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SEBI and Regulations of The Capital Market (16 to 21)

Before the establishment of the securities and exchange board of India, the principal legislations governing the securities market in India were the capital issues control act 1956 and the securities contract act 1956. The regulatory powers were vested with controller of capital issues for the primary market and the stock exchange division for the secondary market in the Ministry of finance, Government of India.

In the year 1989, SEBI was created by an administrative fiat of the ministry of finance.

Since then, SEBI as gradually was granted more and more powers. With the repeal of the capital issues control act and the enactment of the SEBI act in 1992, the primary market has become the preserve of SEBI. Further, the ministry of finance, government of India, has transferred most of the powers under the securities contracts act 1956 to SEBI.

SEBI protects the interest of investors in securities and promote the development of securities market.

Functions of the SEBI are as follow:

1. Regulate the business in stock exchanges and any other securities markets.
2. Register and regulate the working of capital market intermediaries like as brokers, merchant bankers, portfolio managers and so on.
3. Register and regulate the working mutual funds.
4. Promote and regulate self- regulatory organizations.
5. Prohibit fraudulent and unfair trades’ practices in securities markets.
6. Promote investors’ education and training of intermediaries of securities markets.
7. Prohibit insider trading securities.
8. Regulate substantial acquisition of shares and takeover of companies.
9. Perform such other functions as may be prescribed by the government.
10. Review any intermediary or market participant information.
11. Review books of depository participants, issuers of beneficiary owners.
12. Investigate and inspect books of accounts and record of insiders.
13. Suspend the registration of banker if and quarry is there.
14. Suspend certificates and registration if and quarry is there.

Regulations of the Capital Market

Securities and Exchange Board of India (SEBI) was set up as an administrative arrangement in 1988.In 1992, the SEBI Act was enacted, which gave statutory status to SEBI. It mandates SEBI to perform a dual function: investor protection through regulation of the securities market and fostering the development of this market. SEBI has been vested most of the functions and powers under the Securities Contract Regulation (SCR) Act, which brought stock exchanges, their members, as well as contracts in securities which could be traded under the regulations of the Ministry of Finance. It has also been delegated certain powers under the Companies Act. In addition to registering and regulating intermediaries, service providers, mutual funds, collective investment schemes, venture capital funds and takeovers, SEBI is also vested with the power to issue directives to any person(s) related to the securities market or to companies in areas of issue of capital, transfer of securities and disclosures. It also has powers to inspect books and records, suspend registered entities and cancel registration.

The securities market is regulated by various agencies such as the Department of Economic Affairs (DEA), The Department of company affairs (DCA), the Reserve Bank of India and the SEBI. The activities of these agencies are coordinated by a high level committee on capital and financial markets.

The capital market for equity and debt securities is regulated by the Securities and Exchange Board of India. The SEBI has full autonomy and authority to regulate and develop the capital market. The government has framed rules under the Securities Contracts Act (SCRA), the SEBI Act and the Depositories Act. The power in respect of the contracts for sales and purchase of government securities, money market securities and ready forward contracts in debt securities are exercised concurrently by the RBI.
The four main legislations governing the capital market are as follows:

1. The SEBI Act, 1992 which establishes the SEBI with four fold objectives of protection of the interests of investors in securities, development of the securities market, regulation of the securities market and matter connected therewith and incidental thereto.

2. The Companies Act, 1956 which deals with issue, allotment and transfer of transfer of securities, disclosures to be made in public issues, underwriting, rights and bonus issues and payment of interest and dividends.

3. The Securities Contracts Regulation Act, 1956 which provides for regulations of securities trading and the management of stock exchanges.

4. The Depositories Act, 1996 which provides for establishment of depositories for electronic maintenance and transfer of ownership of demat securities.