` 7,62,79,139

is not paid within the specified time,
Jayesh P. Khandwala - HUF and Mr.
Jayesh P. Khandwala shall be restrained
for a further period of seven years from
(i) buying, selling or dealing in securities
market in any manner whatsoever,
(ii) accessing the securities market,
directly or indirectly, or (iii) associating

with any securities market intermediary
or listed company in any manner or
capacity, without prejudice to SEBIs
right to enforce disgorgement.
e.
The period of debarment already

undergone by Jayesh P. Khandwala HUF and Mr. Jayesh P. Khandwala shall
be set-off from the period of debarment
as directed herein above.
R.
Final Order in the matter of market

manipulation using GDR issues against
several entities including Shri Arun
Panchariya (hereinafter referred to as
AP) and M/s. Pan Asia Advisors Ltd.
(now known as M/s. Global Finance
and Capital Ltd.)
disclosed to exchanges in India were found

to be fictitious. Therefore together, AP and
Indian companies have created a scheme
to mislead the investors about the inflow of
foreign investment through GDRs and that
the companies were found as favourable
investments by foreign investors. Thereafter,
these GDRs were converted through subaccounts controlled by AP and the shares
so converted were dumped in the Indian
securities markets to the detriment of the
Indian investors.
WTM, SEBI has passed final order dated
June 20, 2013 against Mr. Arun Panchariya
and M/s. Pan Asia Advisors Ltd in the matter.
Directions have been passed against Mr. Arun
Panchariya and M/s. Pan Asia Advisors Ltd
prohibiting them from rendering services in
connection with instruments that are defined
as securities (as in section 2(h) of Securities
Contracts Regulation Act, 1956) in the Indian
market or in any way dealing with them,
directly or indirectly, for a period of 10 years,
from the date of the order. M/s. Pan Asia
and Panchariya have also been prohibited
from accessing the capital market directly or
indirectly for a period of 10 years, from the
date of the order. Entities went in for appeal in
Honble SAT. SAT vide order dated September
30, 2013 revoked the directions against both
the entities. Presently matter is pending in
Supreme Court.
SEBI had passed an ad interim ex-parte

order dated September 21, 2011, in the matter
of market manipulation using GDR issues
against several entities including Mr. Arun
Panchariya (hereinafter referred to as AP) and
M/s. Pan Asia Advisors Ltd (now known as
M/s. Global Finance and Capital Ltd).
SEBI subsequently completed its
investigation regarding the role of M/s. Pan
Asia and Mr. Arun Panchariya in the matter of
market manipulation using GDR issues. It was
inter-alia observed that Mr. Arun Panchariya
had entered into a fraudulent arrangement
with the promoters of certain issuer companies
viz. M/s. Asahi Infrastructure & Projects Ltd.,
M/s. IKF Technologies Ltd., M/s. Avon
Corporation Ltd, M/s. K Sera Sera Ltd., M/s.
CAT Technologies Ltd. and M/s. Maars
Software International Ltd. to issue GDRs.
The cross referenced agreements signed by
entities of AP and by the issuer company
with European American Investment Bank
AG, Austria led to GDR proceeds received by
company being pledged against loans raised
by entity of AP. The names of foreign investors
S.

manipulation using GDR issues against
several entities including M/s. Cals
Refineries Ltd (hereinafter referred to
as Cals).
SEBI passed an ad interim ex-parte order

dated September 21, 2011, in the matter of
market manipulation using GDR issues against
several entities including M/s. Cals Refineries
Ltd (hereinafter referred to as Cals).
149
Following are the details of the

counterparties of the shares sold by Mavi in
Maars and CAT.
SEBI subsequently completed its

investigation in the matter and it was
observed that:
a.
Cals siphoned funds to the accounts of
its promoters
b. Cals provided financial assistance in the
form of guarantee to create illusion of
successful GDR subscriptions.
c.
Cals concealed material information
regarding its GDR issue to mislead its
investors and SEBI.
Subsequently, SEBI completed the

investigation against Mavi. Following are the
observations with respect to Mavi:
b.
The counterparties to the shares sold by

Mavi were either CP Group entities or
connected to the promoters of the issuer
companies.
It cannot be conclusively determined that

such trades were synchronized by Mavi
with the CP Group/promoters of CAT.
SEBI has taken the following steps to

prevent the occurrence of FUTP practices:
SEBI passed an ad interim ex-parte

order dated September 21, 2011, in the matter
of market manipulation using GDR issues
against several entities including M/s. Mavi
Investment Fund Ltd (Mavi).
Mavi had purchased and cancelled GDRs

and sold resultant shares of two listed
companies, viz. M/s. Cat Technologies
Ltd (CAT) and M/s. Maars.
b.
III. Steps taken to prevent the occurrence of

fraudulent and unfair trade practices

manipulation using GDR issues
against several entities including M/s.
Mavi Investment Fund Ltd (hereinafter
referred to as Mavi)
a.
No connection between Mavi and Arun

Panchariya/CP Group or the promoters
of CAT could be established in the
investigation.
Based on the conclusion arrived in the

investigation report, Whole Time Member,
SEBI vide Order dated September 25, 2013,
disposed of the SCN issued to Mavi and the
restraint imposed on Mavi vide the aforesaid
orders are vacated. However, the revocation
is without prejudice to any additional
information that SEBI might receive from
foreign authorities.
In view of the fraudulent activities of

Cals, Whole Time Member, SEBI vide Order
dated October 23, 2013, directed M/s. Cals
Refineries Ltd not to issue equity shares or
any other instrument convertible into equity
shares or any other security, for a period of
ten years. Further, the prohibition already
undergone by Cals pursuant to the SEBI interim
order shall be reduced while computing the
period in respect of the prohibition imposed
vide this order. Presently matter is pending in
SAT.
T.
a.
A.
SEBI (Prohibition of Fraudulent and

Unfair Trade Practices Relating to
Securities Market) Regulations, 2003 are
in place.
B.
Actions are taken in terms of provisions

of SEBI Act, 1992 which also includes
Adjudication proceedings for levy of
monetary penalty. This also acts as a
deterrent.
The total penalty imposed by SEBI in

adjudication proceedings for the violations
of SEBI (Prohibition of Fraudulent and Unfair
Trade Practices relating to the Securities
Market) Regulations, 2003 was `134.65
crore in 2013-14 compared to `39.98 crore in
2012-13 representing a rise of 236.8 percent.
However, the total penalty imposed in
2012-13, includes `1.96 crore imposed under
150
awareness programs/workshops compared to

206 awareness programs/workshops in 201213 (Table 3.17).
SEBI (Prohibition of Fraudulent and Unfair

Trade Practices relating to the Securities
Market) Regulations, 2003 and SEBI (Stock
Brokers and Sub-brokers) Regulations,1992
as common orders were passed in certain
matters during 2012-13.
6.
Table 3.17: Trends in Awareness Programs/

Workshops Conducted by SEBI
INVESTOR EDUCATION AND

TRAINING OF INTERMEDIARIES
B.
2012-13
2013-14
175
206
224
Investor Education
Campaign
Multimedia
As part of SEBIs multimedia Investor

Education and Awareness Campaign,
campaigns aiming to spread awareness
regarding Collective Investment Schemes
(CIS), were broadcast in mass media through
TV and Radio in Hindi, English and 11 major
Indian languages. During 2013-14, through
above such campaigns, investors were
cautioned not to rely on schemes offering
unrealistic returns, and not to invest by
hearsay and do proper due diligence.
Investor Education
Education and awareness along with the

grievance redressal had been the thrust areas
as a part of capacity building and to make
investors confident and aware while investing
in securities market. SEBI has been actively
pursuing investor/ financial education activities
in the past. During 2013-14, the same has been
continued with wider reach and increase in the
total number of such programs.
A.
2011-12
Number of Programs
Section 11(2) (f) of SEBI Act empowers

SEBI to promote investors education and foster
training for intermediaries in the securities
market. Along with investor education and
training, SEBI has also actively pursued investor
grievance redressal with a view to protect the
investor interest, enhance the confidence and
increase the participation of investors.
I.
Particular
C.
Regional Seminars
This initiative started in 2011-12 and has

expanded its scope and reach significantly in
terms of investor population and geographical
landscape. At present it primarily concentrates
on Tier II and Tier III cities. During 2013-14,
77 regional seminars have been conducted in
Moradabad, Jakhama, Gwalior, Pratapgarh,
Mumbai, Sangli, Madurai, Chandigarh,
Sirohi, Banaskantha, Mehsana, Bhuj, Vidisha,
Bhopal, Ujjain and Indore. Further, to create
more awareness regarding unauthorised CIS,
a CD containing the media campaigns have
been sent to all Resource persons and all
offices of SEBI. The same was included as a
key topic in all the regional seminars organised
(Table 3.18).
Investor Awareness Programs/Workshops
Various investor awareness programs

have been conducted by SEBI with the help
of exchanges, depositories and various trade
bodies like AMFI etc. SEBI also reimburses
the cost of the approved programs conducted
by Investor Associations recognised by SEBI,
subject to certain limits. The topic of investor
grievance redressal mechanism in securities
market has been an integral part of all such
programs. A booklet on investor grievance
redress mechanism has also been published
and made available on the investor website.
During 2013-14, SEBI has conducted 224
151
Table 3.18: Regional Seminars Conducted

by SEBI
Particular
2011-12
2012-13
2013-14
Number of Seminars
47
44
77
D.
enhance the quality of securities markets.

The Institute is engaged in capacity building
among the stakeholders in the securities
markets through financial literacy, professional
education, enhancing governance standards
and fostering policy research
NISM has established six distinct schools
to cater the educational needs of stakeholders
and market participants such as investor,
issuers, intermediaries, regulator, policy
makers, academia and future professionals
of securities markets. In addition, NISM
publishes various materials with a view to
enhance knowledge levels of participants
in the securities industry. Over the years,
NISM has also developed and implemented
certification examinations, as mentioned
below, for professionals employed in various
segments of the Indian securities markets.
Dedicated investor website
SEBI
maintains
an
updated,
comprehensive website for education of
investors (www.investor.sebi.gov.in). The
website has been revamped to make it more
user friendly and the educative material is
being updated. The schedules of various
programmes are also updated on the website.
Efforts also have been made to popularise
Rajiv Gandhi Equity Savings Scheme (RGESS)
through the website. The revised guidelines
along with the revised frequently asked
questions (FAQs) have been provided in the
SEBI investor website.
E.
Educative
material
for
education and awareness
A.
NISM
launched
the
following
certification examinations in the financial year
2013-14:
investor
SEBI is in the process of updating various

materials relating to investor education and
awareness across various topics in securities
market. A series on various topics on modes
through which an individual can invest in
securities market is being launched.
II.
Certification of Associated Persons in

Securities Markets
NISM-Series-X-A: Investment Adviser

(Level 1) Certification Examination
NISM-Series-X-B: Investment Adviser

NISM-Series-III-B: Issuers Compliance

Certification Examination
Training of Intermediaries
Pursuant
to
the
announcement
made by the Finance Minister in Budget
Speech in February 2005, to set up an
institution of national importance to cater to
securities market education and training of
intermediaries, SEBI established the National
Institute of Securities Markets (NISM). NISM
was set up as a public trust to lead, catalyse and
deliver educational and training initiatives
to intermediaries and other stakeholders to
As a part of its periodic examination

review, NISM launched revised exams for the
following certification examinations in the
financial year 2013-14:
152
NISM-Series-I: Currency
Derivatives
NISM-Series-II-A: Registrar to an Issue

and Share Transfer Agent (Corporate)
NISM-Series-II-B: Registrar to an Issue

and Share Transfer Agent (Mutual
Fund) Certification Examination
NISM also revised the following two

days CPE Program and launched them as one
Day CPE Program:
NISM-Series-IV: Interest Rate Derivatives

NISM Series-V-A: Mutual Fund Distributors

Certification Examination,
CPE Program for NISM-Series-I:

Currency
Derivatives
Certification
Examination
CPE
Program
for
NISM-SeriesII-A: Registrar to an Issue and Share
Transfer Agent Corporate Certification
Examination
CPE Program for NISM-Series-II-B:

Registrar to an Issue and Share Transfer
Agent Mutual Fund Certification
Examination
CPE Program for NISM-Series-V-A:

Mutual Fund Distributors Certification
Examination
CPE
Program
for
NISM-SeriesVI: Depository Operations Certification
Examination
CPE
Program
for
NISM-SeriesVII: Securities Operations and Risk
Management Certification Examination
NISM-Series-V-B: Mutual Fund Foundation

Certification Examination,
NISM-Series-VI: Depository Operations

NISM-Series-VII: Securities Operations

and Risk Management Certification
Examination
NISM-Series-VIII: Equity
Derivatives
NISM-Series-X-A: Investment Adviser

During the year 2013-14, a total of

1,14,805 candidates appeared for NISM
Certification Examinations available in 196 test
centres located at 157 cities across India.
B.
Development & Administration of

Continuing Professional Education
(CPE)
NISM has initiated the accreditation

of various CPE Providers for the delivery
of NISM CPE Programs. In addition to
the accredited CPE Providers, NISM also
provides classroom delivery of CPE Program
specific to each certification examination.
During 2013-14, NISM along with CPE
Providers conducted 1,065 CPE programs at
102 locations covering 42,678 participants
across different segments like Mutual Fund
Distributors, Equity derivatives, Currency
derivatives, Depository operations, RTACorporate, Securities Operations and Risk
Management and Mutual Fund Foundation.
NISM also undertook an exercise to increase
number of CPE trainers. Accordingly, 71
NISM launched the following one day

CPE Programs during the year:
CPE Programs for NISM Series-IV:

Interest Rate Derivatives Certification
Examination
CPE Programs for NISM SeriesVIII: Equity Derivatives Certification

Examination
CPE Programs for NISM-Series-III-A:

Securities Intermediaries Compliance
(Non-Fund) Certification Examination
153
new CPE trainers were empanelled during

the year. NISM conducted four NISM CPE
Trainers Contact Programmes at Mumbai,
Lucknow and Bangalore for enhancing the
domain knowledge and training delivery of
empanelled CPE trainers. In all, 75 trainers
benefitted from these programmes.
C.
Other Initiatives
a.
Accreditation of Certification Exams:

Subsequent to the notification of SEBI
(Investment Advisers) Regulations,
2013, NISM finalized the process
for accreditation of certifications for
Investment Advisers and invited
applications for accreditation. Two
certifications were granted in-principle
approval by NISM. During the year,
Chartered Wealth Manager (CWM)
certification of the American Academy
of M/s. Financial Management India Pvt.
Ltd. met with NISM requirements and
was granted accreditation.
b.
c.
This will be delivered in a customized

Learning management system.
d.
Online CPE Registration and Enrolment

System (OCRES): NISM is developing a
web based online system for registration,
enrolment and issuance of certificates to
participants of CPE programmes. The
fourth phase of development and testing
is completed.
e.
Skills Registry: Skills Registry, a web

based system was developed and made
available on NISM website to provide
access to the members of public to the
database of all certificates issued by
NISM.
III. Financial Education

With the aim of spreading financial
literacy, SEBI has taken up various programs
across the country. The resource person model
developed by SEBI has been well appreciated
internationally as well as domestically by
other regulators and various ministries.
Memorandum of Understanding (MoU):

NISM enters into MoUs with different
institutes / organizations with the objective
of offering innovative certifications and
educational programmes in financial
markets to enhance the choices and
availability of quality financial education
to students. During the year, NISM
entered into MoUs with the Association
of International Wealth Management
of India (AIWMI) and ICICI Securities
(ICICI Direct Center for Financial
Learning).
A.
Through SEBI trained Resource Persons
SEBI launched a financial education drive

through Resource Persons (RPs) in June 2010,
where teachers and lecturers were trained and
empanelled for conducting financial education
workshops. The study material developed for
the above target groups is presently available
in 10 vernacular languages. During 2013-14,
refresher training in two batches was conducted
for empanelled RPs in July and August 2013 in
New Delhi and Bangalore. As on March 31,
2014, 899 RPs have been empanelled, covering
26 states and six union territories. These
Resource Persons have conducted around 9,493
financial education workshops during 2013-14
(Chart 3.1).
E-learning initiative: Currently, NISM

is developing content for Mutual Fund
Distributors as part of our Continuing
Professional Education (CPE) initiative.
154
Chart 3.1: Trends in Financial Education Programs through Resource Persons (RPs)
B.
Visit to SEBI
Stability and Development Council (FSDC).

With a vision of a financially aware and
empowered India, National Strategy for
Financial Education (NSFE) had been finalised
under which various activities have been
undertaken. The National Financial Inclusion
Survey (NFLIS) has been initiated and shall be
completed by August 2014.
SEBI invites students from schools,

colleges and professional institutes who are
interested to learn about SEBI and its role as a
regulator of securities markets through a visit
to SEBI. The program was started in 2010 and
has been quite popular. As on March 31, 2014,
169 such visits from educational institutions
have happened and participants from different
parts of the country (Amritsar, Pondicherry,
Goa, Bareilly, Thrissur etc) and attending
different courses (Company Secretaries,
Management, Commerce, Banking, Law, Arts,
science etc) have been visiting SEBI Office.
Educational institutions from 12 different
States and two Union Territories and 26
different districts have visited SEBI under this
program.
C.
National
Strategy
Education
for
A national level exam for school students,

National Financial Literacy Assessment Test
(NFLAT) had been conducted under National
Centre for Financial Education (NCFE) where
over one lakh students participated in the test.
The results have been published on the NCFE
website and a press release was issued in this
regard.
The portal, www.ncfeindia.org, has been
launched with information covering on various
aspects of financial market including banking,
pension, insurance and securities market and
with inputs from various regulators including
SEBI. The website is being updated with
videos, audios and other material.
Financial
The process of drafting a National

Strategy for Financial Education was
initiated by SEBI under the aegis of Financial
155
Table 3.19: Status of Investor Grievances

Received and Redressed
IV. Investor Grievance Redressal

measures to expedite the redressal of
investor
grievances.
The
grievances
lodged by investors are taken up with the
respective listed company or intermediary
and continuously monitored. Grievances
pertaining to stock brokers and depository
participants are taken up with concerned
stock exchange and depository for redressal
and monitored by the concerned department
through periodic reports obtained from them.
Grievances pertaining to other intermediaries
are taken up with them directly for redressal
and continuously monitored by concerned
department of SEBI.
Year
Grievances
Redressed
YearCumuwise
lative
4
5
Cumulative
Pending
Grieances*
6
2008-09 57,580
26,74,560 75,989
25,03,560
49,113
2009-10 32,335
27,06,895 42,742
25,46,302
37,880
2010-11 56,670
27,63,565 66,552
26,12,854
28,653
2011-12 46,548
28,10,113 53,841
26,66,695
23,725
2012-13 42,411
28,52,524 54,852
27,21,547
11,410
2013-14 33,550
28,86,074 35,299
27,56,846
9,147
Note: * Cumulative pending grievances exclude complaints

against whom regulatory actions are initiated. Further, the
above data does not include complaints received by SEBI in
the matter of Sahara OFCDs.
SCORES enables the investor to directly

lodge the complaints online and such
complaints are considered as e-complaints.
During 2013-14, total 18,811 e-complaints
were received compared to 26,195 received
during the previous year.
The company/intermediary is required

to respond in prescribed format in the
form of Action Taken Report (ATR). Upon
the receipt of ATR, the status of grievances
would be updated. If the response of the
company/intermediary is insufficient /
inadequate, follow up action is initiated.
SEBI takes appropriate enforcement actions
(Adjudication, 11B directions of SEBI Act
1992, Prosecution etc) as provided under the
law where progress in redressal of investor
grievances is not satisfactory.
A.
Grievances
Received
Year- Cumuwise
lative
2
3
SEBI provides assistance/guidance to

investors through various modes. Investors can
duly get their queries addressed with replies
from SEBI through e-mail at asksebi@sebi.gov.
in, letters to SEBI, and by in-person visits by
investors to SEBI Head Office, Mumbai. During
2013-14, SEBI replied 2,023 such queries.
B.
SEBI Toll Free Helpline
SEBI had launched toll free helpline

service numbers 1800 22 7575/1800 266 7575
on December 30, 2011. The helpline service
is available every day from 9:30 a.m. to 5:30
p.m. (except on declared public holidays in
Maharashtra) to investors from all over India
in 14 languages viz. English, Hindi, Marathi,
Gujarati, Tamil, Bengali, Malayalam, Telugu,
Urdu, Oriya, Punjabi, Kannada, Assamese
and Kashmiri. During 2013-14, SEBI has
received 1,25,121 calls on Toll Free Helpline.
The feedback of the calls received during
2013-14 is given in Chart 3.2.
SEBI Complaints Redress System
SEBI has received 33,550 grievances

during 2013-14 and resolved 35,299 grievances
compared to 42,411 grievances received
and 54,852 grievances resolved in 2012-13.
Further, as on March 31, 2014, there were 9,147
cumulative complaints pending with SEBI for
resolution compared to 11,410 cumulative
pending grievances as on March 31, 2013
(Table 3.19).
156
Chart 3.2: Trends of feedback for calls received in SEBI Helpline
V.
Further regulatory actions have been

initiated against companies for their failure
to redress grievances. During 2013-14,
Adjudication Proceedings has been approved
against 246 companies for levying monetary
penalty for their failure to redress investor
grievances.
Regulatory action against companies

and their directors for non-redressal of
investor grievances
SEBI takes appropriate enforcement

actions (adjudication, directions, prosecution
etc) as provided under the law where
progress in redressal of investor grievances
is not satisfactory. During 2013-14, SEBI
has levied penalty of `120 lakh against 20
companies through adjudication proceedings
for their failure to redress investor grievances
(Table 3.20).
VI. Issuance of No-objection Certificate

Companies raising capital through
public issue of securities are required to
deposit one percent of the issue amount with
the designated stock exchange. This deposit
is released by the stock exchange only after
receiving the NOC from SEBI.
Table 3.20: Failure to Redress Investor

Grievances:
Adjudication
Proceedings
Year
Number of
companies
Penalty amount
(` lakh)
2010-11
42
2011-12
61
2012-13
10
40
2013-14
20
120
SEBI issues NOCs to companies after

satisfactory redressal of complaints received
by SEBI against the companies. During the
year 2013-14, NOCs were issued to 47 applicant
companies. NOCs to 39 companies were not
issued as the applications were incomplete
or due to unsatisfactory redressal of investor
grievances.
157
7.
PROHIBITION OF INSIDER TRADING
Types of Insider trading practices
A.
Managing Director of the company was

indulging in insider trading by trading
before the announcement of annual
results while he was in possession
of
unpublished
price
sensitive
information;
B.
Company not adopting Model Code of

Conduct as specified in SEBI (Prohibition
of Insider Trading) Regulations, 1992;
C.
Directors of the company not making

disclosure of the shareholding;
D.
Directors of the company not following

the Model Code of Conduct as specified
in SEBI (Prohibition of Insider Trading)
Regulations, 1992.
II
Insider Trading Cases during 2013-14
A.
Order in respect of M/s Reliance

Petroinvestments Ltd. in the matter of
M/s. Indian Petrochemicals Corporation
Ltd.
It was further observed from the

disclosures made by IPCL itself to the
stock exchanges under Regulation 8 (3)
of SAST Regulations as on March 31,
2006 that RPIL is a promoter having
control over the company with the
total shareholding of approx. 46percent
Further, RIL has been shown as a
person(s) acting in concert with RPIL.
The above facts established that RPIL
was having control over IPCL. It was
therefore, concluded that by virtue of
RPIL having control over IPCL, it was
reasonably expected to have access
to UPSI of IPCL. Noticee being the
promoter having control over the
company holding approx. 46 percent
shares of IPCL was inherently expected
to have access to UPSI.
It was further observed that during the
period June 9, 2006 to February 26, 2007
RPIL had not dealt in the shares of IPCL
but all of a sudden started buying the
shares of IPCL from February 27, 2007
i.e just before the major announcement
of declaration of the interim dividend
and amalgamation of IPCL with RIL.
Therefore, the charge of insider trading
against the Noticee as per regulation
3 of SEBI PIT Regulation, 1992 stood
established.
SEBI conducted an investigation in

the trading of the scrip of M/s. Indian
Petrochemicals Corporation Ltd. (IPCL/
Company) during the period from
February 22, 2007 to March 08, 2007.
As per the investigation report, the
M/s. Reliance Petroinvestments Ltd.
(RPIL/Noticee) was deemed to be
connected person of IPCL in terms of
Regulation 2(h) of SEBI PIT Regulation,
1992. Therefore, the first element of the
definition of insider i.e. deemed to
have been connected with the company
as per regulation 2(e) was established.
It was observed that declaration of
interim dividend and amalgamation
by the company were price sensitive
information as per regulation 2(ha) of
SEBI PIT Regulation, 1992.
A penalty of `11 crore was imposed on

M/s. Reliance Petroinvestments Ltd. in
terms of the provisions of Section 15G
of the SEBI Act, 1992 for the violation
of Regulation 3 of SEBI PIT Regulation,
1992.
B.
Orders in respect of Shri Shanti Ranjan

Paul & ors; Mr.Sisir Kumar Shaa &
Mr. Soura Sekhar Saha ; Mr.Chirantan
Mukherji & Ms. Chandra Mukherji in the
matter of M/s Shelter Infra projects Ltd.
The investigation revealed that M/s
158
Kumar Saha made a profit of ` 840 only.

Therefore after considering all the facts
and circumstance of the case Adjudicating
officer imposed a consolidated penalty
of `50 lakh on Mr. Sisir Kumar Saha and
Mr. Soura Sekhar Saha for dealing in the
scrip based upon UPSI.
SIPL had entered into a Share Purchase

Agreement (SPA), to be executed
between SIPL and the proposed
acquirers, M/s Ramayana Promoters
Pvt. Ltd. on July 31, 2009 for the sale of
the issued and subscribed equity share
capital of the company held by the
erstwhile promoters, as also change in
management of the company.
Mr. Chirantan Mukherji was Chairman

& promoter of SIPL and Ms. Chandra
Mukherji was wife of Shir Chirantan
Mukherji. On the basis of investigation it
was alleged that Mr. Chirantan Mukherji
being the Chairman & promoter of SIPL
was privy to the unpublished price
sensitive information (UPSI) and traded
in the shares of SIPL. Further, he had also
communicated or counselled, directly
or indirectly, the UPSI to Mr. Chandra
Mukherji who also traded in the shares
of SIPL. The Adjudicating officer vide
order dated March 7, 2014 held that
there is no dispute to the fact that
Mr.Chirantan Mukherji is a connected
person as defined under Regulation
2(c)(i) of the SEBI PIT Regulation, 1992
and therefore an insider. Further, since
Ms. Chandra Mukherji is the wife of
Mr. Chirantan Mukherji, she is deemed
to be a connected person as per
Regulation 2(h)(viii) of the SEBI PIT
Regulation, 1992. Adjudicating officer
took into consideration that Ms. Chandra
Mukherji has not sold any of the shares
he has brought in the scrip and therefore
the profit cannot be quantified i.e. profit
not realised.
Mr. Shanti Ranjan Paul, the Director of

the M/s. Shelter Infra projects Ltd (SIPL)
had passed on the unpublished price
sensitive information (UPSI) to others
(his close relatives) just before the period
of open offer. The Adjudicating officer
vide order dated March 7, 2014 imposed
a penalty of rupees one crore on Shri
Shanti Ranjan Paul and rupees two crore
on others under SEBI PIT Regulation,
1992.
Mr. Sisir Kumar Saha, the Whole Time
Director of SIPL was privy to the
unpublished price sensitive information
(UPSI) and traded in the shares of SIPL.
Further, he had also communicated or
counselled, directly or indirectly, the
UPSI to Mr. Soura Sekhar Saha , son of Mr.
Sisir Kumar Saha who also traded in the
shares of SIPL. The Adjudicating officer
vide order dated March 7, 2014 held that
there is no dispute to the fact that Mr.
Sisir Kumar Saha is a connected person
as defined under Regulation 2(c)(i) of the
SEBI PIT Regulation, 1992 and therefore
an insider. Since Mr. Soura Sekhar Saha
is the son of Mr. Sisir Kumar Saha, he
is deemed to be a connected person as
per Regulation 2(h)(viii) of the SEBI PIT
Regulation, 1992. Adjudicating officer
took into consideration that Mr. Soura
Sekhar Saha has not sold any of the
shares he has brought in the scrip and
therefore the profit cannot be quantified
i.e. profit not realised, whereas Mr. Sisir
Therefore, after considering all the

facts and circumstance of the case
Adjudicating officer imposed a penalty
of rupees one crore on Ms. Chandra
Mukherji for dealing in the scrip based
upon UPSI. However no penalty was
imposed on Mr. Chirantan Mukherji as
he expired on March 03, 2013.
159
C.
Order in respect of M/s. Falcon Tyres

Ltd.
Secretary cum Compliance Officer of the

company.
D.
SEBI had sought various information

from M/s.Falcon Tyres Ltd. such as a
copy of Code of Internal Procedure
and Conduct and Code of Corporate
Disclosure Practices of the company
in accordance with SEBI (Prohibition
of Insider Trading) Regulations, 1992,
the time of closing and opening of
trading window with respect to the
above announcements and the details
of disclosures made to the company and
to the stock exchanges under SEBI PIT
Regulation, 1992.
Orders
in respect of M/s N R
Mercantiles Private Limited and M/s
Imtihan Commercial Private Limited in
the matter of M/s Ramsarup Industries
Limited
SEBI conducted an investigation into
the affairs relating to buying, selling
and dealing in the shares of M/s
Ramsarup Industries Limited (RIL). The
investigation covered the period from
July 01, 2010 to August 31, 2010.
Adjudication was initiated for violation

of regulation 12 (1) read with Clause 1.2
under Part A of Schedule I of the SEBI
PIT Regulation, 1992. It is observed that
the lackadaisical and uninvolved manner
in which the Noticees have conducted
themselves, irrespective of whether the
Model Code as specified under the SEBI
PIT Regulation, 1992 is considered to be
in place or not, provided ample scope for
misuse of price sensitive information.
It was established that Ashish, Chairman

& Managing Director and Mr. Naveen
Gupta, Whole Time Director & CFO of
RIL were in possession of UPSI from
August 07, 2010. The sales of RIL which
were `651.48 crore for quarter ended
March 2010, fell to `343.36 crore for
quarter ended June 2010 (fall of 52.70
percent). Similarly the net profit for
quarter ended June 2010 fell to `5.88 crore
from `14.41 crore in previous quarter, a
fall of almost 60 percent. The company
management was definitely aware of the
erosion in performance of the company.
As per the shareholding disclosure of RIL
available on NSE website, it was found
that M/s. N R Mercantiles Private Limited
(Noticee no.1) was a part of promoter
group of RIL and its shareholding in RIL
for quarter ending June 2010 was 17.72
percent.
Pursuant to Adjudication proceedings,

the Adjudicating officer vide order dated
Feb 26, 2014 imposed a penalty of rupees
one crore, jointly and severally on M/s.
Falcon Tyres Limited, its Chairman and
Promoter Director- Mr. Pawan Kumar
Ruia, its Executive Director - Mr. Sunil
Bhansali, Mr. S. Ravi, Non - Executive
Director and Mr. M. C. Bhansali,
Further, as per shareholding disclosure

available in NSE website and submissions
made by M/s. Imtihan Commercial
Private Limited (the Noticee no.2) vide
its letter dated September 17, 2011 it was
observed that Noticee was part of the
promoter group of RIL. It was found that
Imtihan is 100 percent held by Ashish
and his wife Neerza Jhunjhunwala.
SEBI observed that the company had

forwarded a copy of the Code of Conduct
and Ethics, instead of a copy of the Code
of Internal Procedure & Conduct and
Code of Corporate Disclosure Practices in
accordance with the SEBI PIT Regulation,
1992.
160
director of the Noticee no.2, placed the

sell orders on behalf of Noticee no.2,
i.e. Noticee had sold the 25,000 shares
of RIL during the UPSI period while in
possession of UPSI, thereby avoided a
potential loss of ` 4,37,500.
Mr.Ashish is Chairman and Managing

Director of RIL. Further, other two
directors of Noticee i.e M/s.. Vikash
Ladia and Mr.Naveen Gupta are also
directors of RIL.
Noticee no.1 vide its letter dated
September 17, 2011 and in its replies
to SCN accepted that it was a part of
promoter group of RIL. In addition,
address of the Noticee no.1 is same as
the registered address of RIL. Further,
Mr.Ashish who is the managing
director of RIL as well as the director of
the Noticee no.1 along with his wife Ms.
Neerza Jhunjhunwala has a shareholding
of 68.52 percent in the Noticee no.1 and
the balance is held by M/s Rav Dravya
Pvt. Ltd., another promoter group entity.
Furthermore, Mr. Naveen Gupta was
found to be a director both in RIL as well
as in the Noticee no.1. Therefore, Noticee
no.1 was a company under control of the
same management and is consequently
deemed to be a connected person to RIL as
per regulation 2h(i) of PIT Regulations.
A penalty of ` 40 lakh was imposed on

M/s N R Mercantiles Private Limited
and ` 13.5 lakh was imposed on M/s
Imtihan Commercial Private Limited,
for violation of sections 12A(d) & 12A(e)
of SEBI Act and regulation 3(i) of SEBI
PIT Regulation, 1992. The said orders
were appealed before the SAT and SAT
vide its order dated October 31,2013
dismissed the appeal finding it devoid
of merits.
E.
Order in the matter of M/s. Man

Industries India Limited
M/s. Man Industries (India) Limited;
Mr.R.C Mansukhani, Chairman; Mr.
J C Mansukhani, Vice Chairman and
Managing Director; Mr.R C Jindal,
Executive Director; & Mr.Sujal Sharma,
Company Secretary & Compliance
Officer, had failed in making of prompt
disclosure of price sensitive information
to the exchanges and disseminations of
the same on a continuous and immediate
basis.
It is pertinent to note that Mr. Ashish was

the common person/director between the
management of RIL, Noticee no.1 and 2
and was in possession of UPSI. As per the
Noticee no.1s reply dated July 16, 2012,
orders for the sale of shares of RIL on
May 11, 2010, July 30, 2010 and August
12, 2010 were placed by Mr. Ashish.
Upon analysis of trading pattern of the
Noticee no.1, it was found that Noticee
no.1 had sold 79,150 shares of RIL on
May 11, 2010 & July 30, 2010 i.e. prior to
UPSI period and sold 75,000 shares of
RIL on August 12, 2010 i.e. during UPSI
period (during August 07 to August 13,
2010). Noticee no.1 s trading during the
UPSI period was found in violation of
PIT Regulations. Mr.Ashish being the
Adjudication was initiated for violation of

regulation 12 (2) & 12 (3) read with Clause
2.1 of Schedule II of SEBI PIT Regulation,
1992 which mandates prompt disclosure
of price sensitive information to the
exchanges and disseminations of the
same on a continuous and immediate
basis.
Pursuant to adjudication proceedings,
March 28, 2014 imposed a penalty of `25
lakh on the above captioned 5 noticees.
161
F.
Order in respect
Chandrakant Doshi
of
Ms.Devyani
H.
Ms. Devyani Chandrakant Doshi and

Mr. Chandrakant Nanalal Doshi were
the promoters of M/s.REL. Ms.Devyani
Chandrakant Doshi was holding 13,45,000
(3.66 percent) shares on February 6, 2013
and received 27,77,000 (11.22 percent)
shares in an off-market transaction from
Mr. Chandrakant Nanalal Doshi which
resulted in an increase in her holding to
more than 5 percent of the total paid-up
share capital. In view of the said increase
/ change in the shareholding, the noticees
being the promoters of REL were required
to make the necessary disclosures.
M/s. Spark Securities Pvt. Limited and

M/s. Anirudh Bubna Trust, acquired/
sold shares in the scrip of M/s Himalaya
Granites Limited without complying
with the relevant provisions of SEBI
(Substantial Acquisition of Shares
and Takeover) Regulations, 1997
(hereinafter referred to as the Takeover
Regulations,1997), and SEBI (Prohibition
of Insider Trading) Regulations, 1992.
Regulations 7(1) read with 7(2) of
Takeover
Regulations,
1997
and
Regulations 13(1) and 13(3) read with
13(5) of SEBI PIT Regulation, 1992.
Adjudication was initiated for violation of

Regulation 13(1), 13(3) & 13(4A) read with
Regulation 13(5) the SEBI PIT Regulation,
1992 for not making the necessary
disclosures within the prescribed time.
Jan 23, 2014 imposed a penalty of `12
lakh on Ms.Devyani Chandrakant Doshi.
G.
Order in respect of M/s. Spark Securities

Pvt. Ltd.

Feb 26, 2014 imposed a penalty of `10
lakh on the noticees, jointly and severally.
I.
Order in respect of Mr.Sarat Chander

Manocha
Order in respect of Mr. G. Jayaraman,

Compliance officer of M/s Satyam
Computer Services Ltd.
Mr. G. Jayaraman, the company secretary
and compliance officer of M/s. Satyam
Computer Services Ltd. (satyam), had
failed to close the trading window, when
Satyam was in possession of unpublished
price sensitive information relating to
its acquisition of two infrastructure
companies. Adjudication was initiated for
violation of para 1.2 and 3.2.3 in Schedule
I, Part-A of the Model code of conduct for
prevention of Insider Trading for listed
companies framed under Regulation
12(1) of SEBI(PIT) Regulations, 1992.
the Adjudicating officer vide order
dated July 27, 2012 imposed a penalty of
`5 lakh on Mr. G. Jayaraman.
In the scrip of M/s. Lanco Infratech Ltd.,

one of its Director, Mr Sarat Chander
Manocha had sold 2,00,000 shares
between April 3,2012 to June 25,2012
resulting in change in shareholding of
Mr. Manocha by 25,000 share on several
occasions since the last disclosure.
of regulation 13(4) read with 13(5) of
SEBI PIT Regulation, 1992 for not making
the continual disclosures of change in
shareholding.
Feb 26, 2014 imposed a penalty of `10
lakh on Mr. Sarat Chander Manocha.
The said order was appealed by Mr. G.

162
K.
Jayaraman in SAT and the SAT in its

order dated December 24, 2013, while
observing Compliance officer would be
liable for penalty if he fails to close trading
window when in possession of Unpublished
price sensitive information even if no
employee has traded in the shares of that
company when in possession of unpublished
price sensitive information. Similarly the fact
that Board of Directors of December 17, 2008
have reversed there earlier decision granting
approval to the acquisition does not absolve
appellant from liability to pay penalty for
violating PIT Regulations upheld the
order of Adjudicating officer.
J.
Order in the matter of M/s CG-Vak

Software and Exports Ltd.
SEBI noticed two instances of delay of
14 days and 31 days in disclosing the
information relating to acquisition of
shares of the company by its managing
director through the stock exchanges,
thereby, the company violated provisions
of Regulation 13(6) of SEBI(PIT)
Regulations,
1992.
Accordingly,
the matter was adjudicated and the
Adjudicating officer imposed a penalty
of `3 lakh on the company vide order
dated December 17, 2013.
The company appealed before SAT that
the delay in making disclosure was
unintentional and was on account of its
managing director travelling abroad at
the relevant time. Honble tribunal vide
its order dated April 23, 2014 was of
the view that Managing director of the
company was travelling abroad at the
relevant time cannot be ground to escape
penalty for not making disclosures
within the stipulated time under the said
Regulations and dismissed the appeal.
Order in respect of Mr. Bhargav

Marepally in the matter of M/s GSS
America Infotech Ltd.
Mr. Bhargav Marepally who was the
Managing Director of the company,
entered into opposite transactions i.e.,
sold/ purchased shares of the company
within six months of the prior purchase/
sale following transaction, thereby
violating the provisions of clause 4.2
of Part A, Schedule I of Model code of
conduct for prevention of Insider Trading
for listed companies under Regulation
12(1) of SEBI (PIT) Regulations, 1992. The
matter was referred for Adjudication.
L.
The entity contended before the

Adjudicating officer that the sale was
a result of invocation of pledge by
the lending entities and was outside
his control and therefore should not
be considered as sale made by him.
With regard to the purchases, he had
contended that he had to maintain a
minimum promoter holding in the
company as per the loan agreements.
April 29, 2013 imposed a penalty of `5
lakh.
Order in respect of Mr. Swaminathan

Srinivasan in the matter of M/s Tech
Mahindra Ltd.( Formerly M/s Mahindra
Satyam Ltd.)
SEBI had received a reference from M/s
Tech Mahindra Ltd. (formerly, Mahindra
Satyam Ltd.), that one of its designated
associate viz., Mr. Swaminathan
Srinivasan had sold 1,000 shares of the
company without the pre-clearance in
excess of threshold limit of 5,000 shares.
SEBI found that the employee had sold
6,000 shares between Feb 04-08, 2013,
resulting his change in shareholding of the
employee exceeding `5 lakh in value since
last disclosure, violating the provisions of
163
M.
Regulation 13(4) read with Regulation

13(5) of the SEBI PIT Regulation, 1992.
monetary penalty. This also acts as a

deterrent.
The matter was adjudicated under

provisions of Section 15A(b) of the SEBI
Act. 1992, Pursuant to Adjudication
proceedings, the Adjudicating officer
vide order dated April 28, 2014 imposed
a penalty of `3 lakh for the said
violations.
The total penalty imposed by SEBI in

adjudication proceedings for the violations
of SEBI (Prohibition of Insider Trading)
Regulations, 1992 was `20.4 crore in 201314 compared to `1.84 crore in 2012-13
representing a rise of 1010.9 percent. The said
penalty includes penalty for disclosure related
violations. Further the total penalty imposed
for 2013-14 includes `0.45 crore imposed
under SEBI (Prohibition of Insider Trading)
Regulations, 1992 & SEBI
(Substantial
Acquisition of Shares and Takeovers)
Regulations, 1997 as common orders were
passed in certain matters during 2013-14.
Order in respect of Mr.Dhaval Janardan

Nanavati in the matter of M/s Organic
Coatings Ltd.
Mr. Dhaval Janardhan Nanavati was
holding 9.79 percent of the equity capital
in M/s.Organic Coatings Ltd. He sold the
entire shareholdings on October 5, 2012
and did not comply with the disclosure
requirements within two working days
as provided under Regulation 13(3) and
13(5) of SEBI (PIT) Regulations, 1992.
The matter was adjudicated and the
Adjudicating officer vide order dated
November 27, 2013, imposed a penalty
of `1 lakh under the provisions of 15
A(b) of the SEBI Act., 1992.
8.
The existence of an efficient and smoothfunctioning market for takeovers plays an

important role in the economic development
of a country. Existence of an efficient and welladministered set of Takeover Regulations
ensures that the takeover markets operate in
a fair, equitable and transparent manner. The
SEBI Act, 1992 expressly mandated SEBI to
regulate substantial acquisition of shares and
takeovers by suitable measures. Accordingly,
SEBI provided a legal framework by notifying
the Takeover Regulations in 1997. The new SEBI
(SAST) Regulations were notified in 2011.
The said order was appealed before

the SAT and SAT vide its order dated
February 27, 2014 observed that, even
if disclosures made under SAST regulations
could be treated as disclosure made under
PIT Regulations, such disclosures being not
made within the time prescribed under PIT
regulations, appellant cannot escape penal
liability, and dismissed the appeal.
III
Steps initiated to curb Insider Trading

practices
A.
SEBI (Prohibition of Insider Trading)

Regulations, 1992 are in place.
B.
Actions are taken in terms of provisions

of SEBI Act, 1992 which also includes
Adjudication proceedings for levy of
SUBSTANTIAL ACQUISITION OF
SHARES AND TAKEOVERS
I.
Open Offer
As on March 31, 2014, total 92 draft letters

were held with SEBI for Open Offers, of which
71 draft letters of offer have been filed during
2013-14 (one under old Takeover Regulations).
Of the 92 draft letters, observations were
issued for 66 letters during 2013-14 and 26
draft letters were pending with SEBI for
issuance of observations as on March 31, 2014
(Table 3.21).
164
Table 3.21: Status of Draft Letter of Offers for Open Offers during 2013-14
Status
Number
Dra leers of oer for open oer

Pending dra leers of oer as on March 31, 2013
21
Dra leers of oer received during 2013-14, under Old Takeover Regulations
Dra leers of oer received during 2013-14, under New Takeover Regulations
70
Total
92
Observations issued by SEBI during 2013-14
66
Dra leers of oer in process as on March 31, 2014
26
Takeover Panel Applications

Applications pending as on March 31, 2013
Applications received during 2013-14
28
Total Applications
37
Applications disposed of during 2013-14
30
of which
Exemption Granted
13
Returned/ withdrawn (without passing order)
17
Applications in Process as on March 31, 2014
applications were filed with SEBI seeking

exemption. Among the 37 applications, 13
applications were granted exemption from
open offer, 17 applications were returned/
withdrawn without passing order and seven
applications were pending with SEBI as on
March 31, 2014.
Regulation 11 of Takeover Regulations

deals with applications for seeking exemption
from open offer obligations (referred as
Takeover Panel Applications). As on March
31, 2013, total nine applications were pending
with SEBI. During 2013-14, additional 28
Table 3.22: Trends of Open Offers
Year/Month
Open Oers
Objectives
Change in Control
of Management
Total
Consolidation
of Holdings
Substantial
Acquisition
No.
Amount
(` crore)
No.
Amount
(` crore)
No.
Amount
(` crore)
No.
Amount
(` crore)
2009-10
56
3,649
14
1,761
448
76
5,858
2010-11
71
10,251
17
8,902
14
145
103
18,748
165
Year/Month
Open Oers
Objectives
Change in Control
of Management
Total
Consolidation
of Holdings
Substantial
Acquisition
No.
Amount
(` crore)
No.
Amount
(` crore)
No.
Amount
(` crore)
No.
Amount
(` crore)
2011-12
57
18,726
286
294
71
19,305
2012-13
14
836
34
8,284
27
2,904
75
12,024
2013-14
59
7,721
10
37,644
46
75*
45,411
Apr-13
10
5,534
10
5,534
May-13
344
352
Jun-13
13
29,220
29,242
Jul-13
1,898
10
1,908
Aug-13
42
64
11
106
Sep-13
317
317
Oct-13
1,060
28
1,088
Nov-13
68
68
Dec-13
115
12
128
Jan-14
42
52
94
Feb-14
121
6,389
6,510
Mar-14
63
64
Notes : 1. Voluntary open offer has been introduced by SEBI under regulation 6 of SEBI (SAST) Regulations, 2011.
2.
The data with respect to Voluntary open offers are being added to Consolidation of Holdings. Since introduction of
voluntary open offer (i.e. 2011), 10 open offers were under Regulation 6 (i.e. voluntary offer) amounting to an offer size of
`11,414 crore.
3.
* Number of open offers opened during the year.
During 2013-14, 75 open offers with open
during 2013-14, of which 25 were through
offer size of ` 45,411 crore opened compared to
open market purchase method and eight were
75 open offers with offer size of ` 12,024 crore
through tender offer compared to 20 buyback
during 2012-13. Of the 75 open offers, 59 open
applications in 2012-13 (17 through
offers with offer size of ` 7,721 crore were with
market purchase method and three through
the objective of change in management control,
tender offer).This
10 open offers of offer size ` 37,644 crore were
65 percent over 20 buyback offers received
made with the objective of consolidation of
during 2012-13. Of the 25 offers for buyback
holdings and six open offers with offer size of
through open market purchase method, 13
` 46 crore were with objective of substantial
offers have been closed and 12 offers have
acquisition (Table 3.22).
not been concluded. Further, seven offers
II.
open
indicates an increase of
for buyback through tender offer have been
Buyback
closed and one is yet to be closed during 2013-
A total of 33 buyback offers were received
14 (Table 3.23).
166
Table 3.23: Buyback cases during 2013-14

Particular
No. of
Buy-back
Applications
size
(` crore)
regulations and administrative and statutory

actions are essential features of effective
enforcement by SEBI.
Actual
amount
utilized for
buy-back of
securities
(` crore)
SEBI conducts inspections directly as

well as through organizations like stock
exchanges and depositories. Inspections
were conducted during the year to verify
the compliance levels of intermediaries. Risk
based and special purpose i.e. theme based
inspections were conducted on the basis of
investor complaints, surveillance reports,
specific concerns, etc.
Buy-back through Open Market

Oers
received and
closed
Oers
received but
not closed
13
2,225.6
1,267.4
12
6,241.9
Na
Buy-back through Tender Oer

Oers
received and
closed
Oers
received but
not closed
2,913.4
2,900.4
231.3
Na
Inspection
of
Stock
Exchanges,
Depositories and Clearing Corporations
A.
Inspection of Stock Exchanges
During the inspection of stock exchanges,

a review of market operations, organizational
structure and administrative control of the
stock exchange is conducted to ascertain as to
whether :-
Note: As on March 31, 2013, there were 14 buy-back offers

through open market which were received but not closed. All
the buy-backs have closed during 2013-14.
A total of 20 buyback offers have been

closed during 2013-14 compared to six
buyback offers during 2012-13. The total
buyback offer size during 2013-14 was
` 11,612 crore compared to buyback offer
size of ` 1,277 crore in 2012-13 indicating an
increase of 809.3 percent over the previous
year. It was also observed from the buyback
offers which were opened and closed during
2013-14 that the average utilization was 81.1
percent of the total offer size.
9.
I.
INFORMATION CALLED FROM,

INSPECTION
UNDERTAKEN,
INQUIRIES AND AUDIT OF
STOCK
EXCHANGES
AND
INTERMEDIARIES AND SELF
REGULATING ORGANISATIONS
CONDUCTED BY SEBI
a.
It provides a fair, equitable , transparent

and growing market to the investors ,
b.
Its organization system and practices are

in accordance with the SC(R) Act , 1956
and rules framed there under,
c.
It has implemented the directions,

guidelines and instructions issued by
SEBI/ Government of India (GoI) from
time to time and
d.
It has complied with the conditions , if

any, imposed on it at the time of renewal
/ grant of its recognition under section 4
of the SC(R) Act, 1956.
During the year 2013-14, comprehensive

inspections were carried out at ten stock
exchanges, namely Bombay Stock Exchange,
MCX-SX Stock Exchange, Pune Stock
Exchange, Jaipur Stock Exchange, United Stock
Exchange, Interconnected Stock Exchange,
Bhubaneswar Stock Exchange, Calcutta Stock
Supervision of intermediaries through

on-site and off-site inspections, enquiries and
adjudications in case of violation of rules and
167
Exchange, Vadodara Stock Exchange and

Madhya Pradesh Stock Exchange. In addition,
during 2013-14, compliance inspections were
carried out at Pune Stock Exchange, OTC
Exchange and Uttar Pradesh Stock Exchange.
The compliance inspections of exchanges
were carried out for the purpose of renewal of
recognition of stock exchange.
C.
Further, inspections were carried out

prior to the commencement of various
segments at respective stock exchanges. In
2013-14, inspections were conducted before
the commencement of debt segment at NSE
and BSE, currency derivative segment at BSE
and SME segment at MCX-SX.
In addition to the above, during 2013-14,

comprehensive inspections of the following
CCs were undertaken for grant of recognition,
viz., NSCCL, ICCL and MCX-SX CCL.
B.
In order to ascertain the adequacy of the

collateral management process of the CCs,
during the financial year 2013-14, special
purpose inspections were undertaken for
the following Clearing Corporations, viz.,
NSCCL, ICCL and MCX-SX CCL.
II.
During the inspection of depositories,

a review of the market operations,
organizational structure and administrative
control of the depository is conducted to
ascertain as to whether:The procedures and practices of the
depository are in compliance with the
Depositories Act 1996, SEBI (Depositories
and Participants), Regulations, 1996,
SEBI circulars, the bye-laws etc.;
b.
The books of account are being

maintained by the depository, in
accordance with SEBI (Depositories and
Participants), Regulations, 1996;
c.
The complaint received by depositories

from participants, issuers, issuers
agents, beneficiary owners or any other
person are redressed.
Inspection of Market Intermediaries
The number of inspections has increased

to 350 during 2013-14 from 300 in 2012-13. The
inspection process of intermediaries has been
further streamlined with a view to improve
the quality such as selection of themes for
inspections, questionnaire for inspections
and follow up action. It was ensured that the
inspections are concluded expeditiously.
Inspection of Depositories
a.
Inspections of Clearing Corporations

(CCs)
Based on the findings of inspections after

considering the comments of intermediaries,
they were specifically advised about the
areas where improvement was required by
them. They were also required to report to
SEBI about the corrective steps taken by them
and also place the same before their board/
partners/proprietor, as the case may be. These
steps taken by SEBI have improved the level
of compliance among the intermediaries.
Administrative and quasi-judicial actions
were initiated based on the deficiencies and
seriousness of the violations committed by
the intermediaries.
A.
During
2013-14,
comprehensive
inspection of NSDL was conducted to
ascertain the systems, procedures and practices
in conducting the inspection of depository
participants by depositories and desirability
of adopting the practices by depositories.
Inspection of
Sub-Brokers
Stock
Brokers
and
During the year 2013-14, 217 stock

brokers and sub-brokers have been inspected
as against 201 in the financial year 2012-13.
Specific purpose risk-based inspections
168
were carried out during the year. The focus

of the inspections included themes such as
compliance of norms regarding anti-money
laundering, investor redressal mechanism,
handling of funds and securities of clients,
settlement of accounts of clients on timely
basis, segregation of clients and proprietary
funds/securities, KYC norms, clearing
operations, etc. During inspections, the
compliance of specific provisions of SEBI
regulations/ circulars was verified. The
details of inspection of stock brokers
and sub-brokers carried out are given in
Table 3.24.
yearly basis by independent auditors. Stock

exchanges levy penalties for delay in filing
the internal audit reports by stock brokers.
The system of internal audits of stock brokers
by outside professionals, inspections by stock
exchanges and by SEBI has improved the
compliance level of stock brokers.
B.
Risk based and special focus inspections

of intermediaries are undertaken by SEBI to
ascertain the extent of compliance on specific
issues. SEBI has been carrying out inspection
of the merchant bankers, randomly on the
basis of public/rights issue, open offer and
buy-back etc., to check the due diligence
exercised in respect of pre-issue and postissue activities, and the registrars to an issue
to check the allotment process followed and
the redressal of investor complaints handled
by them.
Table 3.24: Inspection of Stock Brokers/

Sub-brokers
Particulars
2012-13
2013-14
Inspections Completed
Stock Brokers
162
160
Inspections Completed Sub - brokers
39
57
201
217
Total
SEBI conducted inspections of debenture

trustees based on the number of public issues
handled by them to confirm the compliance
with the applicable regulatory and statutory
requirements with focus on their systems and
controls with respect to monitoring of payment
of interest/ redemption amount, processing of
investor grievances and action taken in case of
defaults by issuer companies.
In compliance with the requirement

of inspecting active members by the stock
exchanges, the number of entities inspected
by the stock exchanges is given in Table 3.25:
Table 3.25: Inspection by Stock Exchanges
Year
1
NSE
BSE
MCX-SX
USE
2012-13
1,384
936
245
89
2013-14
889
442
490
22
Inspection of Other Intermediaries
During 2013-14, inspections were

completed for 57 depository participants, 42
merchant bankers, five credit rating agencies,
four debenture trustees and 25 RTIs & STAs.
The total number of inspections conducted
by SEBI of these intermediaries has increased
during the year, from 99 in 2012-13 to 133 in
2013-14 (Table 3.26). There was special focus
on follow-up actions after the inspections
so that corrective steps are taken by the
intermediaries.
The stock exchanges carried out risk

based inspections as per new policy adopted by
them in consultation with SEBI. Additionally,
stock brokers/clearing members are required
to carry out complete internal audit on a half
169
Table 3.26: Inspection of Other Market

Intermediaries
Particulars
2012-13
2013 -2014
Debenture Trustees
10
Depository Participants
51
57
Merchant Bankers
16
42
Registrars To an Issue and

Share Transfer Agents
17
25
Total
99
133
Credit Rating Agencies
capable of handling new evolving threats in

the area of money laundering and financing
of terror. Further, the Prevention of Money
Laundering (Maintenance of Records) Rules,
2005 were also amended in August 2013 to
reflect these new changes.
During 2013-14, SEBI has continued its
focused efforts to strengthen the regulatory
framework and minimize the risk emanating
from money laundering and terrorist financing
in the securities markets. The following steps
have been taken in this regard:
A.
Updation of the AML/ CFT framework

of SEBI (in line with amendments made
to the PML Act 2002 and Rules)
The AML/ CFT framework prescribed

by SEBI for market intermediaries has been
updated to incorporate the amendments made
in the PML Act, 2002 and Rules. The major
changes to the framework are with respect
to duration of record keeping requirements,
which has been reduced from 10 to five
years, appointment of Designated Director
to oversee compliance with AML/ CFT
obligations and the intermediaries to carry
out risk assessment. Further, intermediaries
are now allowed to rely on regulated and
supervised third parties for carrying out client
due diligence. The circular in this regard
was issued on March 12, 2014. Details of the
circular have been given in this report.
III. Prevention of Money Laundering

Money laundering is globally recognized
as one of the largest threats posed to the
financial system of a country. The fight
against terrorist financing is another such
emerging threat with grave consequences
for both the political and economic standing
of a jurisdiction. Rapid developments and
greater integration of the financial markets
together with improvements in technology
and communication channels continue to
pose serious challenges to the authorities
and institutions dealing with Anti-Money
Laundering and Combating Financing of
Terrorism (AML/ CFT).
The Prevention of Money Laundering
Act, 2002 (PMLA) and the rules framed thereunder, which have been brought into force
with effect from July 1, 2005, have been a
significant step taken by India towards joining
the global war against money laundering
and financing of terrorism. PMLA has been
amended in December 2012 so that the
legislative and administrative framework
of the country becomes more effective and
B.
Inspections on AML/ CFT related

issues
SEBI has included the AML/ CFT risks as

part of its inspection of intermediaries, such
as, stock brokers, depository participants
and mutual funds. SEBI has also carried
out specific theme based inspections of
intermediaries focusing on compliance
with KYC norms (which includes client due
170
inspections conducted by SEBI, compliance

with AML/ CFT norms is also verified by the
stock exchange and depositories during their
inspections of stock brokers and depository
participants and also at the time of half yearly
internal audits by independent professionals.
Depository participants are also required
to undergo concurrent audits with respect
to their operations, which includes account
opening/ KYC/ AML norms. Appropriate
sanctions are applied where AML/ CFT
violations/ discrepancies are observed.
diligence) and AML/ CFT guidelines. During

2013-14, with respect to stock brokers, SEBI
has carried out 62 special purpose inspections
to check their compliance with the AML/
CFT and KYC norms. In case of depository
participants, 53 inspections were carried out
to verify compliance with AML/ CFT and KYC
norms. With regard to portfolio managers,
SEBI officials visit the entity during which
compliance with KYC norms is verified before
granting registration/ renewal of registration.
With respect to mutual funds, 21 inspections
were carried out wherein compliance with
AML/ CFT and KYC related norms was
reviewed.
The table 3.27 provides data on the

number of members / participants against
whom action for AML / CFT related deficiencies
has been taken by the exchanges and
depositories in 2013-14:
In addition to the special purpose
Table 3.27: Actions by stock exchanges and depositories for AML/ CFT related deficiencies
Particular
NSE
BSE
CDSL
NSDL
No. of members against whom AML discrepancies were

observed and action taken
47
258
34
36
57
30
34
34
Actions taken by Exchange/ Depository

Warnings issued
4
215
Advice issued
34
Value of nes imposed (No. of intermediaries)
15
43
Note: The deficiencies as well as action taken includes only those cases where action decided by relevant authority is completed
of India, has set up different working groups

to carry out risk assessments of every financial
sector in India to identify the various money
laundering and terrorist financing risks
faced and to suggest measures to mitigate
these risks. A group for the securities
sector has also been set up comprising of
representatives from SEBI, stock exchanges,
depositories, associations of intermediaries and
Financial Intelligence Unit-India.
Stock exchanges and depositories have

also conducted trainings/ seminars for their
members to sensitize them towards the
significance of AML/ CFT framework and
the need to ensure continuous compliance
with it.
C.
Risk Assessment for the Securities

Sector to identify ML/TF risks
The Ministry of Finance, Government
171
D.
International co-operation on AML/

CFT related issues
markets in South Asia to assess the threats

and vulnerabilities of the securities markets in
South Asia to money laundering. SEBI made
a presentation on the AML/ CFT framework
and steps taken in Indian securities markets.
In order to protect the international

financial system from money laundering
and financing of terrorism (ML/ FT) risks
and to encourage greater compliance
with the AML/ CFT standards, the FATF
identifies jurisdictions that have strategic
deficiencies and works with them to address
those deficiencies that pose a risk to the
international financial system. The names of
these jurisdictions are made public as part
of a FATF Public Statement. As required by
the FATF Recommendations, the Ministry
of Finance, Government of India circulates
the FATF Public Statements to all regulators
with an advice to disseminate the same to all
financial institutions under their supervision
for applying enhanced due diligence
measures when dealing with clients from
these high-risk jurisdictions. In the year 201314, SEBI circulated three such FATF Public
Statements dated June 21, 2013, October 18,
2013 and February 14, 2014 to registered
intermediaries for their compliance.
10. DELEGATED
FUNCTIONS
POWERS
AND
Section 29A of the Securities Contracts

(Regulation) Act, 1956 permits the Central
Government to delegate powers exercisable by
it under any provision of the SC (R) Act, 1956
to SEBI also by order published in the Official
Gazette except the power to make rules. The
Central Government has delegated certain
powers to SEBI with respect to regulation of
contracts in securities and stock exchanges
and clearing corporations.
The delegated powers with respect to
contracts in securities include the power to
notify permissible contracts in securities,
power to prohibit contract in securities
in certain cases and power to extend the
application of section 17 with respect to
spot delivery contracts. In exercise of such
delegated powers to prevent undesirable
speculation in securities market, SEBI vide
notification dated October 3, 2013 had
superseded the notification dated the March
1, 2000 and declared that no person in the
territory to which SC (R) Act extends, shall,
save with the permission of the Board, enter
into any contract for sale or purchase of
securities other than a contract falling under
any one or more of categories specified therein.
The said notification, inter alia, permitted
contracts for pre-emption including right of
first refusal, tag-along or drag-along rights
contained in the shareholders agreements or
articles of association of companies. SEBI has
also permitted contracts containing an option
for purchase or sale of securities subject to
the following:
The Eurasian Group (EAG) had instituted

a typology research project on topic Money
Laundering through the Securities Market,
the leadership of which was assigned to SEBI.
SEBI submitted the final report of the project,
based on information received from various
member jurisdictions. Earlier, SEBI had also
made two presentations on the preliminary
findings in the meetings of the Group held
in Moscow and New Delhi. The report was
published on the EAG website in September
2013.
In September 2013, the Australian
Transaction Reports and Analysis Centre
(AUSTRAC) had organized a three day
AML regional workshop in Colombo, Sri
Lanka, to assist the regulators of the capital
172
the title and ownership of the underlying

securities are held continuously by the
selling party to such a contract for a
minimum period of one year from the
date of entering into the contract;
the price or consideration payable for

the sale or purchase of the underlying
securities pursuant to exercise of any
option contained therein, is in compliance
with all the laws for the time being in
force, as applicable; and
include the power to grant or withdraw

recognition, power to approve additional
trading floor, new segments and new products
in stock exchanges, power to enquire into
the affairs of a stock exchange, licensing of
dealers in securities, power to direct rules to
be made or make rules, power to supersede or
reconstitute the governing board and suspend
the business.
11. FEES AND OTHER CHARGES

Details of the amount of fees and other
charges (un-audited) collected by SEBI from
market intermediaries on both recurring
and non-recurring basis is provided in Table
below. During 2013-14, the total amount of fees
and other charges received was `175 crore
(unaudited) as against `148.7 crore in 2012-13
(audited). The recurring fee was 46.5 percent
in 2013-14 as compared to 59.4 percent in
2012-13. The largest amount of `34.4 crore
was collected from registration of derivative
members, while the second largest recurring
fee of `12.5 crore was collected from stock
brokers and sub-brokers. In non recurring
fee category, the highest fee was collected
from FIIs (`22.2 crore) followed by fees from
sub account - foreign institutional investors
(`20.3 crore), mutual funds (`15 crore), and
offer documents and prospectuses filed
(`13.3 crore).
the contract has to be settled by way

of actual delivery of the underlying
securities.
The contracts permitted under the

said notification are mandated to be in
accordance with the provisions of Foreign
Exchange Management Act, 1999. Further, it
was declared that the said notification would
not affect or validate any contract which has
been entered into prior to the date of the said
notification. The said notification is also in
line with the proviso to section 58(2) of the
Companies Act, 2013 which states that any
contract or arrangement between two or more
persons in respect of transfer of securities shall
be enforceable as a contract.
Delegated powers to SEBI with respect
to stock exchanges and clearing corporations
173
Table 3.28: Fees and other Charges (` crore)

Particulars
1
Oer Documents and prospectuses led
Merchant Bankers
Underwriters
Portfolio Managers
Registrars to an Issue and Share Transfer
Agents
Bankers to an Issue
Debenture Trustees
Takeover fees
Mutual Funds
Stock Brokers and Sub-Brokers
Foreign Institutional Investors
Sub Account - Foreign Institutional
Investors
Depositories
Depository Participants
Designated Depository Participant
Venture Capital Funds
Custodian of Securities
Approved Intermediaries under Securities
Lending Scheme
Credit Rating Agencies
Listing Fees Contribution from Stock
Exchanges
Alternative Investment Scheme
KYC Registration Fees
Foreign Venture Capital
Derivatives Members registration
Investment Advisor
Informal Guidance Scheme
Regulatory Fees
Total
2012-13
2013-14 (Unaudited)
Total Fees
Received
Recurring
fees #
Nonrecurring
fees ##
2
3.0
0.1
2.7
3
4.9
2.0
0.0
2.4
4
4.9
5.0
0.1
5.1
0.4
0.1
1.1
0.5
2.4
19.8
-
Recurring
fees #
5
Total Fees
NonReceived
recurring
fees ## (Unaudited)
1.8
0.1
3.2
6
13.3
2.4
1.2
7
13.3
4.2
0.1
4.4
0.5
0.3
0.1
0.4
0.8
0.4
10.3
11.2
11.6
1.9
0.9
10.3
13.6
19.8
11.6
0.7
0.6
2.5
12.5
-
0.6
0.1
10.6
15.0
22.2
1.3
0.6
10.6
17.5
12.5
22.2
10.2
10.2
20.3
20.3
0.2
0.1
10.0
2.2
0.2
0.2
0.2
2.3
0.2
10.2
0.2
0.1
11.1
1.6
0.7
0.0
0.2
1.7
0.7
11.1
0.0
0.0
0.1
0.2
0.3
0.1
0.1
0.1
0.1
6.9
6.9
7.6
34.8
6.4
88.4
2.8
0.1
0.8
0.0
60.3
2.8
0.1
0.8
34.8
0.0
6.4
148.7
34.4
6.22
81.3
7.6
3.5
0.0
1.0
0.9
0.0
93.7
3.5
0.0
1.0
34.4
0.9
0.0
6.2
175
Notes: 1.
# Recurring fees: Fees which is received on annual/3-yearly/5-yearly basis (includes Fee/ Service Fee/ annual fee/ Listing
Fees from exchanges/ Regulatory Fees from stock exchanges).
2.
## Non-recurring fees: Fees which is received on one time basis. Includes fee for Offer Documents Filed/ Registration Fee/
Application Fee/ Takeover Fees/ Informal Guidance Scheme/ FII Registration and FII Sub Accounts Registration.
3.
Since the amount realised by way of penalties on or after 29.10.2002 has been credited to the Consolidated Fund of India,
therefore, the same has not been included in the fees income of SEBI since 2003-04.
4.
Stock brokers and sub-brokers fee includes annual fees and turnover fees.
5.
Stock brokers and derivatives fees are of recurring nature and depend on the trading turnover of the stock brokers and
members of derivatives segment.
174
12. RESEARCH AND STUDIES
suggest new policy alternatives, essentially

on subjects contributing clarity and solutions
to challenges faced by SEBI. During 201314, under DRG-I, four DRG studies were
successfully completed and published on the
following topics :
Section 11(2) (l) of the SEBI Act, 1992

enshrines SEBI to undertake research
activities for effectively fulfilling its functions.
During 2013-14, SEBI undertook new research
initiatives to boost in-house research and
capabilities, complied with the submission of
mandatory report as per the Act and continued
to publish information for the benefit of
various stakeholders.
SEBI is responsible to maintain a
repository of data for entire capital/ securities
market, collection of data from various sources,
verifying their accuracy and continuously
maintaining/ updating the data. During 201314, SEBI has published SEBI Annual Report
2012-13, Handbook of Statistics on Indian
Securities Market 2013 and SEBI Monthly
Bulletin (monthly publication) which are
available in the publication section of SEBI
website (www.sebi.gov.in). SEBI has been
distributing these publications to various
stakeholders in the market like research
institutions, investor associations, mutual
funds, banks, etc on gratis. Apart from
the publications, SEBI was responsible for
providing information regularly to Ministry
of Finance (MoF), Reserve Bank of India (RBI),
Ministry of Corporate Affairs and Government
of Maharashtra etc.
Foreign
Investment
in
Government bond Market
B.
Impact of Increased Derivatives Trading

in India on the Price-Discovery Process
C.
Earnings Management in India
D.
Penetration of Mutual Funds in India Opportunities and Challenges
Indian
During 2013-14, officers from SEBI

presented research papers on the following
topics
SEBI celebrated its Silver Jubilee in

2013. In this context, SEBI published the Book
Banyan tree to e- trading at the silver jubilee
celebrations. The book was released on May
25, 2013 by Honble Prime Minister of India
Dr. Manmohan Singh.
I.
A.
A.
Black Economy & Securities Market - Role

of SEBI presented on 9-10 December
2013 at Jawaharlal Nehru University,
New Delhi.
B.
Currency Futures Trading in India

presented at World Finance & Banking
Symposium held at Beijing during Dec
16-17, 2013.
C.
Cross Country Trading of Nifty

Derivatives presented at the Golden
Jubilee Conference of the Indian
Econometric Society (TIES) be held
on Dec 22-24, 2013 at Indira Gandhi
Institute of Development Research
(IGIDR), Mumbai.
D.
Capital Market Development and Economic

Growth: An Asian Perspective presented
at the International Research Conference,
held on March 14, 2014 at Durgadevi
Saraf Institute of Management Studies
(DSIMS), Mumbai.
II.
Systemic Stability Unit
Research Activities
SEBI Development Research Group

(DRG) is a new research initiative which
aims to undertake extensive policy research
to analyze the existing regulatory policies
from an academic perspective as well as to
During 2013-14, SEBI represented India

on Thematic Review Team IOSCO Principles
on Systemic Risk Assessment of IOSCO
175
developments in the market place, including

market movements, policy requirements and
regulations.
Principle 6 and 7 and also participated in

the review conducted. SEBI is also involved
in the implementation of the Non-Legislative
Recommendations of the Financial Sector
Legislative Reforms Commission (FSLRC).
CPSS and IOSCO under the aegis of FSB,
issued 24 principles Principles for Financial
Market Infrastructure -April 2012. In light of
the above, SEBI had set up a Technical Group
for reviewing the self assessment done by the
FMIs pertaining to the securities market. The
Technical group had identified systemically
important FMIs: Clearing CorporationsNSCCL, ICCL, MCX-SX CCL; DepositoriesNSDL, CDSL. The self assessment exercise
by all FMIs and assessment by SEBI has been
completed.
IV. International Research Conference

SEBI organized its First International
Research Conference during January 27-28,
2014 in Mumbai. The topic of the conference
was High frequency trading (HFT), Algo
Trading and Co-location. Academicians/
market
practitioners/regulators,
having
experience in the field, from countries such as
USA, Spain, Australia, Canada, Japan, India
etc were invited for the conference. During the
conference, the participants discussed issues
related to impact of HFT on market quality,
financial stability, information asymmetry and
retail investors, HFT in developing countries,
regulatory mechanism and technology as an
enabler to re-level the field.
SEBI had also contributed in the

Financial Stability Report June and
December, 2013, published by RBI covering
issues like Tapering of Quantitative Easing
and FII flows in India, Volatility and Returns
in Indian Securities Market, Cyber Crime
growing as Systemic Risk, FII Holdings
and financial stability, Trends in FII Flows,
Analysis of trends in equity issuances by
Indian companies, Facts and Concerns on
Pledging of Shares by Promoters, Liquidity
Issues in MMMFs etc.
V.
New Research Initiatives
Statistical Analytics Group has been

set up to scientifically supplement the
investigation and surveillance functions of
SEBI. The works initiated within the group
are as follows:
III. Academic Interactions

SEBI invites renowned scholars and
financial market practitioners, to deliver
lecture/talk on the topics related to securities
markets, economics and finance. During
the year, SEBI invited experts to speak on
the topics such as: Economic Outlook for
2013-14: Indian and Global context, HFT,
Latency and Regulations and Impact of
Financial Globalization. These discussions
between the speaker and the SEBI staff
helped the SEBI officials to gain insights and
enhance their knowledge about the latest
176
Stock price modelling using the

concepts of Geometric Brownian
Motion: In financial markets, the
dynamics of stock prices are reflected by
uncertain movements of their value over
time which is attributed to the Efficient
Market hypothesis (EMH) . Based on
market restrictions and laws, Geometric
Brownian Motion is a mathematical
approach for stock price modelling. The
objective of this initiative is to model the
return data of stock prices of different
scrips and check whether they really
follow Geometric Brownian Motion as
desired or not.
as a primary regulator, are entrusted to act as

first level source of detection of market frauds,
suspicious activity and any aberration in the
market movement are then reported to SEBI
for further examination.
Disgorgement calculation for insider

trading: In order to overcome the
limitations of event study analysis, a
probabilistic methodology was used to
calculate disgorgement amount. The
method mainly consists of computation of
the potential probabilistic disgorgement
by analyzing all the future price scenarios,
assigning them a suitable probability
measure on the basis of the strategy of the
insider and on the current stock price. The
stochastic differential equation adopted
in this model is the geometric Brownian
motion applied by Black & Scholes to
their option-pricing model.
At SEBI, the Integrated Surveillance

Department (ISD) monitors market activity
through its market alert systems and is in
charge of overall market surveillance. The
various processes and systems implemented
as mentioned below help in detecting FUTP.
A.

(IMSS) keeps track of market aberrations and
generates alerts on a daily basis. The alerts
are analyzed periodically so as to identify
any manipulative trading in the market.
During the year, SEBI redesigned the IMSS
system software to handle more than two
billion messages in a day by implementing
market splitting and streaming mechanism.
To further enhance the system capability
and performance of alert generation process,
implementation of alerting on multiple market
stream are underway.
Developing algorithm to detect Insider

Trading: The aim of this initiative to
generate alert for entities that may be
associated with Insider trading based
on the day-wise trading data. Based on
the model parameters, notional volume
and notional percentage profit, cluster
analysis mechanism is used to classify
all the clients/ investors traded in a
scrip into some mutually exclusive and
exhaustive groups ,such that within each
group the investors are homogeneous in
nature and between the groups they are
heterogeneous. By forming two groups,
namely normal and anomalous, the
anomalous investors are filtered based
on their trading pattern surrounding the
announcement date in order to generate
final suspect list.
B.
Data Warehousing and Business

Intelligence System (DWBIS)
DWBIS comprises of data warehouse,

data mining and business intelligence tools.
Presently, DWBIS consists of three phases:
a.
Phase-I: A single source of market data

and enables users to generate multidimensional reports dynamically (fully
operational).
b.
Phase-II: Several pattern recognition

modules and predictive modeling
scenarios (fully operational).
c.
Phase-III: It consists of various reports

to help research initiatives (released for
User Acceptance Test (UAT)).
13. OTHER FUNCTIONS

I.

(IMSS)
Surveillance
An effective surveillance mechanism

is one of the prime requirements for well
functioning securities market. Effective
surveillance aims to facilitate orderly markets
by safeguarding the integrity of market and can
achieve investor confidence, protection and
market development. The stock exchanges,
177
C.
During the year, DWBIS has been

rolled out to other departments of SEBI
like Recovery Cell and OIAE. Process for
comprehensive upgrade of the system
to handle data up to 2018 has also been
initiated.
Significant market movements
During 2013-14, Sensex and Nifty

touched their respective life-time highs at
22386.3 and 6704.2 on March 31, 2014. Major
market movements in terms of percentage
change are given in Table 3.29.
Table 3.29: Major Market Movement during 2013-14

Date
Sensex
Closed
Niy
Change over previous Day
Change over previous Day

Point
Percent
-4.0
5507.9
-234.5
-4.1
-651.5
-3.5
5341.5
-209.3
-3.8
19997.1
727.0
3.8
5896.8
216.4
3.8
20646.6
684.5
3.4
6115.6
216.1
3.7
Point
Percent
16-Aug-13
18595.0
-769.4
03-Sep-13
18234.7
10-Sep-13
19-Sep-13
Closed
Note: The Sensex/Nifty changed by 3.5 percent and more from previous day closing level, considered as major market movement.
Source: BSE and NSE.
D.
Surveillance Measures
of others by indulging in manipulation

or any other illegal activities which pose
risk to the integrity of the market and
distorts the equilibrium of the market.
Accordingly, a surveillance obligation for
brokers for detection of suspicious and/
or manipulative transactions has been
framed. In order to facilitate this at trading
member level, SEBI has mandated all
exchanges to disseminate transactional
market alerts to trading members as part
of surveillance obligation for trading
members.
As an ongoing mechanism, SEBI

conducts meetings at regular intervals with
stock exchanges/depositories to keep track of
surveillance activities and market movements.
In consultation with the stock exchanges, the
following surveillance measures have been
taken:
a.
Trading members along with their

employees/ branch offices/ sub-brokers/
authorized persons are the first touch
point in the securities market for investors.
As the trading members interact with
their clients on a day-to-day basis, they
are expected to have reasonably fair
understanding about their client(s) and
its trading activity. Thus, at a first level,
it is the responsibility of the trading
member to ensure that neither he nor
his client(s) are misusing the trading
system for their own benefit at the cost
b.
178
In accordance with the requirements

of SEBI (PIT) Regulations, 1992 and
Listing agreement, companies are
required to make disclosures in respect
of price sensitive information to stock
exchanges. In this regard, it was decided
that companies shall also disclose to
the exchanges the applicable trading
Table 3.30: Surveillance

2013-14
window period along with any price

sensitive information.
c.
Often trading members appear as

shareholders of a listed company while
the actual holding is on behalf of their
clients. This practice leads to masking
the identity of the actual shareholders
of a company. Accordingly, in order
to increase transparency and provide
correct picture of the actual shareholding
of a listed company, the exchanges
are advised to collect and disseminate
shareholding by trading member in
listed companies along with breakup of
shareholding (held in their name or on
behalf of the clients), in the format as
prescribed by SEBI, on a quarterly basis,
if such holding is one percent or more of
the share capital of a listed company.
d.
SEBI has mandated all exchanges to

disseminate on their website, volume
and member level concentration details
for scrips / indices on which Liquidity
Enhancement Schemes (LES) are
present.
E.
Surveillance Actions
Actions
during
Nature of Action
NSE
BSE
MCX-SX
586
1,509
236
Trade segment
(336)
(1,151)
(1)
No. of scrips in which
1,093
2,002
603
(693)
(1,652)
(41)
56
644
33
(85)
(885)
(Na)
116
122
(94)
(100)
(Na)
Scrips shied to Trade to
price bands were imposed

(2 percent, 5 percent &
10 percent)
Preliminary Investigation
taken up
Rumours Veried
Note: Figures in parentheses pertains to 2012-13.
With a view to dampen the amplitude of

prices, scrips shifted to T to T segment attract
applicable circuit filters. NSE reduced circuit
filter in 1,093 instances, BSE in 2,002 instances
and MCX-SX in 603 instances. NSE, BSE and
MCX-SX verified 116, 122 and one rumours,
respectively (Table 3.18A). Further, as a soft
enforcement measure, NSE and BSE issued
observation letter to 458 and 708 entities,
respectively and caution letter to one and
three entities, respectively.
During 2013-14, NSE, BSE and MCXSX initiated preliminary examination and
investigation in 56 cases, 644 cases and 33 cases
respectively. In addition, as surveillance action,
during 2013-14, NSE shifted 586 scrips to trade
to trade (T to T) segment, BSE shifted 1,509
scrips to trade to trade (T to T) segment and
MCX-SX shifted 236 scrips to trade to trade
(T to T) segment. In this segment, scrips are
traded and settled through mandatory delivery
and no netting off positions are allowed. This
leads to reduction in the amount of speculation
as only those who can deliver the securities can
enter into sale transactions and thereby day
trading is reduced (Table 3.30).
II.
Investigation
Timely completion of investigation cases

and effective, proportionate and dissuasive
action in case of violations of securities laws is
important for protection of investors interest
and ensuring fair, transparent and orderly
functioning of the market. It is also vital for
improving the confidence in the integrity of the
securities market. SEBI is therefore constantly
striving to upgrade its investigative skills by
making use of Information Technology (IT)
and other latest investigative tools. Importance
of effective and credible use of investigation
179
can be taken, wherever required. Outcome

of investigation in the form of enforcement
action is a clear signal to the market players to
comply with the legal provisions and expected
standards of conduct in the market.
has also been underscored by IOSCO in its

Principles for the Enforcement of Securities
Regulation.
Keeping the above objectives and
principles of securities regulations in view,
SEBI initiates investigation to examine alleged
or suspected violations of laws and regulations
relating to securities market. The possible
violations may include price manipulation,
creation of artificial market, insider trading,
capital issue related irregularities, takeover
related
violations,
non-compliance
of
disclosure requirements and any other
misconduct in the securities markets.
A.
C.
During 2013-14, 108 new cases were

taken up for investigation and 120 cases
were completed compared to 155 new cases
taken up and 119 cases completed in 2012-13
(Table 3.31). Apart from enforcement action,
an important attendant benefit resulting from
such investigations is contribution to the policy
changes with a view to further strengthening
the regulatory and enforcement environment.
Initiation of Investigation
There are various sources of information

for initiation of investigation. SEBI initiates
investigation based on reference received
from sources such as stock exchanges,
SEBIs integrated surveillance department,
other government departments, information
submitted by market participants and
complainants.
In
appropriate
cases,
investigation may also be initiated suo-moto,
where there are reasonable grounds to believe
those investors interest are being adversely
affected or there are suspected violations of
the provisions of the securities laws.
B.
Trends in Investigation Cases
Table 3.31 Trends of Investigations

Year
Cases Taken
up for
Investigation
Cases
Completed
Up to 2003-04
778
576
2004-05
130
179
2005-06
159
81
2006-07
120
102
2007-08
25
169
2008-09
76
83
2009-10
71
74
2010-11
104
82
2011-12
154
74
2012-13
155
119
2013-14
108
120
1,880
1,659
Process of Investigation
The steps involved during investigation

process include an analysis of market data
(order and trade log, transaction statements,
etc.) and static data (KYC documents obtained
from brokers, depository participants, etc.,
bank records, financial results, events around
major corporate developments, etc.) The
purpose of such investigation is to gather
evidence and to identify persons/ entities
behind irregularities and violations so that
appropriate and suitable regulatory action
Total
D.
Nature of Investigation Cases Taken

Up
During 2013-14, 62 percent (67 out of
180
108) of the cases taken up for investigation

pertained to market manipulation and price
rigging compared to 55 percent (86 out of 155)
cases in 2012-13. While the insider trading
and takeover violation cases accounted for 12
percent (13 cases) and 5.6 percent (six cases)

respectively, Issue related manipulation and
other violations of securities laws accounted
for 5.6 percent (six cases), and 14.8 percent
(16 cases) (Table 3.32 and Chart 3.3).
Table 3.32: Category-wise Nature of Investigation

Particulars
Investigations Taken up
Investigations Completed
2012-13
2013-14
2012-13
2013-14
Market manipulation and price rigging
86
67
41
73
"Issue" related manipulation
43
52
12
Insider Trading
11
13
14
13
12
16
10
16
155
108
119
120
Takeovers
Miscellaneous
Total
Since, several investigation cases

involved multiple allegations of violations,
water-tight classification under specific
category becomes difficult. Therefore,

cases were classified on the basis
of main charge / violations.
Chart 3.3: Category-wise Nature of Investigation Taken up (percent)
181
E.
Nature
of
Completed
Investigation
Cases
pertained
to
insider
trading,
takeover
violations,
Issue
related
manipulation and other violations of
securities laws accounted 10.8 percent
(13 cases), 5.0 percent (six cases), 10.0 percent
(12 cases), and 13.3 percent (16 cases),
respectively (Table 3.32 and Chart 3.4).
During
2013-14,
60.8
percent
(73 out of 120) investigation cases completed
pertain to market manipulation and
price rigging compared to 34 percent
(41 out of 119) cases in 2012-13. In addition,
the other category of cases completed
Chart 3.4: Category-wise Nature of Investigation Completed (percent)
F.
facts. The actions include issuing warning
Regulatory Action Taken
letters,
After completion of investigation,

penal action is initiated as approved by the
competent authority wherever violations of
laws and obligations relating to securities
market is observed. Action is decided based
on the principles of objectivity, consistency,
materiality and quality of evidence available,
for
initiating
registered
adjudication
enquiry
proceedings
intermediaries,
proceedings
for
initiating
levy
of
monetary penalties, passing directions under

Section 11 of SEBI Act, 1992, and initiating
prosecution and referring matter to other
regulatory agencies.
after thorough analysis and appreciation of
182
Table 3.33: Type of Regulatory actions taken during 2013-14

Particulars
Number of
Entities
Suspension
Warning issued
Prohibitive directions issued under Section 11 of SEBI Act (other than consent orders)
Cancellation
270
1
Adjudication orders passed where penalties were levied
619
Administrative warning /warning leer issued
304
Deciency observations issued
88
Advice leer issued
141
Total
1,436
a timely and faster response. In addition,

adjudication orders were passed where
penalties were levied against 619 entities,
administrative warning/warning letter were
issued to 304 entities and registration of nine
entities were suspended (Table 3.33 and
Chart 3.5).
During 2013-14, SEBI issued 270

prohibitive directions under Sec. 11 of
SEBI Act, 1992 compared to 168 prohibitive
directions during 2012-13. These directions
have the strong and salutary effect of
deterrence and also act as an effective tool
to deal with emergent situations requiring
Chart 3.5: Percentage share of type of Regulatory actions taken during 2013-14
183
G.
Regulatory Action Initiated
re-prioritize areas of focus and enhance

organizational efficiency. The consultant had
identified significant areas for improvement
in the follow up processes of investigation and
recommended handing over of enforcement
proceedings
from
the
Investigation
Department to the Enforcement Department
(EFD) upon completion of investigation.
This would ensure uniformity in approach
and improve the efficiency of enforcement
proceedings across the organization.
During 2013-14, proceedings under

Section 11 of SEBI Act, 1992 were initiated
against 402 entities, proceedings under
Intermediaries Regulations were initiated
against nine entities and adjudication
proceedings were initiated against 697 entities.
In addition, Show Cause Notices were issued
to 142 entities for the proceedings under
Section 11 of SEBI Act, 1992.
H.
Follow up of Investigations
Accordingly, an Enforcement Task Force

(ETF) was constituted, primarily to formalize
the process / framework for handing over of
enforcement matters to EFD upon completion
of investigation/ inspection/ examination. The
implementation of the ETF recommendations
has commenced and will continue in phases
and is to be completed by 2014-15.
After completion of investigation, the

Investigation Department is also actively
involved in post-investigation enforcement
actions and quasi-judicial proceedings.
Such actions include issuing show cause
notices to the entities, examining their
replies, organising and participating in the
hearings of the entities before the Whole Time
Members (WTM) of SEBI, co-ordination with
Enforcement Department (EFD), issuing press
releases after orders are passed, attending
briefings of advocates and replying to their
queries, co-ordination with Enforcement
Department in the proceedings before
Securities Appellate Tribunal (SAT) and before
Courts, filing of complaints with Courts in
co-ordination with Prosecution Department,
follow-up for collection of penalty amount
for orders passed by Adjudicating Officers,
initiating prosecution for non-payment of
penalties, processing of consent proposals
filed by the entities, etc. Timely and qualitative
completion of such actions is also important
for ensuring the effectiveness of regulatory
measures taken by SEBI.
III. Enforcement of Regulations

Effective enforcement lies at the heart of
ensuring integrity, transparency and fairness in
the market. It not only leads to better compliance
culture, but also underscores the point that
market misconduct and abuse will not go
unpunished. A credible enforcement strategy
underpins the importance of consistent, timely
and transparent regulatory outcomes, which
are proportionate, dissuasive and effective.
Under SEBI Act, 1992, Securities Contracts
(Regulation) Act, 1956 (SCRA) and Depositories
Act, 1996, SEBI, broadly, pursues two streams
of enforcement actions i.e. Administrative /
Civil or Criminal. Administrative/Civil actions
include issuing directions such as remedial
orders, cease and desist orders, suspension
or cancellation of certificate of registration
and imposition of monetry penalty under
the respective statutes. Proceedings of
criminal nature involve initiating prosecution
proceedings against violators by filing
complaint before a criminal court.
On March 28,2014, SEBI has initiated

the process of revamping of the followup proceedings pursuant to completion of
investigation. This re-engineering has been
initiated subsequent to the recommendations
of the Consultant engaged by SEBI to revisit
structural and organizational concerns,
184
A.
Enforcement Mechanisms
orders such as debarment from accessing the

securities market or not to deal in securities.
During 2013-14, 208 cases under section 11/11B
were disposed by SEBI. In the same year, 612
fresh cases under the 11/11B of SEBI Act,
1992 were initiated by SEBI. The cumulative
pending cases as on March 31, 2014 were 1,420
(Table 3.34).
There are five enforcement mechanisms

that SEBI uses in case of any violation(s)
pertaining to the laws regulating the securities
market.
a.
Section 11/11B Proceedings
Under section 11/11B of SEBI Act, 1992,

SEBI may issue directions or prohibitive
Table 3.34: Age-wise Analysis of Enforcement Actions - u/s 11, 11B and 11D of SEBI Act, 1992
Year
No. of
No. of Cases Disposed
Actions
Initiated 2004- 2005- 2006- 2007- 2008- 2009- 2010- 2011- 2012- 201305
06
07
08
09
10
11
12
13
14
2
10
11
12
Pending
Cases
Aggregate
Disposal
13
14
As on
2003-04
2,158
194
68
104
237
94
85
46
55
2,058
100
2004-05
522
38
39
168
105
85
19
46
510
12
2005-06
196
NA
12
31
65
69
18
196
2006-07
402
NA
NA
34
67
65
119
54
15
355
47
2007-08
374
NA
NA
NA
58
75
61
61
48
316
58
2008-09
75
NA
NA
NA
NA
44
23
75
2009-10
376
NA
NA
NA
NA
NA
30
69
114
45
260
116
2010-11
346
NA
NA
NA
NA
NA
NA
30
87
37
28
182
164
2011-12
348
NA
NA
NA
NA
NA
NA
NA
10
35
58
103
245
2012-13
184
NA
NA
NA
NA
NA
NA
NA
NA
10
43
53
131
2013-14
612
NA
NA
NA
NA
NA
NA
NA
NA
NA
65
65
547
5,593
196
107
189
561
412
493
320
375
142
208
4,173
1,420
Total
b.
does not warrant suspension or cancellation

or registration.
Enquiry Proceedings
SEBI may suspend or cancel the certificate

of registration of an intermediary through
Enquiry Regulations on the recommendation
of the enquiry officer/designated authority
appointed for that purpose. It may also issue
warning to an intermediary if it considers that
the violations committed by the intermediary
During 2013-14, 13 cases were disposed

by SEBI after the due completion of enquiry
proceedings. Further, 12 fresh cases were
initiated where enquiry proceedings are being
followed. The cumulative pending cases as on
March 31, 2014 stands at 113. (Table 3.35)
185
Table 3.35: Age-wise Analysis of Enforcement Actions - Enquiry Proceedings

Year
No. of
Actions
Initiated 200405

200506
200607
200708
200809
200910
201011
201112
201213
10
11
Aggre- Pending
gate
Cases
2013- Disposal
14
As on
2003-04
1,816
124
155
148
117
44
52
28
14
1,816
2004-05
190
17
57
70
30
10
190
2005-06
80
NA
NA
31
19
13
80
2006-07
122
NA
NA
28
22
27
20
115
2007-08
89
NA
NA
NA
11
14
11
53
36
2008-09
20
NA
NA
NA
NA
NA
10
10
2009-10
23
NA
NA
NA
NA
NA
11
12
2010-11
24
NA
NA
NA
NA
NA
NA
20
2011-12
NA
NA
NA
NA
NA
NA
NA
2012-13
27
NA
NA
NA
NA
NA
NA
NA
NA
24
2013-14
12
NA
NA
NA
NA
NA
NA
NA
NA
NA
12
2,411
127
172
164
216
172
125
108
40
36
13
2,298
113
Total
c.
12
13
14
by SEBI under adjudication proceedings.
Adjudication Proceedings
In the same year, 1,095 fresh cases were
Under Chapter VIA of SEBI Act, 1992,

SEBI may appoint an Adjudicating Officer for
conducting enquiry and imposing penalties.
During 2013-14, 581 cases were disposed
initiated under adjudication proceedings. The

cumulative pending cases as on March 31,
2014 stands at 2,827 (Table 3.36).
Table 3.36: Age-wise Analysis of Enforcement Actions - Adjudication Proceedings

Year
Aggre- Pending
Cases
gate
2005- 2006- 2007- 2008- 2009- 2010- 2011- 2012- 2013Disposal
06
07
08
09
10
11
12
13
14
No. of
Actions
Initiated
200405
As on
2003-04
956
444
89
88
29
66
12
2004-05
418
137
126
45
28
17
2005-06
283
NA
27
47
22
2006-07
578
NA
NA
34
2007-08
1,215
NA
NA
2008-09
546
NA
2009-10
644
NA
2010-11
571
2011-12
10
11
12
923
13
21
23
407
11
66
23
56
10
258
25
82
102
120
106
18
467
111
20
152
373
295
47
908
307
NA
NA
NA
70
101
255
42
51
519
27
NA
NA
NA
NA
114
229
121
80
49
593
51
NA
NA
NA
NA
NA
NA
284
257
30
571
609
NA
NA
NA
NA
NA
NA
NA
143
118
122
383
226
2012-13
1,548
NA
NA
NA
NA
NA
NA
NA
NA
187
174
361
1,187
2013-14
1,095
NA
NA
NA
NA
NA
NA
NA
NA
NA
226
226
869
Total
8,463
581
242
218
181
473
764
1,257
645
485
581
5,616
2,827
186
13
14
d.
Prosecution
a court of criminal jurisdiction. During

2013-14, 10 prosecution cases filed by SEBI
were disposed by Courts and 269 new cases
were initiated. The cumulative pending
cases as on March 31, 2014 stood at 1,247
(Table 3.37)
Section 24 of the SEBI Act, 1992

empowers SEBI to launch prosecution
against any person for contravention of any
provision of the SEBI Act, 1992 or any rules
or regulations made there under before
Table 3.37: Age-wise Analysis of Enforcement Actions - Prosecution Proceedings

Year
No. of
Aggre- Pending
Actions
gate
Cases
Initiated 2004- 2005- 2006- 2007- 2008- 2009- 2010- 2011- 2012- 2013- Disposal
05
06
07
08
09
10
11
12
13
14
2
10
11
12
13
14
As on
2003-04
891
39
50
12
21
22
39
20
233
658
2004-05
86
13
30
56
2005-06
30
NA
24
2006-07
23
NA
NA
23
2007-08
40
NA
NA
NA
38
2008-09
29
NA
NA
NA
NA
29
2009-10
30
NA
NA
NA
NA
NA
30
2010-11
17
NA
NA
NA
NA
NA
NA
16
2011-12
29
NA
NA
NA
NA
NA
NA
NA
29
2012-13
75
NA
NA
NA
NA
NA
NA
NA
NA
75
2013-14
269
NA
NA
NA
NA
NA
NA
NA
NA
NA
269
1,519
43
65
19
24
25
43
22
10
272
1,247
Total
e.
Summary Proceedings
During 2013-14, no case for summary

proceedings were disposed as well as
initiated by SEBI. The cumulative pending
cases as on March 31, 2014 stands at 83
(Table 3.38).
Chapter
VA
of
the
SEBI
(Intermediaries)
Regulations,
2008
provides the power to conduct summary
proceedings in certain specific cases.
187
Table 3.38: Age-wise Analysis of Enforcement Actions - Summary Proceedings

Year
No. of
Actions
Initiated
200405
200506
200607
200708
200809
200910
201011
201112
201213
201314
10
11
12
Aggregate
Disposal
Pending
Cases
13
14
As on
2003-04
47
19
30
17
2004-05
2005-06
2,296
NA
230
79
11
1,820
90
2,230
66
2006-07
NA
NA
NA
2007-08
NA
NA
NA
NA
2008-09
91
NA
NA
NA
NA
91
91
2009-10
NA
NA
NA
NA
NA
2010-11
NA
NA
NA
NA
NA
NA
2011-12
NA
NA
NA
NA
NA
NA
NA
2012-13
NA
NA
NA
NA
NA
NA
NA
NA
2013-14
NA
NA
NA
NA
NA
NA
NA
NA
NA
2,436
232
82
11
1,932
94
2,353
83
Total
B.
Enquiry and Adjudication
15 cases were enquiry related. During 201314, SEBI issued 1,527 show cause notices and
conducted 1,307 hearings (Table 3.40).
During 2013-14, SEBI initiated 1,095

adjudication and 12 enquiry proceedings
(Table 3.39).
Table 3.40: Enquiry

and
during 2013-14
Table 3.39: Enquiry

and
Adjudication
Proceedings Initiated during
2013-14
Particulars
1
Adjudication
Enquiry Adjudication Total

2
Orders Passed/
Report Submied
15
619
634
12
Hearings Conducted
1,305
1,307
Adjudications
1,095
Show Cause Notices

Issued
11
1,516
1,527
Total
1,107
Particulars
No. of Cases
Enquiry Related
During 2013-14, 12 enquiry proceedings

and 869 adjudication proceedings are pending
with enquiry and adjudicating officers
(Table 3.41).
Further, during 2013-14, there were 634

orders passed/ reports submitted, of which
619 cases were adjudication proceedings and
188
Table 3.41: Pending Enforcement Actions

during 2013-14
Pending with Enquiry and
Adjudicating Ocers
No. of
Cases
Enquiry Related
(excluding summary proceedings)
12
Adjudications
869
Total
881
C.
a.
Registrar to an
Issue & Share
Transfer Agents
Merchant
Bankers
Depository
Participants
24
Credit Rating
Agencies
Debenture
Trustees
11
Total
47
M/s. Lee Capital Services Private Ltd
Inquiry into the matter revealed that

M/s. Lee Capital acted as un-registered
portfolio manager, indulged in fund-based
activities involving personal financial liability,
in violation of rule 8(3)(f) of the Securities
Contracts (Regulation) Rules, 1957 (SCRR)
and made mis-representations by making
fraudulent and deceitful claims.
Intermediaries Adjudication Enquiry Warning/

deciency/
advice
3
of
SEBI received a large number of investor

complaints against M/s. Lee Capital Service
Private Limited, inter alia, pertaining to,
collection of funds/money from public
offering very high returns, running schemes
which offered hefty commissions for bringing
in new clients; misuse of SEBI Registration for
unauthorized PMS and Gold Trading schemes;
and carrying out fund based activities
unrelated to the securities market etc.
Table 3.42: Enquiry

and
Adjudication
Proceedings
against
other
Intermediaries during 2013-14
Enforcement
There were three cases which came to

notice of SEBI during the year 2013-14 where
the intermediaries registered with SEBI
indulged in unlawful activities like making
false claims to investors or mobilising money
for different schemes. Prompt action was
taken against them by passing interim orders.
Details of these cases are given below:
During 2013-14, SEBI issued 47

warning/deficiency/advice letters to other
intermediaries of which 24 were issued
against Depository Participants, 11 against
Debenture Trustees, nine against RTI &
STAs and three against Merchant Bankers.
Moreover, SEBI has initiated adjudication
proceedings against one Merchant Banker
and one Depository Participant. There
wasnt any enquiry proceedings initiated
during 2013-14 against other intermediaries
(Table 3.42).
Significant
Regulations
In view of the foregoing and in order

to protect the interest of investors and the
integrity of securities market, an ad-interim
ex-parte order under sections 11(1), 11(4), 11B
and 11D of SEBI Act, 1992 was passed:
i.
189
directing M/s. Lee Capital Services

Private Limited to close, terminate, and
wind up all its schemes and to refund
the monies collected from the investors
in its schemes along with income, profits
or returns promised to them under
its schemes or interest at the rate of
10 percent per annum, whichever is

higher, from the date of investment till
the date of refund, within a period of
three months from the date of this order
and submit a winding up and repayment
report to SEBI;
ii.
restraining M/s. Lee Capital Services

Private Limited and its directors Mr.
Santosh Kumar K.L. and Mr. Kunjiraman
Pillai from buying, selling or dealing in
the securities markets, either directly or
indirectly, in any manner whatsoever, till
further directions:
iii.
directing M/s. Lee Capital Services

Private Limited and its directors Mr.
Santosh Kumar K.L. and Mr. Kunjiraman
Pillai
b.
a)
to cease and desist from unauthorized

activities as noted above and not to
solicit or undertake such activities
or any other unregistered activity
in the securities market, directly
or indirectly, in any manner
whatsoever;
b)
to immediately withdraw and remove

all advertisements, representations,
literatures, brochures, materials,
publications, documents, websites,
etc. in relation to those schemes/
activities or any unregistered activity
in the securities markets.
has claimed to be active in stock trading and

commodities trading.
It was further observed that on its
website MBS had displayed a sub-broker
registration certificate showing it to have been
issued by SEBI. The certificate was fake and
MBS was observed to be not registered with
SEBI as represented. Hence vide Order dated
November 18, 2013, MBS and its sole proprietor
Mr. Syed Sadaq were inter-alia restrained from
accessing the securities markets and further
prohibited from buying, selling or otherwise
dealing in securities, directly or indirectly, or
being associated with the securities market in
any manner till further directions.
c.
Mr. Sunil Kale and M/s. Trendline

Trades Academy
In another matter of sub broker Sri Sunil

Kale, SEBI noticed that M/s. Trendline Traders
Academy, of which Mr. Sunil Kale is the
founder/director, had issued advertisement
in Sakal newspaper (a Marathi newspaper)
dated April 28, 2013 claiming to double the
money invested by an investor through it
in a years time and also offered portfolio
management services on its website without
seeking the requisite registration under the
SEBI Act and the Regulations. Hence vide
Order dated November 18, 2013, Mr. Sunil
Laxman Kale and M/s. Trendline Traders
Academy were interalia restrained from
accessing the securities market and further
prohibited from buying, selling or otherwise
dealing in securities, directly or indirectly, or
being associated with the securities market in
any manner.
M/s. MCX Biz Solutions and Mr Syed

Sadaq
In the matter of M/s. MCX Biz Solutions

(hereinafter referred to as MBS) SEBI noticed
that the entity was soliciting and collecting
money from public and was promising high
returns. Therefore SEBI undertook preliminary
inquiries into the matter and it was observed
that MBS is maintaining a website wherein it
After the issuance of the Order, Mr. Sunil

Laxman Kale attended personal hearing in
the matter and interalia submitted that the
activities alleged in the Order happened due
to mistake, non-understanding and ignorance
of rules and regulations of SEBI and also
190
submitted that he had not done any activities in

the nature of portfolio management services in
the past and would not do so in future. Taking
into account the submission of the sub-broker,
the prohibitions and debarments regarding
restraining Mr. Sunil Laxman Kale and M/s.
Trendline Traders Academy from accessing
the securities market etc. were discontinued
vide Order dated December 31, 2013.
Table 3.44: Region-wise Data on Prosecution

Cases as on March 31, 2014
Region
1
Trends in Prosecution
a.
Number of Prosecutions Launched
906
59.7
Northern Region
347
22.8
Southern Region
96
6.3
170
11.2
1,519
100.0
Table 3.45: Nature of Prosecutions Launched

as on March 31, 2014
No. of cases in
No. of persons/
which prosecution entities against
whom prosecution
has been
launched
has been launched
2
891
4,332
2004-05
86
432
2005-06
30
101
2006-07
23
152
2007-08
40
185
2008-09
29
114
2009-10
30
109
2010-11
17
67
2011-12
29
60
2012-13
75
150
2013-14
269
652
1,519
6,354
Nature of Prosecution
Prosecutions are launched by SEBI

under the SEBI Act, 1992, Companies Act,
1956, Depositories Act, 1996, SC(R) Act, 1956
and the Indian Penal Code. As on March 31,
2014, 1,519 cases were launched (Table 3.45).
Table 3.43: Prosecutions Launched
Total
Head Oce/Western Region
b.
During 2013-14, 269 prosecution cases

were launched against 652 persons/ entities as
compared to 75 prosecutions launched against
150 persons/entities in 2012-13 (Table 3.43).
Up to 2003-04
Total
A.
Eastern Region
IV. Prosecution
Year
Number Percentage
of Cases
of Total
Nature of Prosecution Launched
Number
of Cases
Securities and Exchange Board of India

Act, 1992 (SEBI Act)
SEBI Act & Securities Contracts
(Regulation) Act, 1956 (SCRA)
94
SEBI Act, SCRA & Companies Act
SEBI Act & Companies Act
SEBI Act & Indian Penal Code
Companies Act, 1956

Securities Contracts (Regulation) Act, 1956
Depositories Act, 1996
Indian Penal Code
Total
As on March 31 2014, region-wise,

the highest number of prosecutions were
launched in Head Office/Western Region
(906) followed by the Northern Region (347),
Eastern Region (170) and Southern Region
(96) (Table 3.44).
1,301
c.
70
7
29
8
1,519
Disposal of Prosecution Cases
Since the start of launch of prosecution

against erring CIS entities, criminal
prosecution cases have been launched by
SEBI against CIS entities. As on March 31,
191
2014, court judgments have been obtained

in the matter of prosecution cases of 179 CIS
entities. In the case of non-CIS entities, 93
prosecution cases have been decided by the
Courts. As on March 31, 2014, 272 prosecution
cases were decided by the Courts of which,
154 cases resulted in convictions and 61 cases
were fully compounded (Table 3.46).
The Court of Additional Sessions Judge,

vide Order dated May 10, 2013 convicted
M/s. Green Endowment Plantations, Mr.
Mohamed Anwar Kumar, Mr. Abdul Majeed
Bhat and Mr. Abdul Gani Parrey for the
alleged violations. The Court was of the view
that convicts deserve substantial punishment
besides fine and accordingly sentenced Mr.
Mohamed Anwar Kumar and Mr. Gani
Parrey for a period of six months rigorous
imprisonment and also imposed a fine of `2
lakh each. Further, the accused company was
burdened with a fine of `5 lakh.
Table 3.46: Number of Prosecution Cases

decided by the Courts as on
March 31, 2014
Type of Decision by
the Courts
CIS
Non-CIS
Total
144
10
154
Compounded (fully)*
53
61
Abated
25
24
49
179
93
272
Convictions
Dismissed/Discharged
Withdrawn
Total
b.
B.
Significant Court Pronouncements in

Prosecution cases in 2013-14
a.
CC No. 1328/2002 SEBI vs. M/s. Green

Endowment Plantation (I) Ltd. &
Others
CC No. 82/2004- SEBI vs. M/s.

Banaraksha Green Plantation & Resorts
Ltd. & Others
The complaint in the captioned matter

was filed by SEBI against M/s. Banaraksha
Green Plantation & Resorts Ltd and its
directors viz., Mr. S. Ajaib Singh, Mr. Parmod
Kumar Sharma, Mr. Surjit Singh, Mr. Pritam
Singh, Mr. Jagdeep Kaushal, Ms. Anu Sharma
and Ms. Parminder Jit Kaur for the violations
of the provisions of Sec. 12 (1B) of the SEBI
Act, 1992 and Regulations 5(1) read with
Regulation 68(1), 68(2), 73 (1) and 74 of the SEBI
(Collective Investment Schemes) Regulations,
1999. The company had mobilised an amount of
` 29.4 lakh from the general public under its
Collective Investment Schemes.

was filed by SEBI against M/s. Green
Endowment Plantations Ltd and its directors
viz. Mr. Mohamed Anwar Kumar, Mr. Abdul
Majeed Bhat and Mr. Abdul Gani Parrey for
the violations of the provisions of Sec. 12 (1B)
of the SEBI Act, 1992 and Regulations 5(1)
read with Regulation 68(1), 68(2), 73 (1) and 74
of the SEBI (Collective Investment Schemes)
Regulations, 1999.
The company had
mobilised `47.9 lakh from the general public
under its Collective Investment Schemes .
During the trial, the Court of Additional

Sessions Judge (ASJ) declared Mr. Surjit Singh
and Ms. Anu Sharma as proclaimed offenders
vide orders dated February 13, 2009 and
September 11, 2009 respectively.
The ASJ vide order dated February
7, 2014 convicted M/s. Banaraksha Green
Plantation & Resorts Ltd, Mr. S. Ajaib
Singh, Mr. Parmod Kumar Sharma and Mr.
Jagdeep Kaushal for the alleged violations
192
and sentenced them to six months rigorous

imprisonment and also imposed a fine of `3
lakh each.
six months rigorous imprisonment and also

imposed a fine of `3 lakh. However, the Court
acquitted Mr. Anand Ballabh Agarwal and
Mr. Mahesh Chandra Agarwal as there was no
sufficient evidence on record to show that they
were holding any position in the company.
Further, the accused company was

burdened with a fine of `10 lakh. However,
the ASJ, acquitted Mr. Pritam Singh and Ms.
Parminder Jit Kaur on the ground that the
complainant failed to bring home their guilt
beyond the shadow of all reasonable doubts.
c.
d.
CC No. 113/2005 SEBI vs. M/s. Burman

Plantation Ltd. & Others
CC No. 650/2001 SEBI vs. M/s.

Agrogold Plantations & Resorts Ltd.
and Others

was filed by SEBI against M/s. Agrogold
Plantations Ltd and its directors viz. Mr.
Asdev Singh Sodhi, Mr. Sukhjot Sodhi and Mr.
Kamlajeet for the violations of the provisions
of Sec. 12 (1B) of the SEBI Act, 1992 and
Regulations 5(1) read with Regulation 68(1),
68(2), 73 (1) and 74 of the SEBI (Collective
Investment Schemes) Regulations, 1999. The
company had mobilised an amount of `7 crore
from the general public under its Collective
Investment Schemes.

was filed by SEBI against M/s. Burman
Plantation Ltd and its directors viz., Mr. Sanjay
Burman , Mr. Ravi Arora, Mr. U.C. Burman,
Ms. Uma Charan Burman, Mr. Ramesh
Chand, Mr. Anand Ballabh Agarwal and Mr.
Mahesh Chandra Agarwal for the violations
of the provisions of Section 12 (1B) of the
SEBI Act, 1992 and Regulations 5(1) read with
Regulation 68(1), 68(2), 73 (1) and 74 of the SEBI
1999. The company had mobilised an amount
of `21.7 lakh from the general public under its
During the trial, the court vide Order

dated November 15, 2003 dropped the
proceedings against Mr. Asdev Singh Sodhi
as there was no sufficient evidence to prove
the role in the accused company.
During the trial, the Court of Additional

Sessions Judge (ASJ) declared Mr. Sanjay
Burman and Ramesh Chand as proclaimed
offenders vide Orders dated July 26, 2007
and February 22, 2013 respectively. The
proceedings against Mr. U.C. Burman and Ms.
Uma Charan Burman were abated on account
of their death. Further, the proceedings on
the accused company was also dropped on
account of its winding up vide order dated
January 13, 2012 passed by Honble High
Court of Allahabad.
The Court of Additional Chief

Metropolitan Magistrate, vide Order dated
January 04, 2014 convicted M/s. Agrogold
Plantations Ltd, Mr. Sukhjot Sodhi and Mr.
Kamlajeet for the alleged violations and
sentenced Mr. Sukhjot Sodhi to six months
simple imprisonment and Mr. Kamlajeet to
three months simple imprisonment and also
imposed a fine of ` 2.5 lakh each. Since, the
name of the accused company was struck
off from the records of ROC after following
the due process, no fine was imposed on the
company.
The Court of ASJ, vide Order dated

July 29, 2013 convicted Mr. Ravi Arora for
the alleged violations and sentenced him to
193
e.
CC No. 746/2001 SEBI vs. M/s. Raman

Plantations Ltd. and Others
the 130 cases disposed ,39 pertained to CIS,

35 were miscellaneous and 22 were related to
investor complaints. As on March 31,2014,
the highest number of cases were pending in
miscellaneous category followed by investor
complaint cases, CIS matters, and cases related
to secondary market.

was filed by SEBI against M/s. Raman
Plantations Ltd and its directors viz. Mr.
Bikki Lal Goyal, Mr. Chander Kant Khemka,
Mr. Banwari Lal Goyal, Mr. Manish Goyal
and Mr. Nitish Goyal for the violations of the
provisions of Sec. 12 (1B) of the SEBI Act, 1992
and Regulations 5(1) read with Regulation
68(1), 68(2), 73(1) and 74 of the SEBI (Collective
Investment Schemes) Regulations, 1999.
The company had mobilised an amount of
`4.5 crore from the general public under its
Table 3.47: Status of Court Cases where

SEBI was a Party (Subject
Matter)
Subject
During the trial, Mr. Bikki Lal Goyal,

Mr. Chander Kant Khemka, Mr. Banwari
Lal Goyal, Mr. Manish Goyal and Mr. Nitish
Goyal were discharged by the Honble High
Court of Delhi vide order dated March 5,
2003 as there was no sufficient evidence to
prove their role in the accused company.
The Court of Additional Chief Metropolitan
Magistrate, vide order dated November 12,
2013 convicted the company and Banwari Lal
Goyal and sentenced the accused four to six
months simple imprisonment with fine of `5
lakh. The accused company had already been
wound up and hence, no fine was imposed on
the company.
V.
A.
Litigations,
Appeals
Pronouncements
and
Issue and Listing
Litigations and Appeals
During 2013-14, 225 cases were filed in

different Courts and 130 cases were disposed,
cumulative 830 such cases are pending, where
SEBI was a party. (Table 3.47 and 3.48). While
81 cases filed belonged to the miscellaneous
category, 60 cases related to investor
complaints and 51 cases pertained to CIS. Of
18
14
53
Takeover
45
Secondary Market
64
Mutual Fund
21
51
39
138
Surveillance and
Investigations
37
Stock Broker
Registration Fee
42
Depository
Participants
Intermediaries
Cases relating to
Investor Complaints
60
22
150
Right to Information
20
General Services
Department
Collective Investment
Schemes
Court
Filed Disposed Pending as

during during on March
2013-14 2013-14
31, 2014
Miscellaneous
Total
81
35
243
225
130
830
Note: This table includes all the cases pending before any
judicial/ quasi judicial forums pertaining to respective
subject matters excluding the statutory appeals filed before
SAT, Honble HC and Honble SC under SEBI Act/SCRA/
Depositories Act.
194
Table 3.48: Status of Court Cases where

SEBI was a Party (Judicial
Forum)
Subject
Supreme Court and Consumer Forums were

10 each. As on March 31, 2014, 830 cases are
pending at diverse stages at judicial fora
with the highest number of pending cases
at High Court (544) followed by Consumer
Forums (91).
Filed Disposed Pending

as on
during during
2013-14 2013-14 March
31, 2014
17
10
47
167
99
544
Civil Courts
75
Criminal Courts
20
10
91
Company Law Board
14
Central Information
Commission
BIFR/AAIFR
54
Labour Commissioner/
Labour Court
Municipal/Local Bodies
225
130
830
Supreme Court
High Court
Consumer Forums
Total
During 2013-14, 182 appeals were filed

before Securities Appellate Tribunal (SAT),
whereas 117 appeals were dismissed and as
on March 31, 2014, 61 appeals are pending
as on March 31,2014 (Table 3.49). During
2013-14, 36 SEBI orders were upheld with
changes. Over the years , number of appeals
dismissed by SAT has increased as shown in
Table 3.50.
Table 3.49: Status of Appeals before the
Securities Appellate Tribunal
Note: Statutory appeals filed before Honble SAT, High Court

and Supreme Court are not included here
During 2013-14, of the 225 cases

filed across various judicial fora, 167 cases
were filed in High Court followed by 20
in Consumer Courts and 17 in Supreme
Court. The cases disposed at various High
Courts were the highest at 99 and that in
Status of Appeals
Number of
Appeals
Appeals pending as on March 31, 2013
72
Appeals led during 2013-14
182
Appeals Dismissed
117
Appeals Remanded
Appeals Allowed
23
SEBI Orders upheld with modications
36
Appeals Withdrawn
12
Appeals Pending as on March 31, 2014
61
Table 3.50: Disposals of Appeals by Securities Appellate Tribunal

Appeals
1
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14
2
No. of Appeals Dismissed
29
46
No. of Appeals Modied
58
No. of Appeals Withdrawn

No. of Appeals Allowed
Total
139
40
81
86
134
90
62
117
101
16
27
19
45
51
45
36
Na
Na
Na
17
19
29
16
28
12
19
72
71
32
39
30
77
44
58
23
114
219
226
99
138
154
285
201
193
188
195
10
11
Act. Further, five appeals have been disposed

where the appeals were filed by SEBI and 27
appeals were disposed where the appeals
were filed against SEBI (Table 3.51).
Against the orders of SAT, 19 appeals

were filed by SEBI, whereas 22 appeals were
filed against SEBI in the Supreme Court
during 2013-14 under section 15Z of the SEBI
Table 3.51: Status of Appeals before the Honble Supreme Court

Subject
Maer
Appeals pending
as on 2012-13
Appeals led
during 2013-14
Appeals
Disposed
Appeals pending as
on March 31, 2014
Appeals led by SEBI
72
19
86
Appeals led against SEBI
89
22
27
84
161
41
32
170
Total
Mr. Tushar Jani and twelve other

respondents invested substantial amounts in
M/s HSBC Guilt Funds- Short Term Plan in
October 2008. Subsequently, M/s HSBC made
certain changes in the scheme by virtue of
which the NAV/price of the respondents
investments fell substantially.
As on March 31, 2014, two appeals were

filed by SEBI and still pending in the High
Court. Further, six appeals were filed against
SEBI, of which all have been disposed during
2013-14. (Table 3.52)
Table 3.52: Status of Appeals before the
Honble High Court
Subject Maer
Appeals Appeals
Appeals
pending as Disposed pending as on
on 2012-13
March 31, 2014
Appeals led
by SEBI
Appeals led
against SEBI
Total
B.
SEBI had examined the issue on receipt

of complaints from certain unit holders. It had
been contended by certain unit holders that
the following fundamental attributes of the
scheme were changed in January 2009 without
following the procedure laid out in the SEBI
(Mutual Funds) Regulations, 1996.
SIGNIFICANT COURT PRONOUNCEMENTS
a.
SUPREME COURT OF INDIA
i.
The Board of Trustees of M/s HSBC

Mutual Fund, M/s HSBC Mutual Fund,
M/s HSBC Asset management (India)
Pvt. Ltd. and Chief Executive Officer
of M/s HSBC vs. Mr. Tushar Jani and
others
i.
The name of the fund from M/s

HSBC Gilt Fund- Short Term Plan
to M/s HSBC Gilt Fund
ii.
Benchmark Index
iii.
Duration of the scheme
It was also contended in the said

complaints that since the fundamental
attributes of the scheme had been changed
which affected the interest of unit holders, M/s
HSBC was required to abide by Regulation
18(15A) of the SEBI (Mutual Funds)
Regulations, 1996 which stipulates that:
196
a written communication about the

proposed change is sent to each unit
holder and advertisement regarding the
same is issued and
unit holders are provided with an option

to exit the scheme at the prevailing
NAV.
comply with the procedure laid down under

Regulation 18(15A) of the SEBI (Mutual
Funds) Regulations, 1996 with respect to all
the investors, but held that an exit route should
be provided to the two appellant investors in
accordance with Regulation 18(15A) of the
SEBI (Mutual Funds) Regulations, 1996.
Following this order by the Honble SAT,
similarly placed entities, also preferred an
appeal against the said order of the Whole Time
Member and the Honble SAT vide its order
dated July 5, 2012 opined that the issue under
consideration was squarely covered by the
order of the Tribunal in Appeal No.11 of 2010
and thus directed M/s HSBC to comply with
the procedure laid down Regulation 18(15A)
of the SEBI (Mutual Funds) Regulations, 1996
and provide the appellant investors with an
exit route.
However, the said requirements were

not complied with by M/s HSBC.
Vide Order dated April 23, 2010, the
Whole Time Member of SEBI held that M/s
HSBC was technically correct in stating that
the changes made by them did not amount
to changing the fundamental attributes of the
investment and therefore there was no legal
compulsion to adhere to the procedure and
manner prescribed under Regulation 18(15A)
of the SEBI (Mutual Funds) Regulations, 1996
but opined that the Fund and its Trustees had
violated Regulation 18 (19) (22) and 15(16)
of the SEBI (Mutual Funds) Regulations,
1996, the AMC had violated Regulations
25(1) and 25(16) of the SEBI (Mutual Funds)
Regulations, 1996 and the CEO had violated
Regulation 25(6A) of the SEBI (Mutual Funds)
Regulations, 1996, all of which lay down
the code of conduct to be followed by them
respectively. For the said violations, a warning
was issued to these entities.
The orders of the SAT dated May 3, 2011

and July 5, 2012 were under challenge before
the Supreme Court of India by M/s HSBC. SEBI
was impleaded in the same as respondent.
Vide order dated January 15, 2014 the
Honble Supreme Court held that it found
no merit in the appeals and dismissed the
same. This order of the Honble Supreme
Court implies that the orders of the Honble
SAT dated May 3, 2011 and July 5, 2012 will
now be in force. However, the Honble SAT
has specifically stated that their order will
be applicable to only those unit holders who
have agitated their case before the judicial
forum. Therefore, the appellants would now
be required to provide an exit route to all the
thirteen respondents, at the then prevailing
NAV in accordance with Regulation 18(15A)
of the SEBI (Mutual Funds) Regulations,
1996.
Challenging this order of the WTM,

Appeal No. 111 of 2010 (by respondents, Mr.
Subramanian R. Venkat and Ms. Anuradha
Venkatasubramanian) was filed before the
Honble SAT. Vide order dated May 3, 2011,
the SAT allowed the appeal holding that the
changes brought about in the scheme altered
the fundamental attributes thereof affecting
the interest of the unit holders. However, the
SAT observed that while NAV of the scheme
had substantially increased, all the unit holders
would not like to exit at the then prevailing
NAV which was much less. In view of the
same, SAT did not give a direction to HSBC to
ii.
Mr.
N.
Narayanan
(Appellant)
vs
Adjudicating
Officer,
SEBI
(Respondent)
SEBI conducted investigation in the
197
orders. Aggrieved by the said order of the

Honble SAT, Mr. N. Narayanan and Mr. V
Natarajan filed an appeal before the Honble
Supreme Court. The appeal was dismissed by
the Honble Supreme Court vide order dated
April 26, 2013 inter alia holding as under:
quarterly financial results and the annual

financial results of the company for the year
2007-08. It was observed that the companys
quarterly reports to the stock exchanges
contained inflated figures of the companys
revenue profits, security deposits and
receivables. It was observed that there was
price rise in scrip consequent to the publication
of the inflated results and promoters of the
company pledged their shares to raise higher
quantum of funds. It was alleged that the
company along with its directors committed
irregularities in its books of accounts and
showed inflated profits and revenues in the
financial statements and lured the general
public to invest in the shares of the company
based on such false financial statements.
Hence, it was alleged that Mr. N. Narayanan
and Mr. V Natarajan violated Section 12A of
SEBI Act, 1992 and Regulation 3(b), 3(c), 3(d),
4(1), 4(2)(a), 4(2) (e), 4(2)(f), 4(2)(k) and 4(2)(r)
of SEBI (Prohibition of Fraudulent and Unfair
Trade Practices) Regulation, 2003.
We notice in this case that the Directors

of the company had clearly violated provisions of
Section 12A of SEBI Act read with Regulations
3 and 4 of 2003 Regulations. Companies whose
securities are traded on a public market, disclosure
of information about the company is crucial for the
accurate pricing of the companies securities and
also for the efficient operation of the market.
The Directors of the company or the person
in charge directly or indirectly use or employ,
in connection with the issue, purchase or sale
of any securities listed in stock exchange, any
manipulative or deceptive device or contrivance
in contravention of SEBI Act or the Regulations
made thereunder have necessarily to be dealt with
in accordance with the provisions of the Act and
the Regulations which is absolutely necessary
for the investors protection and to avoid market
abuse.
An Adjudicating Officer was appointed

to inquire into and adjudge the above
mentioned violations. After conducting
inquiry Adjudicating Officer found that Mr. N.
Narayanan and Mr. V Natarajan have violated
the provisions as alleged above and imposed
a monetary penalty of ` 50 lakh.
Responsibility is cast on the Directors to

prepare the annual records and reports and those
accounts should reflect a true and fair view. The
over-riding obligation of the Directors is to approve
the accounts only if they are satisfied that they
give true and fair view of the profits or loss for the
relevant period and the correct financial position of
the company.
Further vide order dated April 18, 2011,

WTM, SEBI found that Mr. N. Narayanan and
Mr. V Natarajan have violated the provision
as alleged above and restrained them from
buying, selling or dealing in securities in any
manner whatsoever or accessing the securities
market, directly or indirectly and from being
a director of any listed company for a period
of two years and three years respectively from
the date of this order.
Above being the factual and legal position, we

are of the view that the SEBI has rightly restrained
the appellant for a period of two years from the date
of that order from buying, selling or dealing with
any securities, in any manner, or accessing the
securities market, directly or indirectly and from
being Director of any listed company and that the
adjudicating officer has rightly imposed a penalty
of `50 lakh under Section 15HA of SEBI Act,
1992.
Both the orders were challenged before

the Honble SAT. Vide order dated October
5, 2012, the Honble SAT upheld both the
198
iii.
SIRECL and SHICL vs SEBI
of documents submitted in terms of the

directions of the Honble Supreme Court, and
also handle the matters connected therewith.
M/s Sahara India Real Estate Corporation

Ltd., (SIRECL) and M/s Sahara Housing
Investment Corporation Ltd., (SHICL) had
raised amounts aggregating to `19,400.9 crore
and `6,380.5 crore respectively from various
subscribers through Red Herring Prospectus
(RHP) dated March 03, 2008 and October 16,
2009. SEBI vide Order dated June 23, 2011
held that SIRECL and SHICL had violated
various provisions of the Companies Act,
the requirements of SEBI (DIP) Guidelines,
1992 and the provisions of the SEBI (ICDR)
Regulations, 2009 and inter alia directed both
the companies and their promoter, directors
to forthwith refund the money collected
by them through the RHPs with 15 percent
interest from the date of receipt of money till
the date of payment.
The directions of the Supreme Court

were not complied with by the Saharas, and
instead the Saharas approached the SAT
for modification of the order dated August
31, 2012 in view of alleged repayments to
investors being carried out by it. The SAT
refused to modify the directions contained in
the order of the Supreme Court dated August
31, 2012. The Saharas then filed an appeal in
the Supreme Court against the order of SAT.
The Full Bench headed by the Chief Justice of
India rejected the claim of alleged repayments
to investors, vide order dated December 5,
2012, and granted 15 days time to the Saharas
to furnish documents pertaining to refunds
made and ordered them to refund an amount
of `5,120 crore immediately and the balance
amount in two installments not later than the
1st week of February 2013.
SHICL, SIRECL, their promoter/

directors appealed to the Honble Securities
Appellate Tribunal (SAT), which dismissed
their appeals and upheld the order of SEBI.
The Saharas approached the Honble Supreme
Court impugning the orders of SAT.
Pursuant to the said Order of the Honble

Supreme Court, Saharas refunded an amount
of `5,120 crore on December 5, 2012 to SEBI.
Saharas also sent 127 trucks stated to contain
about 3 crore application forms and 2.2 crore
redemption vouchers / statutory forms to
SEBI in December 2012, which were found to
be incomplete and hopelessly mixed up.
The Honble Supreme Court vide its

Order dated August 31, 2012, upheld the
order of SEBI and directed inter alia Saharas
to refund the amounts raised, along with
interest at the rate of 15 percent per annum
to SEBI within three months; to furnish all
documents in their custody, particularly
the application forms submitted by the
subscribers, the approval and allotment of
bonds and all other documents to SEBI within
a period of 10 days, so as to enable SEBI to
ascertain the genuineness of the subscribers
as well as the amounts deposited. The
Court also appointed Justice (Retd.) Mr. B N
Agarwal to oversee the implementation of its
order.
The Saharas did not pay the amounts

as required in terms of Supreme Court order
dated August 31, 2012 as modified by the
Supreme Court order dated December 5, 2012.
Consequently, SEBI passed Orders dated
February 13, 2013 attaching the moveable
and immoveable properties including bank
accounts, of SHICL and SIRECL, their promoter
and directors, and also filed contempt
petitions before the Honble Supreme Court.
The Saharas moved applications indicating
that the monies had been repaid directly to
the investors and that therefore they cannot be
asked to pay twice. These applications were
SEBI constituted a Cell (Special

Enforcement Cell) to specifically handle
the work relating to the verification process
199
rejected on February 25, 2013 by a Full Bench

headed by the Chief Justice of India.
of SHICL/SIRECL shall not leave the country

without the permission of the Court.
Pursuant to an application filed by

SEBI, the Honble Supreme Court, vide its
Order dated May 8, 2013, permitted SEBI to
make refunds to those investors who have
filed or would be filing their complaints
with SEBI, except investors holding multiple
accounts, after ascertaining their genuineness.
Accordingly, SEBI issued a Press Release on
May 28, 2013 stating initiation of the process
of refunds to those genuine investors and have
devised a methodology to process claims and
make refunds to genuine investors.
On the insistence of the counsels

of the Saharas, the Division Bench of the
Honble Supreme Court heard the defense
of repayment alleged to have been made by
the Saharas, (earlier rejected by the Full bench
headed by the CJI) and vide order dated
January 9, 2014 directed the Saharas to furnish
documentary evidence of the source of money
alleged to have been used for repayment. The
Saharas submitted a second set of property
documents as security and also submitted
various documents in furtherance of the
direction contained in the order dated January
9, 2014. SEBI examined the details and pointed
out several contradictions, defects in the reply
of the Saharas, in particular, that Saharas had
been constantly changing their stands and had
now claimed that the entire alleged repayment
to investors had been carried out in cash and
that no bank account details were furnished
in support of the same. SEBI also pointed out
various defects in the second set of title deeds
submitted by the Saharas.
The Saharas challenged SEBI orders

dated February 13, 2013 before SAT indicating
that the assets had been sold for alleged
repayments and details of bank accounts
would be furnished as and when directed to
do so. These SAT appeals stand transferred
to the Honble Supreme Court vide its order
dated July 17, 2013.
In the contempt petitions, pending
before the Supreme Court, the Saharas once
again claimed repayment to the investors
approximately ` 30,000 crore and refused
to comply with the orders of the Supreme
Court.
In view of the same, the Division bench

of the Supreme Court directed the promoter/
directors to be personally present before it on
February 26, 2014. The promoter i.e. Subrata
Roy failed to appear on the said date and
the Honble Supreme Court issued a bench
warrant for his arrest and production on
March 4, 2014. When produced by the Police
authorities, before the Honble Supreme Court,
on March 4, 2014, the Honble Supreme Court
ordered judicial detention of Mr. Subrata Roy
and two other male directors and granted
liberty to the Saharas, to submit a proposal
in respect of the monies due under the order
dated August 31, 2012. Mr. Subrata Roy filed
Writ Petition No. 57/2014 against the aforesaid
order of detention.
The Supreme Court directed the Saharas

to submit title deeds of properties worth
`20,000 crore to SEBI. SEBI examined the
deeds furnished by the Saharas and found
that while the properties were overvalued
and incomplete title was submitted in respect
of the properties, in some cases title was
defective for various reasons viz. land in NoDevelopment Zone, under litigation, etc. Vide
order dated November 28, 2013 the Honble
Supreme Court was pleased to hold that
its direction to submit title deeds had been
violated and directed that the Sahara Group
of companies shall not part with moveable/
immoveable assets and the promoter/directors
SEBI has so far received 3,612 applications

involving 13,948 deposit accounts.
Out
200
of the said 3,612 applications, SEBI has

made refunds in respect of 445 applications
involving equal number of deposit accounts
for an aggregate amount of `1,25,21,241
including interest of `43,83,241. Out of the
remaining 3,167 applications, in respect of
424 applications involving 1,683 deposit
accounts, certain deficiencies were observed
in the applications/supporting documents
submitted by the applicants which were
brought to the notices of the applicants for
their clarification/rectification, and replies
are awaited from them. SEBI is unable to
process 1,260 applications involving 7,159
deposit accounts as these represent multiple
investment category which issue is pending
before the Honble Supreme Court, and 92
cases involving 92 deposit accounts which are
not meeting the extant refund methodology
adopted by SEBI. 1,776 applications involving
4,395 deposit accounts could not be processed
as these applications fall under mismatch
category i.e., either the investment details as
furnished by the applicant are not matching
with those submitted by Saharas, or the
investments are already claimed to have been
refunded by Saharas or the investment details
are not found in the information submitted by
Saharas.
b.
HIGH COURT
i.
Mr. Brijinder Makkar vs SEBI (CRL A.

No. 330 of 2010), Mr. S.P. Kalia vs SEBI
(CRL. A. No. 331 of 2010), Mr. Manoj
Kapur vs SEBI (CRL. A. No. 334 of 2010)
before Honble High Court of DelhiDate of Decision- January 22, 2014.
dated February 15, 2010 and order dated

February 23, 2010 convicting the appellants
u/s. 24 and 27 of the SEBI Act and sentenced
them to pay fine of `5 lakh each and to undergo
rigorous imprisonment for six months each.
Appellants submitted that principal
amount has been paid to all the investors of
Collective Investment Schemes, therefore, the
sentence and fine awarded to them should
be reduced. Honble High Court dismissed
the appeal interalia noting that since no
material in regard to payment of principal
amount to investor has been produced either
before SEBI or before the trial court despite
specific opportunity given for this purpose,
there is no good ground for reducing either
the substantive sentence awarded to the
appellants or to reduce the fine imposed upon
them.
ii.
Mr. Shailender Kaushik vs SEBI, (CRL

A. No. 329 of 2010), Sudha Mittal vs
SEBI, (CRL A No 334 of 2010) before
Honble High Court of Delhi- Date of
Decision- January 22, 2014
SEBI had filed criminal complaint under

section 24 (1) r/w 27 of SEBI Act, 1992 against
M/s Asian Plantation Ltd for the violation of
provision of SEBI (CIS) Regulations, 1999.
The trial court after hearing the counsel for
the parties and appreciating the evidence was
pleased to convict and sentenced the accused.
Appellant preferred appeal against
order dated February 15, 2010 and order
dated February 23, 2010 convicting the
appellant u/s. 24 and 27 of the SEBI Act, 1992
and sentenced him to pay fine of `5 lakh and
to undergo rigorous imprisonment for six
months. Honble High Court vide its judgment
dated January 22, 2014 allowed the appeal
and acquitted the appellant on the ground
that the appellant was merely subscriber to
the memorandum and articles of association
and cannot be held liable as person in charge

section 24 (1) r/w 27 of SEBI Act, against
M/s Asian Plantation Ltd for the violation of
provision of SEBI (CIS) Regulations, 1999.
The trial court after hearing the counsel for
the parties and appreciating the evidence was
pleased to convict and sentenced the accused.
Appellants preferred appeals against order
201
Managing Director, Mr. S.K. Jain as well as the

appellant, Mr. Pankaj Jain, who is also son of
the then Managing Director Mr. S.K. Jain. The
compliance certificate submitted to SEBI was
also signed by him on behalf of the company.
The letter received by SEBI on January 9,
2001 submitted on behalf of company was
signed by the appellant, Mr. Deepak Jain. He
was also son of the Managing Director, Mr.
S.K. Jain. The copy of Form-32 produced by
the appellant showed that Mr. Deepak Jain
became the Director of the company at the
time of its incorporation. Thus, both of them
were actively involved in the business of the
company and were also associated with the
Collective Investment Schemes under which
the money was collected by the company from
various investors. Thus, Honble High Court
dismissed the appeals
and responsible for the conduct of affairs of

the accused company.
iii.
M/s Glitter Gold Plantation Ltd. and

Others Vs. State (NCT of Delhi) (Crl.
A. No. 567 of 2010) before Honble
High Court of Delhi- Date of DecisionFebruary 24, 2014

M/s Glitter Gold Plantation Ltd and its directors
for the violation of provision of SEBI (CIS)
Regulations, 1999. The trial court after hearing
the counsel for the parties and appreciating
the evidence was pleased to convict and
sentenced the accused. Appellants preferred
appeal against judgment dated March 30,
2010 and order dated April 9, 2010 inter-alia
convicting the company and its directors, Mr.
Pankaj Jain, Mr. Deepak Jain, Mr. Sachin Gupta
and Mr. Yashwant Jain and sentencing them
to undergo rigorous imprisonment for three
months each and to pay fine of `1 lakh each
or to undergo simple imprisonment for three
months each in default. Further, the trial court
also found Ms. Manjul Jain and Ms. Arti Jain
guilt of the violation alleged and sentenced
them with a fine of `50,000 each or to undergo
simple imprisonment for three months each
in default.
iv.
Mr. Sachin Gupta vs SEBI (CRL. A.

No. 563 of 2010 and Mr. Yashwant Jain
vs SEBI (CRL A No 573 of 2010) before
Honble High Court of Delhi- Date of
Decision- February 24, 2014

M/s Glitter Gold Plantation Ltd and its directors
sentenced the accused. Appellants preferred
appeal against judgment dated March 30,
2010 and order dated April 9, 2010 inter-alia
convicting the company and its directors, Mr.
Pankaj Jain, Mr. Deepak Jain, Mr. Sachin Gupta
and Mr. Yashwant Jain and sentencing them
to undergo rigorous imprisonment for three
months each and to pay fine of `1 lakh each
months each in default. Further, the trial court
also found Ms. Manjul Jain and Ms. Arti Jain
guilt of the violation alleged and sentenced
Honble High Court dismissed the

appeal observing that both Mr. Pankaj Jain and
Mr. Deepak Jain are the whole time directors
of the appellant company M/s Glitter Gold
Plantation Ltd. Both have been corresponding
with SEBI with respect to the CIS of the
company. Additional information to SEBI with
respect to the CIS of the company, including
the balance sheet, balance sheet certificate and
statement of deployment of funds submitted
by the appellant , Mr. Pankaj Jain, vide letter
was received by SEBI on April 29,1998. The
balance sheet of the company was signed by its
202
them with a fine of `50,000 each or to undergo

simple imprisonment for three months each
in default.
vi.
The appeals preferred against the order

of conviction and sentences were allowed
vide order dated February 24, 2014 on the
ground that there is no sufficient evidence to
show that Mr. Sachin Gupta and Mr. Yashwant
Jain were directors and person in charge and
responsible to the accused company for the
conduct of its business, hence, acquitted by
the Honble High Court.
Criminal Complaint was filed by SEBI

under Section 200 Cr.P.C r/w Section 24 (1)
and 27 of SEBI Act, 1992 for violation of CIS
Regulations, 1999 against M/s Himanchal
Harvest Farms Ltd and its directors. The trial
court took cognizance and issued summons to
the accused person, including the Petitioner,
which was challenged by the Petitioner on
the ground of delay in filing the complaint.
SEBI opposed the petition contending that
the offences for which petitioner has been
prosecuted are continuing offence, and
despite directions issued by respondent
on December 7, 2000, petitioner has failed
to refund the money collected under the
investment schemes. The Honble High Court
being satisfied with the submission advanced
on behalf of SEBI, was pleased to dismiss
the petition vide order dated November 13,
2013 by holding that the contravention of
provisions as alleged in the complaint gives
rise to continuing offences, hence, complaint
cant be quashed as being time barred.
v.
Mr. Ajay Vohra vs SEBI (CRL. A. No. 474

of 2010); Mr. Major P.C. Thakur vs SEBI
(CRL. A. No. 464 of 2010); Mr. Rajan Rai
vs SEBI (CRL.A. No. 473 of 2010); Ms.
Sunita Bhagat vs SEBI (CRL A. No. 442 of
2010)- Date of Decision- January 29,2014

M/s Accord Plantation Ltd and its directors
sentenced the accused. The appellants
preferred appeal against judgment and order
on sentence dated March 25, 2010 and March
26, 2010 respectively sentencing the appellants
to undergo rigorous imprisonment for six
months each, and to pay fine of `10 lakh each
months each in default.
Mr. Parambir Singh vs SEBI (Crl

Misc No. 831/2007) Date of DecisionNovember 13, 2013
vii. M/s Janraksha Green Forests Ltd. and

Others vs SEBI (Crl Misc No. 1356/2012),
order dated October 19, 2013
Prosecution was launched against the
captioned company and its directors for the
violation of SEBI Act, 1992 r/w CIS Regulations,
1999. Trial court considered the case as a
warrant trial case and listed the same for
recording of pre-charge evidence. However,
the Petitioners challenged the impugned order
before Delhi High Court on the ground that a
summons trial case cannot be converted into
warrant trial case. The grievance of petitioners
was that once the directions of SEBI were not
followed by the Petitioner within prescribed
time, then cause of action to file the complaint
The appeals preferred by the appellants/

accused were dismissed by the Honble High
Court vide its judgment dated January 29,
2014, wherein the Honble High Court have
found that there is sufficient evidence on
record to prove that these appellants were
directors and liable as person in charge and
responsible for the conduct of affairs of the
accused company.
203
in question against petitioners (accused) arose

on July 15, 2002. But instant complaint was
filed after waiting for one year and in the
meanwhile, Section 24 (1) of SEBI Act, 1992 was
amended. The effect of amendment was that
mode of the trial for the offences in question
were changed to warrant trial instead.
Regulations, 1997. Since Regulation 10 had

been attracted on both the occasions, SEBI
sent the letter dated December 17, 2012 under
regulation 18(2) of SEBI (SAST) Regulations,
interalia, advising, to revise the offer price
taking into consideration of acquisition of
more than 15 percent of the shares by Mr.
Akshay Pitti.
The Honble High Court dismissed the

Petition and held that since the complaint in
question had been filed under the amended
section 24 of SEBI Act, 1992, the procedure to
be adopted would be of warrant trial.
c.
SECURITIES APPELLATE TRIBUNAL
i.
Mrs. Madhuri Pitti vs SEBI (Appeal

No. 2 of 2013)
Aggrieved by the letter dated December

17, 2012, an appeal was filed before SAT.
The issue before the Honble Tribunal was
whether the individual acquisition of shares
by Mr. Akshay Pitti of 4.97 percent and 1.27
percent of shares in the target company on
April 26, 2006 and April 11, 2007 consequent
to conversion of warrants resulting in increase
in his individual shareholding breaching
the 15 percent limit should be considered
as triggering of regulation 10 of SEBI (SAST
Regulations), 1997 resulting into consequent
obligations for the same. SAT has vide order
dated October 31, 2013, disposed of the appeal
by permitting the appellants to continue with
the offer excluding SEBIs directions on the
ground that SEBI (SAST Regulations), 1997
intended to bring out a clear distinction
between individual acquiring of shares on
the one hand and shares acquired by persons
acting in concert on the other. It observed
that the individual acquisition breaching
the threshold of 15 percent should not be
considered as triggering of regulation 10.
Instead, only the collective shareholding of
all PACs together may be considered for the
purpose of breaching the threshold limit. It
further observed that liability to make open
offer for breach of threshold limit by individual
acquisition is stipulated only in SEBI (SAST)
Regulations, 2011. The appeal filed by SEBI
under section 15Z of SEBI Act, 1992 is pending
before the Supreme Court.
Mrs. Madhuri Pitti (Appellant No.1),

M/s. Pitti Electrical Equipment Pvt. Ltd.,
(Appellant No 2) is the acquirers of M/s Pitti
Laminations Ltd., (Target Company). They
were acting jointly with, Mr. Akshay S. Pitti
(Appellant No. 3) and Mr. Sharad Pitti, (not a
party in appeal). A preferential allotment was
authorised on August 11, 2011 in the Annual
General Meeting of the shareholders of the
target company resulting in the increase of
shareholding of the promoter group from 41.7
percent to 59.2 percent requiring the acquirers
(along with persons acting in concert) to make
an open offer under Regulation 11(1) of the
SEBI (SAST), 1997 Regulations. Accordingly,
a public announcement was made by
the appellants on September 9, 2011 and
simultaneously a Draft Letter of offer was filed
before the respondent i.e. SEBI on September
19, 2011.
It came to light that on two occasions in
the past i.e. April 26, 2006 and April 11, 2007,
Mr. Akshay Pitti had individually acquired
shares consequent to conversion of warrants
which triggered Regulation 10 of the Takeover
204
ii.
M/s. Clearwater Capital Partners

(Cyprus) Ltd. vs SEBI (Appeal No. 21 of
2013)
the Takeover Regulations, 1997 has been

triggered, the appellant challenged the
impugned letter dated November 30, 2012,
before SAT. Before the appeal is finally disposed
of, the appellant completed the open offer
without following the directions/observations
of the SEBI contained in impugned letter.
The appellant/acquirer had subscribed

to the Foreign Currency Convertible Bonds
(FCCBs) for a consideration of USD 18 million
offered by the target company, M/s Kamat
Hotels India Ltd. as per the shareholders
resolution dated September 23, 2006. Upon
conversion of the FCCBs, the appellant holding
along with PAC increased to 32.23 percent post
equity share capital of the target company.
Since it has triggered regulation 3(1) of SEBI
(SAST Regulations), 2011, the appellant
made a public announcement dated January
11, 2012. The letter of offer dated January 25,
2012 with the offer price calculated as ` 135
per share were filed by the merchant banker
with SEBI.
SAT has vide order dated February 12,

2014 observed that there is no decision of
SEBI on the objections raised by the appellant
regarding the directions in the impugned
letter. It also observed that the impugned
communication does not set out consequences
for non-compliance of above directions. In the
above scenario, the Honble SAT permitted
SEBI to issue any show cause notice for noncompliance of the directions mentioned in the
impugned letter, if it chooses to do so.
iii.
However, on August 13, 2010, the

target company had entered into an inter-se
agreement with the appellant, and specified
promoters of the target company. Various
clauses in the inter-se agreement conferred
on the appellant certain affirmative rights and
veto rights on the policy decisions of the target
company. Hence, the appellant had acquired
control over the policy decision of the target
company triggering regulation 12 of the SEBI
(SAST Regulations), 1997. However, no public
announcement was made by the appellant
for the acquisition of control over the target
company by virtue of the inter-se agreement.
M/s. Gillette India Ltd. vs SEBI and

Others (Appeal No. 65 of 2013) Order
dated July 3, 2013
The captioned appeal was filed by M/s

Gillette India Ltd., (Appellant), against order
dated April 26, 2013 passed by SEBI, rejecting
the method proposed by the appellant to attain
the minimum public shareholding (MPS)
requirement of 25 percent in accordance with
the Securities Contracts (Regulation) Rules,
1957.
The appellant, jointly promoted by
the M/s Poddar Group and M/s Procter and
Gamble Group (P&G Group) who were parties
to a Shareholders Agreement dated July
10, 1996 (SHA), made an application dated
October 10, 2012 to SEBI under circular dated
August 29, 2012 proposing a method to attain
the mandatory requirement of minimum
public shareholding of 25 percent in all
listed companies, as the public shareholding
of the appellant was 11.2 percent, which is
significantly below the prescribed 25 percent
limit.
In view of the acquisition of control

and the resultant triggering of regulation
12 of the SEBI (Takeover Regulations), 1997,
SEBI offered its comments on the draft letter
of offer vide letter dated November 30, 2012,
requiring to incorporate the fact of triggering
of regulation 12 of the Takeover Regulations
and to make consequential changes. Aggrieved
by the finding of SEBI that regulation 12 of
205
hands of a few market players by ensuring

a sound and healthy public float to stave off
any manipulation or perpetration of other
unethical activities in the securities market.
SAT also noted that no hardship or problems
have been brought forth during the course
of proceedings before this Tribunal which
seem insurmountable to such an extent as to
lead the Appellant to come up with such a
dubious manner of achieving the 25 percent
requirement regarding public shareholding
while ignoring all other perfectly executable
methods suggested by SEBI in various
circulars over the past few years.
The respective shareholdings of the

M/s Poddar Group and the M/s P&G Group
were 12.9 percent and 75.9 percent. The
manner in which to achieve the required public
shareholding as presented by the appellant in
the application, in brief, is that the M/s Poddar
Group would first transfer four percent of its
shares to the M/s P&G Group, which being
an inter-se transfer of shares held by the M/s.
Poddar Group for around 16 years would be
exempt from the obligation of making an open
offer as per Regulation 10(1)(a)(ii) of the SEBI
(SAST) Regulations, 2011. As a result of this
transfer, the holding of the M/s Poddar Group
would go down to 8.9 percent. This would
be followed by termination of the SHA and
amendments to the Articles of Association
of the company, as a result of which the M/s
Poddar Group would be classified as an
ordinary public shareholder and would lose
all its rights and control over the appellant
as promoter. Once the M/s Poddar Group
joins the ranks of a public shareholder, the
appellant will cause the M/s P & G Group,
who shall then be holding 79.9 percent of
the issued share capital, to sell or otherwise
dilute 4.9 percent of their shareholding in the
appellant company in the manner prescribed
by the SEBI for achieving minimum public
shareholding.
iv.
M/s. Bombay Rayons Fashions Ltd. &

Others vs SEBI ( Appeal No. 203/ 2013)
order dated June 28,2013
The appeal was preferred by two entities

M/s Bombay Rayons Fashions Ltd. and M/s
B.R. Machine Tools Private Ltd. which were
the promoters group companies. The fact
leading to the dispute is that M/s Bombay
Rayons Fashions Ltd. made preferential issue
of 10 million of optionally convertible warrants
to M/s B.R. Machine Tools Private Ltd. and to
M/s Reynold Shirting Ltd. on September 13,
2009. Pursuant to the above said allotment
of 20 million warrants, 12.5 million warrants
were converted into equity shares within
the creeping acquisition limit as prescribed
by SEBI (SAST) Regulations, 1997. Thus, 7.5
million warrants remained to be converted into
equity shares and the prescribed limitation of
18 months for conversion of such warrants
was to expire on April 3, 2012.
SEBI in its letter dated April 26, 2013

inter alia stated that it is not an acceptable
means for achieving the MPS requirement in
terms of rule 19 A of the Securities Contracts
(Regulation) Rules, 1957. This letter of the
SEBI was challenged by the appellant in the
captioned appeal.
In the meanwhile, certain developments

took place which led to the reconstitution of
the promoters group and consequently, the
promoter groups holding in M/s Bombay
Rayons Fashions Ltd. stood at 93.15 percent
of the total capital. In this situation, M/s B.R.
Machine Tools Private Ltd. did not convert
the balance 7.5 million outstanding warrants
SAT vide its order dated July 7, 2013,

upheld the order passed by SEBI by recording
inter alia the fact that the underlying
philosophy behind the requirement of a
minimum public holding of 25 percent is
prevention of concentration of shares in the
206
that time. Honble SAT was of the view that

that M/s B.R. Machine Tools Private Ltd.
has totally failed to satisfy the respondent
regarding any factor beyond the control of
the issuer which would have prevented him
from converting the warrants in question into
shares. SEBI, therefore, rightly did not exercise
its jurisdiction to permit any relaxation in the
matter. The appeal was dismissed.
on account of proviso to sub-regulation (2) of

Regulation 3 of the SEBI (SAST) Regulations,
2011. According to the appellants, M/s B.R.
Machine Tools Private Ltd. was, therefore,
restrained from exercising its conversion
option in respect of 7.5 million outstanding
warrants and this peculiar situation which
had arisen entirely due to coming into force
of SAST Regulations, 2011 w.e.f. October 23,
2011. As such the appellants approached SEBI
under Regulation 109 (C) of the SEBI (ICDR)
Regulations, 2009 for grant of relaxation from
the strict enforcement of Regulation 75 and 77
of SEBI (ICDR) Regulations, 2009. SEBI vide
its reasoned order dated August 10, 2012,
rejected the request of the appellants. This
letter of the respondent was challenged in the
captioned appeal.
v.
M/s. Uditi Mercantile Pvt. Ltd. vs

SEBI (Appeal. No. 16/2012 & Misc.
Application No. 7/2012); M/s Pams
Investment Trading Co. Pvt. Ltd. vs
SEBI in the scrip of Reliance Industries
Limited (Appeal. No. 22/2012 & Misc.
Application No. 10/2012)
Thirty four entities acting in concert

with the promoter group of RIL, are alleged
to have triggered the SAST Regulations upon
acquisition of shares on January 7, 2000 on
exercise of `12 crore convertible warrants
issued to them by RIL in January 1994. The
warrants appeared to have been issued at
a price lower than the market price, and
without a supporting resolution of the general
body of shareholders (the existing resolution
was exhausted by RIL in issuing warrants
to another entity) as brought out in the
Investigation Report. Despite triggering the
SEBI (SAST) Regulations, 1997, the promoters
and PACs failed to make the required public
announcement in terms of Regulation 11
of SEBI (SAST) Regulations, 1997. The
Adjudicating Officer (AO) was appointed
vide order dated December 15, 2010 and the
SCNs were issued to the said entities.
Honble SAT noted that the promoter

group in M/s Bombay Rayons Fashions Ltd.
increased their shareholding in a systematic
manner from 31.54 percent to 93.2 percent
during December 2009 to December 2011.
The process of conversion of warrants into
equity shares went on till September 30, 2011
when M/s B.R. Machine Tools Private Ltd.
converted at least 2.5 million warrants into
shares. The new SEBI (SAST) Regulations,
2011 had already been published in the
official Gazette on September 23, 2011 and
as such the M/s B.R. Machine Tools Private
Ltd. was fully aware of the implication of the
said Regulations which were to come into
force on October 23, 2011 i.e. after 30 days of
their being Gazetted. M/s B.R. Machine Tools
Private Ltd. should have atleast approached
SEBI for any relaxation or exemption from the
applicability of Regulation 3(2) of the SAST
Regulation, 2011 immediately after the same
were Gazetted on September 23, 2011 or after
October 23, 2011 when they were brought into
force. But no such application was preferred
by M/s B.R. Machine Tools Private Ltd. at
The aforesaid appeals were filed by two

entities representing the allottee group against
the appointment of AO vide order dated
December 15, 2010 and the issuance of SCNs
by the AO, dated February 24, 2011 and March
18, 2011, alleging violation of Regulation 11 of
207
(PIT) Regulations, 1992, trading in securities

when in possession of any unpublished
price sensitive information constitutes
violation of SEBI (PIT) Regulations, 1992.
Takeover Regulations, 1997. The appellants

have challenged the jurisdiction of SEBI on
the ground of inordinate delay in issue of
SCN, the maintainability of SEBIs actions
on the ground of inapplicability of Takeover
Regulations, 1997 and difficulty in gathering
evidence.
vii. Mrs. Komal Nahata vs SEBI (Appeal

No. 5 of 2014)
The captioned appeal was filed against
the order dated September 30, 2013 (impugned
order) vide which a penalty of `1 lakh was
imposed on the appellant. SEBI found that the
appellant failed to make disclosures under
regulations 7(1) and 7(2) of the SEBI (SAST)
Regulations, 1997 and under regulation 13(3)
read with regulation 13(5) of the SEBI (PIT)
Regulations, 1992 in respect of transfer of
3,75,000 shares of M/s Arvind International
Ltd. (AIL) to the appellants demat account,
which constituted 5.4 percent shareholding of
AIL.
SEBI filed an Affidavit opposing

admission of the appellants appeal on the
ground that the order appointing the AO is
not an appealable order. SAT dismissed the
appeal filed for challenging the issuance of
notice to show cause by the adjudicating officer
for violations relating to failure to make open
offer under the Takeover Regulations and
directed that the AO may consider the issues
as raised by the appellants in accordance with
law.
vi.
M/s. N R Mercantile Private Ltd. vs

SEBI (Appeal No.138 of 2013) and M/s.
Imtihaan Commercial Private Ltd. vs
SEBI (Appeal No. 141 of 2013) in the
matter of M/s. Ramswarup Industries
Ltd.
The Honble SAT, while upholding the

impugned order, held that penalty for noncompliance of SEBI (SAST) Regulations,
1997 and SEBI (PIT) Regulations, 1992 is
not dependent upon the investors actually
suffering on account of such non-disclosure.
The captioned appeals were filed against

the separate orders dated May 31, 2013
(impugned orders) passed by the Adjudicating
Officer (AO) vide which penalty of `40,00,000
and `13,50,000 were imposed on M/s N R
Mercantile Private Ltd. and M/s Imtihaan
Commercial Private Ltd., respectively, for
the violation of sections 12A(d) and 12A(e) of
the SEBI Act, 1992 and regulation 3(i) of the
SEBI (PIT) Regulations, 1992. It was observed
in the impugned orders that the appellants
were insiders and had traded in the shares
of M/s Ramswarup Industries Ltd. while in
possession of Unpublished Price Sensitive
Information (UPSI).
viii. Mr. Navin Kumar Tayal vs SEBI and

other connected appeals - in the matter
of Bank of Rajasthan
The captioned appeal/s were filed
challenging the SEBI order dated February
14, 2013 wherein a cumulative penalty of
`29.9 crore was imposed on the 118 entities
(Represented in the 14 appeals) for the
violations of the provisions of SEBI Act, 1992,
the SEBI (PFUTP) Regulations, 2003 and the
SEBI (SAST) Regulations,1997.
Honble SAT had observed that some
of the appellants have neither filed reply to
show cause notices issued to them, not availed
opportunity of personal hearing offered to
them in the adjudication proceedings and,
The Honble SAT upheld the orders

passed by the AO and held that pursuant to
the amendment to regulation 3(i) of the SEBI
208
cannot be applicable in view of the earlier

judgement of the Honble SAT in Mr. Dipak
Patel Vs. Adjudicating Officer.
therefore, appellants are presumed to have

admitted charges leveled against them in
the show cause notices. Further, Honble
SAT also held that the Adjudicating Officer
was justified in holding that the transactions
in question were carried out by promoter
group in connivance with connected entities
with a view to mislead investors that the
promoter group has divested shares of Bank
of Rajasthan when in fact there was no such
divesting because both Promoter group and
the connected entities were controlled by
Tayal family.
The Honble SAT, while upholding the

order of the Adjudicating Officer, inter alia,
have given a liberal interpretation to the
concept of front running and held that any
person, who is connected with the capital
market, and indulges in front running is
guilty of a fraudulent market practice as such
liable to be punished as per law by SEBI. The
definition of front running, therefore, cannot
be put in a straight-jacket formula.
Honble SAT partly modified the amount

of penalty imposed by the Adjudicating
Officer and upheld the penalty to the tune of
`15.4 crore.
ix.
x.
Appeal No. 126 of 2013 by M/s Pan Asia

Advisors & Anr. vs. SEBI
The appeal was filed against the order

dated June 20, 2013 of SEBI wherein M/s
Pan Asia Advisors and Mr. Arun Panchariya
(the appellants) who were involved in the
conversion of Global Depository Receipts
(GDR) into equity shares to sell in Indian
markets, were barred from rendering
services in connection with instruments that
are defined as securities in section 2(h) of
Securities Contracts (Regulations) Act, 1956 in
the Indian market and also prohibited them
from accessing the capital market directly or
indirectly, for a period of 10 years, from the
date of the order. The said order dated June
20, 2013 was under challenge in the appeal.
Mrs. Vibha Sharma and Mr Jitendra

Kumar Sharma vs SEBI (Appeal No. 27
of 2013)
The appeal was filed against the

adjudication order dated December 19, 2012
vide which a penalty of `25 lakh was jointly
and severally imposed on the appellants for
violation of Regulation 3(a), (b), (c) & (d) and
4(1) of the SEBI (PFUTP) Regulations, 2003. It
was found out that the appellants were related
as husband and wife and that the appellant
no. 1 (Mrs. Vibha Sharma, who was a day
trader) was front running/ trading on basis
of the information (by whatsoever means it
was communicated) received from Appellant
No. 2 (Mr. Jitendra Kumar Sharma, who was a
dealer in securities for Central Bank of India).
Mrs. Vibha Sharma made handsome profits
by manipulating sale price of one scrip only
on each and every of the 14 days, out of 40
days of investigation period, and was suitably
supported, in this activity by Mr. Jitendra
Kumar Sharma.
In the appeal, the appellants have raised

a preliminary objection as to the jurisdiction
of SEBI to take action in the matter of issuance
of GDRs outside India and subsequent
transaction of sale/purchase of underlying
shares released on redemption of GDRs in
the securities market in India. The Honble
SAT, after hearing the parties, disposed of
the matter, vide order dated September 30,
2013 wherein the Presiding Officer held that
SEBI has jurisdiction in the matter while the
other two Members of the Honble SAT have
It was argued by the appellants that front

running charge against Mrs. Vibha Sharma
209
the Indian securities market and accordingly

they are liable for action under SEBI Act, 1992
and regulations made thereunder.
held that SEBI does not have jurisdiction and

accordingly, the appeal was allowed. The
two Members of the Honble SAT, inter alia
observed in the said order that the SEBI Act,
1992; the Securities Contracts (Regulations)
Act, 1956; the Depositories Act, 1996 and the
Companies Act, 1956 give no power to SEBI
to exercise any jurisdiction in respect of the
issuance, trading or conversion of GDRs
abroad and SEBI may have a role only when
GDRs are converted into shares and traded
on Indian Stock Exchanges, and that too when
any loss or prejudice is caused to the Indian
investors or to the Indian capital market.
SEBI filed appeal before the Honble

Supreme Court challenging the majority
decision of the Honble SAT and vide order
dated December 13, 2013, the Honble Supreme
Court stayed the operation of the order dated
September 30, 2013 of the Honble SAT.
d.
CONSUMER COURTS
Mr. Manoj Aggarwal vs M/s J.M.

Financial Mutual Fund & another (First
Appeal No. 590/2013) before State Consumer
Disputes Redressal Commission, New Delhi
Order dated July 15, 2013
However, the Presiding Officer the

Honble SAT disagreed with the above decision
of the Members and dismissed the appeal,
inter alia, on the reasons that the transactions
relating to sale/purchase of underlying
shares in the securities market in India (after
conversion of GDRs created/sold/traded
outside India) are fraudulent transactions
and that fraudulent intention existed right
from the date of issuance of shares through
GDR mechanism, then, SEBI would be
justified in invoking jurisdiction under SEBI
Act, 1992 and debar persons connected with
such transactions from rendering services in
connection with instruments that are defined
as securities (as in section 2(h) of SCRA, 1956)
in the Indian market for such period as it deems
fit and further prohibit persons involved in
such fraudulent transactions from accessing
the capital market directly or indirectly for
such period as it deems fit. The Presiding
Officer has observed that the appellants were
architects of a fraudulent scheme and were
involved at every stage with their connivance
of connected entities from raising ordinary
shares through GDR mechanism up to the
stage of sale/purchase of underlying shares in
The appeal in the matter was preferred

against the order of District Consumer
Disputes Redressal Forum, Delhi wherein the
complaint was dismissed on the ground that
complainant is not a consumer as per section
2(1)(d) of Consumer Protection Act, 1986
(Act) and directed him to approach SEBI for
relief. The complainant had invested in the
respondent fund and he alleged manipulation
by Respondent, as the money he invested got
reduced due to arbitrary merger of his scheme
by the Respondent with another scheme
without justification or his consent. The issue
before the Commission was whether stock
market trader or investor in mutual fund is a
consumer or not under the Act. Answering the
same in negative, the Commission dismissed
the appeal on the ground that the Act is not
for entertaining or compensating speculative
transactions and losses and trading in shares
are carried out with the help of intermediaries
and provision for adjudication of disputes
in this regard is present in SEBI Rules and
Guidelines.
210
VI. Consent and Compounding
consent and compounding were withdrawn

by the applicants. The number of applications
in rejection and withdrawal categories may
include the applications filed during previous
financial years including current financial year.
(Table 3.53)
During 2013-14, SEBI has received 121

applications for consent and compounding.
Further, 58 consent applications and one
compounding applications were rejected
during the year. In addition, 46 applications for
Table 3.53: Receipt and Disposal of applications under Consent and Compounding Process
Month/
Year
No. of
Applications
received
No. of
Applications
Seled by
passing orders
Selement /
Compounding
Charges
Legal/Admn.
Charges
Disgorgement
Total
Amount
( `)
( `)
( `)
( `)
2010-11
359
177
70,44,96,771
4,76,500
1,71,20,811
72,20,94,082
2011-12
272
105
16,49,04,875
97,000
16,50,01,875
2012-13
193
65
12,44,71,413
3,00,000
2,25,72,831
14,73,44,244
2013-14
121
46
4,21,53,408
60000
4,22,13,408
Apr-13
13
1,30,94,000
60000
1,31,54,000
May-13
25,99,266
25,99,266
Jun-13
25,53,867
25,53,867
Jul-13
10,00,000
10,00,000
Aug-13
15,60,000
15,60,000
Sep-13
21
1,29,54,525
1,29,54,525
Oct-13
Nov-13
10
15,97,375
15,97,375
Dec-13
21
45,98,750
45,98,750
Jan-14
17,00,250
17,00,250
Feb-14
12
2,95,375
2,95,375
Mar-14
2,00,000
2,00,000
Note: In addition 58 applications were rejected and 46 applications were withdrawn/in fructuous during 2013-2014.
During 2013-14, 46 applications were

settled by SEBI by passing orders under the
consent and compounding category and
collected an amount of ` 4,22,13,408 towards
settlement / legal / administrative / disgorgement
charges compared to ` 14,73,44,244 in 2012-13.
Of the 99 applications received during 201314 for consent, 45 applications were disposed
by passing orders whereas 58 applications
were rejected. During the year, SEBI collected
` 4,21,13,408 as consent charges for settlement of
cases through consent mechanism. (Table 3.54).
211
Table 3.54: Consent Applications filed with SEBI during 2013-14

No. of
Consent Application
received
No. of
application disposed of by
passing order^
Consent Charges (`)*
No. of
Application rejected
99
45
4,21,13,408
58
Notes: 1. *Amount received towards disgorgement, settlement and legal expenses.

2. ^The number of applications may include the disposal of the application filed during previous financial years.
amount of `1,00,000 but the remaining 20

applications are pending. (Table 3.55)
Further, 22 applications were received

for compounding during 2013-14 and, one
application was fully compounded, for an
Table 3.55 Compounding Applications filed by the accused in criminal courts during
2013-14
No. of
Compounding
Applications led
No. of applications compounded
Compounding
charges received
by SEBI (`)*
No. of Application
rejected
Fully
Compounded
Partly
Compounded
22
Nil
1,00,000
Note: * Amount received towards disgorgement, settlement and legal expenses.
VII. The Recovery Proceedings
or fail to comply with any direction of the

Board for refund of money or fail to comply
with a direction of disgorgement order or
fail to pay any fees due to the Board. The
table below presents the details of Recovery
proceedings by SEBI (Table 3.56). As on March
31,2014,notices for attachment were issued
against 251 bank lockers, 48 demat accounts
and 11 other asset categories. The recovery
proceedings were completed in 8 cases and
`7.8 crore has been recovered as on March
31,2014. The amount covered under the 64
recovery certificates / notice of demand issued
during 2013-14 was `1,574 crore.

Ordinance, 2014 was promulgated by the
President of India under Article 123 of the
Constitution of India on March 28, 2014 for
amending the Securities and Exchange Board
of India Act, 1992, the Securities Contracts
(Regulation) Act, 1956 and the Depositories
Act, 1996. As per section 28A of SEBI Act as
amended by Securities Law (Amendment)
Ordinance, SEBI is empowered to recover
money from persons who fail to pay the
penalty imposed by adjudicating officer
212
Table 3.56: Details of Recovery Proceedings

Description
As on
March 31,
2014
Recovery Certicates drawn and Notice

of Demand Issued
Aachment
notices issued
against
Bank Accounts
(including lockers)
64
b. SEBI (Foreign Portfolio Investors)

Regulations, 2014 w.e.f. January 7, 2014.
251
Demat Accounts
48
Others
11
Cases where recovery is completed
which are in compliance with the criteria

specified by RBI for inclusion in Additional
Tier I Capital. The Regulations are also
applicable to such instruments issued by
banks.
The SEBI (Foreign Portfolio Investors)

Regulations, 2014 have been framed keeping
in view the provisions of SEBI (Foreign
Institutional Investors) Regulations, 1995,
Qualified Foreign Investors (QFIs) framework
and the recommendations of the Committee
on Rationalization of Investment Routes and
Monitoring of Foreign Portfolio Investments.
The FPI Regulations provides for registration
and regulation of Foreign Portfolio Investors
(FPIs) and Designated Depository Participants
(DDPs). The key features of the said
Regulations are as under:
(in `crore)
Amount covered under the Recovery
Certicates
Amount Recovered
1,574.4
7.8
VIII. Regulatory Changes

Section 30 of the SEBI Act empowers
SEBI to make regulations consistent with the
Act by issuing notifications. Every rule and
every regulation made under this Act shall be
laid, before each House of Parliament. During
2013-14, various new regulations were notified
by SEBI. In addition, amendments were also
made to existing Regulations. The regulatory
changes during the financial year as follows:
A.
i.
Existing Foreign Intuitional Investors

(FIIs), sub-accounts and Qualified
Foreign Investors (QFIs) have been
merged into a new investor class termed
as FPIs;
ii.
SEBI approved DDPs will register FPIs

on behalf of SEBI subject to compliance
of the provisions of the FPI Regulations.
The registration of FPIs by the DDPs
on behalf of SEBI will be permanent in
nature unless suspended or cancelled by
SEBI;
iii.
FPI can obtain registration in any one

of the categories like Category I , II or
III on the basis of their structure and
constitution;
iv.
Existing FIIs and sub-accounts have been

permitted to deal in securities subject to
payment of conversion fees and subject to
the provisions of the FPI Regulations till
NEW REGULATIONS
a.
SEBI (Issue and Listing of NonConvertible Redeemable Preference Shares)
Regulations, 2013 w.e.f. June 12, 2013.
The said Regulations provides for a
comprehensive regulatory framework for
public issuance of non-convertible redeemable
preference shares and also for listing of
privately placed redeemable preference
shares. Further, as per Basel III norms, banks
can issue non-equity instruments such as
Perpetual Non-Cumulative Preference Shares
and Innovative Perpetual Debt Instruments,
213
the expiry of their registrations or until

they obtain a certificate of registration
as FPI, whichever is earlier. Similarly,
QFIs have also been permitted to deal in
securities till the period of one year from
the date of commencement of the FPI
Regulations;
settlement. Accordingly, the said Regulations

were framed to provide for the procedure
for the settlement of administrative and civil
proceedings in lines of the existing consent
proceedings as per SEBI circulars dated
April 20, 2007 and May 25, 2012 which was
rescinded vide the said Regulations.
v.
FPIs are allowed to invest in all those

securities in which FIIs were allowed to
invest;
d.
SEBI (Procedure for Search and

Seizure) Regulations, 2014 w.e.f.
January 10, 2014
vi.
Category I and Category II FPIs are

allowed to issue or otherwise deal
in offshore derivative instruments
subject to certain conditions;
i.

Ordinance, 2013 and subsequent repromulgations thereof, inter alia,
empowered SEBI to conduct search
and seizures without the intervention
of the court of law. The said Ordinance
empowers the Chairman, SEBI to
authorise the Investigating Authority or
any other officer of the Board to search
any building, place, vessel, vehicle or
aircraft, if the Investigating Authority
has reason to believe that the person
to whom a notice has been issued or
might be issued has failed to provide
information or document or that the
information or document would not be
provided or that the documents would
be destroyed or mutilated or altered or
falsified or secreted.
ii.
The said Ordinance also empowered

SEBI to make regulations in relation to
search and seizure under section 11C
of the SEBI Act. SEBI (Procedure for
Search and Seizure) Regulations, 2014
were notified in exercise of the powers
conferred under the said Ordinance. The
said Regulations are framed on lines of
the provisions of the Income Tax Act,
1961.
iii.
The said Regulations provide for the

procedure for the issuance of the warrant
vii. SEBI registered custodian of securities

and certain qualified depository
participants have been deemed to be
DDPs, subject to payment of fees; and
application for approval as DDP is to
be forwarded by a depository with its
recommendation and certification as to
eligibility criteria of the participant to
SEBI for grant of approval.
c.
SEBI (Settlement of Administrative

and Civil Proceedings) Regulations,
2014 w.e.f. January 9, 2014.
Vide the Securities Laws (Amendment)

Ordinance, 2013 and subsequent repromulgations thereof, section 15JB in the
SEBI Act, 1992, section 23JA in the Securities
Contracts (Regulation) Act, 1956 (SCRA) and
section 19-IA in the Depositories Act, 1996,
were inserted whereby SEBI was expressly
empowered to settle administrative and civil
proceedings. The Ordinance enabled SEBI to
settle administrative and civil proceedings
under the SEBI Act, 1992, SCRA and the
Depositories Act, 1996 in accordance with
the procedure specified in the Regulations
providing for the terms and procedure for
214
any other investors as may be specified

by sectoral regulators from time to time
to trade only on their own account in
debt segment; and
of authority by the Chairman to the

authorised officer empowering him to
carry out search and seizure. It also lays
down the obligations of the authorized
officer and the detailed procedure to be
followed by him at the time of search
and seizure. It further provides for the
rights and obligations of the persons
being searched and the persons who
are in charge of the premises being
searched. In addition, the Regulations
mandate safe custody and return of the
documents seized. As a salient measure
of protection of privacy, the personal
information contained in any document
seized is safeguarded from disclosure
by SEBI except for the compliance of
law, without the consent of the person to
whom such information relates.
B.
AMENDMENTS
REGULATIONS
TO
a.
SEBI (Stock Brokers and Sub-brokers)

(Amendment) Regulations, 2013 w.e.f.
April 5, 2013
iii.
Introduced a new chapter in the said

Regulations as Chapter IIIC to provide
for registration, procedures, fees,
obligations and responsibilities for
trading member/ proprietary trading
member/self clearing member/ clearing
member of debt segment.
b.
SEBI (Mutual Funds) (Amendment)

Regulations, 2013 w.e.f. April 16, 2013
The SEBI (Mutual Funds) Regulations

were amended to provide the following
regulatory changes:
i.
Regulation 49-OA was introduced vide

this amendment, whereby the mutual
funds may raise money by way of private
placement in case of infrastructure debt
fund schemes. The private placement
shall be made to less than 50 persons
subject to the approval of trustees and
board of asset management company. In
case of a private placement, the mutual
fund will have to file a Placement
Memorandum with SEBI instead of a
Scheme Information Document and a
Key Information Memorandum.
ii.
The overall investments by an

Infrastructure Debt Fund (IDF) scheme
in debt instruments or assets of
infrastructure companies or projects
or special purpose vehicles, which are
created for the purpose of facilitating or
promoting investment in infrastructure
or bank loans in respect of completed
and revenue generating projects of
infrastructure companies or projects or
special purpose vehicles, which are rated
below investment grade or are unrated,
EXISTING
In order to enable direct membership of

banks and other institutional participants (as
specified by their sectoral regulators) in the
debt segment of the stock exchanges, the SEBI
(Stock Brokers and Sub-brokers) Regulations,
1992 were amended as to provide as follows:
i.
Debt segment was inserted in addition

to derivatives segment and currency
derivatives segment in the definition of
clearing members, self clearing members,
trading members;
ii.
Introduced the definition of proprietary

trading member to permit specified
institutions
such
as
scheduled
commercial banks, primary dealers,
pension funds, provident funds,
insurance companies, mutual funds and
215
d.
shall not exceed 30 percent of the net

assets of the scheme.
iii.
The strategic investors for the

infrastructure debt fund schemes
with
minimum
contribution
in
such schemes shall now include
systematically important NBFCs and
Foreign Institutional Investors along
with the existing strategic investors list
which include infrastructure finance
companies, scheduled commercial banks
and international multilateral financial
institutions.
Through the aforesaid amendment

to the SEBI (Mutual Funds) Regulations,
1996, SEBI increased the initial offering
period for eligible schemes under Rajiv
Gandhi Equity Savings Scheme from 15 days
to 30 days. The timeline for refund of money
and sending statement of account, for such
eligible schemes, was also extended from
five working days to 15 days from closure of
initial subscription.
e.
iv.
IDFs can extend scheme tenure by up to

two years with the consent of two-third
investors.
v.
IDFs may also invest in bonds of public

financial institutions and infrastructure
finance companies.
c.
SEBI (Depositories and Participants)

May 17, 2013
Depository participants were made

liable to pay registration fee for every
five years from the sixth year of the date
of grant of permanent registration;
ii.
Depositories were enabled to prepare

consolidated account statement of
beneficial owners who hold demat assets
other than securities;
iii.
A framework for action in case of

default or non-compliance by issuers or
its agents is provided in the regulations.
This also authorises depository to
conduct inspection of issuers and
agents.
SEBI
(Buy-back
of
Securities)
August 8, 2013
In the amendments to the SEBI (Buyback of Securities) Regulations, 1998, the

following changes to buy-back of shares
or other specified securities from the open
market through stock exchange mechanism
were specified:
i.
The mandatory minimum buy-back

has been increased to 50 percent of the
amount earmarked for the buy-back, as
against existing 25 percent, failing which,
the amount in the escrow account would
be forfeited subject to a maximum of 2.5
percent of the total amount earmarked;
ii.
The maximum buy-back period has been

reduced to six months from 12 months;
iii.
The companies have been mandated

to create an escrow account towards
security for performance with an amount
equivalent to at least 25 percent of the
amount earmarked for buy-back;
iv.
It was specified that companies shall

not raise further capital for a period of
one year from the closure of the buyback except in discharge of its subsisting
obligations as against the existing six
months;
SEBI (Depositories and Participants)

Regulations, 1996 were amended to provide
the following regulatory changes:
i.
SEBI
(Mutual
Funds)
(Second
Amendment) Regulations, 2013 w.e.f.
Jun 19, 2013
216
v.
Companies are prohibited from making

another buy-back offer within a period
of one year from the date of closure of
the preceding offer;
vi.
The disclosure requirements have been

rationalized requiring disclosure of the
shares bought back on a cumulative
basis on the website of the company
and the stock exchange, only on a daily
basis instead of the current requirement
of disclosure on daily, fortnightly and
monthly basis;
AMCs would be allowed to trade only on

behalf of schemes managed by them. The move
could lead to the reduction in cost of trading
for AMCs in debt segment, which in turn
could enhance the performance of debt funds.
Another change made by these regulations
is that subject to certain conditions, the
custodian in which the sponsor of a mutual
fund or its associates hold 50 percent or more
of the voting rights, would be allowed to act
as custodian for a mutual fund constituted
by the same sponsor or any of its associates
or subsidiary.
vii. The companies are permitted to buyback 15 percent or more of capital (paidup capital and free reserves) only by way
of tender offer;
g.
viii. Procedure for buy-back of physical

shares (odd-lot) has been modified which
includes creation of separate window
in the trading system for tendering the
shares, requirement of PAN/Aadhaar for
verification, etc;
ix.
x.
f.

Requirements) (Second Amendment)
Regulations, 2013 w.e.f. August 26,
2013
The said Regulations made certain

changes to the preferential issue norms. The
key features of the amendments are as under:
Companies were permitted to extinguish

shares bought back during the month,
within fifteen days of the succeeding
month subject to the last extinguishment
within seven days of the completion of
the offer;
The promoters of the company have been
barred from executing any transaction,
either on-market or off-market, during
the buy-back period.
SEBI
(Mutual
Funds)
(Third
Amendment) Regulations, 2013 w.e.f.
August 19, 2013
This amendment was made to enable

mutual funds to directly trade on the debt
platforms of the stock exchanges. Pursuant
to this amendment, asset management
companies can register themselves under
proprietary trading members category. These
217
i.
The issuers were mandated to disclose

the identity of the natural persons who
are the ultimate beneficial owners of
the shares proposed to be allotted and/
or who ultimately control the proposed
allottees with certain exceptions;
ii.
The issuers were mandated to ensure

that consideration of specified securities,
if paid in cash, shall be received from
respective allottees bank account;
iii.
Allotment shall be in demateralised

form;
iv.
Lock-in of specified securities allotted

on preferential basis was made effective
from the date of trading approval;
v.
Prohibited transfer of specified securities

allotted on preferential basis till trading
approval is granted by stock exchanges
where the equity shares of the issuer are
listed.
h.
SCR (Regulation) (Stock Exchanges and

Clearing Corporations)(Amendment)
Regulations, 2013 w.e.f. September 2,
2013
j.
Giving effect to the announcement on

angel investor pools in Union Budget for
financial year 2013-14 by Honble Finance
Minister, amendments to SEBI (Alternative
Investment Funds) Regulations, 2012 (AIF
Regulations) have been notified for
providing a framework for registration
and regulation of angel pools under a subcategory Angel Funds under Category
I-Venture Capital Funds. Salient features of
such angel funds are as under:
The Amendment Regulations enshrines

finality of settled transactions. It also provides
for right of Clearing Corporations over
collateral and assets of the clearing members
in order to recover dues arising from
discharge of their clearing and settlement
functions.
i.
SEBI (Alternative Investment Funds)

September 16, 2013
SEBI (Prohibition of Fraudulent

and Unfair Trade Practices relating
to Securities Market) (Amendment)
Regulations, 2013 w.e.f. September 6,
2013
In order to make illegal mobilization of

funds without obtaining a certificate under
the SEBI (Collective Investment Schemes)
Regulations, 1999, a fraudulent and unfair
trade practice under regulation 4 of the SEBI
(PFUTP) Regulations, 2003, a new clause was
inserted in regulation 4(2) as clause (t). This
provision enables imposition of deterrent
monetary penalties for illegal mobilization
of funds by floating schemes in the nature of
unregistered collective investment schemes
within the existing scheme of adjudication.
There was a perception that an activity
specifically prohibited under Regulation 4(2)
of the SEBI (PFUTP Regulations), 2003 was
restricted to a certain class of persons despite
regulation 3 being couched in wide terms
to cover any person irrespective of who the
perpetrator of fraud or unfair/manipulative
practice is. Therefore, an explanation to
regulation 4(2) was inserted to clarify that
an activity falling foul of regulation 3 is
prohibited notwithstanding that it may not be
included in categories of activity enumerated
in Regulation 4(2)(a) to (s), or is mentioned
in Regulation 4(2)(a) to (s), but is restricted
therein to a certain class of persons.
218
i.
Angel Funds have been included in the

definition of Venture Capital Funds
and a separate Chapter has been inserted
specific to such funds. Angel funds shall
raise funds only from angel investors.
ii.
In view of the high risk investments

of such funds, certain conditions have
been imposed on investors. For instance,
individual angel investors shall be
required to have early stage investment
experience/ experience as a serial
entrepreneur/ be a senior management
professional with 10 years experience.
They shall also be required to have net
tangible assets of at least rupees two
crore. Corporate angel investors shall be
required to have `10 crore net worth or
be a registered Alternative Investment
Fund (AIF)/Venture Capital Fund.
iii.
Angel Funds shall have a corpus of at

least `10 crore (as against `20 crore for
other AIFs) and minimum investment
by an investor shall be `25 lakh (may
be accepted over a period of maximum
three years) as against `1 crore for other
AIFs. Further, the continuing interest
by sponsor/manager in the Angel Fund
shall be not less than 2.5 percent of the
corpus or `50 lakh, whichever is lesser.
iv.
l.
For ensuring investments are genuine

angel investments, angel funds are
permitted to invest only in venture
capital undertakings which are not more
than three years old, have a turnover not
exceeding `25 crore, are not promoted,
sponsored or related to an industrial
group whose group turnover is in
excess of ` 300 crore, and have no family
connection with the investors proposing
to invest in the company.
v.
Investment in an investee company by

an angel fund shall be not less than `50
lakh and more than `5 crore and shall
be required to be held for a period of at
least three years.
vi.
A minimum amount of `25 lakh is

permitted to be collected as grants
by Social Venture Funds. However,
no profits or gains shall accrue to the
provider of such grants.
k.
SEBI (Stock Brokers and Sub-brokers)

(Second Amendment) Regulations,
2013 w.e.f. September 27, 2013
SEBI (Listing of Specified Securities

on Institutional Trading Platform)
Regulations, 2013 w.e.f. October 8, 2013
In order to facilitate capital raising by

small and medium enterprises including startup companies which are in their early stages of
growth and to provide for easier exit options
for informed investors like angel investors,
VCFs and PEs etc., from such companies, SEBI
permitted listing without an initial public offer
and trading of specified securities of small
and medium enterprises (SMEs) including
start-up companies on Institutional Trading
Platform (ITP) in SME Exchanges in line with
the Budget Announcement dated February 28,
2013 with respect to capital market. The SEBI
(Listing of Specified Securities on Institutional
Trading Platform) Regulations, 2013 amended
the following regulations to enable listing of
small and medium enterprises without initial
public offer:
The
Amendment
Regulations
implements one registration per stock
exchange for all segments and categories
of stock brokers. Registration of clearing
members has also been introduced. Further,
where an entity is already registered as a
stock broker, he would not require a separate
registration as a clearing member and viceversa, if such entity is a member of a stock
exchange promoted clearing corporation of
which he desires to seek membership and
registration or vice versa. Consequently, the
fee, deposit and networth requirements have
also been modified. Since the amendments do
away with segment-wise registration, multiple
nomenclature used such as trading member,
proprietary trading member, etc., are now
referred to commonly as stock broker.
i.

Requirements) Regulations 2009, by
inserting a new chapter as Chapter XC
on Listing and Issue of Capital by Small
and Medium Enterprises on Institutional
Trading Platform;
ii.
SEBI (Substantial Acquisition of Shares

and Takeovers) Regulations, 2011 was
amended to exclude the applicability of
this regulation to companies listed on
this institutional trading platform;
iii.
SEBI (Delisting of Equity Shares)

Regulations, 2009 was amended to
exclude the applicability of this regulation
to companies listed on institutional
trading platform.
The key features of the said Regulations

are as under:
i.
219
Institutional Trading Platform (ITP) was

introduced for listing and trading of
amounts for violation of securities laws and

restitute investors using such disgorged
amounts. The Ordinance, inter alia, mandates
credit of disgorged amounts to the Investor
Protection and Education Fund (IPEF)
established by the Board.
specified securities of small and medium

enterprises including start-up companies
in a SME Exchange;
ii.
Access restricted to informed investors

and the minimum trading lot is `10
lakh;
iii.
Companies listed on ITP are prohibited

from making public issue;
iv.
The said Regulations, inter alia, provides

for eligibility criteria for listing, process
of listing, restriction on raising capital,
lock-in of promoter holdings, voluntary
and compulsory exit from the ITP.
m.
SEBI (Self Regulatory Organisations)

(Second Amendment) Regulations,
2013 w.e.f. November 18, 2013
The aforesaid amendment to the SEBI

(Investor Protection and Education Fund)
Regulations, 2009 expressly provides for
utilization of disgorged amounts credited
to the fund for the purpose of restitution of
investors wherever identifiable. However, the
amounts remaining after restitution may be
used for the other purposes of IPEF as well.
For such determination, the Board may engage
the services of any other agency or expert.
o.
In order to regulate distributors of

mutual fund products, it has been decided
to have a single SRO for distributors of
mutual fund products. Further, it has been
decided to have a two stage procedure for
grant of recognition as SRO for distributors
of mutual fund products. First stage is grant
of in-principle approval for setting up of the
SRO for distributors of mutual fund products
and upon receipt of the same the applicant
has to complete the remaining requirements
of SEBI (SRO) Regulations, 2004 within the
stipulated time period of six months for grant
of recognition as SRO. Second stage is grant of
recognition as SRO subject to compliance with
all the regulatory requirements.

Ordinance, 2013 provides for regulation
of pooling of funds under any scheme or
arrangement, involving a corpus amount
of ` 100 crore or more, to be deemed to be a
Collective Investment Scheme, subject to subsection (3) of section 11AA of the SEBI Act.
Accordingly, amendments were made to SEBI
1999, providing a framework for regulation
of such deemed CISs. It was also provided
that all Collective Investment Management
Companies shall mobilize money only
through cheques.
p.
n.
SEBI (Collective Investment Schemes)

(Amendment) Regulations, 2014 w.e.f
January 9, 2014
SEBI (Investor Protection and Education

Fund) (Amendment) Regulations, 2014
w.e.f. January 9, 2014
SEBI (Issue and Listing of Debt

Securities) (Amendment) Regulations,
2014 w.e.f January 31, 2014
The Companies Act, 1956 had allowed

only banks and public financial institutions to
file shelf prospectus. However, the Companies
Act, 2013 specifically enabled SEBI to specify
the class of the companies which can be
allowed to file shelf prospectus. The aforesaid
Pursuant to the insertion of section

11(5) in the SEBI Act, 1992 vide Securities
Laws (Amendment) Ordinance, 2013 and
subsequent re-promulgations thereof, SEBI
has been expressly empowered to disgorge
220
amendments allowed the following class

of entities to file shelf prospectus for public
issuance of non-convertible debt securities:
i.
Public
financial
Scheduled Banks;
institutions
and
ii.
Issuers authorized by the notification of

Central Board of Direct Taxes to make
public issue tax free secured bonds;
iii.
Infrastructure Debt Funds - NBFCs

regulated by RBI;
iv.
NBFCs, registered with RBI, Housing

Finance Companies registered with
National Housing Bank (NHB) and
entities which have listed their shares/
debentures in the stock exchanges for
at least three years complying with the
following criteria:
i.
Regulations, 2009 made the IPO grading

mechanism voluntary as against the
earlier provision which made IPO grading
mandatory.
r.
Earlier, intermediaries were permitted to

access the centralised KRA system in case of a
client who is already KYC compliant or carry
out fresh KYC process on its own. Vide the
said Regulations, it was made mandatory that
all intermediaries shall access the KRA system
and the option to conduct KYC process on its
own is done away with. Further, upon receipt
of information on change in KYC details
and status of the clients by the intermediary
or when it comes to the knowledge of the
intermediary, they are liable to upload the
updated information on the system of KRA.
net worth of `500 crore;
ii. track record of three years of

distributable profits;
iii. having a credit rating of not less than
AA-;
IX. Right to Information Act, 2005

SEBI has been implementing the various
provisions of the Right to Information Act,
2005 (RTI Act) not only in letter but also in its
true spirit.
iv. having no default history or

regulatory action pending with RBI,
SEBI or NHB.
In order to avoid fragmentation of the
issues, the said Regulations stipulated that
only a maximum of four issuances can be made
under a shelf prospectus. It was also specified
that companies filing a shelf prospectus with
the Registrar of Companies are not required
to file prospectus afresh at every stage of offer
of securities, within the period of validity of
such shelf prospectus. They are required to file
only an information memorandum containing
material updations with respect to subsequent
issues.
q.
SEBI
{KYC(Know
Your
Client)
Registration Agency} (Amendment)
Regulations, 2014 w.e.f. March 13, 2014
As per the provisions of the RTI Act, SEBI

has designated a Central Public Information
Officer (CPIO) at its Head Office in Mumbai.
Dr. Anil Kumar Sharma is the present CPIO of
the SEBI. As provided in the RTI Act, SEBI has
an Official as the Appellate Authority (AA)
with whom the appeal can be made against the
Order of the CPIO. Shri S Raman, Whole Time
Member, SEBI is the Appellate Authority.
In compliance with the direction of the
Central Information Commission (CIC), SEBI
has designated a Transparency Officer and
Shri P. K. Nagpal, Executive Director, SEBI,
is the present Transparency Officer. SEBI has
also appointed 13 Central Assistant Public
Information Officers (CAPIO) at its regional

Requirements)
(Amendment)
Regulations, 2014 w.e.f February 4, 2014
The aforesaid amendment to SEBI (Issue

of Capital and Disclosure Requirements)
221
and local offices to streamline the process of

attending to RTI applications for efficient and
time bound response. CAPIOs receive the
applications for information or appeals filed
in their jurisdictions under the provisions of
the RTI Act and refer the same to the CPIO.
Further, various information / statistics/

reports / discussion papers are also made
available in public domain from time to time,
in order to assist investors and researchers
working in the area of the securities market
to provide their inputs to further the vision
of SEBI of promotion and development of the
securities market.
Section 4 of the RTI Act casts obligation

on every public authority to make certain
disclosures on a proactive basis. SEBI has been
proactively making such disclosures. The focus
of the disclosure is transparency in working
and functioning of SEBI. In this regard, SEBI
has put in place various effective systems and
procedures viz. policy decisions and reform
measures taken by SEBI generally emanate
through extensive consultative processes
through various advisory committees. While
evolving policy changes, SEBI endeavors to
seek valuable comments from the investing
public and the stakeholders at large though
the public comments process.
SEBI has also been taking various

steps for ensuring the transparency in the
functioning of the exchanges and other market
participants. SEBI has through its various
Regulations, such as the ICDR Regulations
and the Insider Trading Regulations and
Takeovers Regulations ensured providing
maximum disclosure to the investing public
in order to take well informed investment
decisions. Further, the disclosure policy of
SEBI requires even the non-public entities,
not falling under the purview of the RTI Act,
to disclose on their respective websites and
otherwise, important details and updated
information on the material developments
and day-to-day operations including details
of redressal of investor grievances.
The SEBI website (www.sebi.gov.in) is

a veritable mine of information for investing
public, stakeholders and researchers alike.
Various sections of the website strive to serve
specific interests. Investor Education and
Awareness materials in various regional
languages and Frequently Asked Questions
(FAQs) on the SEBI website pertaining to
different areas of the securities markets enable
the investors and stakeholders to understand
and acclimatize themselves with the nuances
of the procedures and terminologies of the
securities market for taking a well informed
decision.
In respect of RTI applications received

by SEBI which are in the nature of complaints
/ seeking redressal of complaints, the office
of CPIO voluntary provides guidance to the
information seeker. SEBI endeavors for proper
and timely redressal of investor complaints
for which separate designated website for the
investor viz. http://investor.sebi.gov.in has
been set up. Further, SEBI has also launched
SCORES (SEBI Complaints Redress System),
a web-based, centralized grievance redress
system for the investors of the securities
market where an investor can make complaint
/ grievances in electronic mode on the SCORES
website (www.scores.gov.in) with facility for
online tracking of his complaint status.
All the relevant Acts, SEBI regulations

and various amendments from time to time
are available on the SEBI website and updated
from time to time. The various orders passed
by SEBI in its quasi-judicial role and the orders
of the Securities Appellate Tribunal (SAT)
and various Courts, as well as Orders of SEBI
Appellate Authority under RTI are promptly
uploaded on the SEBI website.
SEBI has endeavored to provide the

disclosable information within the stipulated
time and there has not been not even a single
222
X.
case of delay, although the information sought,

many times, is voluminous and contain
large number of issues pertaining to various
departments of SEBI in a single application.
Wherever felt appropriate, SEBI has provided
additional information / guidance voluntarily
to the information seeker about the securities
market.
The Parliament Cell-SEBI, interfaces

with the various Departments of GoI, for
addressing issues relating to parliament
questions, assurances thereof, references from
Honble Members of Parliament and other
references received through various Ministries
of the GoI.
The details of RTI applications and First

Appeal to SEBI AA during 2011-12, 2012-13
and 2013-14 are in Table 3.57:
A.
2011-12 2012-13 2013-14

2
No. of applications received 1,157

Total no. of issues raised in
applications
No. of appeals received by
the Appellate Authority,
SEBI
No. of orders passed by the
Appellate Authority, SEBI
No. of appeals rejected /
dismissed by the Appellate
Authority, SEBI
No. of appeals partially
allowed
975
1,099
4,468
4,152
4,622
294
216
254
304
225
243
227
168
210
76
57
35
Table 3.59: Parliament Queries Received

and replied by SEBI during
2013-14
The details of Appeals before Central

Information Commission (CIC) during 201112, 2012-13 and 2013-14 are given as under:
Table 3.58: Trends in Appeals before Central
Information Commission
Particulars
1
24
74
12
No. of appeals rejected /

dismissed by CIC
31
No. of appeals with

directions by CIC to furnish
part of information
43
Parliament
Session
Period
Admied
No. of
Questions Questions
received
3
Budget Session April 22

- Part II
May 10, 2013
30
26
Monsoon
Session
50
42
30
23
110
91
August 5 - 30,
2013
Winter Session December 5 20, 2013
2011-12 2012-13 2013-14
No. of appeals received by

CIC*
Parliament Questions
During 2013-14, SEBI received a number

of Parliament Questions, referred by the GoI,
mainly from MoF and Ministry of Corporate
Affairs. Of the 110 questions referred, 91
questions were admitted and SEBI furnished
information and material for reply/replies,
in a time-bound manner. The number of
parliamentary questions received sessionwise and replied by SEBI is shown in Table
3.59.
Table 3.57: Trends in RTI applications and

First Appeal to SEBI AA
Particulars
Parliament Questions
Total
B.
VIP and Other References
During 2013-14, references, complaints,

representations, received through various GoI
Offices, Honble Members of Parliament, etc,
were responded promptly. The tabulation of
the various references attended to is provided
in Table 3.60.
Note: * on the basis of Appeal Memo/ hearing notice received

from Appellant/CIC
223
Table 3.60: Data on Various References

Received and Responded to
during 2013-14
References
No.
VIP (MP) References

General References/representations
Newspaper/magazine articles related to
Securities Market
C.
as the Financial Stability Board (FSB), the

international body that has been mandated by
the G20 to promote implementation of financial
sector regulatory reforms in the world, and
the Joint Forum (JF), a co-operative crosssector group established in 1996 to deal with
issues common to the banking, securities and
insurance sectors, including the regulation of
financial conglomerates.
7
31
6
As a part of its other varying commitments

as the securities market regulator, SEBI on
several occasions, provided inputs to the
Government of India on international issues/
treaties and financial sector dialogues, hosted
and organized visits of foreign delegates,
international seminars and training programs.
Responses/ Materials to Committees
During 2013-14, SEBI provided the

required information and clarifications
as desired by Parliamentary Committees/
High Powered Committees in a time bound
manner. In 2013-14, 54 points/questions were
raised on Securities Laws Amendment Bill,
2013.
A.
Association with IOSCO
a.
IOSCO Board
The IOSCO Board, the governing body

of the IOSCO, is made up of 32 securities
regulators and SEBI is one of the members
of the IOSCO Board. SEBI participates in the
various work streams of IOSCO and makes
contributions to the policy decisions on
different issues pertaining to the securities
market. SEBI has its representations in six out
of the eight Policy Committees of IOSCO. SEBI
endeavors to implement the recommendations
made by IOSCO through its reports.
XI. International Co-Operation

In the financial year 2013-14, SEBI
continued to actively engage and contribute
to the ongoing works in the international
arena. Along with contributing towards the
substantive projects and issues, the past year
saw SEBI play a pivotal role in many areas:
at the bilateral, Asia-Pacific regional and
international levels.
SEBI continued to play a key role at
the various meetings and committees of the
IOSCO and, thus, strengthened its position
in the global space. Amongst other significant
work streams, SEBI also actively engaged in
co-operation on investigation / enforcement/
supervisory matters with other overseas
regulators under the framework of mutual
collaboration provided under the IOSCO
Multilateral Memorandum of Understanding
(MMoU) and several bilateral MoUs.
b.
Assessment Committee
SEBI plays a leadership role in the

IOSCOs Assessment Committee (AC) and is
currently the Vice-Chair of this Committee.
The AC has been formed in February 2012
to drive IOSCOs key strategic goal of being
the recognized standard setter for securities
regulation. The main objectives of AC are to
identify and assess implementation of IOSCO
Principles and Standards and to promote the
full, effective and consistent implementation
of IOSCO Principles and Standards across the
IOSCO membership. The main responsibilities
In addition, SEBI continued to make a

meaningful contribution as a member of the
leading international bodies and fora, such
224
and Assessment of Implementation of policy

recommendations for Money Market Funds.
of AC are to (a) conduct Thematic Reviews

of particular IOSCO Principles and IOSCO
Standards across IOSCOs membership; (b)
conduct Country Reviews and review Self
Assessments prepared by IOSCO Members
about the implementation of IOSCO Principles;
and (c) maintain and periodically update the
IOSCO Principles and related Methodology.
c.
Asia- Pacific Regional Committee
APRC is one of four regional committees

constituted by the IOSCO to focus on regional
issues relating to securities regulation. The APRC
comprises 25 members representing securities
regulators from the Asia-Pacific jurisdictions.
The ACs first thematic review was on the

Implementation of IOSCO Principles 6 and 7.
SEBI was one of the members in the Review
Team formed for conducting this Review. SEBI
had also participated in this Review. During
the year 2013-14, AC has started several
thematic reviews.
Chairman SEBI, Shri U. K. Sinha was

elected as Chair of the IOSCO Asia- Pacific
Regional Committee (APRC) in its meeting
held in Beijing, China during May 2012. Shri
U. K. Sinha was the Chair of the APRC till
April 2013.
During the year 2013-14, APRC met three
times. The first meeting in 2013 - 14 held in
New Delhi during April 29 - May 1, 2013 was
chaired by Shri U. K. Sinha and was hosted
by SEBI. The detail of the meeting is given in
Box 3.5.
SEBI is a member of the Review Team

formed for the thematic reviews on the
assessment of the regulatory requirements
about the timeliness and frequency of
disclosures by issuers and collective investment
schemes under IOSCO Principles 16 and 26
The IOSCO Asia Pacific regional Committee meeting held in New Delhi in April
April, 2013
225
Box 3.5: IOSCOs Asia-Pacic Regional Commiee Meeting, New Delhi

The three day APRC meeting held in New Delhi aimed at further enhancing mutual cooperation, exchange of
information and highlighting common issues of concern amongst the securities market regulators of the Asia-Pacic
region, one of the fastest growing regions of the world.
The event began with an Enforcement Directors (ED) Meeting on April 29, 2013, that provided a platform for the
regulators to share the insights on the recent enforcement trends, innovative investigative techniques and the need for
enhanced cooperation amongst the regulators to strengthen the enforcement network in the region. The ED meeting
was organized into two themes: Insider Trading Regulatory Framework and Recent enforcement trends & innovative
tools and techniques. The regulators shared their insights and shared information on the use of new techniques and
technology to deal with investigation and enforcement. The ED meeting also stressed the need to further enhance the
information sharing mechanism in the region.
The APRC meeting held on April 30, 2013 was chaired by Mr. U. K. Sinha, Chairman, SEBI. The meeting underscored
the potential strong growth of securities markets in the future and the importance of securities regulators engaging
with one another both at the global and at the regional level. The meeting was preceded by a Roundtable on
Regulatory inconsistencies in Asia/Pacic Region-Scope and Extent? What needs to be done from policy perspective? The
Roundtable highlighted the importance of having consistency in their regulatory policies and their implementation
with a view to reduce the possible regulatory arbitrage across the jurisdictions in the region.
Towards the end of the Meeting, the APRC chairman, Mr. Sinha summarized the initiatives taken by the APRC
Secretariat to increase cooperation amongst regulators of the region. Such initiatives include Industry roundtable to
deliberate issues of common interests, quarterly issuance of APRC Digest, Creation of central Enforcement Database,
Public Seminars, revival of Enforcement Directors meeting amongst others. So far more than 100 cases have been
posted into the database by 8 jurisdictions.
The Meeting concluded with the IOSCO APRC Public Seminar on May 01, 2013 where regulators and market
participants met to share their perspectives on the following two public panel discussions:
1.
IPOs in Asia: Role of regulators in ensuring fairness and alignment of interests of various stakeholders;
2.
Regulation and Innovation: Striking a balance from securities market perspective.
d.
Growth and
Committee
Emerging
In order to ensure that the GEM

Committee is effective in achieving its
strategic objectives, including strengthening
market development and capacity building
of its members, deepening regulatory policy
work on emerging market issues and having
a much stronger voice at global regulatory
discussions, it was decided to form a Steering
Committee within the GEM Committee. SEBI
is a member of the GEM Steering Committee
and participates in the various work streams
of the GEM Steering Committee.
Markets
Growth and Emerging Markets (GEM)

Committee of IOSCO comprises 85 members
which constitute more than 80 percent of IOSCOs
ordinary membership. The EMC members also
represent the worlds fastest growing economies
and include 10 of the G-20 members. SEBI is a
member of the GEM Committee.
During 2013-14, the GEM Committee
met two times. The first meeting was held in
Panama City on May 21, 2013. The members
of the GEM Committee had a Roundtable on
Emerging Risks. The second meeting of the
GEM Committee during 2013-14 was held
on September 15, 2013 during the IOSCO
Annual Conference held in Luxembourg. The
members discussed the future role of the GEM
Committee.
e.
Policy Committee 4 and Screening

Group Meeting
IOSCO
Screening
Group
and
Committee 4 (Committee on Enforcement
and the Exchange of Information) Meeting
was held in Mumbai during May 14 - 16,
2013. SEBI hosted the meeting.
226
Participants at the IOSCO Screening Group and Committee 4 Meeting held in Mumbai
B.
Association With G-20 / Financial

Stability Board
as (a) Building resilient financial institutions;

(b) Ending too-big-to fail; (c) Shadow Banking;
(d)
Making
derivatives
markets
safer; (e) Benchmark Reforms; and
(e) Accounting and auditing.
The Financial Stability Board (FSB) is

an international body established to address
financial system vulnerabilities and to drive
the development and implementation of
strong regulatory, supervisory and other
policies in the interest of financial stability.
One of the main mandates of the FSB is to
implement G-20 Policy announcements on
financial regulation.
The FSB Regional Consultative Group

for Asia held its meeting on October 30, 2013
in Tokyo, Japan and reviewed the FSBs policy
priorities and work plan. SEBI participated
in the FSB meetings and FSB RCG for Asia
meeting held in 2013-14. Further, SEBI
provides comments to the Ministry of Finance
on various FSB issues since the MoF is also a
member to the FSB from India.
SEBI is a member of the Plenary and

Regional Committee Group- RCG (Asia) of the
FSB. During 2013-14, FSB Plenary met three
times. The FSB met in Basel on June 24, 2013,
Moscow on November 8, 2013 and London on
March 31, 2014. At its various meetings, the FSB
discussed vulnerabilities affecting the global
financial system and reviewed work plans for
completing the core financial reforms such
Since the onset of the global financial

crisis, the G-20 has established core elements
of a new global financial regulatory framework
that will make the financial system more
resilient and better able to serve the needs
of the real economy. National authorities
227
where the CCP is recognized by European

Securities Markets Agency (ESMA). For
recognition of a non-EU CCP, the EC has
to be satisfied that the countrys legal and
supervisory framework (including regulations
and laws) are equivalent to EMIR. Also the
jurisdiction in which CCP is established needs
to have equivalent systems for anti-money
laundering and combating the financing of
terrorism. The last date for submission of
applications by CCPs for obtaining recognition
was September 15, 2013. CCPs from India
have already submitted their applications for
obtaining the said recognition. SEBI is also in
touch with the European authorities, in this
regard.
and international bodies, with the Financial

Stability Board (FSB) as a central locus of
co-ordination, have further advanced the
financial reform programme, based on clear
principles and timetables for implementation.
Major international policy reforms of FSB have
now globally been agreed, to address risks
and strengthen regulation across the financial
sector.
FSB adopts, inter-alia, survey /
questionnaire methodologies in order to
obtain inputs for recommending policies,
ascertaining the feedback and status of the
recommended policies. During 2013-14, SEBI
provided responses to various FSB surveys/
questionnaires.
C.
The issue of extra territorial reach of EMIR

was actively debated at the APRC Meeting
last year under the Chairmanship of Shri U.K.
Sinha. Pursuant to these discussions, the issue
has been collectively taken up by SEBI and
other APRC jurisdictions with the European
Commission and the ESMA Authorities.
Joint Forum
The Joint Forum is a co-operative crosssector group which was established in 1996 by
its three parent bodies, the Basel Committee
on Banking Supervision (BCBS), the IOSCO
and the International Association of Insurance
Supervisors (IAIS), to deal with issues common
to the banking, securities and insurance
sectors, including the regulation of financial
conglomerates. SEBI is a member of the Joint
Forum since February 2012. The Joint Forum
has recently been working on areas relating
to longevity risk transfer markets, mortgage
insurance and point of sale disclosure in the
insurance, banking and securities sector.
D.
Engagement
Authorities
with
E.
Bilateral Engagements
Along with its engagements at the

multilateral levels, SEBI has also entered
into bilateral MoUs with a cross-section of
jurisdictions. Such bilateral agreements, while
further strengthening and consolidating the
existing communication channels, pave the
way for enhanced mutual co-operation in
respect of a variety of matters pertaining to
supervision, investigation, enforcement and
technical assistance in the securities markets.
European
The European Parliament and the

Council adopted the European Market
Infrastructure Regulations (EMIR) on July 4,
2012. These Regulations came into force on
August 16, 2012. Article 25(1) of the European
Market Infrastructure Regulations (EMIR)
states that a CCP established in third country
may provide services to clearing members or
trading venues established in the Union only
a.
MoU with Comisin Nacional de

Valores, (CNV) Argentina
SEBI signed a bilateral Memorandum of

Understanding with the Comisin Nacional
de Valores, (CNV) Argentina. The MoU
was signed by Mr. U.K. Sinha, Chairman,
SEBI and Mr. Alejandro Vanoli, Chairman,
Comisin Nacional de Valores, Argentina on
228
September 16, 2013, during the 38th IOSCO

Annual Conference held in Luxembourg. The
MoU between SEBI and CNV seeks to promote
mutual assistance and exchange of information
with a view to facilitate the development of
deeper and broader capital market, enhance
greater cross-border activities and attain
closer regulatory co-operation between two
jurisdictions in a mutually beneficial manner.

The MoU also seeks to establish and implement
technical assistance and training program,
for an effective development of regulatory
framework for securities markets in the two
jurisdictions. As on March 31, 2014, SEBI has
signed bilateral MoUs with 18 Jurisdictions and
one letter of Intent for mutual cooperation.
SEBI signs bilateral Memorandum of Understanding with Comisin Nacional de Valores,

Valores
Argentina at the sidelines of the IOSCO Annual Conference held in Luxembourg
b.
MoU with SIDC
On the sideline of IOSCO Annual

Conference, SEBI discussed with Securities
Commission, Malaysia (SC) various avenues
of mutual co-operation and interaction
with a view to promote inter-regulatory
understanding and capacity building. After
deliberations, it was agreed that the education
and training arm of both SEBI and SC,
namely NISM and SIDC respectively may
consider entering into a Memorandum of
Understanding (MoU) for realizing mutual

goals towards financial education, research,
training and such other activities related to
the securities markets. The scope of the MoU
covers areas of:
229
Financial literacy including investor

education and raising awareness about
the securities market among the public
in general;
Assisting intermediaries to impart

necessary skills to their staff through
various programs, including workshops,
webcasts, conferences and seminars;
Designing
and
conducting
examinations / certifications for staff of
intermediaries
Training staff of regulators on

various aspects of policy, regulation,
supervision, inspection and any other
area of securities or financial market
regulatory processes;
Conducting focused and specialized

training and joint educational programs
on request from each other or on third
party referrals;
policy-makers and such other bodies

and research in topics pertaining to
the securities markets and the financial
sector, and their publication through
monographs, reports, papers etc.
F.
Conference on Investor Protection in

Capital Markets
SEBI, jointly with German Federal

Financial Supervisory Authority (BaFin) and
Deutsche Gessellschaft Fuer Internationale
Zusammenarbeit (GIZ) GmbH, had organised
a regional conference on the topic of Investor
Protection in Capital Markets during October
28-29, 2013 at Mumbai.
The Regional Conference was attended
by approximately 175 participants (including
participants
from
stock
exchanges,
depositories, mutual funds, stock brokers,
merchant bankers, corporate representatives
etc.) and included around 50-60 international
participants from Germany, China, Japan,
Indonesia, Vietnam, Hong Kong, Sri Lanka,
Maldives, Italy and Mongolia (Box 3.6).
Fostering corporate governance through

workshops, conferences, seminars for
raising awareness and standards of
market integrity; consultancy pertaining
to the securities markets and the
financial sector for staff of regulators,
230
Box 3.6: Conference on Investor Protection in Capital Markets

The conference was an opportunity for regulators of the Asia-Pacic region to share knowledge and experience and
to discuss measures to improve investor protection. It also provided a comparative perspective from European/
German experiences on the important topics related to investor protection. The various areas covered in the
conference included new trends in capital market regulation; investor education; disclosure, transparency and
other regulatory measures to prevent mis-selling of nancial products; dispute resolution regime & mediation and
arbitration; investor compensation funds; and stock exchange surveillance.
The conference was aended by the representatives of various regulators, policymakers, international standard
seing bodies, market participants as well as other stakeholders and shared their knowledge and experience and
discussed measures to improve investor protection. It also provided a comparative perspective from European/
German experiences on these important topics. Speakers of the conference were the representatives from regulatory
authorities, stock exchanges, market participants and other stakeholders from several Asian and European countries
as well as international organizations.
g
Se Left: Mr. Stephen

Seen
Helming, Country Director
He
India, GIZ lighting the
In
lamp at the Regional
lam
Conference along with Mr.
Co
U.K Sinha, Chairman SEBI,
U.
Mr. Karl-Burkhard
M
Caspari, Executive
Ca
Director, BaFin and Mr.
Di
Thorsten Giehler, Project
Th
Director Emerging Markets
Di
Dialogue Asia, GIZ
Di
Seen Right: Regional

Conference on Investor
Protection in Capital
Markets organized by SEBI
along with GIZ and BaFin,
held in October, 2013 at
Mumbai
231
G.
Ministry References: Contribution

to various International Treaties and
Dialogues
between India and Argentina, Indo-Canada

Economic and Financial Sector Policy, U.S.India Economic and Financial Partnership
Dialogue, 6th India-China Financial Dialogue,
India-France Economic and Financial Dialogue,
India- Norway Bilateral Consultation, 4th
India - Republic of Korea Finance Ministerial
meeting, India- EFTA Trade and Investment
Agreement, 10th Joint Commission Meeting
between India and Saudi Arabia and 7th IndiaEU Macro Economic and Financial Dialogue.
The ever increasing globalization and

interconnectedness of financial markets calls
for newer and dynamic levels of regulatory
co-operation at varying stages. Towards this
objective, SEBI along with the Government
of India (GoI) and other regulatory bodies,
was seen to make its own set of contributions.
During the year, SEBI continued to contribute
towards an effective and useful engagement
with the GoI as regards various international
treaties, under consideration by the GoI for
areas related to the securities markets.
SEBI hosted the second Indo-US

Financial & Regulatory Dialogue held during
February 6-7, 2014 at the SEBI Headquarters in
Mumbai. From the US side, the said meeting
saw the participation of delegates from the
US Treasury, the Federal Reserve, Commodity
Futures Trading Commission, the Securities
and Exchange Commission, etc. From the
Indian side, the delegation comprised
representative from the Ministry of Finance,
RBI, SEBI, IRDA, FMC, PFRDA, etc.
In this direction, SEBI provided its

inputs to the Ministry of Finance on various
issues, agenda items and topics relating
to the securities markets, for a number of
bilateral dialogues thorough the year. A few
such treaties and dialogues include the 4th
round of Joint Commission Meeting (JCM)
The 2nd Indo-US Financial and Regulatory Dialogue, February 06 - 07, 2014, SEBI Bhavan, Mumbai
232
H.
Policy Dialogue with Organisation

for Economic Co-operation and
Development (OECD)
in the regular work of the OECD Corporate

Governance Committee and continued
involvement in the Asian Roundtable on
Corporate Governance (Box 3.7).
In 2011, India and the OECD launched a

bilateral dialogue to deepen policy discussions
between the OECD and key decision-makers in
India. It supports policy makers by assessing
key market practices and policy trends that may
be detrimental to sound corporate governance.
It also supports implementation by offering
recommendations and policy options based
on a comparative analysis. Furthermore,
the program facilitates closer engagement
One of the primary goals of the Policy

Dialogue is to support policy-makers in
their ambitions to improve monitoring and
prevention of abusive related party transactions,
as part of overall efforts to improve corporate
governance standards and practices in India.
SEBI is the main partner, with the Ministry
of Corporate Affairs, stock exchanges and
professional associations also participating.
Asian Roundtable on Corporate Governance in Mumbai - February 2014

(L to R): Mr. Prashant Saran, Whole-Time Member, SEBI along with Mr. William Danvers, Deputy Secretary-General, OECD
I.
Participation in International Programs
seminars held by international bodies.

The purpose to nominate SEBI officials to
these programs is to share their expertise at
renowned forums and to further strengthen
the global image of SEBI as reliable source
of knowledge and its competent human
resources.
SEBI officials have been invited

to participate as Speakers / Panelists at
many accredited international seminars
and conferences. During 2013-14, SEBI
nominated its officials as Speakers /Panelist
in overseas training programs/ conferences/
233
Box 3.7: Asian Roundtable and SEBI-OECD Conference on

Corporate Governance in Mumbai - February, 2014
SEBI co-hosted the Asian Roundtable on Corporate Governance on February 11 - 12, 2014 and it also hosted the
SEBI-OECD Conference on Corporate Governance on February 13, 2014. The Conference brought together senior
government ocials and regulators from Asian countries, private sector representatives, practitioners and academics
from the region and international institutions.
The Roundtable began with Mr. Prashant Saran, Whole-Time Member, SEBI stressing how the Asian region has
come a long way in enhancing Corporate Governance standards in the region and that a wide range of laws and
regulations have been enacted, standards have been developed and enforcement has been strengthened to increase
the Corporate Governance standards. Mr. Prashant Saran highlighted the importance of OECD Principles on
Corporate Governance which have become international benchmark for policy makers, corporations, investors and
other stakeholders.
Mr. William Danvers,
Mr
Deputy Secretary - General,
De
OECD applauded SEBIs
OE
initiative to undertake
ini
extensive consultations for
ext
improving and introducing
im
the ambitious provisions
of Corporate Governance
for listed companies in
sync with international
syn
standards. Mr. William
sta
Danvers, emphasized that
Da
Corporate Governance in
Co
Asia is of global importance
As
and developments in
Asia resonate around the
As
world.
wo
Above: Participants at the Asian Roundtable on Corporate Governance in Mumbai

Below: Concluding Session in SEBI-OECD Conference on Corporate Governance
The various sessions in

Th
the Roundtable addressed
several of the special
sev
characteristics
of Asian
h
markets, such as the
ma
prevalence of concentrated
pre
ownership, notably by
ow
the state and families and
how corporate governance
policies,
regulations,
pol
enforcement and practices
enf
have evolved and should
hav
be adjusted to t the
particular challenges and
par
opportunities associated
opp
with such characteristics.
wit
There were small group
The
discussions which focused
dis
on Asian experience with
the OECD Principles of
Corporate Governance and
Co
drew out aspects that could
dre
be taken into consideration
during
the
revision.
du
234
The SEBI-OECD Conference on Corporate Governance began with discussions on global institutional investor
landscape as most OECD countries have witnessed a signicant rise in the institutional ownership of publicly listed
companies along with the more traditional institutional investors, such as pension funds and investment funds.
The various sessions in the Conference concentrated on the business model of the Institutional Investors in India
which determines their quality of ownership engagement in the companies along with further issues pertaining to
adequacy of information, fundamental incentives for Institutional Investors to make active and informed decisions.
The Conference concluded with Mr. S. Ravindran, Executive Director, SEBI stressing SEBIs commitment to further
enhance the Corporate Governance standards in the country and how SEBI has borrowed from the OECD Principles
on Corporate Governance and adapted the same to suit Indian scenario.
J.
MMoU Requests
Table 3.61: Trends of Regulatory Assistance

made and received by SEBI
As a crucial part of its commitment

towards the IOSCO Multilateral Memorandum
of Understanding Concerning Consultation
and Co-operation and the Exchange of
Information (MMoU), to which SEBI has been
a signatory since April 2003, SEBI provides
co-operation and facilitates exchange of
information with its counterparts in other
jurisdictions.
Type of References
1
Requests Received by SEBI

from Foreign Authorities
37
40
94
17
Requests Made by SEBI
During 2013-14, SEBI received a total of

94 requests for information from the overseas
securities regulators seeking SEBIs assistance.
SEBI addressed and executed such requests,
subject to the provisions of the MMoU.
Similarly, 17 such requests were made by
SEBI to the counterpart regulatory bodies of
other jurisdictions. The Table 3.61 highlights
the past trends of Regulatory Assistance made
and received by SEBI over the last 3 years.
2011-12 2012-13 2013- 14
K.
Foreign delegations / Dignitaries to

SEBI
To promote mutual collaboration

and establish deeper levels of regulatory
co-operation, and to facilitate a better
understanding of the Indian securities
markets, SEBI played host to a number of
important dignitaries and delegations of
overseas regulatory bodies / agencies.
235
Chairman SEBI presenting a memento to the Lord Mayor of City of London
The authorities from which delegations

visited SEBI during the year include the
US India Business Council, Non-Bank
Financial Institutions Regulatory Authority
of Botswana, British High Commission,
Bangladesh
Securities
and
Exchange
Commission, Australian Treasury, Lord Mayor
of City of London and Securities & Exchange
Commission Nigeria. The Lord Mayor of City
of London and other delegates visited SEBI on
January 20, 2014 for sharing information and
engaging discussions on the best practices

and the recent developments in the capital
markets in their respective jurisdictions.
A delegation from SEC Nigeria led by
their Director General, Ms. Arunma Oteh,
visited SEBI for Study Tour on December 12
and 13, 2013. SEBI shared the information on
the regulatory frameworks and the Indian
experiences on various topics relating to
securities markets with the delegates.
236
Study visit of a High Level delegation from Securities and Exchange Commission,
Nigeria at SEBI, Mumbai, December 12 - 13, 2013
I.
XII. National Institute of Securities Markets

The activities of National Institute of
Securities Markets (NISM) are dedicated
towards
enhancing
the
quality
of
participation in securities markets within the
broad framework of its vision, mission and
philosophy. This involves development of
knowledge and skill base of all stakeholders,
which in turn embodies NISMs spirit of
commitment to achieve these objectives.
School for Securities Education (SSE)

and School for Securities Information
and Research (SSIR)
Activities and initiatives of SSE and SSIR,

broadly can be encompassed into three areas
viz., Education, Training and Research.
A.
Education
During the Academic Year 2013-14, SSE

offered four long-term programmes. Postgraduate Programme in Securities Markets
(PGPSM) is a one-year fulltime Post-Graduate
Programme for students aspiring careers
in securities markets. Currently, Batch IV
of PGPSM: 2013-14 is underway. NISM has
entered into a MoU with ICICI Bank Ltd.
since 2011, for conducting an exclusive one-
The activities of NISM are carried out

though its six schools and National Centre for
Finance Education (NCFE). The school-wise
information and data in relation to activities,
programmes and initiatives undertaken by
NISM during the year 2013-14 is given below:
237
training on Securities Markets for 66th Batch

of IRS from NADT and Indian Corporate Law
Officers (ICLS). Pursuant to an MoU signed
with ICSI for undertaking various initiatives
for capacity building in securities markets,
NISM conducted two training programmes
for ICSI members viz., Securities Law
Documentation and Compliance with Listing
Agreement.
year fulltime programme, Post-Graduate

Certificate in Securities Market (PGCSM),
for applicants seeking various roles in ICICI
Group. NISM has successfully completed two
batches of PGCSM.
Certificate in Financial Engineering
and Risk Management (CFERM) is offered
over weekends spread over nine months
and also on contact modules format which
is spread over a years time. Currently, Batch
V are undergoing their academic sessions.
CFERM is benchmarked with the best content
and is listed in the International Association
of Financial Engineers (IAFE) site and has
also been appreciated by the Public Pension
Authority of Saudi Arabia. CFERM is now a
recognized qualification for the Certificate
in International Investment Analyst (CIIA)
programme of ACIIA, Switzerland. Certificate
in Securities Law (CSL) offered as a part-time
programme for working executives, across 26
Saturdays.
C.
Research activities carried out in

Academic Year 2013-14 included publication
of research papers and project research.
Research papers: During 2013-14, a
number of Research papers were published by
NISM faculty during the year in international
journals and presented in national and
international conferences. A few of them are
listed below:
NISM had received recognition as a

Research Centre for PhD studies, by the
Symbiosis International University, Pune.
In order to enrich the education processes,
NISM entered into a number of collaborative
relationships with the following national and
international organizations viz. ICSI; National
Academy of Direct Taxes, Nagpur; Indian
Corporate Law Service Academy, Manesar;
CFA Institute, USA; Chartered Institute of
Securities and Investment, UK.
B.
Research
a.
Factors Affecting the SMILE Effect

and Implied Volatility in the Context
of Option Pricing Models presented at
the Actuarial & Financial Mathematics
Conference, is published by the Royal
Flemish Academy of Belgium for Science
& Arts;
b.
Affine and Modular Option Pricing:

An Integration of Stochastic Factors
Affecting Option Prices, published
in Journal of Financial and Economic
Practices, (Springer, Fall 2013);
c.
Outstanding Paper Presentation award for

An Unified Risk Management Framework
for Option Valuation: A Fourier Transform
Approach presented at International
Mathematical Finance Conference 2014,
at Bradley University, USA;
d.
A paper titled Structure of the Indian

Corporate Bond Market: A Post 2005
View was published in the Jan-June 2013
issue of International Economics and
Training
SSE carved out six training programmes

from various subjects being taught in the
various long-term programmes of SSE. The
training programmes benefited over 200
professionals and included Behavioural
Finance for Principal Retirement Solutions,
Financial Derivatives and Risk Management
for SBI Societe Generale Global Securities,
238
training on Compliance of SEBI Regulations

was provided for officers of banks and a
workshop was conducted for Mutual Fund
Trustees and Independent Directors.
Finance Journal (IEFJ), a peer-reviewed

publication, Peking University;
e.
Reference Price Effect in Indian Mergers

& Acquisitions presented at the Indian
Econometric Society Conference at
IGIDR, Mumbai;
f.
Can Business Groups Survive with

Institutional Development: Theory and
Evidence presented in India Finance
Conference and Emerging Markets
Finance Conference;
g.
Economic Shocks, Fund Flows and

Market Returns presented at the NYU
NSE Indian Capital Market Conference
at Mumbai.
NISM also organised various lectures

for the benefit of middle and senior officers
of SEBI during the year. This included
Program on Risk Management: International
Perspective, by Prof Richard Flavel, a
renowned international risk management
expert;
Talk on Designing the Future
Perfect, by Prof Tyrone Pitsis of Newcastle
University Business School, UK; and Talk
on Integrity at Work, by Prof. Kevin Moore,
Director with Chartered Institute of Securities
and Investment.
III. School for Investor Education and
Financial Literacy (SIEFL)
Project Research
In order to influence policy and practice,
NISM faculty engaged in the following
research projects:
a.
The Study on Arbitration Mechanism

in Stock Exchanges and Depositories
submitted to SEBI;
b.
Associated with SEBI for organising the

First International Research Conference
with SEBI on Algorithmic Trading, High
Frequency Trading and Co-Location in
January 27-28, 2014.
A.
Refresher Workshop for SEBI Financial

Education Resource Persons
During the year 2013-14, NISM organised

two Review Workshops covering 69 SEBI
Financial Education Resource Persons at
Bengaluru and New Delhi.
B.
Investor Education Sessions
During the year, NISM organised

investor education / careers in securities
markets sessions at 25 management/academic
institutions/colleges.
II. School for Regulatory Studies and

Supervision (SRSS)
IV.
During year 2013-14, NISM conducted 12

training programmes/workshops in addition
to three one-day talks arranged for officers
of SEBI. Training programmes for 149 mandays were conducted for the benefit of 639
participants. Apart from the various induction
programmes, training was also provided to
SEBI officers on overview of securities market,
International Financial Reporting Standards
and Macro Economic Review. In addition,
School of Certification of Intermediaries

(SCI)
The School for Certification of

Intermediaries (SCI) set up at NISM is involved
in developing certification examinations for
professionals employed in various segments
of the Indian securities markets. These
examinations are being developed by NISM
as mandated under SEBI (Certification of
Associated Persons in the Securities Markets)
Regulation, 2007.
239
V.
School
(SCG)
for
Corporate
Governance
size of 75,000 people covering all the states

and UTs of India is being carried out through
a survey agency, for assessing the state of
financial inclusion and financial literacy.
NISM has entered into an MoU with

ICSI for undertaking various activities in
capacity building for securities markets.
One of the initiatives in this regard is to
organise conference on Ethics and Corporate
Governance at strategic centres. During
the year, four conferences were organised
at Mumbai, Delhi, Chennai and Kolkata in
association with ICSI. The deliberations at
these conferences focused on three aspects of
the topic Ethics and Corporate Governance
viz. Regulatory Perspective, Practitioners
Perspective and Academic Perspective. Senior
functionaries from the industry spoke on these
occasions.
C. Financial Education through school

curriculum
The Core Committee for implementation
of NSFE now has representation from NCERT
and both the major education boards in
India, CBSE and ICSE. The boards have been
actively and regularly participating in the
discussions of the Core Committee. NCERT
has already developed supplementary
material on Personal Finance for school
students.
NISM has been in continuous dialogue
with NCERT to facilitate the inclusion of
the financial literacy material as a part of
the compulsory syllabus. It has proposed
to introduce the concepts of finance in an
integral manner in their school curriculum
from Class VI to X. To facilitate this process,
NISM has formally approached NCERT and
MHRD to get representation in the National
Curriculum Framework Committee that is
due to be constituted in 2014 and as apprised
by NCERT efforts are on for taking this
matter forward.
VI. National Centre for Finance Education

(NCFE): Activities during 2013-14
A.
NCFE National Financial Literacy

Assessment Test (NCFE-NFLAT)
NCFE invited all school students in

India, from classes VIII to X to participate in
the NFLAT, a first of its kind national level
assessment to measure the financial literacy
quotient in a range of concepts like inflation,
compounding, basic money management,
banking, insurance, pension, etc. The response
was overwhelming with around 1,00,000 plus
students and 2,000 schools registering from
all over the country. The test was conducted
in partnership with IBPS over two days, 11th
and 12th January, 2014. Results of the test were
declared on 23rd January 2014.
B.
NCFE Financial Education Website

(NCFE-FEW)
The NCFE website (www.ncfeindia.
org) was recently inaugurated by Dr. K C
Chakrabarty, Chairman, Technical Group on
Financial Inclusion and Financial Literacy of
the Sub-Committee of the FSDC and Deputy
Governor, RBI. Currently, the website is
being enriched to be developed into a one
stop repository for all the financial education
material and actions.
NCFE Financial Literacy and Inclusion

Survey (NCFE-FLIS)
As a very first step towards improving

financial literacy and inclusion in India, a
nation-wide baseline survey with a sample
240
PART FOUR: ORGANISATIONAL MATTERS OF THE SECURITIES

AND EXCHANGE BOARD OF INDIA
1.
SEBI BOARD
2.
In pursuit of high standards of

governance and transparency, the SEBI Board,
in its 127th meeting held on September 22,
2009, constituted an Audit Commiee to
exercise oversight of SEBIs nancial reporting
process and disclosure of its nancial
information. The Commiee comprises three
members nominated by the Board. The tenure
of the members of the Commiee is two years.
The Commiee is presently chaired by Shri
Naved Masood. Shri Rajeev Kumar Agarwal
(Whole Time Member, SEBI) and Shri Prakash
Chandra Chhotaray (Retired Chairman,
Income Tax Selement Commission) are the
other two members. Shri Naved Masood was
nominated to the Commiee by the Board in
its meeting held on February 13, 2014, in place
of Shri V. K. Jairath. During the nancial year
2013-14, the Commiee held four meetings.
During 2013-14, the Government of

India vide notication dated February 6, 2014
extended the tenure of appointment of Shri U.
K. Sinha as Chairman of SEBI with eect from
February 18, 2014 for a period of two years or
till the age of 65 years or until further orders,
whichever is earliest.
Shri V. K. Jairath, Part-Time Member,
relinquished the oce on expiry of his term
of appointment on December 31, 2013. Shri
Anand Sinha, Part-Time Member, ceased to
be a Member of the Board consequent to his
retirement from the Reserve Bank of India on
January 18, 2014.
During the year 2013-14, SEBI Board met
on six occasions. (Table 4.1)
Table 4.1: Board Meetings during 2013-14
Number of
Meetings
(i)
AUDIT COMMITTEE
The Commiee has the mandate to review:-
Held
Aended
The internal audit reports with the

management and the internal auditors;
The quarterly statement of accounts of

SEBI;
Shri Prashant Saran
Shri Rajeev K. Agarwal
Shri S. Raman
The action taken by the management

to rectify deciencies and implement
suggestions as pointed out by the internal
auditors;
The investment policy of SEBI.
Dr. Arvind Mayaram
Shri Naved Masood
Shri P. C. Chhotaray
Chairman
Shri U. K. Sinha
(ii) Whole Time Members
(iii) Members
During the year, the Audit Commiee

through its review as above helped in bringing
improvements in the internal control systems.
During the year, as recommended by the
Audit Commiee, a comprehensive review
was undertaken by an internal Commiee viz.
Commiee on Rationalisation of Financial
Notes: 1. Shri V. K. Jairath aended 4 out of 4 meetings held

during 2013-14, prior to his demiing the Oce of
the Part-Time Member.
2. Shri Anand Sinha aended 3 out of 4 meetings held
during 2013-14, prior to his demiing the Oce of
the Part-Time Member.
241
Resources (CRFR) of SEBI, for augmentation

and rationalization of the nancial resources.
CRFR was constituted for rationalization of
nancial resources with following terms of
reference:
manpower needs of SEBI. The SEBI Board

thereby approved engagement of an external
consultant, M/s Oliver Wyman, to study and
make appropriate recommendations in the
areas of:
Identication of areas of focus for

regulatory oversight;
To review the expenditure so as to

align with the thrust areas and growing
organisational and regulatory needs.
Developing a best suited organisational

structure;
Dening a new human resource model;
The Commiee has submied its Report

to the Board in its meeting held on March 20,
2014.
Identication of technological needs and

resources;
Development of a mechanism to share

regulation and oversight with SROs.
To examine the present revenue sources

and suggest measures for harmonization
of resources in line with the evolving
market structure; and
During the year, the Audit Commiee

has reviewed and discussed the annual
statement of accounts of SEBI for the year
2013-14 with the management of SEBI and
internal auditors. Relying on the review and
discussions conducted with the management
and internal auditors, the Audit Commiee
believes that SEBIs annual statements of
accounts are fairly presented in conformity
with the Generally Accepted Accounting
Principles (GAAPs) in all material aspects.
The Commiee also reviewed the internal
control systems put in place and expressed its
satisfaction with the same. The members of
the Commiee discussed among themselves,
without the management or the internal
auditors being present, the information
disclosed in the Annual Statement of Accounts.
The Commiee fullled its responsibilities in
compliance with its charter.
3.
Based on its ndings, the consultant

has made several recommendations. The
key recommendations, included greater
focus on mobilising household savings into
capital market assets, enhanced focus on
supervisory functions, oversight of listed
companies, re-organisation of functional
departments, increase in manpower, IT
strategy for organisational eciency and
improving
training
and
performance
management system. The recommendations
were considered and approved by the Board
in its meeting held on August 12, 2013.
A Project Management Oce has been
set up to look aer the implementation of the
recommendations made by the consultant.
The Project Management Oce has initiated
steps to implement various action points in
phased manner.
ORGANISATIONAL RESTRUCTURING
CELL AND PROJECT MANAGEMENT
OFFICE
4.
HUMAN RESOURCES
Human Resources Development (HRD)

Division continued to play an important role
with prime focus on implementation of policies
on capacity-building, training, promotions,
placements and transfers.
SEBI had engaged an independent

consultant to revisit the structural and
organisational issues, re-prioritize areas of
focus and to look at the technological and
242
Part Four: Organisational Maers of SEBI
I.
Staff Strength, Recruitment, Resignation
III. Promotions
During the current year, promotion
exercise at various levels was undertaken.
(Table 4.2)
As on March 31, 2014, SEBI has a total of

756 employees in various grades 662 ocers
and 94 secretaries and other sta. During the
nancial year 2013-14, SEBI has recruited 110
ocers in Grade A in an eort to augment
its sta strength in various areas. SEBI has
also appointed one Executive Director on
deputation and one Security co-ordinator on
contract during the year. During the year, six
employees - ve ocers and one secretarial
sta- resigned from the service of the Board.
II.
Table 4.2: Promotions of Officers during the

year
From
To
No. of Persons
Promoted
Benefits
Many benets have been revised or

introduced during the year for sta members.
Entitlement limits under Leave Fare
Concession scheme, halting allowance for
ocers while on tour, and the Special Advance
scheme have been revised. Entitlements under
medical reimbursement (non-hospitalisation
claims) scheme and Group Personal Accident
Insurance Policy have also been revised. Car
facility outside place of posting for private
use by EDs and above and facility for availing
advance for lodging and halting allowance
upon transfer have been introduced during
the period.
GM
CGM
DGM
GM
AGM / Asst.
Director
DGM / Deputy
Director
The exercise of switchover of secretarial

sta to ocer cadre was also undertaken
during the year. Seventeen sta members were
promoted to Ocer cadre from Secretary/
Account Assistant cadre through switchover
exercise.
IV. Strengthening of Regional / Local
Offices
During the year, 34 ocers, including
six Division Chiefs, have been transferred to
various regional / local oces of SEBI.
V.
HRD division always endeavours to

encourage the employees of the Board to
pursue higher studies and upgrade their
skills. As such, collaboration was made with
CFA Institute, USA for the CFA certication.
Accordingly, 24 enrolments have been made
for the CFA course during the year under
the collaboration. The list of courses of
study available under the scheme of benets
for acquiring professional qualications
/ certications has also been revised and
updated.
Job Rotation
Ocers in various grades have been

transferred as part of inter-departmental
and inter-oce job rotation measure. A total
of 73 ocers were rotated among dierent
departments, and regional and local oces.
VI. Disciplinary Matters
During the year, one sta member has
been dismissed from the service of the Board
in terms of Regulation 79 (2) (e) of the SEBI
(Employees Service) Regulations, 2001.
243
domestic and international. Several training

initiatives were undertaken during the year
to enhance the skills and eciencies of sta
members.
Disciplinary proceedings have been initiated

against two other sta members during the
year.
VII. Training and Development
A.
In order to enhance and widen the

knowledge base and perspective as well
as so skills including motivation,
communication etc., sta members across all
grades were deputed to various behavioural
and functional training programmes, both
Domestic Training
During the year, a total

of 579
nominations have been made for various
domestic training programmes. The major
training programmes arranged/ conducted
during the year by HRD division are shown
in Table 4.3.
Table 4.3: Training Programmes during 2013-14

No.
1
No. of
Training Programme
Participants
Leadership Skills Development program for newly promoted Division Chiefs

at ASCI
13
Workshop on Risk Management for Ocers and Division Chiefs
28
Training on IFRS for Ocers and Division Chiefs
44
Program on overview of Securities Market
19
Workshop on Macroeconomic review
30
Training Programme on BSE Online Trading System conducted by the BSE

Training Institute
200
Training Programme for Senior CBI Ocers
18
Institutional Training Programme for IAS Ocer-Trainees
18
Training Programme for IRAS Ocers
21
10
Training Programme for NIFM Students
40
newly joined ocers and sta members

promoted to ocer cadre.
Besides the above, the following training

programmes/ lectures were also organised by
HRD division:
Training on Advance MS-Excel for SEBI

employees
Perspective Lecture Series on Wellness

- Transforming Together; Integrity at
Work and Design the Future Perfect
B.
Foreign Training
A total of 104 nominations were made

for various International Trainings/ Seminars/
Meetings/ Conferences during the year.
VIII. Internship
SEBI, as an integral part of its policy,
oers short duration projects/ internships
During the year, induction programme

was conducted for 150 ocers comprising
244
of employees were rewarded for academic

excellence in 10th / 12th standard. They were
also presented Certicate of Recognition by
the Chairman on Republic Day.
to students of reputed management and

law schools. SEBI oered internships to 32
students from such schools during the year.
IX.
Extracurricular activities within SEBI
5.
A SEBI Sports Commiee has been

constituted that organised intra-SEBI sports
tournament during the year, wherein SEBI
sta members participated in games like table
tennis, carom, chess and cricket. Aadhaar Card
registration and Voter ID Card registration
drives were organised for sta members and
their families. SEBI also published its quarterly
in-house magazine Insider.
X.
OF
OFFICIAL
In order to ensure the compliance of

ocial language policy of the Government of
India on implementation of ocial language,
Hindi, in the oces of SEBI, various eorts
were made during 2013-14:
I.
Bilingualisation
During the year, various documents,

viz. all notications, registration certicates
granted to various market participants,
intermediaries, etc., were issued in both
the languages, i.e. Hindi and English. All
the papers were submied before various
Parliamentary Commiees in diglot form.
Further, the reports like Annual Report,
Audit Report were also issued in Hindi and
English.
Initiatives in the realm of corporate

social responsibility
Contribution towards Prime Ministers

National Relief Fund was collected from sta
members for relief eort for the victims of
ood-aected areas in Uarakhand. A total
sum of `10,98,790 was donated towards this
cause.
A blood donation camp was organised
by SEBI Shakti in collaboration with KEM
Hospital. It received an overwhelming
response from sta members with over 100
donors voluntarily giving blood. Further,
mammography camp was organized in
association with Helping Hand wherein 41
ladies aended the camp. In its eorts towards
social service, SEBI Shakti organised a visit to
the Bandra East Community Centre (BECC),
which is a registered NGO looking aer street
children, senior citizens and local community
and donated food items of daily use with the
funds collected from SEBI colleagues.
XI.
PROMOTION
LANGUAGE
II.
Rajbhasha Competitions
In order to encourage the sta members

for the usage of Hindi in day-to-day ocial
work, various Hindi competitions were
organized during the year, namely, Katha
Lekhan Pratiyogita, Kavita Lekhan Pratiyogita,
Lekh Pratiyogita, Rajbhasha Prachar Banner
Pratiyogita, Ashubhashan Pratiyogita, Bolati
Tasveer Pratiyogita, Prashnoari Pratiyogita,
Hindi Karyalayeen Kaamkaaj Pratiyogita,
Hindi Tankan Pratiyogita, Varg Paheli
Pratiyogita, Abhinay Pratiyogita and Kavita
Pathh Pratiyogita. Sta members took part in
these competitions with zeal.
Scheme for recognizing and rewarding

academic excellence of children of
employees
III. Aaj Ka Shabd
During the nancial year, nine children
To make the sta members conversant

245
and follow-up actions were taken to ensure

the implementation of these decisions. In
addition, ocials of the Board also took part
in the Rajbhasha Seminars organised by other
institutions.
with Hindi vocabulary, one new Hindi word

was displayed daily through SEBI Portal
during the year.
IV.
Hindi Notings and Hindi Quotes
The practice of displaying one phrase,

generally used in Hindi notings, and one
Hindi Quote daily through SEBI Portal for
sta members of SEBI has been continued.
V.
VIII. Investor Website and SCORES

Eorts are in progress to make the
investor website available in Hindi and to
ensure bilingualisation of SEBI Complaints
Redress System (SCORES), so as to make
available the investor website and the SCORES
for investors in their language.
Incentive Schemes
During the year, in order to promote the

use of Ocial Language Hindi, the incentive
schemes (Hindi ka Karyasadhak Gyan,
Hindi Tankan /Aashulipi Gyan, Hindi Karya,
Rajbhasha Shilpi, Rajbhasha Gaurav, Rajbhasha
Pratishtha and Rajbhasha Shiromani) were
continued. Information about such incentive
schemes was also provided through Hindi
workshops organised during the year.
IX.
Regional Offices
Eorts are being made in the regional

oces also towards compliance of the ocial
language policy of the Government of India,
which includes meetings of the Ocial
Language
Implementation
Commiee,
bilingualisation, reply in Hindi to the leers
received in Hindi, correspondence in Hindi,
etc. In addition, by way of various meetings,
discussions and workshops, etc., sta members
were encouraged to use the ocial language
Hindi in their day-to-day ocial work.
VI. Hindi Workshops

During the year, Hindi Workshops
were organised for newly recruited ocers
in the oces of SEBI. Thus, through these
workshops, the newly recruited ocers were
made aware of various requirements relating to
India, in order to enable them to ensure timely
implementation of various requirements of
India in their day-to-day ocial work.
Thus, during the year, besides compliance

of the ocial language policy in the regional
oces, all possible eorts were continued to
be made towards the use of Hindi in day-today ocial work.
6.
LOCAL OFFICES
SEBI Board in its meeting held on March

25, 2011 had suggested SEBI to explore the
scope of strengthening its regional oces
and open local oces in various state capitals
for the development of pan-India securities
market. It was felt that physical proximity of
SEBI oce to investors and intermediaries
would promote deepening and broadening
of the securities market. The proposal was
approved by the Board on July 28, 2011 and
VII. Rajbhasha Meetings and Seminars

In order to ensure compliance and
implementation of the ocial language policy
of the Government of India in the oces of
the Board, meetings of the Ocial Language
Implementation Commiee were conducted.
Accordingly, during 2013-14, various crucial
decisions were taken with regard to the
usage of Hindi in day-to-day ocial work,
246
administered the pledge to their sta. A

banner on Vigilance Awareness Week was
prominently displayed outside the oce
premises at Mumbai and all four regional
oces and local oces during the above
mentioned week.
the implementation of the decision to open

local oces was done in phases, with Phase I
starting from 2011-12. During 2013-14, Phase
III was implemented and it was decided
to open the local oces at the remaining
state capitals not covered in Phase I and II,
excluding North East. Accordingly, four new
oces have been opened in Ranchi, Raipur,
Panaji and Dehradun.
7.
9.
The major information technology (IT)

initiatives during 2013-14 include completion
of scanning of closed les, electronic workow
implementation.
FACILITIES MANAGEMENT
The following initiatives were taken in

2013-14 towards expansion of infrastructure
and increase in facilities management:
I.
II.
I.
National
Building
Construction
Corporation (NBCC) has alloed oce
space and Guest House accommodation
in their upcoming project at East
Kidwai Nagar, New Delhi for NRO. The
possession is expected in 2017.
III. The oce premise at Mial Court was

refurnished and some of the Divisions
have been shied to Mial Court oce
premises.
Local oces at Chandigarh, Kochi,
Ranchi, Raipur and Panaji have been
made operational.
8.
VIGILANCE CELL
Implementation
of
unified
communication across SEBI offices
and upgradation of SEBI network and
security systems
Unied communication systems was

successfully implemented across SEBI oces
including regional and local oces. Using
unied communication sta members posted
across various SEBI oces can communicate
through IP Phones via audio/video calling,
Instant Messaging and are also able to
participate in video conferencing resulting in
substantial savings in inter oce audio/video
communications. The networking equipments
such as switches, routers, voice gateways,
etc. which were end of life/ support were
replaced with the latest and high performance
equipments to cater the future computational
requirements. The latest security solution
such as rewall VPN solution with two
factor authentication was implemented for
secured access to SEBI
online resources
through the internet by sta members and
other intermediaries who are authorized to
access these online resources. The Two factor
authentication system is integrated with the
Short Message Service (SMS) gateway solution
to send One Time Password (OTP) code to
user mobile phones through Short Message
Service (SMS).
State of the art conference room was

furnished and made operational in SEBI
Bhavan.
IV.
INFORMATION TECHNOLOGY
Vigilance Awareness Week for the

year 2013 was observed from October 28
November 2, 2013. The observance of the week
commenced with the pledge administered by
WTM to the Executive Directors and Division
Chiefs, who in turn, administered the pledge
to their sta. The Regional Manager located at
the four regional oces Northern Regional
Oce, Eastern Regional Oce, Southern
Regional Oce and Western Regional Oce
247
II.
Disaster Recovery (DR) Drill
the CIS cases across all the oces of SEBI and

help to monitor and manage them eectively.
A Disaster Recovery Drill (DR Drill)

was conducted successfully for mail and
messaging systems.
VI. System
Persons
A new soware system for analysing

trade and order data was developed by SEBI.
The system was developed with the aim of
increasing the eciency of the investigation
process at SEBI. The input data formats
required by the system were standardized
to enable data to be loaded in the system
in an ecient manner. The report formats
were designed for all scenarios. This system
has the ability to identify paerns, links and
relationships from vast disparate data sets in a
fast manner. The quality of the investigations
has also improved as the system can analyse
large volumes of trade and order log data
running into lakh of rows in a faster and
ecient manner.
Resource
VII. Software development for Recovery

Division
In light of section 28A of SEBI Act as
amended by Securities Law (Amendment)
Ordinance, 2013, SEBI is empowered to
recover money from persons who fail to pay
the penalty imposed by adjudicating ocer or
fail to comply with any direction of the Board
for refund of money or fail to comply with a
direction of disgorgement order or fail to pay
any fees due to the Board. Recovery involves
complicated procedures at each stage and needs
to be monitored continuously by the division.
Further, it is necessary to have a centralized
exhaustive Recovery Soware facilitating
real time status of recovery proceedings. In
this connection, a system is being developed
for ecient and eective management of
information and to keep a record of all
developments in recovery proceedings.
Connectivity to local offices
Connectivity to various new local

and regional oces like
Bengaluru,
Bhubaneswar, Goa, Guwahati, Hyderabad,
Indore , Jaipur, Kochi, Patna, Dehradun,
Lucknow, Chandigarh, Ranchi oces was
established.
V.
managing
A system for managing resource persons

was developed and implemented. This
system helps to eectively manage and make
payments to resource persons providing
investor education camps.
III. Software for Investigation Department
IV.
for
CIS Complaint System
VIII. Implementation
of
Centralized
Biometric Attendance System
A soware system for monitoring of cases

for Collective Investment Department was
developed in-house and installed. This system
will help to maintain a central database of all
A new centralized biometric system for

recording aendance across all the oces of
SEBI was implemented.
248
Chronology of Major Policy Initiatives By SEBI
Date
Policy Initiatives
April 1, 2013
SEBI rationalized the debt limits by merging the categories of

Government Debt Old (USD 10 billion) and Government Debt Long
Term (USD 15 billion) into a single category named 'Government Debt'
and prescribing the combined limit of USD 25 billion, equivalent to
`1,24,432 crore.
April 16, 2013
SEBI amended SEBI (Mutual Funds) Regulations, 1996 and made

modifications in terms of "offering period", "private placement for debt
fund" and "investment guidelines for infrastructure debt funds", etc.
April 23, 2013
SEBI amended SEBI (Mutual Funds) Regulations, 1996 and made

certain modifications. Private Placement to less than 50 investors has
been permitted as an alternative to new fund offer to the public, in case
of Infrastructure Debt Funds (IDF). FIIs shall be considered strategic
investors in the IDF.
May 21, 2013
SEBI issued clarification on revised requirements for the stock

exchanges and listed companies, in case of Scheme of Arrangement
under the Companies Act, 1956
May 30, 2013
SEBI issued comprehensive guidelines on Offer For Sale (OFS) of

Shares by promoters through the stock exchange mechanism.
May 30, 2013
In order to further extend the benefits of Securities Lending and

Borrowing (SLB) and to facilitate efficient use of margin collateral,
SEBI modified the SLB framework with respect to eligible scrips for
SLB and collateral to be accepted.
June 12, 2013
SEBI enhanced limit of USD 5 billion for investments only to those

FIIs which are registered with SEBI under the categories of Sovereign
Wealth Funds (SWFs), Multilateral Agencies, Endowment Funds,
Insurance Funds, Pension Funds and Foreign Central Banks.
June 12, 2013
SEBI notified SEBI (Issue and Listing of Non-Convertible Redeemable

Preference Shares) Regulations, 2013 for public issuance of nonconvertible redeemable preference shares and also for listing of
privately placed redeemable preference shares. Further, as per Basel
III norms, banks can issue non-equity instruments such as Perpetual
Non-Cumulative Preference Shares and Innovative Perpetual Debt
Instruments, which are in compliance with the criteria specified by
RBI for inclusion in Additional Tier I Capital.
July 5, 2013
SEBI mandated stock exchanges with nation-wide terminals to set

up investor service centres at Bangalore, Pune, Jaipur, Ghaziabad,
Lucknow, Gurgaon, Patna and Vadodara. These centres shall provide
investor grievances redressal mechanism and arbitration facility
(arbitration as well as appellate arbitration).
Contd.
249
Date
Policy Initiatives
July 8, 2013
In consultation with RBI and in view of the turbulent phase of extreme

volatility in USD-INR exchange rate, SEBI imposed client level
position limit of 6 percent of the total open interest or USD 10 million,
whichever is lower and increased margin requirements from 5 percent
to 10 percent for USD-INR contracts in currency derivatives.
July 29, 2013
SEBI notified operational, prudential and reporting norms for

Alternative Investment Funds (AIFs).
August 13, 2013
To bring QFI and FII at par for investment in to be listed debt

securities, SEBI allowed QFIs to invest in to be listed corporate debt
securities directly from the issuer.
August 19, 2013
SEBI specified the testing procedure for market participants before

deployment of the software. Stock exchanges shall also ensure that
the system auditors examine the compliance of stock broker / trading
member, who use trading algorithms, with regard to the requirement
of participation in mock trading session.
August 26, 2013
SEBI made amendments to SEBI (Issue of Capital and Disclosure

Requirements) Regulations, 2009 relating to preferential issue
August 27, 2013
SEBI issued General Guidelines for dealing with conflicts of interest

of intermediaries, stock exchanges, clearing corporations, depositories
and their associated persons in securities market.
August 28, 2013
SEBI issued Guidelines for dealing with conflict of interest for

investment/ trading by CRAs, access persons and other employees.
September 3, 2013
SEBI partially modified the system of index based market wide circuit
breaker. The stock exchange on a daily basis shall translate the 10 percent,
15 percent and 20 percent circuit breaker limits of market-wide index
variation based on the previous day's closing level of the index. Postobservation of the trading halt, stock exchange shall resume trading in
the cash market with a fifteen minutes pre-open call auction session.
September 4, 2013
SEBI mandated the systemically important Clearing Corporations - Indian

Clearing Corporation Ltd., MCX-SX Clearing Corporation Ltd. and
National Securities Clearing Corporation Ltd. and Depositories - CDSL
and NSDL, to comply with the PFMIs prescribed by CPSS and IOSCO.
September 12, 2013
SEBI prescribed the risk management framework for dedicated debt

segment on stock exchanges.
September 13, 2013
SEBI decided to extend the allocation mechanism, as presently

applicable for corporate debt securities, to FII/QFI investment in
Government debt securities also. FIIs can invest in corporate debt/
Government debt without purchasing debt limits till the overall
investment reaches 90 percent after which the auction mechanism
shall be initiated for allocation of the remaining limits.
Contd.
250
Date
Policy Initiatives
September 17, 2013
SEBI prescribed the formats for filing reports in terms of regulations

15(i) and 20(j) of SEBI (Buy Back of Securities) Regulations, 1998.
September 26, 2013
With a view to streamline and make more effective the investor

grievance redressal mechanism at stock exchanges, SEBI advised
exchanges to shorten the time taken for the proceedings as well as to
give monetary relief to the investors, during the course of pendency
of proceedings.
September 30, 2013
In continuation to the simplification of prior approval and permanent

registration requirements, SEBI introduced the concept of single
registration per stock exchange for stock brokers.
September 30, 2013
SEBI suggested amendments to bye-laws of recognised stock exchanges

with respect to non-compliance of certain listing conditions and
adopting standard operating procedure for suspension and revocation
of trading of shares of listed entities for such non-compliances.
October 4, 2013
In order to enable the mutual fund distributors also to leverage the

stock exchange platform so as to improve their reach and mutual fund
distributions, it has been decided to allow mutual fund distributors to
use recognised stock exchanges' infrastructure to purchases and redeem
mutual fund units directly from mutual fund/assets management
companies on behalf of their clients.
October 8, 2013
SEBI notified SEBI (Listing of Specified Securities on Institutional

Trading Platform) Regulations, 2013.
October 21, 2013
SEBI specified revised format for

a) Disclosures under Regulation 29(1) and 29 (2) of SEBI (SAST)
Regulations, 2011 about details of acquisition and
b) Disclosure by the promoter(s) to the stock exchanges and to
the target company for encumbrance of shares / invocation of
encumbrance/ release of encumbrance, in terms of Regulation
31(1) and 31(2) of SEBI (SAST) Regulations, 2011
October 22, 2013
SEBI created centralized database regarding corporate bonds which is

available in demat form for public dissemination. Both the depositories
viz. NSDL and CDSL shall, jointly, create, host, maintain and
disseminate the centralized database of corporate bonds/debentures,
which are available in demat form.
October 23, 2013
Introduction of General Information Document. SEBI outlined generic

disclosures to be brought out in the General Information Document in
terms of regulation 58 (1) read with General Instructions (I) of Schedule
VIII, Part D of SEBI (ICDR) Regulations, 2009.
Contd.
251
Date
Policy Initiatives
October 24, 2013
SEBI permitted exchanges to introduce Institutional Trading Platform

(ITP), enabling start-ups and SMEs to list in SME platform without
having to make an IPO.
October 28, 2013
SEBI outlined detailed guidelines for STAs/ issuer companies and

depositories for transmission of securities with a view to make the
transmission process more efficient and investor friendly.
October 28, 2013
In order to bring more transparency in the disclosure of complaint

redressal status of the stock brokers on the website of stock exchange,
SEBI modified the format of disclosures made on the exchanges website.
October 29, 2013
SEBI decided to implement measures such as a) disclosure of cash flows,

b) withdrawal of requirement to upload bids on date-time priority, c)
disclosure of unaudited financials with limited review report and d)
disclosure of contact details of debenture trustees in Annual Report
for development of corporate bond market.
November 6, 2013
SEBI advised exchanges to keep track of findings of system audits of

all brokers on quarterly basis and ensure that all major audit findings,
specifically in critical areas, are rectified / complied in a time bound
manner failing which follow up inspection of such brokers may be
taken up for necessary corrective steps / actions thereafter, if any.
November 18, 2013
Framework put in place for monitoring by stock exchanges of

compliance with the provisions of listing agreement by the listed
entities.
November 28, 2013
SEBI permitted FIIs and QFIs to invest in the credit enhanced bonds,
up to a limit of USD 5 billion within the overall limit of USD 51 billion
earmarked for corporate debt.
November 29, 2013
The timeline for aligning the existing employee benefit schemes

involving securities of the company with the SEBI (ESOS and ESPS)
Guidelines, 1999 was also extended to December 31, 2013.
December 3, 2013
Illustrative format of statement of assets & liabilities in SEBI (ICDR)

Regulations, 2009 revised.
December 4, 2013
To further simplify and rationalize the demat account opening process,

SEBI replaced existing Beneficial Owner-Depository Participant
Agreements with a common document Rights and Obligations of the
Beneficial Owner and Depository Participant.
December 5, 2013
SEBI permitted stock exchanges to introduce cash settled interest rate

futures on 10-year GoI security and mandated the product feature and
broad risk management framework.
Contd.
252
Date
Policy Initiatives
December 19, 2013
SEBI prescribed modification for the deposit requirements for the

members of the debt segment specified in the "Risk Management
Framework for Dedicated Debt Segment on Stock Exchanges."
December 19, 2013
SEBI rationalized the periodic call auction mechanism.
January 7, 2014
SEBI notified SEBI (Foreign Portfolio Investors) Regulations, 2014.
January 7, 2014
SEBI mandated that all the trades in Securitised Debt Instruments

(listed or unlisted) by mutual funds, FIIs/sub-accounts/QFIs/ FPIs,
AIFs, FVCIs and Portfolio Managers shall be reported on the trade
reporting platform of either NSE, BSE or MCX-SX within fifteen
minutes of the trade with effect from April 1,2014.
January 7, 2014
In order to safeguard the interest of the investors, SEBI advised

depositories to strengthen the supervisory and monitoring role of
depositories and their participants with respect to issuance and
processing of Delivery Instruction Slips.
January 8, 2014
SEBI issued Operational Guidelines for Designated Depository

Participants.
January 20, 2014
SEBI notified revised FII Position Limits in Exchange Traded Interest

Rate Futures (IRF). The gross open positions of the FII across all
contracts shall not exceed 10 percent of the total open interest or
Rs.600 crore, whichever is higher. The total gross short (sold) position
of each FII in IRF shall not exceed its long position in the government
securities and in Interest Rate Futures, at any point in time. The total
gross long (bought) position in cash and IRF markets taken together for
all FIIs shall not exceed the aggregate permissible limit for investment
in government securities for FIIs.
January 29, 2014
SEBI enhanced Government Debt Investment Limits for FIIs which are
registered with SEBI under the categories of Sovereign Wealth Funds
(SWFs), Multilateral Agencies, Endowment Funds, Insurance Funds,
Pension Funds and Foreign Central Banks from USD 5 billion to USD
10 billion within the overall Government debt limit of USD 30 billion,
February 4, 2014
IPO grading made 'voluntary'
February 6, 2014
As a measure to protect against excessive price movements, with

respect to those scrips on which no derivatives products are available
but which are part of Index Derivatives, SEBI specified appropriate
individual scrip wise price bands upto 20 percent on such scrips.
February 7, 2014
SEBI issued Guidelines for inspection of Depository Participants (DPs)

by Depositories.
Contd.
253
Date
Policy Initiatives
February 11, 2014
SEBI advised safeguards such as establishing a software escrow

arrangement with their existing software vendors or reducing
dependence on a single software vendor for trading and risk
management systems to avoid trading disruption in case of failure of
software vendor.
February 14, 2014
FIIs and QFIs permitted to invest in Commercial Papers only upto USD
2 billion and upto USD 5 billion in Credit Enhanced Bonds within the
limit of USD 51 billion.
March 12, 2014
SEBI updated AML/ CFT framework of SEBI for registered market

intermediaries (in line with amendments made to the PML Act and
Rules).
March 21, 2014
SEBI mandated all OTC trades in corporate bonds shall be reported

only on any one of the reporting platform provided in the debt segment
of stock exchanges viz., NSE, BSE and MCX-SX within 15 minutes of
the trade.
March 24, 2014
To enhance the reach of mutual fund products, promoting financial

inclusion, tax treatment, obligation of various stakeholders, increasing
transparency, etc, SEBI took several measures such as enhanced
disclosures of AUM and votes cast by mutual funds, investor education
& awareness campaign, developing alternative distribution channels
for mutual fund products, etc.
March 25, 2014
Format for Auditors Certificate prescribed under Clause 24(i) of the

Equity Listing Agreement.
March 28, 2014
SEBI postponed the FPI implementation date to June 01, 2014. SEBI
shall continue to accept all applications for registration of FIIs and Sub
Accounts till May 31, 2014 provided such applications are complete in
all respects.
254

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This Report is in conformity with the format as per the Securities

and Exchange Board of India (Annual Report) Rules, 1994,

MEMBERS OF THE BOARD

MEMBERS OF THE SEBI BOARD

DR. ARVIND MAYARAM

CHAIRMAN, WHOLE TIME MEMBERS AND

Shri Ananta Barua, Executive Director; Shri R K Padmanabhan, Executive Director;

REVIEW OF THE GENERAL MACRO-ECONOMIC ENVIRONMENT AND THE

REVIEW OF POLICIES AND PROGRAMMES

Primary Securities Market................................................................................................... 13

Secondary Securities Market............................................................................................... 20

Mutual Funds ........................................................................................................................ 36

Intermediaries Associated with Securities Market .......................................................... 38

Foreign Institutional Investment ........................................................................................ 43

Other Policies and Programmes having a bearing on the working of

Assessment and Prospects .................................................................................................. 51

PART TWO: REVIEW OF WORKING AND OPERATIONS OF THE SECURITIES AND

PRIMARY SECURITIES MARKET

Resource Mobilisation through Public and Rights Issues .............................................. 56

Resource Mobilisation through QIP and IPP ................................................................... 61

Resource Mobilisation through Preferential Allotment.................................................. 63

Resource Mobilisation through Private Placement in Corporate Debt ........................ 64

SECONDARY SECURITIES MARKET

Equity Market ....................................................................................................................... 65

Performance of Major Stock Indices and Sectoral Indices .............................................. 69

Turnover in Indian Stock Market ....................................................................................... 71

Market Capitalisation .......................................................................................................... 75

Stock Market Indicators ....................................................................................................... 76

Volatility in Stock Markets .................................................................................................. 79

Trading Frequency ............................................................................................................... 82

Derivatives Segment ............................................................................................................ 88

MUTUAL FUNDS .......................................................................................................................... 98

INTERMEDIARIES ASSOCIATED WITH SECURITIES MARKET................................. 104

Portfolio Managers ............................................................................................................. 104

Alternative Investment Funds .......................................................................................... 105

FOREIGN INSTITUTIONAL INVESTMENT ....................................................................... 106

OTHER ACTIVITIES HAVING A BEARING ON THE WORKING OF SECURITIES

Corporate Bond Market ..................................................................................................... 112

Wholesale Debt Market ..................................................................................................... 115

PART THREE: FUNCTIONS OF SEBI IN RESPECT OF MATTERS SPECIFIED IN SECTION

REGULATION OF BUSINESS IN STOCK EXCHANGES .................................................. 118

Recognition of Stock Exchanges ....................................................................................... 118

Trading and Settlement Practices at Stock Exchanges .................................................. 119

Memorandum of Understanding (MoU) between Stock Exchanges .......................... 120

Steps taken by SEBI to ring-fence MCX-SX .................................................................... 120

Exit of Stock Exchange ....................................................................................................... 121

Measures adopted for Regulation of Stock Exchanges ................................................. 122

REGISTRATION AND REGULATION OF WORKING OF INTERMEDIARIES

Streamlining the Process of Initial / Permanent Registration of Intermediaries ....... 123

Measures for Regulation of Intermediaries .................................................................... 124

Registration of Stock Brokers............................................................................................ 124

Registration of Sub-brokers .............................................................................................. 127

Registration of Other Intermediaries ............................................................................... 128

Registration of Foreign Institutional Investors, Sub-Accounts and Custodians ....... 129

VIII. Registration of Portfolio Managers and Investment Advisers..................................... 133

REGISTRATION AND REGULATION OF WORKING OF COLLECTIVE

Registration of Collective Investment Schemes ............................................................. 134

Inspection of Collective Investment Schemes ................................................................ 134

Regulatory actions against Collective Investment Schemes ........................................ 134

Registration and Regulation of Mutual Funds............................................................... 139

PROMOTION AND REGULATION OF SELF REGULATORY ORGANISATIONS .... 140

FRAUDULENT AND UNFAIR TRADE PRACTICES .......................................................... 140

INVESTOR EDUCATION AND TRAINING OF INTERMEDIARIES ............................ 151