Ozg Sarfaesi / DRT Lawyer
Ahmedabad | Pune |
Kolkata | Bangalore | Delhi | Mumbai
VoIP Text / Phone
# 09811415837-61-72-84-92-94
Website: http://sarfaesi.ozg.in
Email: debt@liaisoning.com
The clause 45B of section 2 of
the Companies Act, 1956 defines the word “Securities and Exchange Board of
India” mean the Securities and Exchange Board of India established under
section 3 of the Securities and Exchange Board of India Act, 1992. Since the
definition in clause (45B) of the act is dependent on section 3 of the
Securities and Exchange Board of India Act, 1992, the same is reproduced below:
“3. (1) With effect from such
date as the Central Government may, by notification, appoint, there shall be
established, for the purpose of this Act, a Board by the name of the Securities
and Exchange Board of India.
(2)The Board shall be a body
corporate by the name aforesaid, having perpetual succession and a common,
seal, with power subject to the provisions of this Act, to acquire, hold and
dispose of property, both movable and immovable, and to contract, and shall, by
the said name, sue or be sued.
(3)The head office of the Board
of shall be at Bombay.
(4)The Board may establish
offices at other places in India.”
The long cause title of the
Securities and Exchange Board of India Act, 1992 has been reproduced below.
“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”.
Thus, a combined reading of the
long cause tile and the definition given under the Section 3 of the Securities
and Exchange Board of India Act, 1992 makes it clear that the Securities
Exchange Board of India is a “body corporate having perpetual succession,
common seal to protect the interests of investors in securities and to promote
the development of and to regulate the securities market and for the matters
connected therewith or incidental thereto”.
Various provisions of the
Securities and Exchange Board of India Act, 1992 gives an insight into the
complicated and commendable work/functions discharged by the Securities and
Exchange Board of India and the same are extracted below:
“Management of the Board.
5. (1) The Board shall consist of
the following members, namely;-
a. a Chairman;
b. members from amongst the
officials of the Ministry of the Central Government dealing with Finance and
administration of the Companies Act, 1956 (1 of 1956);
c. one member from amongst the
officials o the Reserve Bank;
d. five other members of whom at
lest three shall be whole-time members,
to be appointed by the Central
Government.
(2)The general superintendence,
direction and management of the affair of the Board shall vest in a Board of
members, which may exercise all powers and do all acts and things which may be
exercised or done by the Board.
(3)Save as otherwise determined
by regulations, the Chairman shall also have powers of general superintendence and
direction of the affairs of the Board and may also exercise all powers and do
all acts and things which may be exercised or done by that Board.
(4)The Chairman and members
referred to in clause (a) and (d) of sub-section (1) shall be appointed by the Central
Government and the members referred to in clauses (b) and (c) of that
sub-section shall be nominated by the Central Government and the Reserve Bank
respectively.
(5)The Chairman and the other
members referred to in clauses (a) and (d) sub-section (1) shall be persons of
ability, integrity and standing who have shown capacity in dealing with
problems relating to securities market or have special knowledge or experience
of law, finance, economics, accountancy, administration or in any other discipline
which, in the opinion of the Central Government shall be useful to the Board.”
“Functions of the Board.
11. (1) Subject to the revision
of this Act, it shall be the duty of the Board to protect the interests of
investors in securities and to promote the development of, and to regulate the
securities market, by such measures as it thinks fit.
(2)Without prejudice to the
generality o the foregoing provisions, the measures referred to therein may
provide for –
(a) regulating the business in
stock exchanges and any other securities markets;
(b) registering and regulating
the working of stock brokers, sub-brokers, share transfer agents, bankers to an
issue, trustees of trust deeds, registering to an issue, merchant bankers,
underwriters, portfolio managers, investment advisers and such other
intermediaries who may be associated with the securities markets in any manner;
(ba)registering and regulating
the working of the depositories, participants, custodians of securities,
foreign institutional investors, credit rating agencies and such other
intermediaries as the Board may, by notification, specify in this behalf;
(c) registering and regulating
the working of venture capital funds and collective investment schemes,
including mutual funds;
(d) promoting and regulating
self-regulatory organizations;
(e) prohibiting fraudulent and
unfair trade practices relating to securities markets;
(f) promoting investors’
education and training of intermediaries of securities markets;
(g) prohibiting insider trading
in securities;
(h) regulating substantial
acquisition of shares and take over of companies;
(i) calling of information from
undertaking inspection, conducting inquiries and audits of the stock exchanges,
mutual funds, other persons associated with the securities market,
intermediaries and self-regulatory organizations in the securities market;
(ia)calling for information and
record from any bank or any other authority or board or corporation established
or constituted by or under any Central, State or Provincial Act in respect of
any transaction in securities which is under investigation or inquiry by the
Board;
(j) performing such functions and
exercising such powers under the provisions of [***] the Securities Contract
(Regulation) Act, 1956 (42 of 1956), as may be delegated to it by the Central
Government;
(k) levying fees or other charges
for carrying out the purposes of this section;
(l) conducting research for the
above purposes;
(la)calling from or furnishing to
any such agencies, as may be specified by the Board, such information as may be
considered necessary by it for the efficient discharge of its functions;
(m) performing such other
functions as may be prescribed.
(2A) Without prejudice to the
provisions contained in sub-section (2), the Board may take measures to
undertake inspection of any book, or register, or other document or record of
any listed public company or a public company (not being intermediaries
referred to ins section (12), which intends to get it securities listed on any
recognized stock exchange where the Board has reasonable grounds to believe
that such company has been indulging in insider trading or fraudulent and
unfair trade practices relating to securities market.
(3) Notwithstanding anything
contained in any other law for the time being in force while exercising the
power under clause (i) or clause (ia) of sub-section (2) or sub-section (2A),
the Board shall have the same power as are vested in a civil court under the
Code of Civil Procedure, 1908 (5 of 1908), while trying a suit, in respect of
the following matters, namely:-
i. the discovery and production
of books of account and other documents, at such place and such time as may be
specified by the Board;
ii. summoning and enforcing the
attendance of persons and examining them on oath;
iii. inspection of any books,
registers an other documents of any person referred to in section 12, at any
place;
iv. inspection of any book, or
register, or other documents or record of the company referred to in
sub-section (2a);
(4) Without prejudice to the
provisions contained in sub-sections (1), (2), (2A) and (3) and section 11B,
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 recognized stock exchanges;
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-barer of
any stock exchange or self-regulatory transaction which is under investigation;
d. attach, 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 securities market in any manner involved in violation of any
of the provisions of this Act, or the rules or the regulations made there
under:
Provided that 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
alienation asset forming part of any transaction which is under investigation:
Provided that the Board may,
without prejudice to the provisions contained in sub-section (2) of sub-section
(2A), take any of the measures specified in clause (d) or clue (e) or clause
(f), in respect of any listed public company or a public company (not being
intermarries referred to in section 12) which intends to get its securities
listed on any recognized stock exchange where the Board has reasonable ground
to believe that such company has been indulging in insider trading or
fraudulent and unfair trade practices relating to securities market:
Provided further that the Board
shall, either before or after passing such orders, given an opportunity of
hearing to such intermediaries or person concerned.”
“Board to regulate or prohibit
issue of prospectus, offer document or advertisement soliciting money for issue
of securities.
11A. (1) Without prejudice to the
provisions of the Companies Act, 1956 (91 of 1956), the Board may, for the
protection of investors.-
a. specify, by regulations –
(i) the matters relating to issue
of capital, transfer of securities and other matters incidental thereto; and
(ii)the manner in which such
matters shall be disclosed by the companies;
b. by general or special orders –
(i) prohibit any company from
issuing prospectus, any offer document, or advertisement soliciting money from
the public for the issue of securities;
(ii) specify the conditions
subject to which the prospectus, such offer document or advertisement, if not
prohibited, may be issued.
(2) Without prejudice to the
provisions of section 21 of the Securities Contracts (Regulation) Act, 1956 (42
of 1956), the Board may specify the requirements for listing and transfer of
securities sand other maters incidental thereto.”
“Power to issue directions.
11B. Save as otherwise provide in
section 11, if after making or causing to be made an enquiry, the Board is
satisfied that it is necessary, -
(i) in the interest of investors,
or orderly development of securities market; or
(ii) to prevent the affairs of
any intermediary or other persons referred to in section 12 being conducted in
a manner detrimental to the interest of investors or securities market; or
(iii) to secure the proper
management of any such intermediary or person,
it may issue such direction, --
(a)to any person or class of
persons referred to in section 12, or associated with the securities market; or
(b)to any company in respect of
matters specified in section 11A, as may be appropriate in the interests of
investor sin securities and the securities market.”
“Investigation.
11C. (1) Where the Board has
reasonable ground to believe that –
(a) the transactions in
securities are being dealt with in a manner detrimental to the investor or the
securities market; or
(b) any intermediary or any
person associated with the securities market has violated any of the provisions
of this Act or the rules or the regulations made or direction issued by the
Board thereunder,
it may, at any time by order in
writing, direct any person (hereafter in this section referred to as the
Investigating Authority) specified in the order to investigate the affairs of
such intermediary or person associated with the securities market and to report
thereon to the Board.
(2)Without prejudice to the
provisions of section 235 to241 of the Companies Act, 1956 (1 of 1956), it
shall be the duty of every manager, managing director, officer and other
employee of the company and every intermediary referred to in section 12 or
every person associated with the securities market to preserve and to produce
to the Investigating Authority or any person authorized by it in this behalf,
all the books registers, other document sand record of, or relating to, the
company or, as the case may be, of or relating to, the intermediary or such
person which are in their custody or power.
(3)The Investigating Authority
may require any intermediary or any person associated with securities market in
any manner to furnish such information to, or produce such books, or registers,
or other documents, or record before him or any person authorized by it in this
behalf as it may consider necessary if the furnishing of such information or
the production of such books, or registers, or other documents, or record is
relevant or necessary for the purposes of its investigation.
(4)The Investigating Authority
may keep in its custody any books, registers, other documents and record
produced under sub-section (2) or sub-section (3) for six months and thereafter
shall return the same to any intermediary or any person associated with
securities market by whom or on whose behalf the books, registers, other
documents an record are produced:
Provide that the Investigating
Authority may call for any book, register, other document and record if they
are needed again:
Provided further that if the
person on whose behalf the books, registers, other documents and record are
produced requires certified copies of the books, registers, other documents and
record produced before the Investigating Authority, it shall give certified
copies of such books, registers, other documents and record to such person or
on whose behalf the books, registers, other documents and record were produced.
(5)Any person, directed to make
an investigation under sub-section (1), may examine on oath, any manager,
managing director, officer and other employee of any intermediary or any person
associated with securities market in any manner, in relation to the affairs of
his business and may administer an oath accordingly and for that purpose may
require any of those persons to appear before it personally.
(6)If any person fails without
reasonable cause or refuses-
a. to produce to the
Investigating Authority or any person authorized by it in this behalf any book,
register, other document and record which is his duty under sub-section (2) or
sub-section (3) to produce; or
b. to furnish any information
which is his duty under sub-section (3) to furnish; or
c. to appear before the
Investigating Authority personally when required to do so under sub-section (5)
or to answer any question which is put to him by the Investigating Authority in
pursuance of that sub-section; or
d. to sign the notes of any
examination referred to in sub-section (7),
he shall be punishable with
imprisonment for a term which may extend to one year, or with fine, which may
extend to one crore rupees, or with both, and also with a further fine which
may extend to five lakh rupees for every day after the first during which the
failure or refusal continues.
(7)Notes of any examination under
sub-section (5) shall be taken down writing and shall be read over to, or by,
and signed, by person examined, and may thereafter be sued in evidence against
him.
(8) Where in the course of
investigation, the Investigating Authority has reasonable ground to believe
that the books, registers, other documents and record of, or relating to, any
intermediary or any person associated with securities market in any manner, may
be destroyed, mutilated, altered, falsified or secreted, the Investigating
Authority may make an application to the Judicial Magistrate of the firs class
having jurisdiction for an order for the seizure of such books, registers,
other documents and record.
(9)After considering the
application and hearing the Investigating Authority, if necessary, the
Magistrate may, by order, authorize the Investigating Authority –
a. to enter, with such
assistance, as may be required, the place or places where such books,
registers, other document sand record oar kept;
b.to search that place or those
places in the manner specified in the order; and
c.to seize books, registers,
other documents and record, it consider necessary for the purposes of the investigation:
Provided that the Magistrate
shall not authorize seizure of books, reregisters, other documents and record,
of any listed public company or a public (non being the intermediaries
specified under section 12) which intends to get its securities listed on any
recognized stock exchange unless such company indulges in insider trading or
market manipulation.
(10)The investigating Authority
shall keep in its custody the books, registers, other documents and record
seized under this section for such period not later than the conclusion of the
investigation as it considers necessary and thereafter shall return the same to
the company or the other body corporate, or, as the case may be, to the
managing director or the manager or any other person, from whose custody or
power they were seized and inform the Magistrate of such return:
Provided that the Investigating
Authority may, before returning such books, registers, other documents and
record as aforesaid, place identification marks on them or any part thereof.
a. Save as otherwise provided in
this section, every search or seizure made under his section shall be carried
out in accordance with the provisions of the Code of Criminal Procedure, 1973
(2 of 1974) relating to searches or seizures made under that Code”.
“Registration of stock brokers,
sub-brokers, share transfer agents, etc.
12.(1) No stock broker,
sub-broker, share transfer agent, banker to an issue, trustee of trust deed,
registrar to an issue, merchant banker, underwriter, portfolio manager,
investment adviser and such other intermediary who may be associated with
securities market shall buy, sell or deal in securities except under, and in
accordance with, the conditions of a certificate of registration obtained form
the Board in accordance with the regulations made under this Act:
Provided that a person buying or
selling securities or otherwise dealing with the securities market as a stock
broker, sub-broker, share transfer agent, banker to an issue, trustee of trust
deed, registrar to an issue, merchant banker, under writer, portfolio manger,
investment adviser, and such other intermediary who maybe associated with
securities market immediately before the establishment of the Board for which
no registration certificate was necessary prior to such establishment, may
continue to do so for a period of three months from such establishment or, if
he has made an application for such registration within the said period of
three months, till the disposal of such application:
Provided further that any
certificate of registration, obtained immediately before the commencement of
the Securities Laws (Amendment) Act, 1995, shall be deemed to have been
obtained from the Board in accordance with the regulations providing for such
registration.
(1A) No depository, participant,
custodian of securities, foreign institutional investor, credit rating agency,
or any other intermediary associated with the securities market as the Board
may by notification in this behalf specify, shall buy or sell or deal in
securities except under and in accordance with the conditions of a certificate
or registration obtained from the Board in accordance with the regulations made
under this Act:
Provided that a person buying or
selling securities or otherwise dealing with the securities markets depository,
participant, custodian of securities, foreign institutional investor or credit
rating agency immediately before the commencement of the Securities Laws
(Amendment) Act, 1995, for which no certificate of registration was required
prior to such commencement, may continue to buy or sell securities or otherwise
deal with the securities market until such time regulations are made under
clause (d) of sub-section (2) of section 30.
(1B) No person shall sponsor or
cause to be sponsored to carry on or caused to be carried on any venture
capital funds or collective investment schemes including mutual funds, unless
he obtains a certificate of registration from the Board in accordance with the
regulations:
Provided that any person
sponsoring or causing to be sponsored, carrying or causing to be carried don
any venture capital funds or collective investment schemes operating in the
securities market immediately before the commencement of the Securities Laws
(Amendment) Act, 1995, for which no certificate of registration wa required
prior to such commencement, may continue to operate till such time regulations
are made under clause (d)of sub-section (2) of section 30.
(2)Every application for
registration shall be in such manner and on payment of such fees as may be
determined by regulations.
(3)The Board may, by order, suspend
or cancel a certificate of registration in such manner as may be determined by
regulations:
Provided that no order under this
sub-section shall be made unless the person concerned has been given a
reasonable opportunity of being heard.
“Prohibition of manipulative and
deceptive devices, Insider trading and substantial acquisition of securities or
control.
12A. No person shall directly or
indirectly –
(a) use or employ, in connection
with the issue, purchase or sale of any securities listed or proposed to be
listed on a recognized stock exchange, any manipulative or deceptive device or
contrivance in contravention of the provisions of this Act or the rules or the
regulations made thereunder;
(b) employ any device, scheme or
artifice to defraud in connection with issue or dealing in securities which are
listed or proposed to be listed on a recognize stock exchange:
(c) engage in any act, practice,
course of business which operates or would operate as fraud or deceit upon any
person, in connection with the issue, dealing in securities which are listed or
proposed to be listed on a recognized stock exchange, in contravention of the
provisions of this Act or the rules or the regulations made thereunder;
(d) engage in insider trading;
(e) deal in securities while in
possession of material of non-public information or communicate such material
or non public information to any other person, in a manner which is in
contravention of the provisions of this Act or the rules or the regulations
made there under;
(f) acquire control of any
company or securities more than the percentage of equity share capital of a
company whose securities are listed or proposed to be listed on a recognized
stock exchange in contravention of the regulations made under this Act.”
The management of board as
enshrined in section 4 of the Securities and Exchange Board of India Act, 1992
exposes that the Board is an expert consisting of experts in finance and
administration and others. The functions of the board as given in section 11,
11A, 11B, 11C and 12A gives an idea of the complicatedness of transaction in
the securities market and also the most difficult functions of regulating
various intermediaries from the stage of granting certificate and continuously
supervising them in order see that they are not abusing their powers/position.
Further, in view of the fact that the security is an marketable interest, in
view of the fact that variety of marketable interests can be issued by the
companies in the market, in view of speculativeness of the stock market and in
view of the ample scope to deceit the investors if the intermediaries
co-operates for such deceitfulness, the functions discharged by the Board are
really commendable. The functions of the Board can be termed as most
complicated among all areas/branches/fields.
The Board also prescribes, under
its authority, various rules/regulations/circulars etc. which are applicable to
public companies or the companies whose shares are going to be listed. The
rules and regulations prescribed by the SEBI are obviously connected with the
issue and the trading at the primary and the secondary market. The SEBI does
commendable job by co-coordinating with the Government, RBI, various other
organs, Intermediaries, Financial Institutions, World Stock Exchanges and
various other recognized stock exchange/s in India.
Some important
rules/regulations/guidelines prescribed by the SEBI are given hereunder:
SEBI (Disclosure and Investor Protection)
Guidelines, 2000
SEBI (Central Listing Authority)
Regulations, 2003
SEBI (Delisting of Securities) Guidelines,
2003
SEBI (Employees Stock Option Scheme and
Employees Stock Purchase Scheme) Guidelines, 1999
SEBI (Issue of Sweat Equity) Regulations,
2002
SEBI (Buy-Back of Securities) Regulations,
1998
SEBI (Substantial Acquisition of Shares and
Takeover) Regulations, 1997
SEBI (Prohibition of Fraudulent and Unfair
Trade Practices relating to Securities Markets) Regulations, 2003.
SEBI (Prohibition of Fraudulent and Unfair
Trade Practices relating to Securities Markets) Regulations, 1995
SEBI (Mutual Funds) Regulations, 1996
SEBI (Collective Investment Schemes)
Regulations, 1999
SEBI Guidelines for Foreign Institutional
Investors
SEBI (FIIs) Regulations, 1995
SEBI (Venture Capital Funds) Regulations,
1996
SEBI (Foreign Venture Capital Funds)
Regulations
SEBI (Depositories and Participants)
Regulations, 1996
SEBI (Custodian of Securities) Regulations,
1996
SEBI (Credit Rating Agencies) Regulations,
1999
SEBI (merchant Bankers) Rules, 192
SEBI (Merchant Bankers) Regulations,
1992/SEBI (Registrars to an issue and Share Transfer Agents) Rules, 1993
SEBI (Registrars to an issue and Share
Transfer Agents)Regulation, 1993
SEBI (Underwriters) Rules, 1993
SEBI (Underwriters) Regulations, 1993
SEBI (Debenture Trustees) Rules, 1993
SEBI (Debenture Trustees) Regulations,
1993/SEBI (Bankers to an Issue) Rules, 1994
SEBI (Bankers to an Issue) Regulations,
1994
SEBI (Stock Brokers and Sub-Brokers) Rules,
1992
SEBI (Stock Brokers and Sub-Brokers)
Regulations, 1992
SEBI (Portfolio Manager) Rules, 1993
SEBI (Portfolio Manager) Regulations, 1993
SEBI (Ombudsman) Regulations, 2003.
Apart from very few prominent
rules and regulations framed or prescribed by the SEBI, there are numerous
circulars etc. issued by the SEBI for effective discharge of its functions.
Among all, the SEBI (DIP) Guidelines will be of great significance when it
comes to initial issue. Again, the SEBI will discharge the most of important
function of Takeovers and has to prevent the indirect takeovers floating the
rules and regulations. Again, insider trading, various schemes, mutual funds
etc. the rule and regulations in respect of the public companies like buyback
of securities etc. will be effectively prescribed and administered by SEBI.
Like RBI which is burdened with the sensitive and complicated functions, the
SEBI too discharges a commendable job it was assigned to.
Ozg Sarfaesi / DRT Lawyer
Ahmedabad | Pune |
Kolkata | Bangalore | Delhi | Mumbai
VoIP Text / Phone
# 09811415837-61-72-84-92-94
Website: http://sarfaesi.ozg.in
Email: debt@liaisoning.com
