SEBI

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SEBI :

SEBI

SEBI:

SEBI The SEBI is the national regulatory body for the securities market It is set up under the securities and Exchange Board of India act, 1992 It has its head office in Mumbai It has now set up regional offices in the metropolitan cities of Kolkata, Delhi, and Chennai

Objectives of SEBI:

3 Objectives of SEBI To protect the interest of the investors in securities To promote the development of securities market To makes rules and regulations for the securities market

The Management of the Board :

The Management of the Board Formation of the board – a chairman two members from the central government representing the ministries of finance and law one member from the Reserve Bank of India two other members appointed by the central government The term of office and conditions of service Removal of member from office Meetings

Functions of SEBI:

5 Functions of SEBI Regulating the business in stock exchange and any other securities market Registering and regulating the workings of intermediaries associated with securities market Registering and regulating the working of collective investment schemes including mutual funds Promoting and regulating self-regulatory organizations Prohibiting fraudulent and unfair trade practices in the securities market Promoting investors education and training of intermediaries in securities market Prohibiting insiders trading in securities

Functions of SEBI:

6 Functions of SEBI Regulating substantial acquisition of shares and take-over of companies Calling for information, undertaking inspection, conducting enquiries and audits of the stock exchanges, intermediaries and self-regulatory organizations in the securities market

Powers of SEBI:

Powers of SEBI Power of inspection Powers of court Powers in the interests of securities market Powers regarding protection of investors Power to issue directors Powers of investigation Power to cease and desist proceedings Registration of stock-brokers, share transfer agents, etc

SEBI Regulates……….:

8 SEBI Regulates……….

SEBI & Primary Market:

9 SEBI & Primary Market Measures undertaken by SEBI:- Entry norms Promoters’ contribution Disclosure Book building Allocation of shares Market intermediaries

Contd………..:

10 Contd……….. Entry norms Track record of dividend payment for minimum 3 yrs preceding the issue. Already listed companies - when post-issue net worth becomes more than 5 times the pre-issue net worth For Manufacturing company not having such track record – appraise project by a public financial institution or a scheduled commercial bank. For corporate body – 5 public shareholders for every Rs.1 lakhs of the net capital offer made to the public Banks – 2 yrs of profitability for issues above par.

Conti………..:

11 Conti……….. 2. Promoters’ contribution Should not be less than 20% of the issued capital. Receiving of promoters’ contribution. Lock in period as per SEBI. Cases of non-under written public issues. 3. Disclosure Draft prospectus Un audited financial results

Conti………..:

12 Conti……….. 4. Book building One of the mode of public issue thru prospectus. Role of syndicate members and book runners. 5. Allocation of shares Minimum application of shares Reservation for small investors Allotment of securities

Conti………..:

13 Conti……….. 6 . Market intermediaries Licensing of merchant bankers Licensing of underwriters, registrars, transfer agents, etc., Merchant bankers net worth – Rs.5 crores

SEBI & Secondary Market:

14 SEBI & Secondary Market Reforms in the secondary market:- Settlement & clearing Debt market Price stabilization Delisting Brokers Insider Trading

Conti………..:

15 Conti……….. 1. Settlement & clearing Weekly settlements Auctions for non-delivered shares within 80 days of settlement Advice to set up clearing houses, clearing corporation or settlement guarantee fund

Conti………..:

16 Conti……….. 2. Debt market segment Regulates thru SEBI regulation Act 1996. Listing of debt instruments Investment range for FIIs 3. Price stabilization Division to monitor the unusual movements in prices. Price filters Price bands

Conti……….. :

Conti……….. 4. Delisting On voluntary de-listing from regional stock exchanges – buy offer to all share holders Promoters to buy or arrange buyers for the securities 3 yrs listing fees from companies and be kept in Escrow A/c with the stock exchange. 17

SEBI and the FIIs:

SEBI and the FIIs Union Govt. allowed- Foreign Institutional Investors (FIIs) Non-Resident Indians (NRIs), and Persons of Indian Origin (PIOs) to enter into both Primary & Secondary market in India through the portfolio investment scheme (PIS), under Liberalized policy regime. Under this scheme, FIIs/NRIs can acquire shares/debentures of Indian companies through the stock exchanges in India. Implications:- Affects the sensex movements Determines the market indications Guidelines announced in 1992 In 1993, 12 FIIs got registered At the end of 1996-97, 439 FIIs were registered

Slide 19:

The ceiling for overall investment for FIIs:- 24% of the paid up capital of the Indian company 10% for NRIs/PIOs. 20% of the paid up capital in the case of public sector banks, including the State Bank of India. Modifications in ceilings:- The ceiling of 24 % for FII investment can be raised up to sectoral cap/statutory ceiling, subject to the approval of the board and the general body of the company passing a special resolution to that effect. The ceiling of 10 % for NRIs/PIOs can be raised to 24% subject to the approval of the general body of the company passing a resolution to that effect.

Slide 20:

FIIs breakup in Indian Capital Market

SEBI guidelines for FIIs:- :

SEBI guidelines for FIIs:- According to the 1995 regulations, FIIs should hold certificate granted by SEBI to trade in Indian stock market. To grant the certificate the applicant should – Have track record, professional & competence record, financial soundness, general reputation of fairness and integrity. Regulated by an appropriate foreign regulatory authority. Permission under the provisions of FERA Act 1973.(FEMA - 2006)

Recent developments in FIIs:

Recent developments in FIIs Exemption from attaching copy of RBI approval with each market lots. Allowed to invest in unlisted stocks of any company. Allowed to invest up to 100% in debt instruments. Mandatory to settle transactions thru dematerialized mode for FIIs having securities more than Rs.10 cr.

Steps to reduce frauds:

Steps to reduce frauds Quicker time to market Auditor constraints Consolidated results IFRS choice

Limitations of SEBI:

Limitations of SEBI Interference of government to frame the rules and regulations of SEBI SEBI have to seek approval for filing criminal complaints for misuse and break of regulations SEBI has not autonomy The chairman of the Board has no fixed period and can be remove with the 3 months notice

The GTB-UTI Bank Merger Story :

The GTB-UTI Bank Merger Story GTB's total exposure to Parekh and his associate companies could be as much as Rs. 250-300 crore at one time ,which was clearly above the prudential limit of 20% of net worth set by the RBI GTB had given loans to over 200 brokers (including Parekh) in 2000. Gelli said that GTB had lent at least Rs. 118 crore to Parekh SEBI conducted an investigation to find out if Gelli used his influence with the brokers to rig the bank's scrip price to get a favourable swap ratio for the proposed merger Parekh held close to 4% stake in GTB with another 2% held in benami transactions

Contd….. :

Contd….. There was the element of insider trading pre-merger announcement when GTB share price touched Rs 114 SEBI preliminary investigation report found that there was manipulation in GTB shares during October-December 2000 the investigation revealed that the manipulation in the GTB scrip was motivated and done with the help of the bank's senior management team

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