PRESENTED BY

SEBI(Securities Exchange
and Board Of India)
The

Securities and Exchange

Board Of India was established
on April 12,1992 in accordance
with the provisions of the
Securities and Exchange Board
of India Act,1992.
Its

main function is to stop

SEBI

promotes orderly and

healthy development in the
stock market but initially SEBI
was not able to exercise
complete control over the stock
market transactions.
It

was left as a watch dog to

observe the activities but was
found ineffective in regulating
and controlling them. As a
result in May 1992, SEBI was
granted legal status.

Formed:12 April,1992
Jurisdiction:
Government Of India
Headquarters :
Mumbai , Maharashtra
Website:
www.sebi.gov.in

The board shall consists of the following

members :

Chairman
Two members, one from amongst the officials of
the Central government dealing with finance and
another from the administration of Companies
Act,1956.
One member from amongst the officials of the
Reserve Bank of India.
Five other members of whom at three shall be
the whole time members to be appointed by the
Central Government

ructure of SEBI

POWERS OF SEBI
For the discharge of its functions
efficiently, SEBI has been vested with
the following powers:
To approve bylaws of stock
exchanges by SEBI
To require the stock exchange to
amend their bylaws.
Inspect the books of accounts and
call for periodical returns from
recognized stock exchanges.
Inspect the books of accounts of a

Reasons For
Establishment Of SEBI

With the growth in the dealings of stock markets,

lot of malpractices also started in stock markets
such as price rigging, unofficial premium on new
issue, and delay in delivery of shares, violation of
rules and regulations of stock exchange and
listing requirements.

Due to these malpractices the customers started

losing confidence and faith in the stock exchange.

So government of India decided to set up an

agency or regulatory body known as Securities
Exchange Board of India (SEBI).

Objectives Of SEBI

The overall objectives of SEBI are to

protect the interest of investors and
to promote the development of stock
exchange and to regulate the
activities of stock market. The
objectives of SEBI are:
To regulate the activities of stock
exchange.
To protect the rights of investors
and ensuring safety to their
investment.
To prevent fraudulent and

Purpose And Role Of

SEBI
SEBI was set up with the
main purpose of keeping a
check on malpractices and
protect the interest of
investors. It was set up to
meet the needs of three
groups.
Issuers : For issuers it

 2.

Investors : For investors it

provides protection and supply
of accurate and correct
information.

3.

Intermediaries : For
intermediaries it provides a
competitive professional market.

Importance of SEBI

Power to make rules for

controlling stock
exchange.
To provide license to dealers a
brokers.
To Stop fraud in Capital Marke
To Control the Merge, Acquisi
and
Takeover the companies.
To audit the performance of s
market.

FUNCTION
S OF SEBI

Functions of SEBI

Functions can be broadly divided into:

Protective functions
Developmental functions
Regulatory functions

Functions of SEBI
1. Protective Functions
These functions are performed by SEBI
to protect the interest of investor
and provide safety of investment.
As protective functions SEBI performs
following functions:
(i)It Checks Price Rigging
(ii)It Prohibits Insider trading
(iii)SEBI prohibits fraudulent and

 Other

protective functions

SEBI undertakes steps to educate investors so that they

are able to evaluate the securities of various companies
and select the most profitable securities.

SEBI

SEBI has issued guidelines to protect the interest of

debenture-holders wherein companies cannot change
terms in midterm.
SEBI is empowered to investigate cases of insider trading
and has provisions for stiff fine and imprisonment.
SEBI has stopped the practice of making preferential
allotment of shares unrelated to market prices.

promotes fair practices and code of

conduct in security market by taking
following steps:

2. Developmental Functions:
These functions are performed by the SEBI to promote and
develop activities in stock exchange and increase the
business in stock exchange. Under developmental categories
following functions are performed by SEBI:
SEBI

promotes training of intermediaries of the

securities market.

SEBI

tries to promote activities of stock

exchange by adopting flexible and adoptable
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) Even initial public offer of primary market is permitted
through stock exchange.

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:
SEBI has framed rules and regulations and a code of conduct to
regulate the intermediaries such as merchant bankers, brokers,
underwriters, etc.
These intermediaries have been brought under the regulatory
purview and private placement has been made more restrictive.
SEBI registers and regulates the working of stock brokers, subbrokers, share transfer agents, trustees, merchant bankers and
all those who are associated with stock exchange in any manner.
SEBI registers and regulates the working of mutual funds etc.
SEBI regulates takeover of the companies.
SEBI conducts inquiries and audit of stock exchanges.

GUIDELINES
BY SEBI

Guidelines by SEBI

Primary market
Secondary market
Foreign institutional investors
issue of bonus shares
Right issues
Debentures
Underwriters
Investor protection

Guidelines For Primary

Market

New company :a new company is

one which has not completed 12
months commercial production and
does not have audited results. The
promoters do not have track record .
These company have to issue shares
only at par.

New company setup by existing

company : when a new company is

Private and closely held companies- these

having track record of consistent
profitability for at least 3 yrs. Shall be
permitted to price their issue freely.

The issue price shall be determined only

by the issues in consultations with lead
managers to the issue.

Existing listed companies- it will be

allowed to raise fresh capital, by freely
pricing expanded capital provided the
promoters contribution is 50% first Rs.
100 crores of issue, 40% on next Rs. 200
crores , 30% on next Rs. 300 crores and
15% on balance issue amount.

Guidelines For
Secondary Market
Stock
a.Board

Exchange:-

of directors of stock exchange has to be

reconstituted so as to include non members, public
representatives, government representative to the
extent of 50% of total no. of members.
b.Capital adequacy norms have been led down for
members of various stock exchanges depending
upon their turnover of trade and other factors.
c.Working hours for all stock exchanges have been
fixed uniformly.
d.All the recognized stock exchanges will have to
inform about the transaction within 24 hours.


Brokers:
a.
Registration

of brokers and sub brokers is made

compulsory.
b.
Compulsory audit of brokers book and filing of
audit report with SEBI have been made mandatory.
c.
In order to ensure that brokers are professionally
qualified and financially solvent, capital adequacy
norms for registration of brokers have been
evolved.
d.
To bring about greater transparency and
accountability in the broker-client relationship,
SEBI has made it mandatory for brokers to disclose
transaction price and brokerage separately in the
contract notes issued to clients.
e.
No broker is allowed to underwrite more than 5% of
public issue.

Foreign Institutional
Investors

FIIs have been allowed to

investing all securities traded
in primary and secondary
market.
There would be no
restrictions on the volume of
investment for the purpose
of entry of FIIs.

Guidelines For Rights Issue

o
o
o

o
o

Where composite issues are made by listed

companies, they can be issued at different prices.
Gaps between the clearance dated of right issues
and public issues should not exceed 30 days.
If right issues of listed companies exceed 50 Rs
Lakhs , issue should be managed by authorized
merchant bankers.
Underwriting of right issues is not mandatory but
as per SEBI rules right issues can be underwritten.
No preferential allotment shall be made along with
the right issues.

Guidelines To Issue Of
Bonus Share

Issue of bonus shares after any

public/rights issue is subject to the
condition that no bonus shall be
made which will dilute the value or
rights of holders of debentures,
convertible fully or partly.
There should be a provision in the
articles of association of the
company for issue of bonus shares.

The bonus is made out of

free reserves built out of the
genuine profits or share
premiums collected in cash
only.
No bonus issue can be made
within 12 months of any
public issue/ rights issue.

Guidelines To
Debentures
The

amount of working capital debenture

should not exceed 20% of the gross current
asset.
Normally debentures above 7 years can not be
issue
The rate of interest can be decided by the
companies.
The debt equity ratio should not exceed 2:1
Debentures issued to public have to be secured
and registered.
Credit rating is compulsory for all debentures
except those issued by public sector.

Guidelines For
Underwriters

Hold certificate of
registration granted
by certificate is valid
for 3 years.
Books of account to
be maintained for a

Guidelines For
Investor Protection

New issues
Prohibition of unfair
trade practices
Investor education
Grievance cell

INVESTOR PROTECTION
Investor

protection is defined by the extent

to which the commercial law and its
enforcement protect investors from
expropriationby company insiders.

Investor

protection is essential to encourage

honest advertising of financial products, and
to prevent fraud to make sure that investors
do not lose money if their investments
default (are not repaid).

'SecuritiesInvestor ProtectionCorporation
- SIPC'

A nonprofit
corporation created
by an act of Congress
to protect the clients
of brokerage firms
that are forced into

Need for investor protection

Corporate scams and investment.

Insider Trading.
Non-Disclosure of material facts.
Vanishing companies Taking
investors money and disappearing.
Terrorist funding.
Money laundering.

ROLE/CONTRIBUTION
OF SEBI IN INVESTOR
PROTECTION :

Issue of guidelines
SEBI has issued guidelines to companies (bringing
new issues in the market) mutual funds, portfolio
managers, merchant bankers, underwriters, lead
managers, etc. These guidelines are for bringing
transparency in their operations and also for avoiding
exploitation of investors by one way or the other. In
order to reduce the cost of issue, the underwriting is
made optional on certain terms. These steps are also
for the protection of investors. SEBI keeps watch on
all intermediaries and see that they follow the
guidelines in the right spirit. It also takes panel
actions when the guidelines are not followed.

Public interest advertisements:

SEBI issues public interest advertisements to

enlighten investors on the basic features of
various instruments and minimum
precautions they should take before
choosing an investment. The SEBI desires to
create an awareness among investors about
their rights and about remedies if
problem arise. It has published some
booklets for the information and guidance of
investors.

Dealing with complaints of investors:

The investors can make complaints to SEBI if

they face problems relating to their investment
inindustrial securitiesand financial assets.
SEBI receives thousands of complaints relating
to non-receipt of refund
orders, allotment letters, non-receipt of
dividend or interest and delays in the transfer
of shares and debentures. SEBI is making
efforts to solve such complaints through
appropriate measures.

Investor education:
SEBI is aware that investor education
is important for his
protection. It encourages the
formation of investor associations
that disseminate
information through news letters.
More than nine such associations are
registered
with SEBI. SEBI is bringing out two
monthly publications for the
investors. These are:

Investor surveys

SEBI has also conducted surveys

in respect of investment and
opportunities for the benefit of
small investors. The findings of
the surveys are given
wide publicity so as to provide
proper guidance to investors
regarding their

Introduction to stock
invest
SEBI has introduced stock invest
as a new instrument
useful while submitting
application for shares. This new
instrument introduced
through the co-operation of
banks gives protection to
investors as they get interest on

Disclosures by
companies:
SEBI has introduced norms for
disclosure of half yearly
unaudited results of companies. It
has also revised the format of
prospectus to
provide more information to
investors. It also insists that every
share application. form
is accompanied by an abridged
prospectus. The provisions relating

Code regarding
takeovers
SEBI has now issued code regarding
takeovers of
companies, mergers and
amalgamations. It has introduced
regulations governing
substantial acquisition of shares and
takeovers and lays down the
conditions under
which disclosures and mandatory
public offers have to be made to the