A PROJECT ON

ROLE AND FUCTIONS OF SECURITIES AND

EXCHANGE BOARD OF INDIA

SUBMITTED TO

DR. Y. PAPA RAO

(FACULTY – CORPORATE LAW)

SUBMITTED BY

RAHUL SHARMA

SEMESTER-VI SEC- B

ROLL NO- 125

DATE OF SUBMISSION- 25/10/2018

HIDAYATULLAH NATIONAL LAW UNIVERSITY,

RAIPUR (C.G.)

ACKNOWLEDGMENTS

1
I, Rahul Sharma, feel highly elated, as it gives me tremendous pleasure to come out with
work on the topic “ROLE AND FUCTIONS OF SECURITIES AND EXCHANGE
BOARD OF INDIA”. I started this project a fortnight ago and, on its completion, I feel that
I have not only successfully completed it but also earned an invaluable learning experience.

First of all I express my sincere gratitude to my teacher, who enlightened me with such a
wonderful and elucidating research topic. Without him, I think I would have accomplished
only a fraction of what I eventually did. I thank him for putting his trust in me and giving me
a project topic such as this and for having the faith in me to deliver. His sincere and honest
approach have always inspired me and pulled me back on track whenever I went off track.
Sir, thank you for an opportunity to help me grow.

I also express my heartfelt gratitude to staff and administration of HNLU in library and IT lab
that was a source of great help for the completion of this project.

Rahul Sharma

(SEMESTER –VI)

ROLL NO.125

INDEX

2
 Sr no. Topic

Chapter: 1 Introduction

Chapter:2 History

Chapter:3 Establishment of SEBI

Chapter:4 Organization structure

Chapter:5 Objective

Chapter:6 Powers and function

Chapter:7 Case study

Chapter:8 Conclusion

Chapter:9 Bibliography

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 INTRODUCTION
The capital market has witnessed tremendous growth in recent times characterized
particularly by the increasing participation of public. Investors confidence in the capital
market can be sustained largely by ensuring investor protection. With this end in view, the
government decided to vest SEBI immediately with statutory powers required to do
effectively with all matters relating to capital market.

It was felt by the government that by transferring the powers of the controller of capital issues
to an independent body it would enable it to effectively regulate, promote and monitor the
working of stock exchange in the country.

Earlier, the regulation of the securities market was being done through the office of controller
of capital issues under the capital issues (control) Act, 1947 which has been since reapled.

Accordingly, SEBI has been set up under the SEBI Act, 1992. The CCI Act has now ceased
to have any application and stand withdrawn from the law w.e.f 246.5.1992. The Securities
Exchange Board Of India Act was passed by the parliament as Act No.15 of 1992 and
received the assent of the President on 4th April, 1992.

The Securities and Exchange Board of India Act, 1992 (the SEBI Act) was amended in the
years 1995, 1999 and 2002 to meet the requirements of changing needs of the securities
market and responding to the development in the securities market.

Based on the Report of Joint Parliamentary Committee (JPC) dated December 2, 2002, the
SEBI Act was amended to address certain shortcomings in its provisions. The mission of
SEBI is to make India as one of the best securities market of the world and SEBI as one of
the most respected regulator in the world. SEBI also endeavors to achieve the standards of
IOSCO/FSAP.

In this background, the internal group constituted by SEBI consisting of its senior officers
had proposed certain amendments to the SEBI Act. The SEBI Board had constituted an
Expert Group under the Chairmanship of Mr Justice M. H .Kania (Former Chief Justice of
India) to consider the proposals. The report of the Expert Group is placed for eliciting public
comments on the recommendations. It may be noted that the Report does not necessarily
reflect the views of SEBI on the various proposals and recommendations. SEBI would
consider the comments received from various sources before taking any final view on the
recommendations.
4
OBJECTIVES

The main objectives are:

 To study the evolution of the SEBI (Security Exchange Board of India).

 To study the role and functions of SEBI (Security Exchange Board of India)..

RESEARCH METHODOLOGY

This is a doctrinal research project. This research paper is based on secondary and electronic
sources. Other references as guided by Faculty of Corporate Law have been primarily helpful
in giving this project a concrete shape. Websites and articles have also been referred.
Footnotes have been provided wherever needed, to acknowledge the source.

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 CHAPTER 1

INTRODUCTION

The capital market has witnessed tremendous growth in recent times characterized
particularly by the increasing participation of public. Investors confidence in the capital
market can be sustained largely by ensuring investor protection. With this end in view, the
government decided to vest SEBI immediately with statutory powers required to do
effectively with all matters relating to capital market.

It was felt by the government that by transferring the powers of the controller of capital issues
to an independent body it would enable it to effectively regulate, promote and monitor the
working of stock exchange in the country.

Earlier, the regulation of the securities market was being done through the office of controller
of capital issues under the capital issues (control) Act, 1947 which has been since reapled.

Accordingly, SEBI has been set up under the SEBI Act, 1992. The CCI Act has now ceased
to have any application and stand withdrawn from the law w.e.f 246.5.1992. The Securities
Exchange Board Of India Act was passed by the parliament as Act No.15 of 1992 and
received the assent of the President on 4th April, 1992.

The Securities and Exchange Board of India Act, 1992 (the SEBI Act) was amended in the
years 1995, 1999 and 2002 to meet the requirements of changing needs of the securities
market and responding to the development in the securities market.

Based on the Report of Joint Parliamentary Committee (JPC) dated December 2, 2002, the
SEBI Act was amended to address certain shortcomings in its provisions. The mission of
SEBI is to make India as one of the best securities market of the world and SEBI as one of
the most respected regulator in the world. SEBI also endeavors to achieve the standards of
IOSCO/FSAP.

In this background, the internal group constituted by SEBI consisting of its senior officers
had proposed certain amendments to the SEBI Act. The SEBI Board had constituted an
Expert Group under the Chairmanship of Mr Justice M. H .Kania (Former Chief Justice of
India) to consider the proposals. The report of the Expert Group is placed for eliciting public

6
comments on the recommendations. It may be noted that the Report does not necessarily
reflect the views of SEBI on the various proposals and recommendations. SEBI would
consider the comments received from various sources before taking any final view on the
recommendations.

Agency overview

Formed 12 April 1992

Jurisdiction Government of India

Headquarters Mumbai, Maharashtra

Employees 525 (2009)

Agency executive U. K. Sinha, Chairman

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 CHAPTER:2

HISTORY

Before 1992, the three principal Acts governing the securities markets were: (a) the Capital
issues (Control) Act, 1947, which restricted issuer’s access to the securities market and
controlled the pricing of issues; (b) the Companies Act, 1956, which sets out the code of
conduct for the corporate sector in relation to issue, allotment and transfer of securities, and
disclosures to be made in public issues; and (c) the Securities Contract (Regulation) Act,
1956, which provides for regulation of transactions in securities through control over stock
exchanges. The capital issues (Control) Act, 1947 had its origin during the war in 1943 when
the objective was to channel resources to support the war effort. The Act was retained with
some modifications as a means of controlling the raising of capital by companies and to
ensure that national resources were channeled into proper lines, i.e, for desirable purpose to
serve goals and priorities of the government, and to protect the interests of investors. Under
the Act, any firm wishing to issue securities had to obtain approval from the Central
Government, which also determined the amount, type and price of the issue.

Major part of the liberalization process was the repeal of the capital issues (Control) Act,
1947 in May 1992. With this, Government’s control over issue of capital, pricing of the
issues, fixing of premia and rates of interest on debentures etc. ceased. The office which
administered the Act was abolished and the market was allowed to allocate resources to
competing uses. However to ensure effective regulation of the market, SEBI Act, 1992 was
enacted to empower SEBI with statutory powers for (a) protecting the interests of investors in
securities, (b) promoting the development of the securities market, and (c) regulating the
securities market. Its regulatory jurisdiction extend over corporate in the issuance of capital
and transfer the securities in addition to all intermediaries and persons associated with
securities market. SEBI can specify the matters to be disclosed and the standards of
disclosure required for the protection of investors in respect of issues; can issue directions to
all intermediaries and other persons associated with the securities market in the interest of
investors or of orderly development for securities market; and can conduct enquiries, audits
and inspection of all concerned and adjudicate offences under the Act. In short, it has been
given necessary autonmy and authority to regulate and develop an orderly securities market.

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 CHAPTER:3

ESTABLISHMENT OF THE 
SECURITIES AND EXCHANGE BOARD OF INDIA

Establishment and incorporation of Board:-

 With effect from such date as the Central Government may, by notification, appoint, there
shall be established, for the purposes of this Act, a Board by the name of the Securities
and Exchange Board of India. 
 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.
 The head office of the Board shall be at Bombay. 
 The Board may establish offices at other places in India. 

 Management of the Board:-

 The Board shall consist of the following members, namely :- 
 a Chairman; 
 two 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)];
 one member from amongst the officials of the Reserve Bank; 
 five other members of whom at least three shall be the whole-time members to be
appointed by the central Government.

 The general superintendence, direction and management of the affairs 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. 

 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. 

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  The Chairman and members referred to in clauses (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. 

 The Chairman and the other members referred to in clauses (a) and (d) of 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. 

 Term of office and conditions of service of Chairman and members of the

Board:-
 The term of office and other conditions of service of the Chairman and the members
referred to in clause (d) of sub- section (1) of section 4 shall be such as may be
prescribed. 

 Notwithstanding anything contained in sub-section (1), the Central Government shall

have the right to terminate the services of the Chairman or a member appointed under
clause (d) of sub-section (1) of section 4, at any time before the expiry of the period
prescribed under sub-section (1), by giving him notice of not less than three months in
writing or three months’ salary and allowances in lieu thereof, and the Chairman or a
member, as the case may be, shall also have the right to relinquish his office, at any time
before the expiry of the period prescribed under sub-section (1), by giving to the Central
Government notice of not less than three months in writing. 

 Removal of member from office:-

The Central Government shall remove a member from office if he – 
 is, or at any time has been, adjudicated as insolvent; 

 is of unsound mind and stands so declared by a competent court; 

10
  has been convicted of an offence which, in the opinion of the Central Government,
involves a moral turpitude; 

 has, in the opinion of the Central Government, so abused his position as to render his
continuation in office detrimental to the public interest:
Provided that no member shall be removed under this clause unless he has
been given a reasonable opportunity of being heard in the matter. 

 Meetings:-
 The Board shall meet at such times and places, and shall observe such rules of procedure
in regard to the transaction of business at its meetings (including quorum at such
meetings) as may be provided by regulations. 

 The Chairman or, if for any reason, he is unable to attend a meeting of the Board, any
other member chosen by the members present from amongst themselves at the meeting
shall preside at the meeting. 

 All questions which come up before any meeting of the Board shall be decided by a
majority votes of the members present and voting, and, in the event of an equality of
votes, the Chairman, or in his absence, the person presiding, shall have a second or
casting vote.

 Member not to participate in meetings in certain cases:-

Any member, who is a director of a company and who as such director has any
direct or indirect pecuniary interest in any matter coming up for consideration at a meeting of
the Board, shall, as soon as possible after relevant circumstances have come to his knowledge,
disclose the nature of his interest at such meeting and such disclosure shall be recorded in the
proceedings of the Board, and the member shall not take any part in any deliberation or
decision of the Board with respect to that matter”.

 Vacancies etc., not to invalidate proceedings of Board:-

No act or proceeding of the Board shall be invalid merely by reason of – 
 any vacancy in, or any defect in the constitution of, the Board; or 

11
 any defect in the appointment of a person acting as a member of the Board; or 

 any irregularity in the procedure of the Board not affecting the merits of the case.

 Officers and employees of the Board:-

 The Board may appoint such other officers and employees as it considers necessary
for the efficient discharge of its functions under this Act. 

The term and other conditions of service of officers and employees of the Board appointed
under sub- section (1) shall be such as may be determined by regulations.

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 CHAPTER:4

ORGANIZATION STRUCTURE

The Board comprises of 6 Members

 One chairman who is the head nominated by the central government.

 2 members selected by the central ministry (Law and Finance).
 1 member appointed by RBI (Reserve Bank of India).
 2 members appointed by central government who are professionals and have special
knowledge of Securities Market.

From To
Name Designation

Upendra Kumar Sinha Chairman

Prashant Saran Whole Time Member

Rajeev Kumar Agarwal Whole Time Member

Joint Secretary, Ministry
Dr. Thomas Mathew
of Finance

V. K. Jairath magya Member Appointed

Deputy
Anand Sinha Governor, Reserve Bank
of India

Secretary,Ministry of
Naved Masood
Corporate Affairs

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 Name

18 February
C. B. Bhave 18 February 2011
2008

18 February
M. Damodaran 18 February 2008
2005

20 February
G. N. Bajpai 18 February 2005
2002

21 February
D. R. Mehta 20 February 2002
1995

G. V. 24 August
17 January 1994
Ramakrishna 1990

Dr. S. A. Dave 12 April 1988 23 August 1990

CHAPTER:5

OBJECTIVE SEBI
In 1988 the Securities and Exchange Board of India (SEBI) was established by the
Government of India through an executive resolution, and was subsequently upgraded as a
fully autonomous body (a statutory Board) in the year 1992 with the passing of the Securities
and Exchange Board of India Act (SEBI Act) on 30th January 1992. In place of Government
Control, a statutory and autonomous regulatory board with defined responsibilities, to cover
both development & regulation of the market, and independent powers have been set up.
Paradoxically this is a positive outcome of the Securities Scam of 1990-91.

The basic objectives of the Board were identified as:

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  To protect the interests of investors in securities;

 To promote the development of Securities Market;

 To regulate the securities market and

 For matters connected therewith or incidental there to.

Since its inception SEBI has been working targetting the securities and is attending to the
fulfillment of its objectives with commendable zeal and dexterity. The improvements in the
securities markets like capitalization requirements, margining, establishment of clearing
corporations etc. reduced the risk of credit and also reduced the market.

SEBI has introduced the comprehensive regulatory measures, prescribed registration norms,
the eligibility criteria, the code of obligations and the code of conduct for different
intermediaries like, bankers to issue, merchant bankers, brokers and sub-brokers, registrars,
portfolio managers, credit rating agencies, underwriters and others. It has framed bye-laws,
risk identification and risk management systems for Clearing houses of stock exchanges,
surveillance system etc. which has made dealing in securities both safe and transparent to the
end investor.

Another significant event is the approval of trading in stock indices (like S&P CNX Nifty &
Sensex) in 2000. A market Index is a convenient and effective product because of the
following reasons:

 It acts as a barometer for market behavior;

 It is used to benchmark portfolio performance;

 It is used in derivative instruments like index futures and index options;

 It can be used for passive fund management as in case of Index Funds.

Two broad approaches of SEBI is to integrate the securities market at the national level, and
also to diversify the trading products, so that there is an increase in number of traders
including banks, financial institutions, insurance companies, mutual funds, primary dealers
etc. to transact through the Exchanges. In this context the introduction of derivatives trading
through Indian Stock Exchanges permitted by SEBI in 2000 AD is a real landmark.

15
 SEBI appointed the L. C. Gupta Committee in 1998 to recommend the regulatory framework
for derivatives trading and suggest bye-laws for Regulation and Control of Trading and
Settlement of Derivatives Contracts. The Board of SEBI in its meeting held on May 11, 1998
accepted the recommendations of the committee and approved the phased introduction of
derivatives trading in India beginning with Stock Index Futures. The Board also approved the
"Suggestive Bye-laws" as recommended by the Dr LC Gupta Committee for Regulation and
Control of Trading and Settlement of Derivatives Contracts. SEBI then appointed the J. R.
Verma Committee to recommend Risk Containment Measures (RCM) in the Indian Stock
Index Futures Market. The report was submitted in november 1998.

However the Securities Contracts (Regulation) Act, 1956 (SCRA) required amendment to
include "derivatives" in the definition of securities to enable SEBI to introduce trading in
derivatives. The necessary amendment was then carried out by the Government in 1999. The
Securities Laws (Amendment) Bill, 1999 was introduced. In December 1999 the new
framework was approved.

Derivatives have been accorded the status of `Securities'. The ban imposed on trading in
derivatives in 1969 under a notification issued by the Central Government was revoked.
Thereafter SEBI formulated the necessary regulations/bye-laws and intimated the Stock
Exchanges in the year 2000. The derivative trading started in India at NSE in 2000 and BSE
started trading in the year 2001. 

CHAPTER:6

POWERS AND FUNCTIONS OF SEBI

 Functions of Board:-
 Subject to the provisions 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.

 Without prejudice to the generality of the foregoing provisions, the measures referred to therein
may provide for -
 regulating the business in stock exchanges and any other securities markets;

16
 registering and regulating the working of stock brokers, sub-brokers, share transfer agents,
bankers an issue, trustees of trust deeds, registrars to an issue, merchant bankers,
underwriters, portfolio managers, investment advisers and such other intermediaries who may
be associated with securities markets in any manner;
 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;
 registering and regulating the working of [venture capital funds and collective investment
schemes],including mutual funds;
 promoting and regulating self-regulatory organisations;
 prohibiting fraudulent and unfair trade practices relating to securities markets;
 promoting investors' education and training of intermediaries of securities markets;
prohibiting insider trading in securities;
 regulating substantial acquisition of shares and take-over of companies;
 calling for 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;
 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;”
 performing such functions and exercising such powers under the provisions of the Securities
Contracts (Regulation) Act, 1956(42 of 1956), as may be delegated to it by the Central
Government;
 levying fees or other charges for carrying out the purposes of this section;
 conducting research for the above purposes;
 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;”
 performing such other functions as may be prescribed.
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 in
section 12) which intends to get its securities listed on any recognised 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.”

17
 Notwithstanding anything contained in any other law for the time being in force while exercising
the powers under [clause (i) or clause (ia) of sub-section (2) or subsection (2A)], the Board shall
have the same powers 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 :
 the discovery and production of books of account and other documents, at such place and
such time as may be specified by the Board;
 summoning and enforcing the attendance of persons and examining them on oath;
 inspection of any books, registers and other documents of any person referred to in section
12, at any place;
 inspection of any book, or register, or other document or record of the company referred to in
sub-section (2A);
 issuing commissions for the examination of witnesses or documents.

 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:-
 suspend the trading of any security in a recognized stock exchange;
 restrain persons from accessing the securities market and prohibit any person associated with
securities market to buy, sell or deal in securities;
 suspend any office-bearer of any stock exchange or self- regulatory organisation from
holding such position;
 impound and retain the proceeds or securities in respect of any transaction which is under
investigation;
 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 accounts of any intermediary or any person associated with the
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 there under
shall be allowed to be attached;
 direct any intermediary or any person associated with the securities market in any manner not
to dispose of or alienate an asset forming part of any transaction which is under investigation:
Provided that the Board may, without prejudice to the provisions contained in subsection (2)
or sub-section (2A), take any of the measures specified in clause (d) or clause (e) or clause (f),

18
 in respect of any listed public company or a public company (not being intermediaries
referred to in section 12) which intends to get its 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: Provided further that the Board shall, either before or after passing such orders, give
an opportunity of hearing to such intermediaries or persons concerned.

 Board to regulate or prohibit issue of prospectus, offer document or

advertisement soliciting money for issue of securities:-
 Without prejudice to the provisions of the Companies Act, 1956(1 of 1956), the Board may, for
the protection of investors, -
 specify, by regulations –
o the matters relating to issue of capital, transfer of securities and other matters incidental
thereto; and
o the manner in which such matters shall be disclosed by the companies;
 by general or special orders –
o prohibit any company from issuing prospectus, any offer document, or advertisement
soliciting money from the public for the issue of securities;
o specify the conditions subject to which the prospectus, such offer document or advertisement,
if not prohibited, may be issued.

 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
and other matters incidental thereto."
 Collective Investment Scheme:-
 Any scheme or arrangement which satisfies the conditions referred to in subsection (2) shall be a
collective investment scheme.

 Any scheme or arrangement made or offered by any company under which,

 the contributions, or payments made by the investors, by whatever name called, are pooled
and utilized solely for the purposes of the scheme or arrangement;
 the contributions or payments are made to such scheme or arrangement by the investors with
a view to receive profits, income, produce or property, whether movable or immovable from
such scheme or arrangement;

19
  the property, contribution or investment forming part of scheme or arrangement, whether
identifiable or not, is managed on behalf of the investors;
 the investors do not have day to day control over the management and operation of the
scheme or arrangement.

 Notwithstanding anything contained in sub-section (2), any scheme or arrangement

 made or offered by a co-operative society registered under the cooperative societies
Act,1912(2 of 1912) or a society being a society registered or deemed to be registered under
any law relating to cooperative societies for the time being in force in any state;
 under which deposits are accepted by non-banking financial companies as idefined in clause
(f) of section 45-I of the Reserve Bank of India Act, 1934(2 of 1934);
 being a contract of insurance to which the Insurance Act,1938(4 of 1938), applies;
 providing for any scheme, Pension Scheme or the Insurance Scheme framed under the
Employees Provident Fund and Miscellaneous Provisions Act, 1952(19 of 1952);
 under which deposits are accepted under section 58A of the Companies Act, 1956(1 of 1956);
 under which deposits are accepted by a company declared as a Nidhi or a mutual benefit
society under section 620A of the Companies Act, 1956(1 of 1956);
 falling within the meaning of Chit business as defined in clause (d) of section 2 of the Chit
Fund Act, 1982(40 of 1982);
 under which contributions made are in the nature of subscription to a mutual fund; shall not
be a collective investment scheme.

Power to issue directions.

Save as otherwise provided in section 11, if after making or causing to be made an enquiry, the
Board is satisfied that it is necessary,-
 in the interest of investors, or orderly development of securities market; or
 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

 to secure the proper management of any such intermediary or person, it may

issue such directions,-
 to any person or class of persons referred to in section 12, or associated with the securities
market; or
 to any company in respect of matters specified in section 11A, as may be appropriate in the
interests of investors in securities and the securities market.

20
Investigation.
 Where the Board has reasonable ground to believe that –
 the transactions in securities are being dealt with in a manner detrimental to the investors or
the securities market; or
 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 directions issued by the Board
there under, 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 persons associated with the securities market and to report thereon to the
Board.
 Without prejudice to the provisions of sections 235 to 241 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
authorised by it in this behalf, all the books, registers, other documents and 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.

 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 it or any person authorised 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.

 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 and record are produced: Provided 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.

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 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.

 If any person fails without reasonable cause or refuses –

 to produce to the Investigating Authority or any person authorised 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
 to furnish any information which is his duty under sub-section (3) to furnish; or
 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
 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.
 Notes of any examination under sub-section (5) shall be taken down in writing and shall be read
over to, or by, and signed by, the person examined, and may thereafter be used in evidence
against him.

 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 first class having jurisdiction for an order for the seizure of such books,
registers, other documents and record.
 After considering the application and hearing the Investigating Authority, if necessary, the
Magistrate may, by order, authorise the Investigating Authority –
 to enter, with such assistance, as may be required, the place or places where such books,
registers, other documents and record are kept;
 to search that place or those places in the manner specified in the order; and
 to seize books, registers, other documents and record, it considers necessary for the purposes
of the investigation

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 Provided that the Magistrate shall not authorise seizure of books, registers, other documents
and record, of any listed public company or a public company (not being the intermediaries
specified under section 12) which intends to get its securities listed on any recognised stock
exchange unless such company indulges in insider trading or market manipulation.
 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.

 Save as otherwise provided in this section, every search or seizure made under this 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.

Cease and desist proceedings:-

If the Board finds, after causing an inquiry to be made, that any person has violated,
or is likely to violate, any provisions of this Act, or any rules or regulations made there under, it may
pass an order requiring such person to cease and desist from committing or causing such violation:
Provided that the Board shall not pass such order in respect of any listed public company or a public
company (other than the intermediaries specified under section 12) which intends to get its securities
listed on any recognised stock exchange unless the Board has reasonable grounds to believe that such
company has indulged in insider trading or market manipulation.

CHAPTER:7

CASE STUDY
Sebi suspects growing insider trading trend; ups vigil
Press Trust of India / New Delhi Nov 14, 2010, 13:21 IST
Suspecting an uptick in the insider trading activities in the recent market rally, SEBI has enhanced
its surveillance for possible violations of rules prohibiting trading based on prior and inside
information.

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The market watchdog has come across over two dozen instances of major suspected
violations of insider trading norms during the recent rally to new record levels above
21,000 level and the subsequent correction last week, a senior official said.

While the suspicious trading activities have been noticed in the SEBI's routine surveillance
of market activities, the regulator has decided to probe further into these cases and enhance
its oversight for such matters going ahead, he added.

Major violations have been suspected in trading of 25-30 stocks over the past few weeks,
the official said, adding that suspicious activities have been noticed in many other shares
also but those are minor in terms of trade value and nature.

Insider trading relates to purchase or sale of shares by people having prior and privileged
information about an upcoming development by virtue of they themselves or those related
to them having holding a position in the company.

As per the SEBI's Prohibition of Insider Trading Regulations, an 'insider' is defined as any
person "who is or was connected with the company or is deemed to have been connected
with the company, and who is reasonably expected to have access to unpublished price
sensitive information in respect of securities of a company, or who has received or has had
access to such unpublished price sensitive information."

The stock market benchmark SENSEX recently crossed 21,000 level to record its highest
closing level at 21,004.96 points on November 5, after a sharp rally over the past few
weeks, but has corrected about 900 points since then. The sentiments have been upbeat on
the bourses, as also reflected in robust response to recent IPOs like Coal India.

Insider trading activities increase during market rally and an environment of improved
investor sentiments makes it easier for insiders to make money on the bourses, experts said.

SEBI has systems in place to monitor unusual stock trends and suspicious activities are
probed further for violations of norms including those regulating insider trading.
     
Recently, SEBI slapped a penalty of Rs 2 crore on Gujarat NRE Coke promoters A K

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Jagatramka and G L Jagatramka and their companies for indulging in insider trading. This
is said to be the largest fine imposed this year for violations of insider trading norms. Later,
the company said it would challenge the order. 

"Many cases of insider trading do go undetected. Only a very small percentage of the total
number of insider trading cases comes under regulatory scrutiny," said Sudip
Bandyopadhyay, MD & CEO, Convexity Solutions and former CEO and MD of Anil
Ambani group firm Reliance Money.

"It is difficult to specify the exact extent or percentage of insider trading. However, it does
happen," he added. Bandyopadhyay said that the regulations are in well in place, but the
difficulty lies in implementing them and detecting the offence. He advocated enhancement
of powers of Sebi for seeking cooperation of other relevant regulatory authorities in matters
of insider trading.

Another market observer Arun Kejriwal, director of KRIS, said that Sebi should keep a
watch on dealing rooms of brokers and fund managers as also the companies' board
meetings.

"Insider trading is rampant... It appears that almost all spiked movement in Indian markets
can be linked to insider trading," he added.

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 CHAPTER 8

CONCLUSION
The enactment of the SEBI Act within the context of other statutes such as the Companies

Act and Depositories Act has provided a strong regulatory framework for the Indian market.

Subsequently much of the growth of the Indian market can be attributed to the robust

processes for issuance, pricing, allotment and listing of securities enabled by SEBI.

Strengthening SEBI's power in the investigative, administrative and legal aspects of

enforcement would enable it to speedily address legal challenges such as those faced during

dematerialization or disclosure requirements. In the future, SEBI should adopt more

transparency to gain higher public confidence.

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 BIBLIOGRAPHY

REFERENCES
BOOKS

 Dr. N.V. Paranjape, The New Company Law, Central Law Agency, Allahabad, ed. 6
(2013).

 G K Kapoor and Sanjay Dhamija, Company Law And Practice, Taxmann, ed. 20
(2015).

 Avtar Singh, Company Law, Eastern Book Company, Lucknow, ed. 16 (2015).

 C R DATTA, THE COMPANY LAW 6th Edition (2008).

 TAXMANN’S COMPANY LAW , 15th Edition (2012).

 AVTAR SINGH, COMPANY LAW, 15th Edition (2007).

WEB SOURCES

 www.sebi.gov.in
 https://www.sebi.gov.in/acts/EmployeeDetails.html
 Govt appoints JP Devadhar as new Presiding Officer of Securities Appellate Tribunal
- Economic Times.  Articles.economictimes.indiatimes.com (2013-07-15).
 Sebi’s 25-year journey. Livemint (2013-05-21). Retrieved on 2013-07-29.
 "SEBI makes it mandatory for companies to disclose promoters' shares". Economic
Times. 6 October 2011.
 Cyril Shroff Managing Partner Mumbai & National Capital Market head
Amarchand". http://barandbench.com/.

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