Securities Exchange Board of India V-Semester

SECURITIES EXCHANGE BOARD OF INDIA V-SEMESTER
SUBMITTED TO
UNIVERSITY OF MUMBAI.
SHREE SHANKAR NARAYAN COLLEGE
NAVGHAR ROAD, BHAYANDER (E), THANE-401 105.
ACADEMIC YEAR - 2017-2018.
T.Y.B.F.M
PROJECT –
SECURITIES AND EXCHANGE BOARD OF INDIA
GUIDED BY
MR. VIVEK WANKHEDE
SUBMITTED BY
KHUSHBOO SHANKAR RAM
T.Y.B. FINANCIAL MARKET Page | 1

OF ARTS AND COMMERCE
Declaration
I Khushboo S. Ram student of T.Y.B.F.M. (2017-18) hereby declare that have

completed this project on “SECURITIES AND EXCHANGE BOARD OF INDIA”. All The
information submitted is true and original to the best of my knowledge.
Signature of Student
Khushboo S. Ram

OF ARTS AND COMMERCE
NAVGHAR ROAD, BHAYANDER (E), THANE-401 105.
BACHELOR OF COMMERCE & FINANCIAL MARKET – SEM V
ACADEMIC YEAR 2017 – 2018.
PROJECT –
SECURITIES AND EXCHANGE BOARD OF INDIA
SUBMITTED BY.
KHUSHBOO S. RAM
GUIDED BY
MR. VIVEK WANKHEDE

SHANKAR NARAYAN COLLEGE
DEPARTMENT OF FINANCE
PROFOMA FOR APPROVAL OF PROJECT SYNOPSIS
2017-18/ V - SEMESTER
NAME : KHUSHBOO SHANKAR RAM
ROLL NO : 2002239
TITLE OF PROJECT : SECURITIES AND EXCHANGE BOARD OF INDIA
SUBJECT AREA : FINANCIAL MARKET
NAME OF GUIDER : MR. VIVEK WANKHEDE
GUIDE SIGNATURE : ________________
STUDENT’S SIGNATURE : _________________

ACKNOWLEDGEMENT
I take this opportunity to express my profound gratitude to

management of Shankar Narayan College for giving me this completion of my
project. A special thanks to DR.V.N.YADAV principal of Shankar Narayan
College for their kind co-operation in the completion of my project.
A special vote of thanks to Mr.VIVEK WANKHEDE is our HOD & also our
project guide for his most sincere, useful and encouraging contribution throughout
the project span.
I am also grateful to my friends for giving support in my project. Lastly I would like
to thank each and every person who helped me in completing my project specially
my parents.

INDEX
SR.NO TOPIC PG.NO
08
01 INTRODUCTION OF SEBI
10
02 OBJECTIVES OF SEBI
15
03 ROLE & FUNCTIONS OF SEBI
30
04 DO’S AND DON’T FOR INVESTORS
REGULATION FOR STOCK EXCHANGE, BROKERS,

TRADING MEMBERS, COMPANIES, AND MUTUAL 33
05 FUNDS
41
06 POWERS OF SEBI
SEBI GUIDELINES REGARDING RIGHT ISSUE OF A 47

07
COMPANY

55
CONCLUSION
56
BIBLIOGRAPHY

CHAPTER: 1
INTRODUCTION OF SEBI
The Securities and Exchange Board of India (SEBI) is the

designated regulatory body for the finance and investment markets
in India. The board plays a vital role in maintaining stable and
efficient financial and investment markets by creating and
enforcing effective regulation in India's financial marketplace.
India's SEBI is similar to the U.S. Securities and Exchange
Commission (SEC).
The SEBI was established in 1988 but was only given regulatory
powers on April 12, through the Securities and Exchange Board of
India Act,. It plays a key role in ensuring the stability of
the financial markets in India, by attracting foreign investors and
protecting Indian investors. SEBI was built by the government of
India. Its headquarters is located at the Bandra Kurla Complex
Business District found in Mumbai. It also has northern, eastern,
southern and western regional offices.
SEBI's management is composed of its own members. Its
management team consists of a chairman nominated by the Union
Government of India, two members who are officers from the
Union Finance Ministry, one member from the Reserve Bank of
India and five other members who are also nominated by the

Union Government of India.SEBI has introduced the

comprehensive regulatory measures, prescribed registration norms,
theeligibility criteria, the code of obligations and the code of
conduct for different intermediaries like,bankers to issue, merchant
bankers, brokers and sub-brokers, registrars, portfolio managers,
creditrating agencies, underwriters and others. It has framed bye-
laws, risk identification and riskmanagement systems for Clearing
houses of stock exchanges, surveillance system etc. which
hasmade dealing in securities both safe and transparent to the end
investor.SEBI is managed by the following members of the board:
 The Chairman who is nominated by the Union Government of

India.
 Two members from the Union Finance Ministry
 One member from the Reserve Bank of India
 The remaining 5 members are nominated by the Union
Government of India, out of them
SEBI has to be responsive to 3 groups which constitute the market:
 The issuer of securities
 The investor
 The market intermediaries

CHAPTER:2
OBJECTIVES OF SEBI
“An Act to provide for the establishment of a Board to protect the

interests of investors in securities and to promote the development
of, and to regulate, the securities market and for matters connected
therewith or incidental thereto.”

The primary objective of SEBI is to promote healthy and orderly

growth of the securities market and secure investor protection.
However, other objectives of SEBI can be categorized as:-
1. Ensuring fair practices in securities market.

2. Promoting efficient, competitive and professional services by
merchant bankers, brokers, advisors, underwriters, port folio
managers and other intermediaries.
3. Formulate rules and regulations for the securities market in
India.
4. Settlement of investor’s grievances in securities market.
The basic objectives of the Board were identified as:

 To protect the interests of investors in securities;
 To promote the development of Securities Market;
 To regulate the securities market and for matters connected
therewith or incidental there to.
SEBI has introduced the comprehensive regulatory measures,

prescribed registration norms, the eligibility criteria, the code of
obligations and the code of conduct for different intermediaries
like, bankers to issue, merchant bankers, brokers and sub-brokers,
registrars, portfolio managers, credit rating agencies, underwriters
and others. It has framed bye-laws, risk identification and risk
management systems for Clearing houses of stock exchanges,
surveillance system etc. which has made dealing in securities both
safe and transparent to the end investor.

Another significant event is the approval of trading in stock indices

(like S&P CNX Nifty & Sensex) in 2000. A market Index is a
convenient and effective product because of the following reasons:
 It acts as a barometer for market behavior;

 It is used to benchmark portfolio performance;
 It is used in derivative instruments like index futures and
index options;
 It can be used for passive fund management as in case of
Index Funds.
Two broad approaches of SEBI is to integrate the securities market

at the national level, and also to diversify the trading products, so
that there is an increase in number of traders including banks,
financial institutions, insurance companies, mutual funds, primary
dealers etc. to transact through the Exchanges. In this context the
introduction of derivatives trading through Indian Stock Exchanges
permitted by SEBI AD is a real landmark.
SEBI appointed the L. C. Gupta Committee in 1998 to recommend

the regulatory framework for derivatives trading and suggest bye-
laws for Regulation and Control of Trading and Settlement of
Derivatives Contracts. The Board of SEBI in its meeting held on
May 11, 1998 accepted the recommendations of the committee and
approved the phased introduction of derivatives trading in India
beginning with Stock Index Futures. The Board also approved the
"Suggestive Bye-laws" as recommended by the Dr LC Gupta
Committee for Regulation and Control of Trading and Settlement
of Derivatives Contracts.
SEBI then appointed the J. R. Verma Committee to recommend

Risk Containment Measures (RCM) in the Indian Stock Index
Futures Market. The report was submitted in november 1998.
However the Securities Contracts (Regulation) Act, (SCRA)

required amendment to include "derivatives" in the definition of
securities to enable SEBI to introduce trading in derivatives. The
necessary amendment was then carried out by the Government.
The Securities Laws (Amendment) Bill, was introduced. In
December the new framework was approved.
Derivatives have been accorded the status of `Securities'. The ban

imposed on trading in derivatives is under a notification issued by
the Central Government was revoked. Thereafter SEBI formulated
the necessary regulations/bye-laws and intimated the Stock
Exchanges. The derivative trading started in India at NSE in 2000
and BSE started trading in the year 2001.
(1) Regulation of Stock Exchanges:The first objective of SEBI is

to regulate stock exchanges so that efficient services may be
provided to all the parties operating there.
(2) Protection to the Investors:
The capital market is meaningless in the absence of the investors.

Therefore, it is important to protect the interests of the investors.

The protection of the interests of the investors means protecting

them from the wrong information given by the companies in their
prospectus, reducing the risk of delivery and payment, etc. Hence,
the foremost objective of the SEBI is to provide security to the
investors.
(3) Checking the Insider Trading:
Insider trading means the buying and selling of securities by those

people’s directors Promoters, etc. who have some secret
information about the company and who wish to take advantage of
this secret information.
This hurts the interests of the general investors. It was very
essential to check this tendency. Many steps have been taken to
check inside trading through the medium of the SEBI.
(4) Control over Brokers:It is important to keep an eye on the

activities of the brokers and other middlemen in order to controlthe
capital market. To have a control over them, it was necessary to
establish the SEBI.

CHAPTER:3
ROLE & FUNCTIONS OF SEBI
Securities and Exchange Board of

India (frequently abbreviated SEBI) is the nodal agency which
safeguards the interests of an investor in the Indian market. SEBI
performs three key functions: quasi-legislative, quasi-judicial
and quasi-executive. It drafts regulations, conducts investigation
& enforcement action and it passes rulings and orders. Even
though this makes it extremely robust, there’s an appeal procedure
to create accountability.

The Main Functions of SEBI

 Safeguarding the interests of investors by means of adequate
education and guidance. SEBI makes rules and regulation that

must be followed by the financial intermediaries like portfolio
exchanges, underwriters and merchant bankers, etc. It takes care
of the complaints received from investors . Additionally, it
issues notices and booklets for the information, assistance and
protection of small investors.
 Regulating and controlling the business on stock markets.
Registration of brokers and sub-brokers is made mandatory
and they have to abide by certain regulations and rules.
 Conduct inspection & inquiries of stock exchanges,
intermediaries and self-regulating organizations and to take
appropriate measures wherever required. This function is
carried out for organized working of stock exchanges &
intermediaries.
 Barring insider trading in securities.
 Prohibiting deceptive and unfair methods used by financial
intermediaries operating in securities markets.
 Registering and controlling the functioning of stock brokers,
sub-brokers, share transfer agents, bankers, trustees, registrars,
merchant bankers, underwriters, portfolio managers,
investment advisers and various other intermediaries who
might be linked to securities markets in any manner.
 SEBI issue guidelines and instructions to businesses
concerning capital issues. Separate guidelines are provided for
initial public issue, issue by a listed companies, etc. It

conducts research and publishes information beneficial to all

market players (i.e. all buyers and sellers).
 SEBI regulates mergers and acquisitions as a way to protect
the interest of investors. For this, SEBI has released
appropriate guidelines with the intention that such mergers
and takeovers won’t be at the expense of small investors.
 Registering and controlling the functioning of collective
investment schemes such as mutual funds. SEBI has created
regulations and guidelines that should be followed by mutual
funds. The aim is to maintain effective supervision and avoid
any unfair and anti-investor actions.
 Promoting self-regulatory organization of intermediaries. It
has extensive legal powers. Having said that, self-regulation is
preferable to external regulation. The function of SEBI is to
motivate financial intermediaries to create their professional
associations and manage harmful actions of their members. It
can also make use of its powers when needed for protection of
investors.
1. Protective Functions:
As clear from the name, SEBI’s protective function is to protect
investors’ interest and provide them security by taking following
actions:
(i) SEBI checks Price Rigging:
Price Rigging means some people manipulate the prices of
securities for inflation or depressing the market price of
securities. SEBI prohibits such practice to avoid fraud and

cheating which can happen to any investor.
(ii) SEBI prohibits Insider trading:
Any person which is connected with a company such as
directors, promoters, workers etc are called Insiders. Due to
working in the company they have sensitive information which
affects the prices of the securities.Such information is not
available to people at large but Insider gets this key full
knowledge by working in such company. Insider can use this
information for their personal benefits or make a profit from it,
such process is known as Insider Trading.
For Example - Managers or Directors of a company may know

that company will issue Bonus shares to its shareholders at a
particular time and they purchase shares from market to make a
profit with bonus issue.
SEBI always restricts these types of practices when Insiders are

buying securities of the company and take strict action to avoid
this in future.
(iii) SEBI prohibits fraudulent and Unfair Trade Practices:

SEBI always restricts the companies which make misleading

statements which are likely to induce the sale or purchase of
securities by any other person.
(iv) SEBI sometimes educate the investors so that become

able to evaluate the securities and always invest in profitable
securities.
(v) SEBI issues guidelines to protect the interest of
debenture holders.
(vi) SEBI is empowered to investigate cases of insider
trading and has provision for stiff fine and imprisonment.
(vii) SEBI has stopped the practice of allotment of
preferential shares unrelated
to market prices.
(viii) SEBI has stopped the practice of making a preferential

allotment of shares unrelated to market prices.
2. Developmental Functions:
Under developmental categories following functions are performed
by SEBI:
(i) SEBI promotes training of intermediaries of the securities

market.
(ii) SEBI tries to promote activities of stock exchange by adopting

a flexible and adaptable approach in following way:
(a) SEBI has permitted internet trading through registered

stock brokers.
(b) SEBI has made underwriting optional to reduce the cost of

issue.
(c) An Even initial public offer of primary market is permitted

through the stock exchange.
These are implemented by SEBI to promote and develop stock
exchange activities or dealings.
3. Regulatory Functions:
These functions are performed by SEBI to regulate the business
in stock exchange. To regulate the activities of stock exchange
following functions are performed:
(i) SEBI has framed rules and regulations and a code of conduct
to regulate the intermediaries such as merchant bankers, brokers,
underwriters, etc.
(ii) These intermediaries have been brought under the regulatory

purview and private placement has been made more restrictive.
(iii) SEBI registers and regulates the working of stock brokers,

sub-brokers, share transfer agents, trustees, merchant bankers
and all those who are associated with stock exchange in any
manner.
(iv) SEBI registers and regulates the working of mutual funds

etc.
(v) SEBI regulates takeover of the companies.
(vi) SEBI conducts inquiries and audit of stock exchanges.
Other function or powers given to SEBI :

 SEBI has been empowered to seek records and information
from any board or statutory authority or corporation
established by central government, state or local government.
 If there are reasonable grounds of believing that a particular
company might be indulging in unfair trade practices then
SEBI may conduct inspection of registers, books or of
documents and records of listed company or any public
company that intends to get the securities listed.
 It shall have similar powers as given to a civil court in certain
matters like summoning, oath examination , issuing of
commissions and also in matters of inspection or production of
books of account , records or documents of a company or of

any person specified in section 12 of the SEBI act 1992.
 Has been empowered to levy fees for carrying out various
functions.
 SEBI may take any of these measure during the investigation
or inquiry or on completion of such an investigation or inquiry:
 Suspending any security’s trading in a recognized stock
exchange.
 Prohibiting a person to deal in securities or restraining the
person from gaining access to the securities market.
 Suspending office bearers of stock exchanges or of self-
regulatory organizations from holding of such positions.
 Retaining the proceeds of securities of a transaction under
investigation.
 Attach after passing of the order
 Directing intermediary or person associated with securities
market not to alienate or dispose of an asset that forms part of
transaction under investigation.
 Regulating or prohibiting the issue of prospectus,
advertisements or offer document or advertisement for issue of
securities.
 SEBI may make enquiries to protect interest of investors, to
prevent activities from being conducted in an unfair manner
and to ensure proper management of the intermediaries.
 SEBI is empowered to conduct search and seizure can be
made use of if there exist reasonable grounds in believing that

operations are being carried on in a way that affects badly the

interests of those associated with securities market.
 SEBI is empowered to issue desist and cease order if after the
inquiry Board finds that the person has violated or may violate
provisions of the SEBI Act or rules made there under.
 Under Securities Contracts Regulations Act of 1956,
following powers have been given to SEBI:
 Granting of recognition to stock exchange.
 Withdrawing such recognition in the interest of the trade.
 Requiring stock exchange to provide periodical returns
 Approving stock exchange for making bye – laws.
 Suspending for a limited period the business of recognized
stock exchange
 Compelling listing of securities by the public companies.
SEBI has laid down strict comprehensive guidelines that control
issue of financial instruments, and detailed norms for merchant
bankers, stock-brokers, sub-brokers, portfolio managers and
mutual funds, thus providing issuers with a place to deal fairly,
providing accurate information and protection to investors and a
good fair market to the intermediaries.
Role of SEBI
Protecting the interest of investors
 SEBI ensures that the investors do not get befooled by
misleading and false advertisements. In return, SEBI issued
guidelines so as to protect investors and also ensured that the
advertisement is fair and concise.
 Regulation of price rigging: Price rigging refers to

manipulation of prices by way of fluctuating the prices with
the object of inflating and depressing the market price of
securities.
 SEBI make efforts to educate investors so that they are able to
make choices between the offerings of different companies
and choose the most profitable securities.
 SEBI has issued guidelines to investigate cases of fraud and
insider trading. Adding to this the provisions for fine and
Imprisonment.
To ensure Development activities in Stock Exchange
 E-Trading: Concept of E-trading have been introduced few
years back by SEBI to eliminate the discomfort. It simplifies
the process of buying and selling of securities.
 The initial public offering of Primary Market (which is a part
of Capital market) permits through stock exchange.
 SEBI promotes training of intermediaries of securities market
with the object of smooth functioning.
Regulate the business of stock exchange and activities of stock
exchange
SEBI introduced proper Code Of Conduct applicable to
everyone who is a part of the process of buying and selling of
securities, stock exchange, etc. Following are the areas of
concern:

 Rules and Regulations to regulate intermediaries such as

Broker, underwriters, etc.
 Registers and Regulates the working of merchant Bankers,
sub-brokers, stock-brokers, share transfer agent, trustees, etc.
 Registers the working of mutual Funds.
 SEBI regulates turnover of the companies.
 It also conducts inquiry and audits.
To Regulate Insider Trading
Insider Trading have been a problem since the introduction of
the Market dealing with buying and selling of securities, stock
exchange, etc. An Insider is a person or a group of people
having first- hand knowledge about the internal issues and Ups
and downs of a company. The moment insider gets to know
about the loss which is going to occur, the shares under insider’s
name are sold immediately. Hence, company suffers a huge
amount of loss.
Explain role of SEBI in regulating Indian Capital Market more
deeply with following points:
1. To make rules for controlling stock exchange :
SEBI has power to make new rules for controlling stock exchange
in India. For example, SEBI fixed the time of trading 9 AM and 5
PM in stock market.
2. To provide license to dealers and brokers :

SEBI has power to provide license to dealers and brokers of capital

market. If SEBI sees that any financial product is of capital nature,
then SEBI can also control to that product and its dealers. One of
main example is ULIPs case. SEBI said, " It is just like mutual
funds and all banks and financial and insurance companies who
want to issue it, must take permission from SEBI."
3. To Stop fraud in Capital Market :
SEBI has many powers for stopping fraud in capital market.It

can ban on the trading of those brokers who are involved
in fraudulent and unfair trade practices relating to stock market.
It can impose the penalties on capital market intermediaries if they
involve in insider trading.
4. To Control the Merge, Acquisition and Takeover the

companies :
Many big companies in India want to create monopoly in capital

market. So, these companies buy all other companies or deal
of merging. SEBI sees whether this merge or acquisition is for
development of business or to harm capital market.
5. To audit the performance of stock market :
SEBI uses his powers to audit the performance of different Indian

stock exchange for bringing transparency in the working of stock

exchanges.
6. To make new rules on carry - forward transactions :
Share trading transactions carry forward can not exceed 25% of

broker's total transactions. 90 day limit for carry forward.
7. To create relationship with ICAI :
ICAI is the authority for making new auditors of companies. SEBI

creates good relationship with ICAI for bringing more
transparency in the auditing work of company accounts because
audited financial statements are mirror to see the real face of
company and after this investors can decide to invest or not to
invest. Moreover, investors of India can easily trust on
audited financial reports. After Satyam Scam, SEBI is
investigating with ICAI, whether CAs are doing their duty by
ethical way or not.
8. Introduction of derivative contracts on Volatility Index :
For reducing the risk of investors, SEBI has now been decided to
permit Stock Exchanges to introduce derivative contracts on
Volatility Index, subject to the condition that;
a. The underlying Volatility Index has a track record of at least one

year.
b. The Exchange has in place the appropriate risk management

framework for such derivativecontracts.
2. Before introduction of such contracts, the Stock Exchanges shall

submit the following:
i. Contract specifications
ii. Position and Exercise Limits
iii. Margins
iv. The economic purpose it is intended to serve
v. Likely contribution to market development
vi. The safeguards and the risk protection mechanism adopted by

the exchange to ensure market integrity, protection of investors and
smooth and orderly trading.
vii. The infrastructure of the exchange and the surveillance system

to effectively monitor trading in such contracts, and
viii. Details of settlement procedures & systems
ix. Details of back testing of the margin calculation for a period of

one year considering a call and a put option on the underlying with
a delta of 0.25 & -0.25 respectively and actual value of the

underlying.
9. To Require report of Portfolio Management Activities :
SEBI has also power to require report of portfolio management to

check the capital marketperformance. Recently, SEBI sent the
letter to all Registered Portfolio Managers of India for
demanding report.

CHAPTER: 4
DO’S AND DON’T FOR INVESTORS
DO'S AND DONT'S
 DO use a financial advisor. Expert advice may well involve

extra cost, but it can pay for itself many times over through
better investment decisions that lead to improved long-term
returns.
 DON’T get emotionally attached to investments that have

served you well in the past, but that are no longer performing
well or are no longer suited to your needs.
 DO make sure you understand your financial circumstances,

your tolerance of risk, and your long-term needs and goals. If
you don’t, you are not very likely to put yourself in the
financial position you want for the future.
 DON’T buy at the top and sell at the bottom. Too many
ordinary investors start putting money into the market when all
the talk is about soaring values, only to sell when prices fall
later.
 DON’T try to time the markets, especially equity markets, by

frequent short-term trading.

 DO invest for the long term. The inevitable fluctuations of

share and bond values, and of the funds that invest in them,
matter less and less the longer you hold them, because the ups
and downs even out over time.
 DON’T rush into investments, whether in shares or funds,

because you have been promised they will be “the next big
thing”. If investment were that easy, everyone would be rich.
 DO take advantage of cost averaging by making regular
investments. Although markets move up and down, expensive
investments you make when prices are high will be matched by
cheap assetswhen prices are low.
 DON’T put all your eggs in one basket. Diversification is the

basis for successful investing. It may not seem appropriate
when a particular asset class or area is climbing high and fast,
but it won’t always stay that way. Studies indicate that the
main driver of long-term investment success is proper, broad-
based asset allocation.
 DO make sure you only invest in things you understand, and

that you understand the basics of investing before going ahead.
It makes no sense to invest money yourself or have other
people do it for you without understanding how investment
works and the kind of assets you can invest in.
 DON’T make investments purely on the basis of their tax

benefits. They are, without a doubt, an important factor in the
ultimate net profit from your investments, but tax conditions

can change over time and rob your chosen tax-optimised
investments of their attractions.
 DON’T pay too much attention to media headlines about

successful – or less successful – investments. The media react
more quickly now than ever before, but steady long-term
growth tends not to make for exciting headlines.
 DO review your investment strategy regularly, ideally with

your investment advisor. People’s financial circumstances
change over time, and so do their goals. Be open to the
possibility of taking another approach if need be.

CHAPTER:5
REGULATION FOR STOCK EXCHANGE,
BROKERS, TRADING MEMBERS,
COMPANIES, AND MUTUAL FUNDS
National Stock Exchange (NSE) – Rules and Regulations
In the role of a securities market participant, NSE is

required to set out and implement rules and regulations to govern
the securities market. These rules and regulations extend to
member registration, securities listing, transaction monitoring,
compliance by members to SEBI / RBI regulations, investor
protection etc. NSE has a set of Rules and Regulations specifically

applicable to each of its trading segments. NSE as an entity
regulated by SEBI undergoes regular inspections by them to ensure
compliance.
Stock Broker
Stock Broker is one who deals in stocks of monied corporations

and other securities. He for a commission attends to the purchase
and sale of stocks or shares, of the Government or other securities,
on behalf of and for the accounts of their clients.[9] He is a person
who has either made an application for registration or is registered
as a stock broker or sub broker, in accordance with the rules and
regulations made under the SEBI Act, 1992.[10] His functions are
broader than the ordinary brokers, since he is entrusted with the
possession of the property for which he acts and may even take and
transfer it without the name of his principal appearing in the
transactions. In India, there is no regulatory body for brokers.
In secondary market, brokers and sub brokers play a vital role.

SEBI, as a regulator of the capital market has recognized their role
and has thus permitted them to act as underwriters, without getting
registered with SEBI pursuant to SEBI (Underwriters) Rules &
Regulations, 1993. But this is subject to the condition that they
hold a valid registration certificate from SEBI under SEBI (Stock
Brokers and Sub Brokers) Rules & Regulations, 1992. However,
he has to comply with all the obligations stipulated thereunder. He
is also required to obtain the permission of the concerned Stock
Exchange of which he is a member, so as to act as an underwriter
for each and every issue.
Brokers send out regulatory newsletters to their clients giving them

details of primary and secondary markets, particularly of new
issues with their recommendation. Some of them undertake
Portfolio Management for their valued clients. The brokers and sub
brokers are even registered with leading merchant bankers, who
handle large number of public issues.
A stock broker invests in the stock market for individuals or

corporations. Only members of the stock exchange can conduct
transactions, so whenever individuals or corporations want to buy
or sell stocks they must go through a brokerage house. Stock
brokers often advise and counsel their clients on appropriate
investments. Brokers explain the workings of the stock exchange
to their clients and gather information from them about their needs
and financial ability, and then determine the best investments for
them. The broker then sends the order out to the floor of the
securities exchange by computer or by phone. When the
transaction has been made, the broker supplies the client with the
price. The buyer pays for the stock and the broker transfers the title
of the stock to the client and performs clearing and settlement
procedures.Every trading member / clearing member shall prepare
annual accounts for each financial year ending on 31st March or on
such other date, as may be specified by the Relevant Authority
from time to time. 13.1.2 The assets and liabilities of a trading
member / clearing member shall be brought into account in the
balance sheet and shall be classified and described therein in such
manner that the balance sheet gives a true and fair view of the state
of affairs of such business as on the date to which it relates.
TRADING MEMBERS
Every trading member / clearing member shall submit to the

Exchange its audited financial statement within such period, not
later than the period by which the return of income tax is required
to be filed. If the Relevant Authority is, however, satisfied that
circumstances warrant an extension of time to furnish such report
beyond the period by which the return of income tax is required to
be filed, it may grant an extension of such time not exceeding one
month at a time, subject to such conditions as it may deem fit,
which extension, in aggregate, shall not be for a period of more
than three months.Every trading member / clearing member shall
comply with all relevant statutory Acts, including Securities
Contracts (Regulation) Act and the Rules made thereunder,
Securities and Exchange Board of India Act and the Rules and
Regulations and guidelines issued thereunder, and the requirements
of or under any notifications, directives and guidelines relating to
maintenance of accounts and records issued by the Central
Government, SEBI or any other statutory body or local authority or
any other body or authority, acting under the authority or direction
of the Central Government, to the extent applicable to each of
them.Every trading member shall enter into an agreement, as may
be prescribed by the Exchange or SEBI from time to time, with
each of his clients before executing any order from any client for
buy or sell of any security on the Exchange. If any trading member

is found to have violated or not strictly adhered to this requirement,
such trading member shall render himself liable for fine and/or any
other disciplinary action, as may be provided in the relevant
Regulations from time to time and as the Relevant Authority may
deem fit. Every trading member shall be required to maintain strict
confidentiality of information relating to each of the clients and
shall disclose or submit the same to the Exchange, Clearing
Agency, SEBI or any other government or regulatory authority or
any other agency specifically authorized by the Exchange, on
demand made in writing.
COMPANIES
All registered companies, both listed and unlisted, which raise

public funds through sale of shares will be answerable to the
Securities and Exchange Board of India (Sebi).
The new companies Bill, being formulated by the Ministry of

Corporate Affairs, is expected to make it clear that privately-held
and unlisted companies will not be allowed to escape Sebi scrutiny
by claiming they are governed by the Registrar of Companies and
the Companies Act, and not Sebi rules.
The move is significant in view of the ongoing Sahara-

Sebi litigation, where Sahara has maintained that Sebi has no
power to probe fund-raising by two of its group firms — Sahara
India Real Estate Corporation and Sahara Housing Investment

Corporation — as they are not publicly listed. These companies
were raising funds from the public through an optionally fully
convertible debenture scheme, allegedly without conforming to
disclosure and other investor protection norms.
Even privately-held companies that have no desire to go public can
come under Sebi scrutiny if they collect or propose to collect
money through sale of shares from 50 and more individuals,
according to official sources.
The move is part of the ministry’s efforts to stay clear of the
jurisdiction issues with sector regulators such as Sebi and the
Reserve Bank of India (RBI).
MUTUAL FUND
SEBI had prepared and widely circulated a paper titled "Mutual

Funds 2000" which identified ways to improve the working and
regulation of the mutual fund industry, so that mutual funds could
provide a better performance and service to all categories of
investors and offer a range of innovative products in a competitive
manner to match investor needs and preferences across various
investor segments. Based on the comments received on the
recommendations made in the paper by market participants and
investors and on discussions held with the Association of Mutual
Funds of India (AMFI), the SEBI (Mutual Funds) Regulations,
were revised and the new regulations notified in December.
The SEBI (Mutual Funds) Regulations,

The revised regulations embodied far reaching changes in the

regulation and functioning of mutual funds. The revised
regulations provide for
 enhanced level of investor protection

 empowerment of investors
 stringent disclosure norms in the offer documents, so that
investors are better informed, better advised, better aware of
risks and rewards
 standardisation of norms for valuation of assets, computation
of Net Asset Values (NAVs) of schemes of mutual funds and
accounting standards and policies
 complete freedom to asset management companies to structure
schemes in accordance with investor preferences
 removal of quantitative restrictions on investment by mutual
funds and replacement by prudential supervision
 replacement of vetting of offer documents by filing
 guaranteed return schemes by mutual funds permitted
provided returns including capital were guaranteed
 indication of expected returns based on hypothetical portfolio
permitted
 better governance of mutual funds through higher
responsibilities and empowerment of trustees as front-line
regulators of mutual funds
 closer scrutiny through off site and on site inspections
 code of ethics for asset management companies

The impact of the new regulations was immediately felt.

Asset management companies framed several schemes which
made use of the freedom provided to them by the new regulations.
Not only did the number of schemes filed with SEBI increase
significantly in a short period of time, but also there was greater
variety in the investment products offered. There was also a
significant improvement in disclosures in the offer documents.
The new regulations have brought into greater focus the

responsibilities of trustees of mutual funds who are uniquely
positioned to promote the interests of the unitholders and to ensure
that mutual funds are managed responsibly and ethically. The
trustees act independently to uphold the public trust. In this
process, trustees act as the first level regulators and are critical in
helping to ensure the profitability and progress of the mutual
funds. To assist trustees in their new role, and to set out the manner
in which they could best perform this role, SEBI appointed a
committee under the chairmanship of Shri P K Kaul, former
Cabinet Secretary and Ambassador to the United States.
SEBI is using its interface with AMFI to assess the impact of the
new regulations on the working of mutual funds and to examine
further ways of improving the performance of mutual funds so as
to restore investor confidence in them. SEBI also continued
working with AMFI so that it becomes a more effective body
representing the mutual fund industry and embarks on a campaign
to sharpen the industry's focus on the consumer.

CHAPTER:6
POWERS OF SEBI
 To make rules and regulation for controlling the stock

exchanges in India.
 To educate brokers and investors.
 To do amendments in the rules and regulations of stock
exchanges in India.
 To encourage investors of foreign to investment in India.
 To safeguard the interests of investors.

 To development the stock and share market in India.
 To stop all fraud and malpractices in stock exchanges.
 To reduce the fluctuations in the market prices of shares.
 To create good relationships among the large numbers of
brokers, finance agents and financers.
 10.To provide license to brokers for activities in stock
exchanges in India.
 For the discharge of its functions efficiently, SEBI has been
vested with the following powers:
 To approve by−laws of Securities exchanges.
 To require the Securities exchange to amend their by−laws.
 Inspect the books of accounts and call for periodical returns
from recognized securities exchanges.
 Inspect the books of accounts of financial intermediaries.
 Compel certain companies to list their shares in one or more
securities exchanges.
 Merchant banker
 SEBI committees
 Technical Advisory Committee
 Committee for review of structure of market infrastructure
institutions
 Advisory Committee for the SEBI Investor Protection and
Education Fund
 Takeover Regulations Advisory Committee
 Primary Market Advisory Committee (PMAC)
 Secondary Market Advisory Committee (SMAC)
 Mutual Fund Advisory Committee

 Corporate Bonds & Securitization Advisory Committee.
1. Powers relating to stock exchanges & intermediaries
SEBI has wide powers regarding the stock exchanges and

intermediaries dealing in securities. It can ask information from the
stock exchanges and intermediaries regarding
their business transactions for inspection or scrutiny and other
purpose.
2. Power to impose monetary penalties
SEBI has been empowered to impose monetary penalties on capital

marketintermediaries and other participants for a range of
violations. It can even impose suspension of their registration for a
short period.
3. Power to initiate actions in functions assigned
SEBI has a power to initiate actions in regard to functions

assigned. For example, it can issue guidelines to different
intermediaries or can introduce specific rules for the protection of
interests of investors.
4. Power to regulate insider trading

SEBI has power to regulate insider trading or can regulate the

functions of merchant bankers.
5. Powers under Securities Contracts Act
For effective regulation of stock exchange, the Ministry of Finance

issued a Notification on 13 September, delegating several of its
powers under the Securities Contracts (Regulations) Act to SEBI.
SEBI is also empowered by the Finance Ministry to nominate three
members on the Governing Body of every stock exchange.
6. Power to regulate business of stock exchanges
SEBI is also empowered to regulate the business of stock

exchanges, intermediaries associated with the securities market as
well as mutual funds, fraudulent and unfair trade practices relating
to securities and regulation of acquisition of shares and takeovers
of companies.
SEBI’S POWER TO ISSUE DIRECTORS
SEBI has wide ranging power to issue directions. “In

the interest of investors, orderly development of securities market”.
Range of creative measures adopted. Link between the restraint on
a noticee and the need for it not often established. Courts have
been favourable in upholding the constitutional validity of the
power. No timeline for review of a preventive order. Most future
litigation involving SEBI would be in this space.
Power to Cancel Certificate:-
The Board may, by order, suspend or cancel a certificate of

registration in such manner as may be determined by regulations.
However as per proviso of this section, no order under this sub-
section shall be made unless the person concerned has been given a
reasonable opportunity of being heard. According to this section
SEBI is empowered to suspend or cancel a certificate of
registration granted by it. However, this should be done as per
principle of natural justice and requires a reasonable opportunity of
being heard to such person. the Supreme Court has held that in
view of the expanding horizon of the principle of natural justice,
the requirement to record reasons can be regarded as one of t he
principle of natural justice which governs exercise of power by
administrative authorities.
Powers to suspend and restrain:-
The Board may, by an order, for reasons to be recorded in writing,

in the interests of investors or securities market, take any of the
following measures, either pending investigation or inquiry or on
completion of such investigation or inquiry, namely:- a) suspend
the trading of any security in a recognised stock exchange; b)
restrain persons from accessing the securities market and prohibit
any person associated with securities market to buy, sell or deal in
securities; c) suspend any office-bearer of any stock exchange or
self- regulatory organisation from holding such position; d)
impound and retain the proceeds or securities in respect of any

transaction which is under investigation; the SEBI (Amendment)
Act, after passing of an order on an application made for approval
by the Judicial Magistrate of the first class having jurisdiction, for
a period not exceeding one month, one or more bank account or
accounts of any intermediary or any person associated with the
securities market in any manner involved in violation of any of the
provisions of this Act, or the rules or the regulations made
thereunder: However, only the bank account or accounts or any
transaction entered therein, so far as it relates to the proceeds
actually involved in violation of any of the provisions of this Act,
or the rules or the regulations made thereunder shall be allowed to
be attached; (e) direct any intermediary or any person associated
with the securities market in any manner not to dispose of or
alienate an asset forming part of any transaction which is under
investigation.

CHAPTER: 7
SEBI Guidelines Regarding Rights Issues of a
Company
SEBI guidelines regarding rights issues of a company are as
follows:
1. Applicability:
These guidelines apply to the rights issues made by existing listed

companies (the companies whose equity capitals listed) Therefore
a company whose debentures/bonds are listed but not the equity
(i.e. shares) will not be governed by those guidelines. These
guidelines are not applicable where the size of the issue is below
Rs. 50 lakhs.
2. Withdrawal of a Rights Issue:
Rights issue cannot be withdrawn after the announcement of the

record date. If done, then no security of the company shall be
eligible for listing up to 12 months.
3. Underwriting:
The underwriting of rights issue shall be optional.

4. Appointment of Registrar:
Appointment of Registrars to Issue shall be compulsory.
5. Appointment of Merchant Banker:
Appointment of Category-1 Merchant Banker holding a valid

certificate of registration issued by SEBI shall be compulsory.
6. Partly Paid Shares:
Partly paid shares, if any, must either be made fully paid or

forfeited.
7. Letter of Offer:
Letter of offer shall contain disclosures specified by SEBI See

Section III of SEBI guidelines relating to contents of offer
document.
The Lead Merchant Banker shall:

 Ensure compliance of the requirements of SEBI guidelines with
respect to the offer document relating to rights issues.
 File with SEBI a copy of the offer document at least 21 days

before filing of the same with the Regional Stock Exchange.

8. Agreement with Depository:
The company shall enter into an agreement with the depository

for dematerialization:
(i) Of securities already issued;
(ii) Proposed to be issued;
(iii) The subscribers/shareholders must be given an option of
holding the shares in a dematerialised mode or by way of share
certificates.
9. Closure of Rights Issue:
The rights issue must be kept open for a minimum period of 30

days. It cannot remain open for more than 60 days.
10. Minimum Subscription:
SEBI requires the following clauses in respect of minimum

subscription to be stated in the letter of offer.
Where the company does not receive the minimum subscription of
90% of the issue the entire subscription will be refunded to the
applicants within 42 days from the date of closure of the issue. If
there is delay in the refund of the application money by more than
8 days after the company becomes liable to pay the amount, i.e.
forty two days after closure of the issue, the company will pay
interest for the delayed period, @ 15% per annum as prescribed in
sub-sections (2) and (2A) of section 73 of the Companies act,
1956.
11. No Reservation in Rights Issues:
No reservation shall be allowed in rights issue.
12. Promoters Contribution and Lock-in-period:
The requirement of promoter’s contribution shall not be applicable

in case of rights issues.
13. Rights of FCD/PCD Holders:
No company shall, pending conversion of fully convertible

debentures/partly convertible debentures (FCD/PCD) issue any
shares by way right unless similar benefit is extended to the
holders of such FCDs or PCDs. The benefit shall be extended by
making a reservation of shares in proportion to the convertible part
of FCDs/PCDs. The shares so reserved may be issued at the time
of conversion of such debentures on the same terms on which the
rights issue was made.
14. Restriction on Further Capital Issues:
No company shall make any further issue of capital in any manner,

whether by way of issue or otherwise, during the period
commencing from the submission of offer document to SEBI on
behalf of the company for rights issue, till the securities referred to

in the said offer document have been listed or application moneys

refunded on account of non-listing or under subscription, etc.
15. Over Subscription not to be retained:
Over-subscription shall not be retained under any circumstances.
16. Issue to be made fully Paid-up:
Issue shall be made fully paid-up within 12months except where

the total issue size exceeds Rs. 500 crore.
17. Offer Document to be made Public:
The draft offer document filed with SEBI shall be made public for
a period of 21 days from the date of filing the offer document with
SEBI.
The Lead Merchant Banker shall:
(a) Simultaneously file copies of the draft offer document with the
stock exchanges where the securities offered through the issue are
proposed to be listed.
(b) Make copies of offer document available to the public.
Lead merchant banker or stock exchanges may charges an
appropriate sum to the person requesting for the copy of offer
document.
18. No Complaints Certificate:

After a period of 21 days from the date the draft offer

document was made public, the Lead Merchant Banker shall
file a statement with SEBI:
(a) Giving a list of complaints received by it.
(b) A statement by it whether it is proposed to amend the draft
offer document or not, and
(c) Highlight of those amendments.
19. Dispatch of letter of offer:
In the case of rights issues, lead merchant banker shall ensure that
the letters of offer are dispatched to all shareholders at least one
week before the date of opening of the issue.
After the prospectus or letter of offer has been filed with the
Registrar of Companies or stock exchange the printed prospectus
or letter of offer shall be forwarded to SEBI at least 10 days prior
to the issue opening date.
20. Composite Issues:
The Lead Merchant Banker shall ensure that the requirements of

‘minimum subscription’ is satisfied both jointly and severally, i.e.,
independently for both rights and public issues.
21. Underwriters:

(a) If the issue is proposed to be closed at the earliest closing date,

the Lead Merchant Banker shall satisfy himself that the issue is
fully subscribed before announcing closure of the issue.
(b) In case, there is no definite information about subscription
figures, the issue shall be kept open for the required number of
days to take care of the underwriters’ interests and to avoid any
dispute, at a later date, by the underwriters in respect of their
liability.
(c) In case there is a devolvement on underwriters, the Lead
Merchant Banker shall ensure that the underwriters honour their
commitments within 42 days from the date of closure of the issue.
(d) In case of under-subscribed issues, the lead merchant banker
shall furnish information in respect of underwriters who have
failed to meet their under writing devolvement’s to SEBI in the
specified format.
22. Additional Facility for Applying:
The Lead Merchant Banker shall ensure that an advertisement

giving the date of completion of dispatch of letters of offer is
released in at least in one English National Daily with wide
circulation, one Hindi National Paper and a Regional language
daily circulated at the place where registered office of the issuer
company is situated. The advertisement must be published at least
7 days before the date of opening of the issue.
23. Utilisation of Funds in Case of Rights Issues:

The issuer company may utilise funds collected against rights

issues after satisfying Regional Stock Exchange that minimum
90% subscription has been received.
24. Compliance Report:
The Post-Issue Lead Merchant Banker shall file.

(a) 3 Day Post Issue Monitoring Report:
The report shall be filed on the 3rd day from the date of closure of
the subscription of the issue.
(b) 50-Day Post-Issue Monitoring Report:
This report shall be filed on the 50th day from the date of closing
of subscription of the issue.

CONCLUSION
The Capital Market Regulator, SEBI has carefully developed good
stability mechanisms to keep the Market functioning with stability
and sustainability. There are difficulties, but the Capital Market
Regulator devises careful working strategies to overcome them.
Such strategies come in the form of rules, regulations and
innovative market reforms. SEBI has been granted powers by the
Law Courts and the Government of India which helps its
machinery to function as expected. SEBI is very much engaged in
the education of investors and the careful training of all Capital
Market participants.
SEBI cannot be held responsible for the bad Corporate Governance

practices initiated by directors of companies. SEBI is an advisory
body charged 328 with the formulation of good Corporate
Governance Rules and Regulations, which should be implemented
and followed by all corporations. A number of significant first-
generation Capital Market reforms have been implemented in the
India Capital Market.

Bibliography
Books reffered from :
 SEBI ACT “A legal commentary on Securities and Exchange

Board of India Act, 1992”- By Sumit Agarwal.
Website Visited :
 www. Wikipedia .com

 www. Google .com
 www. Investopedia .Com
 www. Scribd . com
 www. SEBI .com

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SECURITIES EXCHANGE BOARD OF INDIA V-SEMESTER

SHREE SHANKAR NARAYAN COLLEGE

NAVGHAR ROAD, BHAYANDER (E), THANE-401 105.

ACADEMIC YEAR - 2017-2018.

SECURITIES AND EXCHANGE BOARD OF INDIA

MR. VIVEK WANKHEDE

KHUSHBOO SHANKAR RAM

T.Y.B. FINANCIAL MARKET Page | 1

SHREE SHANKAR NARAYAN COLLEGE

OF ARTS AND COMMERCE

I Khushboo S. Ram student of T.Y.B.F.M. (2017-18) hereby declare that have

T.Y.B. FINANCIAL MARKET Page | 2

SHREE SHANKAR NARAYAN COLLEGE

OF ARTS AND COMMERCE

NAVGHAR ROAD, BHAYANDER (E), THANE-401 105.

BACHELOR OF COMMERCE & FINANCIAL MARKET – SEM V

ACADEMIC YEAR 2017 – 2018.

SECURITIES AND EXCHANGE BOARD OF INDIA

MR. VIVEK WANKHEDE

T.Y.B. FINANCIAL MARKET Page | 3

SHANKAR NARAYAN COLLEGE

PROFOMA FOR APPROVAL OF PROJECT SYNOPSIS

NAME : KHUSHBOO SHANKAR RAM

TITLE OF PROJECT : SECURITIES AND EXCHANGE BOARD OF INDIA

SUBJECT AREA : FINANCIAL MARKET

NAME OF GUIDER : MR. VIVEK WANKHEDE

GUIDE SIGNATURE : ________________

STUDENT’S SIGNATURE : _________________

T.Y.B. FINANCIAL MARKET Page | 4

I take this opportunity to express my profound gratitude to

T.Y.B. FINANCIAL MARKET Page | 5

SR.NO TOPIC PG.NO

REGULATION FOR STOCK EXCHANGE, BROKERS,

SEBI GUIDELINES REGARDING RIGHT ISSUE OF A 47

T.Y.B. FINANCIAL MARKET Page | 6

T.Y.B. FINANCIAL MARKET Page | 7

The Securities and Exchange Board of India (SEBI) is the

T.Y.B. FINANCIAL MARKET Page | 8

Union Government of India.SEBI has introduced the

 The Chairman who is nominated by the Union Government of

T.Y.B. FINANCIAL MARKET Page | 9

“An Act to provide for the establishment of a Board to protect the

T.Y.B. FINANCIAL MARKET Page | 10

The primary objective of SEBI is to promote healthy and orderly

1. Ensuring fair practices in securities market.

The basic objectives of the Board were identified as:

 To promote the development of Securities Market;

 To regulate the securities market and for matters connected

therewith or incidental there to.

SEBI has introduced the comprehensive regulatory measures,

T.Y.B. FINANCIAL MARKET Page | 11

Another significant event is the approval of trading in stock indices

 It acts as a barometer for market behavior;

Two broad approaches of SEBI is to integrate the securities market

SEBI appointed the L. C. Gupta Committee in 1998 to recommend

SEBI then appointed the J. R. Verma Committee to recommend

However the Securities Contracts (Regulation) Act, (SCRA)

Derivatives have been accorded the status of `Securities'. The ban

(1) Regulation of Stock Exchanges:The first objective of SEBI is

The capital market is meaningless in the absence of the investors.

T.Y.B. FINANCIAL MARKET Page | 13

The protection of the interests of the investors means protecting