brief overview of capital market laws

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SEBI ACT 1992



SECTION WISE DISTRIBUTION

2. Definitions3. Establishment and incorporation of the

Board ±The head office of the boardwill be at Mumbai

4. Management of the Board ± AChairperson, two members from theMinistry of Finance, a member fromRBI and five other members.




5. Terms of the office and conditions of serviceof chairman and members of the Board. ±

These will be as prescribed6. Removal of member from office ± Because of inability and/or

conviction

7. Meetings ± As and when needed anddecision by majority vote9. Office and employees of the Board




11. Functions of the Board11AA Collective investment scheme

11B Power to issue directions11C Investigation12 Registration of stock brokers sub

brokers etc




15 Accounts and audit15A to 15JA Penalties

15K to 15Z Securities Appellate Tribunal16 Power of central Government to

issue directions.

17 Power of central government tosupersede the board




18 Returns and reports19 Delegation

20 Appeals27 Offences by companies29 Power of the GOI to make rules.

30 Power to make regulations



SECURITIES CONTRACTS(REGULATION) ACT 1956




3. Application for recognition of stockexchanges.

4. Grant of recognition of stockexchanges.

5. Withdrawal of recognition.

6. Power of central government to callfor periodical returns or directinquiries to be made.




7. Annual reports to be furnished tocentral government by stock

exchanges8. Power of the central government to

direct rules to be made or to makerules.

9. Power of recognized stock exchangeto make bye laws




10. Power of SEBI to make and amendbye laws.

11. Power of the Central government tosupersede governing body of arecognised stock exchange.

12. Power to suspend business of recognized stock exchange.

13A Additional trading floor




16 Power to prohibit contracts in certain cases- The central government can prohibit suchcontracts as it thinks may lead to

undesirable practices and over speculation.18A Contracts in derivatives allowed if they aretraded in a recognized stock exchange.

21 Conditions for listing

22 Right of appeal to central governmentagainst refusal to stock exchanges listsecurities of public companies




22A Right to appeal to SAT againstrefusal of stock exchanges to listsecurities of public limitedcompanies.

22B ± Procedure and powers of theSecurities Appellate tribunal

22C - Right to legal representation -CA,CS, ICWA or legalpractitioner




22E Civil court not to have jurisdiction

22F Appeal to High Court23 Penalties and procedures

24 Offences committed bycompanies




27 Title to Dividends ±The dividend will be entitled to the person

who holds the security even if he has transferredthe security to another if the other person hasnot lodged the security and all other documentsrelating to the transfer with the company within15 days from the date he dividend becomes due.

27A The same rule applies to income fromcollective investment scheme




28. The Act not to apply in certain cases ± Government, RBI, etc.

29. Protection of action taken in goodfaith.

29A Power of the Central government to

delegate ± To SEBI and RBI.30 Power to make rules.



DEPOSITORIES

A depository is an institution whichdematerialises physical sharecertificates and effects the transfer of ownership by electronic book entries.NSDL and CSDL are the twodepositories in India.

The functioning of the Depositories inIndia is governed by the DepositoriesAct 1996.



THE HIGHLIGHTS OF THE

DEPOSITORIES ACT 1996Sec 3 Every depositor will be required to register withSEBI.Sec 8 - Investors will have the choice of continuing withthe existing share certificates of opting for thedepository mode.Sec 7 - Investors opting to join the depository mode willbe required to be registered with the agents of thedepositories. These will be custodial agents like banks,financial institutions and large brokerage firms.Sec 41 (Indian Companies Act 1956) and Sec 10 Whilethe depository will be the registered owner in theregister of the company, the investor will enjoy theeconomic benefits and the voting rights on the sharesconcerned.



THE HIGHLIGHTS OF THE

DEPOSITORIES ACT 1996Sec 9 - Shares in the depository mode will be fungible.This means that they will cease to have distinctivenumbers.Sec 14 - Investors are free to leave the depository

mode.Sec 6 - Ownership changes in depository system will bemade automatically on he basis of delivery againstpayment.There will be no stamp duty on the transfer of ownership (Sec 8A Indian Stamps Act 1899)Sec 16 - Loss caused to the beneficial owners due tothe negligence of the depository will be indemnified bythe depositorySec 23 - The appeals against the orders of SEBI will bemade in the Securities Appellate Tribunal SAT.



SOME OTHER SECTIONS

Sec 2 (Definitions) ³Beneficial owner´ ±A person whose name is recorded assuch with a depository.Sec 18 Power of SEBI to call for information and enquiry.Sec 20 Penalty for individuals and

companies.Sec 26 Power of depositories to makebye laws.

brief overview of capital market laws

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