cs – professional – open book exam...lesson –1. economic framework of capital market...
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SIMPLIFIED INDEX – CAPITAL COMMODITY & MONEY
MARKET
-BY CS POOJA AGARWAL
CS – PROFESSIONAL – OPEN BOOK EXAM COMPLETE LIST OF ALL TOPICS – SAVE TIME & GET ANSWERS QUICKLY! BASED
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Topics Page No.
LESSON – 1. Economic Framework of Capital Market
Constituents Of The Financial System 2
Financial Assets 2
Classification Of Financial Assets 2
Marketable Assets 2
Non-Marketable Assets 2
Cash Assets 2
Debt Asset 2
Stock Asset 2
Financial Intermediaries 3
Capital Market Intermediaries 3
Money Market Intermediaries 3
Financial Markets 3
Classification Of Financial Market 3
Unorganized Markets 3
Organized Markets 4
Capital Market 4
Industrial Securities Market 4
SIMPLIFIED INDEX – CAPITAL COMMODITY & MONEY
MARKET
Topics Page No.
Government Securities Market 4
Long-Term Loans Market 4
Money Market 4
Features Of Money Market 5
Capital Market 5
Primary Market 6
Secondary Market 6
What Is Transaction Cost? 7
Functions Of Capital Market 8
Role Of Capital Market In Resource Allocation 9
Capital Formation 10
Stages Of Capital Formation 10
Role Of Capital Market In Capital Formation 11
Lesson 2 Legal Framework
Department of Economic Affairs (DEA) 16
Capital Market Division 17
Primary Market (PM) 17
Secondary Market (SM) 17
External Markets (EM) 17
External Commercial Borrowings (ECB) 18
National Company Law Tribunal 19
Reserve Bank of India 19
Securities and Exchange Board of India (SEBI) 19
SEBI Act, 1992: 20
Securities Contracts (Regulation) Act, 1956 20
Depositories Act, 1996 20
Companies Act, 2013 20
Grievance Redressal Mechanism 20
Grievance Redressal Mechanism At Stock Exchange 21
Investor Protection Fund 21
Grievance Redressal Mechanism at SEBI 21
Investor Protection and Education Fund 21
Securities Appellate Tribunal 22
Prevention Of Money Laundering Act, 2002 23
Objective Of PREVENTION OF MONEY LAUNDERING ACT, 2002 23
Punishment for Money-Laundering 23
Obligations of Banking Companies, Financial Institutions and Intermediaries of 23
Securities Market
SIMPLIFIED INDEX – CAPITAL COMMODITY & MONEY
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Topics Page No.
Cash Transaction Reports 25
Suspicious Transaction Reports 25
Investigating Agencies In Case Of PMLA, 2002 27
Central Bureau of Investigation 28
Financial Intelligence Unit – India (FIU-IND) 28
Functions of FIU-IND 29
The Financial Action Task Force (FATF) 29
FATF Recommendations 2016 29
Lesson 3 Framework of Market Infrastructure Institutions
Framework Of Market Infrastructure Institutions 36
Securities Contract (Regulation) (Stock Exchanges And Clearing Corporations) 36
Regulations, 2012 Recognition of Stock Exchanges and Clearing Corporations 36
Networth Requirements FOR LISTING ON STOCK EXCHANGES 36
Ownership of Stock Exchanges 37
Ownership of Clearing Corporations 37
Governance of Stock Exchanges and Clearing Corporations 38
Listing of Securities 38
Procedural Norms For Listing 38
The Depositories Act, 1996 41
Eligibility Condition For Depository Services 41
Eligible Securities Required To Be In The Depository Mode 41
Fungibility 42
Rights Of Depositories And Beneficial Owner 42
Pledge Or Hypothecation Of Securities Held In A Depository 42
Furnishing Of Information And Records By Depository And Issuer 43
Option To Opt Out In Respect Of Any Security 43
Depositories To Indemnify Loss In Certain Cases 43
Enquiry And Inspection 43
Power of SEBI 43
Power of SEBI to give directions 44
Penalty 44
Penalty for failure to furnish information/return etc. 44
Penalty for failure to enter into agreement 44
Penalty for failure to redress investors' grievances 44
Penalty for delay in dematerialisation or issue of certificate of securities 45
Penalty for failure to reconcile records 45
Penalty for failure to comply with directions issued by SEBI 45
SIMPLIFIED INDEX – CAPITAL COMMODITY & MONEY
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Topics Page No.
Penalty for contravention where no separate penalty has been provided 45
Power to adjudicate 45
Factors to be taken into account by Adjudicating Officer 45
Settlement of Administrative Civil Proceedings 46
Recovery of amounts 46
Crediting of penalties to consolidated fund of India 47
Offences 47
Offences by companies 47
Cognizance of offences by Courts 48
Composition of certain offences 48
Power to grant immunity 48
Special Court 48
Establishment of Special Courts 48
Offences triable by Special Courts 48
Appeal and Revision 48
Application of Code to proceedings before Special Court 48
Transitional provisions 49
Appeals 49
Appeal To Securities Appellate Tribunal 49
Procedure And Powers Of Securities Appellate Tribunal 50
Appeal To Supreme Court 50
Right To Legal Representation 50
Civil Court Not To Have Jurisdiction 50
Securities Contracts (Regulation) Act, 1956 50
Application For Recognition Of Stock Exchanges 51
Grant Of Recognition To Stock Exchanges 51
Withdrawal of recognition 52
Power of Central Government to call for periodical returns or direct inquiries to be 52
made Power of recognised stock exchange to make rules restricting voting rights, etc 53
Power of Central Government to direct rules to be made or to make rules 53
Clearing Corporation 54
Power of SEBI to make or amend bye-laws of recognised stock exchanges 54
Power of Central Government to supersede governing body of a recognised stock 55
exchange Power to suspend business of recognised stock exchanges 55
Lesson 4 Financial Intermediaries Framework
Primary Market Intermediaries 60
SIMPLIFIED INDEX – CAPITAL COMMODITY & MONEY
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Topics Page No.
Merchant Banker 60
Sebi (Merchant Bankers) Regulations, 1992 60
Capital Adequacy For Merchant Bankers 61
General Obligations and Responsibilities of Merchant Banker 61
Code Of Conduct For Merchant Bankers 62
Responsibilities of Lead Manager 64
Merchant Banker not to Act as such for an Associate 64
Minimum Underwriting Obligation 64
Prohibition to Acquire Shares 64
Disclosure to SEBI 64
Appointment of Compliance Officer 64
Procedure for Inspection 64
Procedure For Action Against Merchant Banker In Case Of Default 65
Registrars To An Issue And Share Transfer Agents 65
Sebi (Registrars To An Issue And Share Transfer Agents) Regulations, 1993 66
Criteria For Registration Of Share Transfer Agents 66
General Obligations And Responsibilities 67
Procedure For Inspection 67
Liability For Action In Case Of Default Of RTA 68
Underwriters 68
Sebi (Underwriters) Regulations, 1993 68
Obligations And Responsibilities Of Underwriters 68
Appointment Of Compliance Officer 68
Inspection and Disciplinary Proceedings of RTA 69
Banker To An Issue 70
Sebi (Banker To An Issue) Regulation, 1994 70
Consideration Of Application To Act As Banker To An Issue 70
Procedure For Registration Banker To An Issue 70
General Obligations And Responsibilities Banker To An Issue 70
Code Of Conduct 71
Procedure for Inspection 72
Debenture Trustees 72
Sebi (Debenture Trustees) Regulations, 1993 73
Responsibilities and Obligations of Debenture Trustees 74
Duties of Debenture Trustees 74
Maintenance of Records by Debenture Trustees 75
Appointment of Compliance Officer by Debenture Trustees 75
SIMPLIFIED INDEX – CAPITAL COMMODITY & MONEY
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Topics Page No.
Information to SEBI by Debenture Trustees 76
Secondary Market Intermediaries 76
Stock Brokers And Sub-Broker 76
Sebi (Stock Brokers & Sub-Brokers) Regulations, 1992 77
Rejection Of Application Of Brokers 77
Registration Of Sub-Brokers 78
Registration Of Trading And Clearing Members 79
Registration Procedure for Trading and Clearing Member 80
Registration of Trading and Clearing Members of Currency Derivatives Segment 80
Registration Procedure 81
General Obligations and Responsibilities 82
Procedure for Inspection of Stock Brokers’ Offices 82
Procedure for Action in Case of Default 83
Liability for Monetary Penalty 83
Liability for Action under the Enquiry Proceeding 84
Liability for Prosecution 85
CASE STUDY ON FRAUDULENT DEALINGS - 85 BishwanathMurlidharJhunjhunwala v. SEBI Certification By Practicing Company Secretary - Sebi (Debenture Trustees) Regulations, 86 1993 Internal Audit for Stock Brokers/Trading Members/ Clearing Members 86
Portfolio Manager 86
Sebi (Portfolio Managers) Regulations, 1993 86
Norms for Registration as Portfolio Managers 87
Capital Adequacy Requirement For PORTFOLIO MANAGERS 87
Renewal Of Certificate Of PORTFOLIO MANAGERS 88
Conditions Of Registration Of PORTFOLIO MANAGERS 88
Procedure Where Registration Is Not Granted For PORTFOLIO MANAGERS 89
Contract with Clients and Disclosures 89
Responsibilities of a Portfolio Manager 91
Investment of Clients Money 91
Accounting by Portfolio Managers 91
Reports by Portfolio Manager to the Client 92
Action on Auditor’s Report and Disclosure to SEBI 93
Obligations of Portfolio Manager 93
Internal Audit Of Portfolio Manager 94
Custodian Of Securities 94
Sebi (Custodian Of Securities) Regulations, 1996 94
SIMPLIFIED INDEX – CAPITAL COMMODITY & MONEY
MARKET
Topics Page No.
Application For Grant Of Certificate For CUSTODIAN OF SECURITIES 95
Application To Conform To Requirements For CUSTODIAN OF SECURITIES 95
Procedure And Grant Of Certificate For CUSTODIAN OF SECURITIES 96
Renewal Of Certificate For CUSTODIAN OF SECURITIES 97
Effect Of Refusal To Grant Certificate For CUSTODIAN OF SECURITIES 97
Prohibition Of Assignment For CUSTODIAN OF SECURITIES 98
Maintenance Of Records And Documents By CUSTODIAN OF SECURITIES 98
Obligations Of Custodian 99
Investment Adviser 100
Sebi (Investment Advisers) Regulations, 2013 100
Registration of Investment Advisers 100
Exemption from registration of Investment Advisers 100
Qualification & Certification of Investment Advisers 101
General Obligations and Responsibilities of Investment Advisers 102
Sebi (Credit Rating Agencies) Regulations, 1999 103
Registration of Credit Rating Agencies 104
Promoter of Credit Rating Agency 104
Eligibility Criteria of Credit Rating Agency 104
Application to Conform to the Requirements of Credit Rating Agency 105
Conditions of Certificate of Credit Rating Agency 105
Procedure where Certificate is not granted for Credit Rating Agency 106
Code of Conduct Code of Conduct by Credit Rating Agency 106
Agreement with the Client by Credit Rating Agency 107
Monitoring of Ratings by Credit Rating Agency 107
Internal Procedures to be Framed by Credit Rating Agency 108
Disclosure of Rating Definitions by Credit Rating Agency 108
Maintenance of Books of Accounts Records by Credit Rating Agency 108
Rating Process of Credit Rating Agency 109
Restrictions on Rating of Securities Issued by Promoter and Certain Entities, Connected 109
with A Promoter, or Rating Agency Procedure for Inspection and Investigation by SEBI of Credit Rating Agency 109
Obligations of Credit Rating Agency 110
MARKET MAKER 111
GUIDELINES FOR MARKET MAKER 111
Registration of the Market Maker 111
The Obligations and Responsibilities of Market Makers 111
Number of Shares per Market Maker 111
Price Band and Spreads 112
SIMPLIFIED INDEX – CAPITAL COMMODITY & MONEY
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Topics Page No.
Sebi (Depositories And Participants) Regulations, 1996 112
Rights And Obligations Of Depositories And Its Constituents 113
Governance Of Depository 114
Audit Under Sebi (Depositories And Participants) Regulations, 1996 114
Internal Audit Of Operations Of Depository Participants 114
CONCURRENT AUDIT By DEPOSITORY PARTICIPANTS 115
Designated Depository Participant (DDP) 116
Eligibility Criteria For DDP 116
Sebi (Research Analyst) Regulations, 2014 116
Saral Account Opening Form For Resident Individuals 125
Investor Protection Fund Of Depositories 125
Lesson 5 Primary Market
Types of Issue in Primary Market 130
Public issue 130
Initial public offer 130
Further public offer 130
Right issue 130
Bonus issue 130
Private placement 130
Preferential allotment 130
Qualified institutions placement (QIP) 130
Institutional placement programme (IPP) 130
OFFER FOR SALE (OFS) 131
OFS PROCESS 131
Difference between Offer for Sale (OFS) process and IPOs/FPOs 132
Price Band UNDER OFS 132
Sebi Guidelines On Offer For Sale (Ofs) Of Shares By Promoters Through The Stock 132
Exchange Mechanism Floor price 134
Order Placement 134
Risk Management 135
Allocation 135
Settlement 135
Handling of default in pay-in 135
Issuance of Contract Notes 135
Withdrawal of offer 136
Cancellation of offer 136
Understanding The Guideline Step Wise 136
SIMPLIFIED INDEX – CAPITAL COMMODITY & MONEY
MARKET
Topics Page No.
Different Form Of Prospectus 137
Offer Document 137
Draft Offer Documents 137
RHP (Red Herring Prospectus) 137
Shelf Prospectus 137
Filing of Offer Document 138
LEAD MANAGER 138
Pre-Issue Management 139
Post-issue Management 139
Co-ordination with Intermediaries 140
UNDERWRITING 140
Due Diligence in IPO / FPO 141
Pre-issue-Due Diligence Certificates 146
Post issue diligence 146
Basis Of Allotment 146
Book Building 147
Book Building Process Through A Flowchart 151
Additional Disclosures In Case Of Book Building 153
Procedure for Bidding 153
Alternate Method of Book Building 154
Green Shoe Option Facility 155
Green Shoe Option Process 158
Pre-Issue Activities 158
Rights Issue 160
Steps Involved In Issue Of Rights Shares 162
Bonus Issue 163
Advantages of Issuing Bonus Shares 163
SEBI Regulations Pertaining to Bonus Issue 164
Steps involved in Issue of Bonus Shares 165
Preferential Issue 166
SEBI ICDR Regulations, 2009 Pertaining to Preferential Issue 166
Relevant date 167
Upfront Payment on warrants 167
Lock-in-period 168
Allotment Pursuant to Shareholders Resolutions 168
Submission of Valuation Report 169
Qualified Institutional Buyer 170
SIMPLIFIED INDEX – CAPITAL COMMODITY & MONEY
MARKET
Topics Page No.
Conditions for making QIP 171
Intermediaries involved in QIP and their roles 171
Placement document 171
Issue of partly paid-up securities 172
Restrictions on allotment 172
Minimum numbers of allottees 173
Institutional Placement Programme 173
Conditions for Institutional Placement Programme 174
Offer DocumentUnder INSTITUTIONAL PLACEMENT PROGRAMME 174
Pricing And Allocation/Allotment Of INSTITUTIONAL PLACEMENT PROGRAMME 174
RestrictionsOf INSTITUTIONAL PLACEMENT PROGRAMME 175
Restrictions On Size Of The Offer 175
Listing Agreement 175
Benefits Of Listing 176
Laws Governing Listing 176
Event Based And Time Based Compliance Under Listing Agreement 176
Event Based Compliances 176
Time Based Compliances 179
Listing On Institutional Trading Platform 181
Listing Pursuant To Public Issue 183
Exit of entities listed without making a public issue 184
LISTING OF SECURITIES ON STOCK EXCHANGES 184
Obligation Of Stock Exchange 185
OFFER FOR SALE (OFS) PROCESS 185
Lesson 6 Secondary Market
Corporate Actions 190
From Listing Agreement To Listing Regulations, 2015: A Birds’ Eye View 190
Listing Agreement: Meaning 191
SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015: An 191
Introduction SEBI (LODR) Regulation, 2015: Basic Features 192
Differences between Listing Regulation and Listing Agreement 192
SEBI (LISTING OF OBLIGATION AND DISCLOSURE REQUIREMENT) 193 REGULATION, 2015
Objectives of LODR 193
Applicability OF LODR 194
Key Features OF LODR 194
Major Transformation FROM LISTING AGREEMENT TO LODR 195
SIMPLIFIED INDEX – CAPITAL COMMODITY & MONEY
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Topics Page No.
Material Disclosures 195
Deemed material 195
Materiality thresholds 195
Board composition and its committees UNDER LODR 196
Duties of the board 196
Related Party Transactions 197
Scope of RPTs 197
Approval of RPT 197
Corporate governance for listed start-ups 197
Common Obligations of Listed Entities – Chapter III of Listing Regulations 198
Obligations of listed entity which has listed its specified securities i.e. Equity shares 198
and convertible securities – Chapter IV of Listing Regulations Obligations of Listed Entity Which Has Listed Its Non-Convertible Debt Securities 201 (NCD’s) Or Non-Convertible Redeemable Preference Shares (‘NCPS’) Or Both – Chapter V of Listing Regulations Quarterly / Half Yearly / Annual Compliances under SEBI (LODR) Regulation 2015 203
Compliance Certificate certifying maintaining physical & electronic transfer facility - 203
Within one month of end of each half of the financial year Regulation 13 (3) - Statement of Investor complaints - Within Twenty one days from 203 the end of each quarter Regulation 27 (2) - Corporate Governance - Within 15 days from quarter end. 203
Regulation 31 - Shareholding Pattern - Within 21 days from quarter end 203
Regulation 33 - Financial Results - Within 45 days from quarter end 203
Regulation 33 - Financial Results - Within 45 days from quarter end 203
Regulation 34 –Annual Report - Within twenty one working days of it being approved 204
and adopted in the annual general meeting. Regulation 40 (9) – Certificate from Practicing Company Secretary -Within one month 204
of the end of each half of the financial year Reconciliation of Share Capital Audit - (SEBI- DP Reg.55A) - Within 30 days from 204
quarter end. Other Compliance Requirements under SEBI Listing Regulations 2015. 204
Regulation 7 – Appointment of New Share Transfer Agent. 204
Regulation 14 – Listing Fees & Other charges. 205
Regulation 29 – Notice for Board Meeting to consider the prescribed matters 205
Regulation 30 – Disclosure of Price-Sensitive Information 205
. Regulation 30 – Outcome of Board Meeting 205
Regulation 42 – Notice for Record Date \ Corporate Action 205
Regulation 43 – Declaration of Dividend 205
Regulation 43 A – Dividend Distribution Policy 205
Regulation 44 – Voting Result 206
SIMPLIFIED INDEX – CAPITAL COMMODITY & MONEY
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Topics Page No.
Regulation 46 - Company Website 206
Regulation 30(1) and 30(2) - SEBI Takeover Regulations 2011 206
Regulation 7(2) - SEBI (Prohibition of Insider Trading) Regulations, 2015 206
Compliance Calendar under SEBI (LODR), Regulation 2015 207
Corporate Governance 213
Regulatory Framework Of Corporate Governance In India 213
Corporate Governance and SEBI (Listing of Obligation and Disclosure Requirements) 213
Regulation, 2015 Time of Reforms in Indian Capital Market in line towards better Corporate Governance 214
Key Features of Corporate Governance under SEBI (LODR) Regulation, 2015 214
SEBI’s Standard on Corporate Governance 215
Regulation 23 - Related Party Transactions 215
Regulation 25: Independent Director 216
Audit Committee 216
Regulation 27 Compliance report on Corporate Governance 216
Corporate Governance under SEBI (LODR) Regulation, 2015 216
Corporate Governance Under Companies Act, 2013 224
Stock Exchange Mechanism 231
Arbitration Mechanism at Stock exchanges 231
Maintenance of a Panel of Arbitrators 231
Code of Conduct for Arbitrators 232
Appellate Arbitration 233
Arbitration Fees 233
Place of Arbitration 234
Implementation of Arbitral Award in favour of Clients 234
Record and Disclosures 235
MARGINING 235
Initial Margin 236
Maintenance Margin 236
Types Of Margins In Cash And Derivative Segment 237
Value at Risk (VaR) margin 237
Extreme Loss Margin 237
Mark-to-Market (MTM) margin 237
Derivatives Segment 238
Initial Margin 238
Exposure Margin 238
Premium Margin 238
TRADING OF SECURITIES 239
SIMPLIFIED INDEX – CAPITAL COMMODITY & MONEY
MARKET
Topics Page No.
Order Placing 239
Order Execution 239
Contract Note Preparation 239
Delivery and Clearing 239
Share Transfer 239
Settlement System 240
Accounting period settlement systems 240
Rolling Settlement 240
Clearing And Settlement 240
Clearing Corporation 240
Clearing Members(CM) 240
Custodians 240
Clearing Banks 240
Depositories 241
Clearing & Settlement Process 241
Trade Guarantee Fund 242
Trading Software 242
Stock Market Indices 242
Types Of Indices 243
BSE Indices 243
NSE Indices 243
BSE INDICES 243
SENSEX - Scrip Selection Criteria 244
S & P BSE SENSEX Calculation Methodology 245
Definition of Free-float 245
Major Advantages of Free-float Methodology 246
Determining Free-float Factors of Companies 247
Index Closure Algorithm 248
Maintenance of BSE Indices 248
On - Line Computation of the Index 248
Adjustment for Bonus, Rights and Newly Issued Capital 249
Adjustments for Rights Issues 249
Adjustments for Bonus Issue 249
Base Market capitalization Adjustment 249
CNX NIFTY 249
Selection Criteria for CNX Nifty 250
Price Index Calculations Formula 250
SIMPLIFIED INDEX – CAPITAL COMMODITY & MONEY
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Topics Page No.
Investible Weight Factors (Iwfs) 250
Lesson 7 Capital Market Investment Institutions
National Level Institutions 256
Industrial Development Bank of India (IDBI) 256
Industrial Finance Corporation of India (IFCI) 256
Industrial Investment Bank of India Ltd (IIBI) 257
Specialised Financial Institutions (SFIs) 257
IFCI Venture Capital Funds Ltd (IVCF) 257
ICICI Venture Funds Ltd 257
Tourism Finance Corporation of India Ltd. (TFCI) 257
Life Insurance Corporation of India (LIC) 257
Unit Trust of India (UTI) 257
General Insurance Corporation of India (GIC) 257
State Financial Corporations (SFCs) 258
– State Industrial Development Corporations (SIDCs) 258
Qualified Institutional Buyers 258
Anchor Investor 259
PRIVATE EQUITY 260
Types of Private Equity 260
Leveraged Buyout (LBO) 260
Venture Capital 260
Areas of Investment 261
Stages Of Investment Financing 261
Early Stage Financing 261
Later Stage Financing 262
Angel Fund 262
SEBI – Recent move in 2016 on Angel Investor 263
Types Of Angel Investors 263
Core Angels 263
High-tech Angels 264
Return On investment (ROI) Angels 264
Enthusiast Angels 264
Micromanagement Angels 264
Professional Angels 264
Pension Fund 264
Formal Sector Pensions 264
Pension Fund Management 265
SIMPLIFIED INDEX – CAPITAL COMMODITY & MONEY
MARKET
Topics Page No.
Foreign Portfolio Investor 265
Investment Conditions and Restrictions FPI 266
Mutual Fund 266
How a Mutual Fund is Set Up 267
Types of Mutual Fund Schemes 267
Structure Based Classification 268
Return based classification 268
Investment based classification 268
Fixed Maturity Plans 269
Exchange Traded Funds (ETFs) 270
Capital Protection Oriented Schemes 270
Gold Exchange Traded Funds (GETFs) 270
Quantitative Funds 270
Funds Investing Abroad 270
Fund of Funds (FOFs) 270
Alternative Investment Funds 270
Types of AIFs 271
Where an AIF can Invest 272
Category wise Investment Condition 272
Conditions for Category II AIFs 273
Conditions for Category III AIFs 273
Hedge Funds 273
How Hedge Funds Work 273
A Taxonomy of Hedge Fund Strategies 274
A Taxonomy of Hedge Fund Strategies 274
Lesson 8 Capital Market Instruments
Characteristics Of Equity Shares 278
Shares With Differential Voting Rights 279
Prohibition Of Superor Rights - Clause 28a 280
Anand Jaiswal v. Jagatjit Industries Limited - Case Law 280
Preference Shares 281
Cumulative Preference Shares 282
Non-Cumulative Preference Shares 282
Convertible Preference Shares 282
Redeemable Preference Shares 283
Participating Preference Shares 283
Fully Convertible Cumulative Preference Share (EQUIPREF) 283
SIMPLIFIED INDEX – CAPITAL COMMODITY & MONEY
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Topics Page No.
Debentures 283
Features of Debentures 283
Types of Debentures 284
Naked or unsecured debentures 284
Secured debentures 284
Redeemable debentures 284
Perpetual debentures 284
Bearer debentures 284
Registered debentures 284
Classification of Debentures based upon Convertibility 284
Basic Features of Convertible Debentures 284
Advantages of Convertible Debentures 285
Fully Convertible Debentures With Interest (Optional) 286
Non Convertible Debentures With Put And Call Option 286
Put Options in NCD 286
Call Option in NCD 286
BONDS 286
Characteristics of a Bond 286
Types of Bond 287
Types of Bond 287
Corporate Bonds 287
Banks and other financial institutions bonds 287
Warrant 287
Sweat Equity Shares 287
Secured Premium Notes (SPN) 288
Equity Shares With Detachable Warrants 288
Foreign Currency Convertible Bonds (FCCBS) 289
Foreign Currency Exchangeable Bonds (FCEBS) 289
American Depository Receipts 290
Global Depository Receipts 290
Difference between American Depository Receipts (ADR) and Global Depository 290
Receipts (GDR) Indian Depository Receipts (Idrs) 291
Benefits of IDRs 291
Derivatives 291
Future 291
Options 291
Index Futures & Options 292
SIMPLIFIED INDEX – CAPITAL COMMODITY & MONEY
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Topics Page No.
Currency Futures 293
Interest Rate Futures 293
Stock Futures And Stock Options 294
Pricing of Stock Futures 294
Exchange Traded Funds (ETFS)Change Traded Funds (ETFS) 295
Lesson 9 Resource Mobilization Through International Markets
American Depository Receipt 298
Types of ADRs 299
Unsponsored ADR 299
Sponsored ADR 299
Global Depository Receipts 299
Advantage Of Adrs And Gdrs 300
Process involved in Issue of ADR/GDR 301
Two-Way Fungibility Scheme 302
One way fungibility 302
Two way fungibility 302
Issuance Of Shares Under Adr/Gdr 302
Provisions of Companies Act, 2013 relating to issue of GDR 304
Companies (Issue of Global Depository Receipts) Rules, 2014 305
Conditions for issue of depository receipts 305
Manner and form of depository receipts 305
Voting rights 305
Voting rights 306
Non applicability of certain provisions of the Act 306
Statutory Approvals Required for issue of GDR/ADR 306
Approval of the Foreign Investment Promotion Board (FIPB) 306
Agencies involved in ADR/GDR issue 307
Agreements and related Documents 308
Custodian Agreement 309
Escrow Agreement 309
Procedural Requirements 310
Roadshows 311
Stepwise Procedure For Issue Of Adr/Gdr 312
Reporting Of Adr/Gdr Issues 313
Fccb And Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993 314
Transfer and redemption 314
Listing Of GDR 314
SIMPLIFIED INDEX – CAPITAL COMMODITY & MONEY
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Topics Page No.
London Stock Exchange 314
Different ways in which a company can list in London 315
Listing On The Main Market 315
FSA’s requirements for a company to receive listed status 315
Listing On The Main Market In London 315
Listing On Professional Security Market 318
Requirement of prospectus 318
Key eligibility criteria OF LONDON STOCK EXCHANGE 318
Listing On AIM Of London Stock Exchange 319
Luxembourg Stock Exchange 320
Listing Of Adr 320
Nasdaq 321
The Nasdaq Global Select Market (NGSM) 321
The Nasdaq Capital Market (NCM) 323
The Nasdaq Global Market (NGM) 325
Newyork Stock Exchange (NYSE) 327
NYSE Quantitative Listing and Maintenance Standards 327
Resource Mobilisation In International Capital Market 331
External Commercial Borrowings (Ecb) 331
Depository Receipts Scheme, 2014 342
Lesson 10 Economics Of Commodities Marketing
Types Of Commodities 346
Commodity Markets 346
Marketing Of Agricultural Commodities 347
STORAGE 349
Bag storage 349
Bag storage 350
Warehousing 350
Importance of warehousing 350
Working of Warehouses 350
Private warehouses 351
Public warehouses 351
Bonded warehouses 351
Central Warehousing Corporation (CWC) 351
State Warehousing Corporations (SWCs) 352
Variance In Commodity Market 352
Weather Derivatives 353
SIMPLIFIED INDEX – CAPITAL COMMODITY & MONEY
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Topics Page No.
Freight Derivatives 353
Electricity Derivates 354
Catastrophe Derivatives 355
Carbon Derivatives 355
Hedging 356
Hedging Risks 356
Understanding Basis Risk 357
Lesson 11 Commodities Market Operations
Role Of Commodity Exchanges 362
Evolution Of Commodity Exchanges 362
Origin Of Commodity Market In India 362
Forward Contracts (Regulation) Act, 1952 363
Three-Tier Regulatory System 364
Forward Market Commission Of India 364
Functions of Forward Market Commission of India 364
Powers of Forward Market Commission 365
Commodity Exchanges In India 365
Hedgers 366
Speculator 367
Difference between a speculator and gambler 368
Arbitrageurs 368
Commodity Producers/Consumers 368
Commodity Processors 368
Commodity Traders 369
Financial Institution/Dealers 369
Trading In Commodity Market 369
Margin money 369
Different types of margins payable on futures 370
Mark-to-Market (MTM or M2M) 370
Maintenance margin 370
Order Types 370
Electronic Spot Exchanges 371
Exchange Membership 372
Clearing 372
Clearing Mechanism 373
Clearing Banks 373
Settlement Mechanism 374
SIMPLIFIED INDEX – CAPITAL COMMODITY & MONEY
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Topics Page No.
Final settlement 375
Settlement Methods 375
Compulsory Delivery Contract 376
Sellers Right Contract 376
Intention Matching Contract 377
Cash settlement 377
Accredited Warehouse 377
Approved Registrar and Transfer agents (R&T agents) 378
Approved assayer 378
Forward Contract 378
Futures 379
Distinction between Futures and Forward Contracts 380
Options 381
In-the-money option 381
Out-of-the-money option 382
Intrinsic value of an option 382
Hedging 382
Short Hedge 383
Long Hedge 383
Advantages of Hedging 384
Speculation 384
Arbitrage 386
Overpriced Commodity Futures: Buy Spot, Sell Futures 386
Underpriced Commodity Futures: Buy Futures, Sell Spot 386
Lesson 12 Money Market
Features Of Money Market 390
Money Market Vs. Capital Market 391
Growth Of Money Market 391
Structure And Institutional Development 392
Money Market Instruments 393
Gilt-Edged (Government) Securities 393
Call Money And Notice Money 393
Term Money 394
Bill Discounting 394
Procedure of Bill Discounting 395
Discount Rates 395
BILL REDISCOUNTING SCHEME (BRD) 396
SIMPLIFIED INDEX – CAPITAL COMMODITY & MONEY
MARKET
Topics Page No.
Repurchase Agreements 396
Banker’s Acceptance 397
Treasury Bills 397
Benefits of Investing in Treasury Bills 399
Features of Treasury Bills 399
Primary Market 400
Secondary Market 400
Types of Auction 400
Certificates Of Deposits 401
Issue of Duplicate Certificates 402
Inter-Corporate Deposits 403
Commercial Bills 403
Commercial Paper 403
Procedure For Issuance 405
Money Market Mutual Funds (MMFS) 406
Factoring 406
Factoring Process 406
Advantages for the Seller 408
Types Of Factoring 409
Letter Of Credit 410
Basic Forms Of Lcs 410
Revocable Letter of Credit 411
Irrevocable Letter of Credit 411
Working Mechanism 411
Bill Of Exchange 413
FIMMDA - The Fixed Income Money Market and Derivatives Association of India 414
FOREIGN EXCHANGE DEALER'S ASSOCIATION OF INDIA 414
Lesson 13 Insider Trading
SEBI (Prohibition of Insider Trading) Regulations, 2015 419
Provisions Relating To Insider Trading In Companies Act, 2013 419
The Sebi (Prohibition Of Insider Trading) Regulations 2015 420
Applicability Of The Regulations 421
DEFINITIONSCompliance officer AS PER SEBI (PROHIBITION OF INSIDER 421
TRADING) REGULATIONS 2015 Connected Person AS PER SEBI (PROHIBITION OF INSIDER TRADING) 422
REGULATIONS 2015 “Insider” AS PER SEBI (PROHIBITION OF INSIDER TRADING) REGULATIONS 423 2015
SIMPLIFIED INDEX – CAPITAL COMMODITY & MONEY
MARKET
Topics Page No.
“Trading” AS PER SEBI (PROHIBITION OF INSIDER TRADING) REGULATIONS 423
2015 “Unpublished Price Sensitive Information” 424
What is Trading window? 425
What is a pre-clearance? 425
What is a contra trade? 425
What is a Trading Plan? 425
Restriction On Communication And Trading By Insiders 425
Trading when in possession of Unpublished Price Sensitive Information 426
Trading Plans 427
Disclosure Of Trading By Insiders 428
Initial Disclosure 428
Continuous Disclosure 428
Code for Fair Disclosure 429
Code of Conduct UNDER AS PER SEBI (PROHIBITION OF INSIDER TRADING) 429
REGULATIONS 2015 Designation of Compliance Officer UNDER AS PER SEBI (PROHIBITION OF 430
INSIDER TRADING) REGULATIONS 2015 PENALTIES FOR CONTRAVENTION UNDER AS PER SEBI (PROHIBITION OF 431
INSIDER TRADING) REGULATIONS 2015
Lesson 14 Substantial Acquisition of Shares and Takeovers
DEFINITIONS: Control 443
Enterprise Value 443
Manager to Open Offer 444
Offer Period 444
Persons Acting in Concert 444
"Volume weighted average market price" 445
"Volume weighted average price" 445
Substantial Acquisition Of Shares Or Voting Rights 446
Obligation to Make Open Offer 446
Trigger Point For Making An Open Offer By An Acquirer 447
25% Shares or Voting Rights 447
Creeping Acquisition Limit 447
Open Offer Under Sebi Takeover Regulations, 2011 447
Mandatory Open Offer 448
Voluntary Open Offer 448
Conditional Offer 449
Delisting Offer 449
Competing Offer 450
SIMPLIFIED INDEX – CAPITAL COMMODITY & MONEY
MARKET
Topics Page No.
Restrictions on Wilful Defaulter 450
OPEN OFFER PROCESS 450
Withdrawal of Open Offer 453
PUBLIC ANNOUNCEMENT 454
Submission of Public Announcement (PA) 454
Publication and Submission of Detailed Public Statement 454
Contents of Public Announcement and Detailed Public Statement 455
Procedure of Filing PA and DPS 456
Offer Price 456
Provision Of Escrow 457
Mode Of Payment Of Escrow 457
Disclosures In Sebi Takeover Regulations, 2011 458
EXEMPTIONS Regulation 10 of the SEBI Takeover Regulations, 2011 459
Regulation 10 - Automatic Exemptions 460
Regulation 11 – Exemption By Sebi 463
Procedure for filing the application under Regulation 11 464
Report Of Justice Dhanuka Committee On Securities Laws 483