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PREPARED BY:

Anurag Garg(61)

Himanshu Kumar Singh

Himanshu Kumar(82)

Manish Kumar(90)

Gautam Saini

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Why do we need a regulatory body for Investor

protection in India?

India is an ` informationally ' weak market

Boosting capital market demands restoring the

confidence of lay investors who have been beaten

down by repeated scams

Progressively softening interest rates and an under

performing economy have eroded investment

options, and require enhanced investing skills.

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What is SEBI?

Securities and Exchange Board of India(SEBI)

was established on April 12,1992 in accordance

with the provisions of the Securities and ExchangeBoard of India Act, 1992 to regulate the functions

Of the securities market with a view to promote

their orderly and healthy development ,to provide

adequate protection to investors and to thus create

an environment to facilitate mobilization of

adequate resources through the securities market.

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History of SEBI

Set up originally in 1988 by Govt.of India

Acquired statutory form in 1992under SEBI Act 1992

Chairmanis Sh. CB Bhave Headquartered in Mumbai

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Objectives of SEBI

To protect the interest ofinvestorsinsecurities .

To promote the development of the securitymarket.

To regulate the securities market.

Focus being the greater investor protection, SEBI has

become a vigilantwatchdog

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Functions of SEBI

The functions of SEBI arise out ofits objectives.

It follows 3 kinds of functions:-

I. ProtectiveII. Developmental

III. Regulatory

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Protective Functions

1. SEBI prohibits fraudulent and unfair trade

practicesin the securities market.These

include:Price Rigging

Making misleadingstatements

2. SEBI prohibitsinsider trading

3. SEBI undertakessteps to educate investors.

4. SEBI promotes fair practices and code of

conduct insecurities market.

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Developmental Functions

1. SEBI promotes training ofintermediaries of

the securities market.

2. SEBI undertakes measures to develop thecapital markets by adapting a flexible andadoptable approach.

For Example:

SEBI has permitted internet trading.

SEBI has made underwriting optional.

SEBI has accepted the system of using the

stock exchanges to market IPOs.

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Regulatory Functions

1. SEBI regulates the businessinstock exchangesand any other securities market.

2. SEBI regulates and registers the working ofstock brokers, sub brokers, share transferagents , bankers to anissue, trustees of trustdeeds , registrars to anissue, merchant bankers

, underwriters , portfolio managers, investmentadvisors and other intermediaries who may beassociated with securities market in anymanner.

3. SEBI regulates takeover of companies.

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Continued

4. SEBI conductsinquiries and audits of thestock exchanges.

5. Registers and regulates the working ofcollective investment schemes, including

mutual funds etc.

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Management Of The Board

The board shall consist of following members:

a. A chairman;

b. Two members from amongst the officials of theministry of the central government dealing with finance

and administration of the companies act 1956;

c. One member from amongst the officials of the RBI;

d. Five other members of whom at least 3 shall be thewhole time members to be appointed by centralgovernment.

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Change In Market

The complete transformation of the trading, clearingand settlement infrastructure

Dramatic transformation to a paperless market andtransparent trading system. All trades on the NationalStock Exchange are settled in demat (paperlessmode).

By also moving towards rolling settlement (albeitafter a considerable and unnecessary delay), cuttingthe settlement cycle and now going forward towards aT+1 settlement system, SEBI has made the marketsmuch safer for investors

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Evaluation Of SEBI s Performance

Enhancing disclosures

In most case only the minimum information requiredunder the Companies Act is made available

The manner in which the swap ratio is fixed and whatthe management thinks of the same is largely taken

for granted.

valuation reports are made available for inspection,but access is not easy for all investors.

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Inability To Utilize The Existing Powers Effectively

SEBI could initiate prosecution proceedings on insider trading

only in one case and seven cases on fraudulent and unfair

practices.

Only in seven of the 181 cases, SEBI resorted to cancellation of

registration during the last four years.

Though SEBI has the power to impose a penalty of Rs 1.50

lakhs every time a person fails to furnish the requisite

information, but rarely has this power has been exercised by it .

The provision for mandatory punishment of imprisonment in

addition to award for penalty has scarcely has been used.

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Financial Scams

The Indian Bank Scam- Rs 763 crore

Helped by the main accused M.Gopalakrishnan, Chairman

of IndianBank, a series of borrowers- mostly small

corporates and exportersfrom south were lent huge sums of

money which were not paid.Cases filed:45 since 1992Charge-sheets filed:27Convictions:None as yet

Recoveries:Nil, Government has pumped in Rs 2,675 crore to

revive the bank.

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Continued..

Kaypee-Rs 3,218 Crore

Ketan Parekh funnelled crores of rupeesinto the K-10

stocks, which saw their pricesspurt . Parekh tripped finally

when pay ordersissued by Madhavpura Mercantile

Cooperative Bank(MMCB) bounced, leading to a default

with the Bank of India.

Cases filed:3, in March and May 2001Charge-sheets filed :2Recoveries:Nil

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Continued

Home Trade-Rs 1,200 Crore.

Even though the dotcom rage had died

down, home trade manged to give theimpression of being the place which could

manage your money. Unfortunately for the

investors Sanjay Agarwal had simply re

invented the wheel swindling a series of

cooperative banks and using their money in

stock market.Charge sheets filed:Not yet filed

Convictions:None

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