this report is in conformity with the format as per the ... · 1 this report is in conformity with...

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This Report is in conformity with the format as per the Securitiesand Exchange Board of India (Annual Report) Rules, 1994,

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MEMBERS OF THE BOARD(As on March 31, 2013)

Appointed under Section 4(1) (a) of the SEBI Act, 1992 (15 of 1992)

U. K. SINHACHAIRMAN

Appointed under Section 4(1) (d) of the SEBI Act, 1992 (15 of 1992)

PRASHANT SARANWHOLE TIME MEMBER

RAJEEV K. AGARWALWHOLE TIME MEMBER

S. RAMANWHOLE TIME MEMBER

V. K. JAIRATHPART TIME MEMBER

P. C. CHHOTARAYPART TIME MEMBER

Nominated under Section 4(1) (b) of the SEBI Act, 1992 (15 of 1992)

DR. ARVIND MAYARAMSecretaryMinistry of Finance

Government of India

NAVED MASOODSecretary

Government of India

Nominated under Section 4(1) (c) of the SEBI Act, 1992 (15 of 1992)

ANAND SINHADeputy Governor

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MEMBERS OF THE SEBI BOARD(As on March 31, 2013)

U. K. SINHAChairman

PRASHANT SARANWhole Time Member

RAJEEV K. AGARWALWhole Time Member

S. RAMANWhole Time Member

V. K. JAIRATHPart Time Member

P. C. CHHOTARAYPart Time Member

DR. ARVIND MAYARAMSecretary

Ministry of FinanceDepartment of Economic

Government of India

NAVED MASOODSecretary

Ministry of Corporate

Government of India

ANAND SINHADeputy Governor

Reserve Bank of India

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CHAIRMAN, WHOLE TIME MEMBERS ANDEXECUTIVE DIRECTORS

Left to Right :

: Shri S. Raman, Whole Time Member; Shri Prashant Saran, Whole Time Member; Shri U. K. Sinha, Chairman; Shri Rajeev K. Agarwal, Whole Time Member.

Standing : Shri S. Raman, Executive Director; Shri R. K. Padmanabhan, Executive Director; Shri SVMD Rao, Executive Director; Shri Ananta Barua, Executive Director; Shri S. Ravindran, Executive Director; Shri J Ranganayakulu, Executive Director; Shri P K Nagpal, Executive Director.

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CONTENTS

Page No.

i

CONTENTS

Page No.

List of Boxes ..................................................................................................................................... vii

List of Tables..................................................................................................................................... viii

List of Charts ................................................................................................................................... xiii

List of Abbreviations ....................................................................................................................... xiv

PART ONE: POLICIES AND PROGRAMMES

1. GENERAL MACRO-ECONOMIC ENVIRONMENT .................................................... 1

2. REVIEW OF POLICIES AND PROGRAMMES.............................................................. 11

I. Primary Securities Market................................................................................................. 11

II. Secondary Securities Market............................................................................................. 18

III. Corporate Debt Market...................................................................................................... 33

IV. Mutual Funds ..................................................................................................................... 34

V. Alternative Investment Funds ......................................................................................... 41

VI. Investment Advisers ......................................................................................................... 41

VII. Foreign Institutional Investors ........................................................................................ 41

VIII. Takeovers.............................................................................................................................. 44

IX. Investor Assistance and Education.................................................................................. 45

X. Legal Framework................................................................................................................ 45

XI. Retrospect and Prospects................................................................................................... 46

PART TWO: TRENDS AND OPERATIONS IN SECURITIES MARKETS

1. PRIMARY SECURITIES MARKET ................................................................................... 51

I. Resource Mobilisation through Public and Rights Issues ........................................... 51

II. Resource Mobilisation through QIP and IPP................................................................. 57

III. Resource Mobilisation through Preferential Allotment ............................................... 58

IV. Resource Mobilisation through Private Placement in Corporate Debt ..................... 59

2. SECONDARY SECURITIES MARKET............................................................................. 60

I. Equity Market in India ...................................................................................................... 60

II. Performance of Major Stock Indices and Sectoral Indices........................................... 64

III. Turnover in the Indian Stock Market .............................................................................. 66

IV. Market Capitalisation......................................................................................................... 68

V. Stock Market Indicators..................................................................................................... 70

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CONTENTS

Page No.

VI. Volatility in Stock Markets................................................................................................ 73

VII. Trading Frequency ............................................................................................................. 75

VIII. Activities of Stock Exchanges ........................................................................................... 76

IX. Dematerialisation................................................................................................................ 77

X. Derivatives Segment........................................................................................................... 80

3. TRENDS IN THE BOND MARKET .................................................................................. 89

I. Corporate Bond Market..................................................................................................... 89

II. Wholesale Debt Market ..................................................................................................... 91

4. MUTUAL FUNDS.................................................................................................................. 92

5. PORTFOLIO MANAGEMENT........................................................................................... 98

6. FOREIGN INSTITUTIONAL INVESTMENT................................................................. 99

7. ALTERNATIVE INVESTMENT FUNDS.......................................................................... 104

8. CORPORATE RESTRUCTURING ..................................................................................... 105

PART THREE: REGULATION OF SECURITIES MARKET

1. INTERMEDIARIES ............................................................................................................... 107

I. Streamlining of Registration Process of Intermediaries............................................... 107

II. Registered Intermediaries Other than Stock Brokers and Sub-brokers..................... 107

III. Registration of Stock Brokers............................................................................................ 108

IV. Registration of Sub-brokers............................................................................................... 112

V. Recognition of Stock Exchanges....................................................................................... 112

VI. Memorandum of Understanding (MoU) between Stock Exchanges ......................... 113

VII. Registration of Foreign Institutional Investors and Custodians of Securities.......... 113

VIII. Registration of Collective Investment Schemes............................................................. 114

IX. Registration of Mutual Funds........................................................................................... 114

X. Registration of Venture Capital Funds............................................................................ 115

XI. Fees and Other Charges .................................................................................................... 115

2. CORPORATE RESTRUCTURING ..................................................................................... 117

I. Substantial Acquisition of Shares and Takeovers.......................................................... 117

II. Buy-back............................................................................................................................... 117

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CONTENTS

Page No.

3. SUPERVISION ....................................................................................................................... 118

I. Promotion and Regulation of Self Regulatory Organisations..................................... 118

II. Inspection of Market Intermediaries ............................................................................... 119

III. Inspection of Depositories................................................................................................. 120

IV. Inspection of Stock Exchanges.......................................................................................... 121

V. Prevention of Money Laundering.................................................................................... 121

4. SURVEILLANCE .................................................................................................................... 124

I. Market Surveillance Mechanism...................................................................................... 124

II. Integrated Market Surveillance System .......................................................................... 125

III. Data Warehousing and Business Intelligence System .................................................. 125

............................................................. 125

V. Surveillance Actions ........................................................................................................... 125

VI. Surveillance Measures........................................................................................................ 126

VII. Enforcement Actions .......................................................................................................... 127

5. INVESTIGATION.................................................................................................................. 130

I. Initiation of Investigation .................................................................................................. 130

II. Process of Investigation ..................................................................................................... 131

III. Trends in Investigation Cases........................................................................................... 131

IV. Regulatory Action............................................................................................................... 132

V. Follow-up of Investigations .............................................................................................. 136

6. ENFORCEMENT OF REGULATIONS.............................................................................. 136

I. Enforcement Mechanisms ................................................................................................. 136

II. Enquiry and Adjudication ................................................................................................ 139

III. Regulatory Actions against CISs ...................................................................................... 140

7. PROSECUTION ..................................................................................................................... 143

I. Trends in Prosecution ........................................................................................................ 143

II. Nature of Prosecution ........................................................................................................ 146

III. Disposal of Prosecution Cases.......................................................................................... 146

8. LITIGATIONS, APPEALS AND COURT PRONOUNCEMENTS.............................. 146

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CONTENTS

Page No.

9. CONSENT AND COMPOUNDING ................................................................................. 148

10. INVESTOR ASSISTANCE AND EDUCATION ............................................................. 148

I. Redressal of Investor Grievances ..................................................................................... 148

II. SEBI Complaints Redress System .................................................................................... 150

III. Regulatory action against companies and their directors for Non-redressal of investor grievances .............................................................................. 150

................................................................................ 151

V. SEBI Toll Free Helpline .................................................................................................... 152

VI. Investor Assistance ............................................................................................................ 153

VII. Investor Education – Multimedia Campaign................................................................. 153

VIII. Investor Awareness Programs/ Workshops .................................................................. 153

IX. Visit to SEBI ........................................................................................................................ 156

11. RESEARCH ACTIVITIES ................................................................................................... 156

I. Research Inputs................................................................................................................... 157

II. Market Interactions............................................................................................................. 157

III. Risk Management .............................................................................................................. 158

PART FOUR: REGULATORY CHANGES

1. REGULATORY DEVELOPMENTS ................................................................................. 159

I. New Regulations................................................................................................................. 159

II. Amendments to Existing Rules/ Regulations ................................................................ 163

2. SIGNIFICANT COURT PRONOUNCEMENTS............................................................. 168

I. Supreme Court .................................................................................................................... 168

II. High Court........................................................................................................................... 170

III. Securities Appellate Tribunal ........................................................................................... 173

PART FIVE: ORGANISATIONAL MATTERS

1. SEBI BOARD .......................................................................................................................... 178

2. AUDIT COMMITTEE ........................................................................................................... 178

3. ORGANISATION RESTRUCTURING CELL ................................................................. 179

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CONTENTS

Page No.

........................................................................................................................ 179

II. Redesigning SEBI's Role .................................................................................................... 180

4. HUMAN RESOURCES ......................................................................................................... 180

.................................................................. 181

................................................................................................................................. 181

III. Promotions .......................................................................................................................... 181

................................................................................... 181

V. Job Rotation ......................................................................................................................... 181

........................................................................................................... 182

VII. Training and Development ............................................................................................... 182

VIII. Internship ............................................................................................................................. 183

IX. Extracurricular activities within SEBI ............................................................................. 183

X. Prizes won............................................................................................................................ 183

XI. Initiatives in the realm of corporate social responsibility............................................ 183

XII. Scheme for recognizing and rewarding academic excellence of children of employees........................................................................................................ 183

5. NATIONAL INSTITUTE OF SECURITIES MARKETS ............................................... 183

I. School for Securities Education and School for Securities Information and Research ................................................................................................ 183

II. School for Investor Education and Financial Literacy ................................................. 185

III. School for Regulatory Studies and Supervision............................................................ 186

...................................................................... 186

....................... 188

6. VIGILANCE CELL................................................................................................................. 189

7. PROMOTION OF OFFICIAL LANGUAGE .................................................................... 189

I. Bilingualisation .................................................................................................................. 189

II. Rajbhasha Competitions and Functions Correspondence in Hindi.......................... 189

III. Aaj Ka Shabd...................................................................................................................... 189

IV. Hindi Noting and Hindi Quotes..................................................................................... 189

V. Rajbhasha Meetings and Seminars ................................................................................. 190

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CONTENTS

Page No.

VI. Hindi Magazine ................................................................................................................. 190

VII. Information Technology and Hindi................................................................................ 190

VIII. Investor Website and SCORES ........................................................................................ 190

................................................................................................................... 190

8. INFORMATION TECHNOLOGY ...................................................................................... 190

I. Strengthening IT Security.................................................................................................. 190

II. Implementation of New Web-Mail .................................................................................. 190

III. Implementation of two factor authentication for secured access to SEBI Web applications ....................................................................................................... 191

IV. Internet Connectivity to Disaster Recovery Site Chennai .......................................... 191

.......................................... 191

VI. Enterprise Wide Portal .................................................................................................... 191

9. INTERNATIONAL CO-OPERATION ............................................................................... 191

I. Association with IOSCO................................................................................................... 192

II. Association with G20/FSB ................................................................................................ 196

III. Joint Forum......................................................................................................................... 196

IV. Bilateral Engagements ...................................................................................................... 167

V. Ministry References- Contribution to various International Treaties and Dialogues ..................................................................................................... 197

VI. Participation in the International Programs.................................................................. 197

VII. MMoU and MoU Requests .............................................................................................. 198

VIII. Foreign Delegations/Dignitaries to SEBI ....................................................................... 198

IX. Study Tours for Overseas Regulators ............................................................................ 198

10. PARLIAMENT QUESTIONS .............................................................................................. 198

11. RIGHT TO INFORMATION ACT ..................................................................................... 199

CHRONOLOGY OF MAJOR POLICY INITIATIVES BY SEBI........................................... 202

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1.1 Business Responsibility Report .................................................................................... 13

1.2 Public issues in electronic form and use of nationwide broker............................. 15

1.3 Single One Time KYC.................................................................................................... 19

1.4 Dedicated Debt segment on stock exchanges............................................................ 28

1.5 Pre-trade Risk Controls ................................................................................................. 30

1.6 Periodic Call Auction for Illiquid scrips and Extension of Pre-Open Call Auction Session .................................................................................... 31

2.1 Impact Analysis of policy measures introduced in Primary Market .................... 56

............................................. 123

LIST OF BOXES

Box No. Name Page No. Page No.

viii

LIST OF TABLES

Table No. Name Page No. Page No.

1.1 National Income (at 2004-05 prices) .......................................................................... 2

1.2 GDP (at Factor Cost) by Economic Activity (at 2004-05 prices) ........................... 3

1.3 Index of Industrial Production................................................................................... 4

1.4 Gross Domestic Savings and Investment ................................................................. 6

1.5a Demat Statistics............................................................................................................. 10

1.5b No. of Listed Companies............................................................................................. 10

1.6 Growth of Turnover in Various Segments in Indian Stock Markets ................... 10

1.7 Assets under the Custody of Custodians................................................................. 11

2.1 Resource Mobilisation through Public and Rights Issues ..................................... 51

2.2 SME Platform ................................................................................................................ 52

2.3 Sector-wise Resource Mobilisation ............................................................................ 53

2.4 Size-wise Resource Mobilisation................................................................................ 54

2.5 Mega Issues in 2012-13 ................................................................................................ 55

2.6 Industry-wise Resource Mobilisation........................................................................ 57

2.7 Resource Mobilisation through QIP and Conforming to MPS through IPP...... 58

............ 58

2.9 Resource Mobilisation through Preferential Allotment ......................................... 59

2.10 Private Placement of Corporate Bonds Reported to BSE and NSE...................... 59

2.11 Major Indicators of Indian Stock Markets................................................................ 62

2.12 Major Stock Indices and their Percentage Variation............................................... 64

2.13 Sectoral Stock Indices and their Returns .................................................................. 65

2.14 Exchange-wise Cash Segment Turnover ................................................................. 66

2.15 Turnover at BSE and NSE: Cash Segment................................................................ 67

2.16 City-wise Turnover of Top 20 Cities in Cash Segment during 2012-13 .............. 68

2.17 Market Capitalisation at BSE...................................................................................... 69

2.18 Market Capitalisation at NSE..................................................................................... 70

2.19 Select Ratios Relating to Stock Market ..................................................................... 71

2.20 Price to Earnings Ratio ................................................................................................ 71

2.21 Price to Book-Value Ratio............................................................................................ 72

2.22 Average Daily Volatility of Benchmark Indices ...................................................... 73

2.23 Trends in Daily Volatility of International Stock Market Indices during 2012-13 74

ix

LIST OF TABLES


2.24 Trading Frequency of Listed Stocks.......................................................................... 75

2.25 Share of Brokers, Securities and Participants in Cash Market Turnover ............ 76

2.26 Trading Statistics of Stock Exchanges....................................................................... 77

2.27 Turnover of Subsidiaries of Stock Exchanges.......................................................... 78

2.28 Depository Statistics..................................................................................................... 78

2.29 Depository Statistics: Debenture/Bonds and Commercial Paper ......................... 79

2.30 Cities According to Number of DP Locations: Geographical Spread ................. 79

2.31 Trends in Turnover and Open Interest in Equity Derivatives Segment ............. 81

2.32 Product-wise Derivatives Turnover at NSE and BSE............................................. 82

2.33 Trends in Index Futures at NSE and BSE ................................................................ 83

2.34 Trends in Single Stock Futures at NSE and BSE..................................................... 84

2.35 Trends in Index Options at NSE and BSE................................................................ 84

2.36 Trends in Stock Options at NSE and BSE ................................................................ 85

2.37 Shares of Various Classes of Members in Derivatives Turnover at NSE and BSE. ............................................................................................................... 85

2.38 Trends in Currency Derivatives Segment ................................................................ 87

2.39 Product-wise Market Share in Currency Derivatives Volume ............................. 88

2.40 Trends in Interest Rate Derivatives at NSE.............................................................. 88

2.41 Secondary Market: Corporate Bond Trades............................................................. 90

.................................................................................. 90

2.43 Business Growth on the Wholesale Debt Market Segment of NSE..................... 91

2.44 Instrument-wise Share of Securities Traded in Wholesale Debt Market Segment of NSE ............................................................................................. 91

2.45 Share of Participants in Turnover of Wholesale Debt Market Segment of NSE ............................................................................................................ 92

2.46 Mobilisation of Resources by Mutual Funds........................................................... 93

2.47 Sector-wise Resource Mobilisation by Mutual Funds during 2012-13................ 94

2.48 Scheme-wise Resource Mobilisation and Assets under Management by Mutual Funds as on March 29, 2013.................................................................... 95

2.49 Number of Schemes by Investment Objective as on March 29, 2013.................. 96

2.50 Trends in Transactions on Stock Exchanges by Mutual Funds............................ 97

.......................... 98

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LIST OF TABLES


as on March 31, 2013.................................................................................................... 98

2.53 Assets Managed by Portfolio Managers................................................................... 99

2.54 Investment by Foreign Institutional lnvestors......................................................... 100

2.55 Investments by Mutual Funds and Foreign Institutional lnvestors ................... 100

2.56 QFI Investments during 2012-13................................................................................ 101

2.57 Allocation of Debt Investment limits to FIIs and Sub-accounts during 2012-13 101

2.58 Debt Utilisation Status as on March 31, 2013 .......................................................... 102

2.59 Notional Value of Open Interest of Foreign Institutional investors in Derivatives during 2012-13..................................................................................... 103

2.60 Notional Value of Participatory Notes (PNs) Vs Assets Under Management of FIIs ..................................................................................................... 103

2.61 Cumulative Net Investments by VCFs and FVCIs ................................................. 104

2.62 Category-wise Investors in VCFs............................................................................... 105

2.63 Trends in Corporate Restructuring ........................................................................... 106

3.1 Registered Intermediaries other than Stock Brokers and Sub Brokers ............... 108

3.1a Intermediaries other than Stock Brokers & Sub-brokers in the Process of Registration ............................................................................................... 108

3.2 Registered Stock Brokers............................................................................................. 109

3.2a Stock Broker and Sub-Broker Applications under the Process of Registration . 109

... 110

3.4 Number of Registered Members in Equity Derivatives Segment ........................ 111

3.5 Number of Registered of Members in Currency Derivatives Segment............... 111

3.6 Registered Sub-Brokers................................................................................................ 112

3.7 Stock Exchanges with Permanent Recognition........................................................ 113

3.8 Renewal of Recognition Granted to Stock Exchanges during 2012-13................ 113

3.9 Number of Registered FIIs, Sub-accounts and Custodians................................... 114

3.9a Status of Registration of FII, Sub-accounts and Custodians during 2012-13 ..... 114

3.10 Mutual Funds Registered with SEBI ......................................................................... 115

3.11 Registered Venture Capital Funds............................................................................. 115

3.12 Fees and Other Charges .............................................................................................. 116

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LIST OF TABLES


............................................ 117

....................................................... 117

3.15 Buyback cases during 2012-13.................................................................................... 118

3.16 Inspection of Stock Brokers/Sub-brokers/Clearing Members ............................... 119

3.16a Inspection by Stock Exchange/Clearing Corporation............................................. 119

3.17 Inspection of other Market Intermediaries .............................................................. 120

3.18 Actions against AML/CFT Violations/Discrepancies.............................................. 123

3.19 Surveillance Actions during 2012-13 ......................................................................... 126

3.20 Investigations by SEBI ................................................................................................. 132

3.21 Nature of Investigations Taken up and Completed ............................................... 133

3.22 Type of Regulatory Actions Taken ............................................................................ 133

3.23 Age-wise Analysis of Enforcement Actions - U/S 11, 11B and 11D of SEBI Act as on March 31, 2013 ................................................................................... 137

3.23a Age-wise Analysis of Enforcement Actions - Enquiry Proceedings as on March 31, 2013.................................................................................................... 138

3.23b Age-wise Analysis of Enforcement Actions - Adjudication Proceedings as on March 31, 2013.................................................................................................... 138

3.23c Age-wise Analysis of Enforcement Actions - Prosecution Proceedings as on March 31, 2013.................................................................................................... 139

3.23d Age-wise Analysis of Enforcement Actions – Summary Proceedings under SEBI Act as on March 31, 2013 ...................................................................... 140

3.24 Enquiry and Adjudication Proceedings Initiated during 2012-13........................ 140

3.24a Enquiry and Adjudication during 2012-13............................................................... 140

3.24b Pending Enforcement Actions as on March 31, 2013 ............................................. 140

3.25 Enquiry and Adjudication Proceedings Initiated against other Intermediaries during 2012-13 ................................................................................... 141

3.26 Prosecutions Launched................................................................................................ 144

3.27 Region-wise Data on Prosecution Cases as on March 31, 2013............................ 144

3.28 Nature of Prosecutions Launched as on March 31, 2013....................................... 146

3.29 Number of Prosecution Cases decided by the Courts as on March 31, 2013 .... 146

.......................................... 147

3.30a Status of Court Cases where SEBI was a Party (Judicial Forum) ........................ 147

xii

LIST OF TABLES

Table No. Name Page No.

3.31 Status of Appeals before the Securities Appellate Tribunal.................................. 147

3.31a Disposals of Appeals by Securities Appellate Tribunal......................................... 147

3.32 Status of Appeals Before the Hon’ble Supreme Courts ......................................... 148

3.32a Status of Appeals Before the Hon’ble High Courts................................................ 148

3.33 Receipt and Disposal of applications under Consent and Compounding Process................................................................................................. 149

........................................... 149

during 2012-13............................................................................................................... 149

3.36 Status of Investor Grievances Received and Redressed......................................... 150

3.37 Failure to Redress Investor Grievances: Order passed under section 11B ......... 151

3.38 Failure to Redress Investor Grievances: Adjudication Proceedings .................... 151

3.39 Companies Restrained From Accessing the Securities Market............................. 151

3.40 Companies Penalised For Their Failure to Redress Investor Grievances ........... 151

3.41 Trends in Awareness Programs/ Workshops Conducted by SEBI ...................... 153

3.42 Regional Seminars Conducted by SEBI during 2012-13 ........................................ 154

3.43 School Programs Conducted by SEBI during 2012-13 ........................................... 155

3.44 Trends in Financial Education Programs through Resource Persons ................. 155

5.1 Board Meetings during 2012-13 ................................................................................. 178

........................................................................................ 181

5.3 Parliament Queries received/ raised.......................................................................... 198

5.4 Session-wise Parliament Queries received and replied by SEBI during 2012-13 199

..... 199

5.6 RTI applications and First Appeal to SEBI Appellate Authority.......................... 201

5.7 Appeal before Central Information Commission.................................................... 201

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LIST OF CHARTS

Chart No. Name Page No.

1.1 Share of Components of GDP (at Factor Cost)........................................................ 52.1 Share of Broad Category of Issues in Resource Mobilisation ............................... 522.2 Sector-wise Resource Mobilisation ............................................................................ 532.3 Movement of Benchmark Stock Market Indices .................................................... 612.4 Value traded in Secondary Market............................................................................ 612.5 Year-on-Year Returns of International Indices......................................................... 632.6 Movement of Sectoral Indices of BSE ...................................................................... 652.7 Movement of Sectoral Indices of NSE ..................................................................... 662.8 P/E Ratio of International Stock Market Indices .................................................... 722.9 Annualised Volatility of International Stock Market Indices ..............................2.10 Derivatives Turnover vis-à-vis Cash Market Turnover.......................................... 802.11 Product-wise Share in Equity Derivatives Turnover at NSE and BSE ................ 822.12 Participant-wise average share in F&O equity turnover in 2012-13 ................... 862.13 Participant-wise share in equity derivative open interest at NSE

at end of the period...................................................................................................... 862.14 Share of Corporate Issuances in Domestic Debt Securities (percent).................. 892.15 AUM - GDP Ratio (percent) ....................................................................................... 933.1 Percentage Share of Stock Brokers (as on March 31, 2013) ................................... 1103.2 Percentage Share of Stock Brokers (As on March 31, 2012) .................................. 1113.3 Investigation Cases....................................................................................................... 1313.4 Nature of Investigation Cases Taken Up.................................................................. 1323.5 Investigation Completed ............................................................................................. 1333.6 Type of Regulatory Actions Taken during 2012-13 ................................................ 1343.7 The trends of phone calls received in SEBI Toll Free Helpline ........................... 1523.8 The trends of feedback of call received in SEBI Toll Free Helpline .................... 1523.9 Trends in Financial Education Programs through Resource Persons ................ 1563.10 The trends of Educational Visit at SEBI.................................................................... 157

Conventions used in this Report

` : Rupees Billion : Thousand million/hundred crore

Lakh : Hundred thousand NA : Not Available

Crore : Ten million Na : Not Applicable

Million : Ten lakh p.a. : Per annum

hundred per cent.Source of Charts and Boxes where not mentioned, is SEBI.

xiv

ABBREVIATIONS

AA Appellate Authority

ADB Asian Development BankADR American Depositary ReceiptAD(s) Authorised Dealer(s)AGM Assistant General ManagerAI(s) Anchor Investor(s)AIF(s) Alternative Investment Fund(s)AMC(s) Asset Management Company/CompaniesAMFI Association of Mutual Funds in IndiaAML Anti-Money Laundering

AP(s) Authorised Person(s)

ARN AMFI Registration NumberASBA Application Supported by Blocked AmountATR(s) Action Taken Report(s)AUM Assets Under Management

BCP Business Continuity PlanBMC Base Minimum Capital

BRLM(s) Book Running Lead Manager(s)BSDA Basic Services Demat AccountBSE Bombay Stock Exchange LimitedBTI Bankers to an Issue

CAF(s) Composite Application Form(s)CAGR Compounded Annual Growth Rate

CBI Central Bureau of InvestigationCC Clearing CorporationCBLO Collateralized Borrowing And Lending ObligationCBSE Central Board of Secondary EducationCCI Competition Commission of India

CDS Credit Default Swaps

xv

ABBREVIATIONS

CDSL Central Depository Services (India) Limited

CETTM Centre for Excellence in Telecom Technology and Management

CFFEX China Financial Futures ExchangeCFA Charted Financial AnalystCFT Combating Financing of TerrorismCGM Chief General ManagerCIC Central Information CommissionCIS Collective Investment SchemesCM Clearing Member

CMIE Centre for Monitoring Indian EconomyCPE Continuing Professional EducationCPF Customer Protection Fund

CP(s) Commercial Paper(s)CRA(s) Credit Rating Agency/Agencies(s)

CRR Cash Reserve Ratio

CSO Central Statistical OrganisationCSX Coimbatore Stock ExchangeDC(s) Division Chief(s)DFIs Development Finance InstitutionsDGM Deputy General ManagerDIP Disclosure and Investor ProtectionDJIA Dow Jones Industrial AverageDLP Data Leakage ProtectionDMA Direct Market AccessDMS Document Management SystemDP(s) Depository Participant(s)DRS Disaster RecoveryDRS Disaster Recovery SiteDSE Designated Stock ExchangeDT(s) Debenture Trustee(s)DWBIS Data Warehousing and Business Intelligence System

xvi

ABBREVIATIONS

EAG Eurasian Group on Combating Money Laundering and Financing of Terrorism

ECS Electronic Clearance ServicesED Executive Director/Enforcement Directorate

EFD Enforcement DepartmentELSS Equity Linked Saving Scheme

EMDE(s) Emerging Market and Developing Economy/EconomiesEPFO Employee Provident Fund Organisation

ESOP Employee Stock Ownership PlanESOS Employee Stock Option SchemeESPS Stock Purchase SchemeETF(s) Exchange Traded Fund(s)ETN(s) Exchange Traded Note(s)EURO EuropeanEWP Enterprise Wide PortalF&O Futures and OptionsFAQ(s) Frequently Asked Question(s)FATF Financial Action Task ForceFCCB(s) Foreign Currency Convertible Bond(s)FDI Foreign Direct InvestmentsFEMA Foreign Exchange Management ActFIA Futures Industry AssociationFII(s) Foreign Institutional Investor(s)FIMMDA Fixed Income Money Market and Derivatives Association of IndiaFINRA Financial Industry Regulatory AuthorityFMP(s) Fixed Maturity Plan(s)

FRRB Financial Reporting Review BoardFRTI Financial Regulators Training InitiativeFSAP Financial Sector Assessment ProgrammeFSB Financial Stability BoardFSDC Financial Stability and Development CouncilFSLRC Financial Sector Legislative Reforms CommissionFSR Financial Stability ReportFSRB FATF-Style Regional Body

xvii

ABBREVIATIONS

FSS Financial Supervisory Service, South KoreaFY Financial YearFVCI(s) Foreign Venture Capital Investor(s)HFC(s) Housing Finance Company/CompaniesHFT High Frequency TradingHNIs High Net Worth IndividualsHRD Human Resource DevelopmentG20 Group of TwentyGAAP(s) Generally Accepted Accounting Principle(s)GBP British Pound SterlingGC Global CustodianGCC Gulf Co-operation CouncilGDCF Gross Domestic Capital FormationGDP Gross Domestic ProductGDR(s) Global Depository Receipt(s)GDS Gross Domestic Savings/Gold Deposit SchemeGETF(s) Gold Exchange Traded Fund(s)GM General ManagerGNI Gross National IncomeGoI Government of IndiaGIZ German Society for International CooperationGSE Gauhati Stock ExchangeG-Sec Government SecuritiesIA Investment AdvisersIAD Investor Awareness DivisionIAIS International Association of Insurance SupervisorsIBT Internet Based TradingICAI Institute of Chartered Accountants of IndiaICAI-FRRB Financial Reporting Review Board of the Institute of Chartered Accountants of

IndiaICCL Indian Clearing Corporation LimitedICDR Issue of Capital and Disclosure RequirementsICSI The Institute of Company Secretaries of IndiaICWAI The Institute of Cost and Work Accountants of IndiaIDF Infrastructure Debt FundIDR(s) Indian Depository Receipt(s)IFCF India Focus Cardinal Fund

xviii

IIP Index of Industrial ProductionIMF International Monetary FundIMSS Integrated Market Surveillance SystemIMD Investment Management DepartmentIPF Investor Protection FundIPP Institutional Placement ProgrammeINR Indian RupeeIOSCO International Organisation of Securities CommissionsIPEF Investor Protection and Education FundIPF Investor Protection FundIPC Indian Penal Code

IPS Intrusion Detection and Prevention System

IRDA Insurance Regulatory and Development AuthorityIRM Information Rights ManagementIRS Indian Revenue ServiceISD Integrated Surveillance DepartmentISE Inter-Connected Stock Exchange

IT Information TechnologyITeS Information Technology Enabled ServicesITF Implementation Task ForceJF Joint ForumJPY Japanese YenJSE Jaipur Stock ExchangeKIM Key Information MemorandumKRA KYC Registration AgencyKYC Know Your ClientLAF Liquidity Adjustment FacilityLECS Local ECSLES(s) Liquidity Enhancement Scheme(s)LLP Limited Liability Partnership

LSE Ludhiana Stock ExchangeMAS Monetary Authority of SingaporeMB(s) Merchant Banker(s)

ABBREVIATIONS

xix

ABBREVIATIONS

MCR Monthly Cumulative ReportMCX-SX MCX Stock ExchangeMF(s) Mutual Fund(s)MIDC Maharashtra Industrial Development CorporationMII(s) Market Infrastructure Institution(s)MIMPS Manner of Increasing and Maintaining Public Shareholding in Recognised Stock

ExchangesMMoU Multilateral Memorandum of UnderstandingMoF Ministry of FinanceMoU Memorandum of UnderstandingMPS Minimum Public ShareholdingMPSE Madhya Pradesh Stock Exchange LimitedMQSOS Median Quarter Sigma Order SizeMSE Madras Stock ExchangeMWPL Minimum Market Wide Position LimitNASDAQ National Association of Securities Dealers Automated QuotationsNAV Net Asset ValueNCAER National Council of Applied Economic ResearchNCD Non Convertible DebentureNCFE National Centre for Financial EducationNECS National ECSNEFT National Electronic Fund TransferNDP Net Domestic ProductNGO Non-Government OrganisationsNHB National Housing BankNII(s) Non-Institutional Investor(s)NISM National Institute of Securities MarketsNNI Net National Income

NRI(s) Non-Resident Indian(s)

NSCCL National Securities Clearing Corporation LimitedNSDL National Securities Depository LimitedNSE National Stock Exchange of India LimitedNSFE National Strategy for Financial EducationNSMD Network for Securities Markets Data

xx

OECD Organisation for Economic Co-operation and DevelopmentOFCD(s) Optionally Fully Convertible Debenture(s)

OMO Open Market OperationsOTC Over the CounterOTCEI Over the Counter Exchange of IndiaP.A. Per AnnumPAN Permanent Account NumberP/B Ratio Price to Book-Value RatioP/E Ratio Price to Earnings RatioPCD Partly Convertible DebenturePCI Press Council of IndiaPF(s) Provident Fund(s)PFI Public Financial InstitutionPFUTP Prohibition of Fraudulent and Unfair Trade Practices relating to Securities

Market

PGPSM Post Graduate Programme in Securities MarketsPIT Prohibition of Insider Trading

PFRDA Pension Fund Regulatory and Development AuthorityPMLA Prevention of Money Laundering Act

PoS Points of ServicePID Public Interest DirectorsPN Participatory Notes

PSE Pune Stock ExchangePSUs Public Sector Undertaking(s)

RAIN Registrars Association of IndiaRBI Reserve Bank of India

RDDBFI Recovery of Debts due to Banks and Financial Institutions

ABBREVIATIONS

xxi

RE Revised EstimateRECS Regional ECS

RGESS Rajiv Gandhi Equity Savings SchemeRHP Red Herring ProspectusRII Retail Individual Investors

RI Rigorous ImprisonmentRP(s) Resource Person(s)RRD Regulatory Research DivisionRSE(s) Regional Stock Exchange(s)RTI/STA(s) Registrar to an Issue and Share Transfer Agent(s)RTI Right to InformationSA(s) Sub Account(s)SAARC South Asian Association for Regional Co-operationSARFAESI Securitization and Reconstruction of Financial Assets and Enforcement of

Security Interest ActSAT Securities Appellate TribunalSAST Substantial Acquisition of Shares and Takeovers

SC(R)A Securities Contracts (Regulation) ActSCRR Securities Contracts (Regulation) RulesSCORES SEBI Complaints Redress SystemSCM Self Clearing MemberSCN Show Cause NoticeSEBI Securities and Exchange Board of IndiaSEBON Securities Board of NepalSEC Securities and Exchange CommissionSECC Stock Exchanges and Clearing CorporationsSI Simple Imprisonment

SID Scheme Information DocumentSIEFL School for Investor Education and Financial LiteracySLB Securities Lending and BorrowingSLR Statutory Liquidity Ratio

SME Small and Medium EnterprisesSOP Statement of PurposeSPV(s) Special Purpose Vehicle(s)

ABBREVIATIONS

xxii

SRO(s) Self Regulatory Organisation(s)SRSS School for Regulatory Studies and SupervisionSSE School for Securities EducationSSIR School for Securities Information and ResearchSTT Securities Transaction TaxSTWT Securities Trading using Wireless TechnologySWF Sovereign Wealth Funds

T-Bills Treasury Bills

TER Total Expense RatioTM Trading Member

T to T Trade-to-TradeUAT User Acceptance TestUCC Uniform Commercial Code

UIN Unique Identity NumberUK United Kingdom

USA United States of AmericaUSD United States DollarUSE United Stock ExchangeUSIBC US-India Business CouncilUTI Unit Trust of IndiaUTI MF UTI Mutual FundVaR Value at RiskVPN Virtual Private NetworkVCF(s) Venture Capital Fund(s)WDM Wholesale Debt MarketWFE World Federation of ExchangesWGFI Working Group on Foreign InvestmentWPI Wholesale Price Index

WTM Whole Time MemberXBRL eXtensible Business Reporting Language

ABBREVIATIONS

1

Part One: Policies and ProgrammesPART ONE: POLICIES AND PROGRAMMES

The Annual Report of the Securities and Exchange Board of India (SEBI) for the year 2012-13 encompasses the developments in capital markets in the wake of early deterioration and later recovery of the global

SEBI Annual Report for 2012-13 keeps in view the developments in the world economy while aligning them with the stated objectives of SEBI. As per the format prescribed by the Securities and Exchange Board of India (Annual Report) Rules, 1994, SEBI Annual Report for 2012-13 elaborates on the policies and programmes undertaken during the year to strengthen the Indian regulatory framework of Capital markets. SEBI continued to ensure its commitment

(a) protection of the interests of investors in securities, (b) promotion of the development of the securities market and (c) regulation of the securities market.

SEBI achieves its objectives through proactive supervision and policy measures. The major policy issues are discussed in public domain through discussion papers. The decisions arrived pursuant to a thorough examination are placed on the website along with the agenda papers of the Board. The various quasi-judicial orders passed by the Board are also posted on the website.

In line with the stated objectives, this Report provides the manner in which SEBI discharged its responsibilities and exercised its powers during the year in furtherance of the objectives enshrined in (a) the Securities and Exchange Board of India Act, 1992, (b) the Securities Contracts (Regulation) Act, 1956 (c) the Depositories Act, 1996 and (d) the relevant provisions of the Companies Act, 1956. It also takes a view of the global background relevant to these developments.

1. GENERAL MACRO-ECONOMIC ENVIRONMENTAfter the setback in 2011-12, the

early 2012-13 marked a more pronounced deterioration in activity across the globe. The recovery however became imminent as credit markets healed in US and short term risks in the Euro area trimmed. While investment dipped, consumption picked up across the globe in varied measures – slowly in advanced economies and steadily in emerging markets. Prudent macroeconomic policies have been leading the way to recovery across the economies.

Financial markets have boosted the economic activity and the broad markets have rallied in late 2012-13. Rate cuts have been induced to combat slowdown by many central banking authorities. Back at home, weakening of growth in industrial and services sector earmarked one of the lowest growth rates in recent times. The ushering of

The growth rate which had declined in 2011-12 to 6.2 percent continued further southward in 2012-13 and the provisional estimates put it at a decadal low rate of 5.0 percent. Gross Domestic Product (GDP) estimates at factor cost at constant (2004-05) prices for FY13 is likely to be ` 55,05,437 crore as against ` 52,43,582 crore for FY12 and the growth is expected to be 5.0 percent as compared to 6.2 in FY12. (Table1.1)

While the previous year witnessed Services sector supporting the growth rate amidst the stagnation prevailing in

year saw all the three sectors losing the

domestic concerns seem to have dampened

2

Annual Report 2012-13

the economic expansion much in the 2012-13 as compared to the previous year. Agriculture growth rate fell from 3.6 percent in 2011-12 to 1.9 percent in 2012-13. Industry recorded a growth of 1.2 percent in 2012-13 as compared

year. Services sector recorded sluggish growth on account of falling export of IT/ITeS and is expected to be 6.8 percent for 2012-13 while it stood at 7.9 percent for 2011-12.

Agriculture

Agriculture is expected to show a growth of 1.9 percent in 2012-13 as opposed to a growth of 3.6 percent seen in 2011-12. The deceleration in the sector may be a result

of an expected decline in production of food grains around by 2.8 percent this year as compared to a growth of 5.2 percent in the

of monsoon has hit the production of rabi and kharif crops alike. The agriculture sector in India today stands at a point where the further development depends upon the reforms undertaken to improve efficiency and productivity along with investments in agriculture. (Table 1.2)

The share of agriculture in the GDP is further expected to reduce from 14.1 percent in 2011-12 to 13.7 percent in 2012-13. The 11th

growth rate of 3.3 percent against the target

Table 1.1: National Income (at 2004-05 prices)*(` crore)

2010-11** 2011-12 2012-13Item (2nd Revised (1st Revised (Provisional

Estimate) Estimate) Estimate)1 2 3 4

A. Estimates at Aggregate Level1. National Product

1.1 Gross National Income (GNI) at factor cost 4,882,249 5,196,848 5,449,1048.8% 6.4% 4.9%

1.2 Net National Income (NNI) at factor cost 4,310,195 4,572,075 4,766,7548.7% 6.1% 4.3%

2. Domestic Product2.1 Gross Domestic Product (GDP) at factor cost 4,937,006 5,243,582 5,505,437

9.3% 6.2% 5.0%2.2 Net Domestic Product (NDP) at factor cost 4,364,952 4,618,809 4,823,087

9.3% 5.8% 4.4%B. Estimates at Per Capita Level1. Population (million) 1,186 1,202 1,217

1.4% 1.35% 1.25%2. Per Capita NNI at factor cost (`) 36,342 38,037 39,168

7.2% 4.7% 3.0%3. Per Capita GDP at factor cost (`) 41,627 43,624 45,238

7.8% 4.8% 3.7%

Note: Figures in the parentheses are percentage change over the previous year.* As per revised CSO nomenclature of Annual GDP Estimates** Growth rates in 2010-11 are based on growth calculated over 3rd revised estimates of 2009-10

3

Part One: Policies and Programmes

sets the agricultural growth at 4.0 percent, the crucial factors underpinning the same would be investments in farm research, rural

(Chart 1.1)

Industry

The growth rate in Industry is further expected to fall to 1.2 percent in 2012-13 from the 2.7 percent as witnessed in 2011-12. High interest rates yielded lower investments, which accompanied with the power cuts, has inhibited the rise of output. Mining sector continued registering a downfall of

manufacturing fell from 2.7 percent in 2011-12 to a mere 1.0 percent growth in 2012-13.

The IIP figures (Index of Industrial Production) showed sluggish growth of a

mere 1.0 percent in 2012-13 when compared with 2.9 percent as recorded in 2011-12. The sector seems to be grappling with the dearth of investments in light of tightened monetary stance. (Table 1.3) The index of eight core industries (37.9 percent weight in IIP) grew by 3.2 percent in 2012-13 as compared to 5.0 percent in 2011-12.

Mining registered a decline of 2.5 percent in 2012-13 as against a decline of 1.9 percent in 2011-12 and has been largely at the root of contraction of industrial output (index for 11 out of 12 months has shown negative growth) on account of the domestic issues of allocation, production and pricing of minerals. Reforms in the areas of auctioning, fuel supply agreements and grading of coal as per international standards are expected to usher in the much needed impetus to the sector.

Table 1.2: GDP (at Factor Cost) by Economic Activity (at 2004-05 prices)*(` crore)

2010-11 2011-12 2012-13 Percentage Change overIndustry (2nd Revised (1st Revised (Provisional Previous Year

Estimate) Estimate) Estimate) 2011-12 2012-13

1 2 3 4 5 6

1. Agriculture, Forestry & Fishing 7,13,477 7,39,495 7,53,610 3.6 1.92. Mining and Quarrying 1,08,938 1,08,249 1,07,619 -0.6 -0.63. Manufacturing 8,01,476 8,23,023 8,31,648 2.7 1.04. Electricity, Gas and Water Supply 92,773 98,814 1,02,918 6.5 4.2

Industry (2+3+4) 10,03,187 10,30,086 10,42,185 2.7 1.2

5. Construction 3,90,692 4,12,412 4,30,277 5.6 4.36. Trade, Hotels, Transport and

Communication 13,45,660 14,40,312 15,32,034 7.0 6.47. Financing, Insurance, Real Estate

and Business Services 8,49,632 9,48,808 10,30,684 11.7 8.68. Community, Social and Personal Services 6,34,358 6,72,469 7,16,645 6.0 6.6

Services (5+6+7+8) 32,20,342 34,74,001 37,09,640 7.9 6.8

GDP at Factor Cost 49,37,006 52,43,582 55,05,437 6.2 5.0

* As per revised CSO nomenclature of Annual GDP Estimates

4


Manufacturing, which contributes 75

and showed a growth of 1.2 percent for 2012-13 as against 3.0 percent in 2011-12.While power outages have hampered the sector recently, the growth in the sector is imminent and desired to improve the contribution of the sector from a current 15-16 percent of the GDP to 25 percent of the GDP by 2022 as laid out in the National Manufacturing Policy.

Electricity posted a lower growth of 4.0 percent in 2012-13 while the growth in 2011-12 was 8.2 percent, thus interrupting the growth trajectory of over seven years displayed by the sector. The sector seems to be affected by the supply constraints. E l e c t r i c i t y g e n e r a t i o n a l o n g w i t h manufacturing leads the path for industrial expansion and the reforms in power sector may be requisite to address the growing gaps.

Services

Services sector has over a decade remained at the forefront of India’s growth rate. Its share in the GDP has risen from 65.2 percent in 2010-11 to 66.3 percent in 2011-12 and further to 67.4 percent in 2012-13. The growth in the sector is expected to be 6.8

percent in 2012-13 as compared to 7.9 percent in 2011-12.

The Community, Social & Personal Services sub sector is anticipated to grow at 6.6 percent in the current year compared to 6.0 percent of the last year. The Financing, Insurance, Real Estate and Business Services, meanwhile, is poised to show a 8.6 percent growth as compared to 11.7 percent exhibited

While Community, Social & Personal Services contributes 13.0 percent to the GDP, the Financing, Insurance, Real Estate and Business Services contributes 18.7 percent. (Chart 1.1)

T r a d e , H o t e l s , T r a n s p o r t & Communication sub sector posted a growth of 6.4 percent in 2012-13 as opposed to 7.0 percent in 2011-12, while its share in the GDP remains roughly at 27 percent. The decline comes as a result of fall in passenger and cargo handled in civil aviation along with cargo handled at major sea ports. Commercial vehicles too have seen a slump in sales as a result of faltering growth. Construction sub sector is expected to grow at 4.3 percent in 2012-13 against 5.6 percent in the previous

Table 1.3: Index of Industrial Production (Base: 2004-05=100)

Mining Manufacturing Electricity GeneralMonth (141.57) (755.27) (103.16) (1000.00)

2011-12 2012-13 2011-12 2012-13 2011-12 2012-13 2011-12 2012-13

AverageApr-Mar 128.5 125.3 181 183.1 149.3 155.2 170.3 172

Growth over thecorresponding period ofprevious yearMar -1.1 -2.9 -3.6 3.2 2.7 3.5 -2.8 2.5

Apr-Mar -1.9 -2.5 3 1.2 8.2 4 2.9 1

5


they exhibit on global scenario.

Savings & Investments

The latest data of CSO points to a decrease in India’s Gross Domestic Savings as a percentage of GDP at market prices from 34.0 percent in 2010-11 to 30.8 percent

assets in Household savings decreased to 8.0 percent in the 2011-12 from 10.4 percent in the previous year. This is the lowest when

a decade. Financial Savings since 2000 have always contributed over 10 percent barring the year 2004-05, which saw a share of 9.8 percent. In light of the decreased share of

that the share of savings in physical assets is currently the highest since 2000 at 14.3 percent. The saving pattern seems to be

growing growth concerns that has resulted

savings. Investors have hence chosen to invest in physical assets like gold that seems to be a “safe haven” for investment by households. With the share of Household Savings being

of investors to physical assets always seem to

indicating that some substitution takes place between the two kinds of savings. (Table 1.4)

While it’s not only the Household Savings that have declined, the Private Corporate and Public Sector Savings have also reduced in 2011-12. While the Private Corporate Savings have decreased marginally from 7.9 percent in 2010-11 to 7.2 percent in 2011-12, public sector savings have halved to 1.3 percent in FY12 when compared with 2.6 percent in FY11. A slowdown in industrial sector along with high interest payments and high input costs impact the level of Private Corporate Savings and consequently its industrial revival may be a pre condition to the improvement in the rate of Private Corporate Savings.

6


In absolute terms, Gross Domestic Saving (GDS) at current prices in 2011-12 stood at ` 27,65,291 crore as against ` 26,51,934 crore in 2010-11, registering a growth of 4.3 percent. Household savings increased by 9.3 percent from ` 18,32,901 crore in 2010-11 to ` 20,03,720 crore in 2011-12. While absolute Savings in Physical Assets increased by 25.3 percent from ` 10,24,567crore in 2010-11 to ` 12,84,191 crore in 2011-

12, the Financial Savings shrunk by 11.0 percent from ` 8,08,334 crore to ` 7,19,529 crore for the corresponding time period. Private Corporate Savings moved up by 4.1 percent in absolute terms from ` 6,19,370 crore in 2010-11 to ` 6,44,473 crore in 2011-12. Public Sector Savings dwindled to ` 1,17,097crore in 2011-12 from ` 1,99,662 crore in 2010-11 registering a decline of 41.4 percent.

Table 1.4: Gross Domestic Savings and Investment

Amount in ` crore (Percent of GDP at currentS. market prices)

No. Item 2008-09 2009-10 2010-11 2011-12 2008-09 2009-10 2010-11 2011-12 (3rd RE) (2nd RE) (1st RE) (3rd RE) (2nd RE) (1st RE) 1 2 3 4 5 6 7 891 Household Saving 13,30,872 16,30,799 18,32,901 20,03,720 23.6 25.2 23.5 22.3

of which :a) Financial Assets 5,71,026 7,74,753 8,08,334 7,19,529 10.1 12.0 10.4 8.0b) Physical Assets 7,59,846 8,56,046 10,24,567 12,84,191 13.5 13.2 13.1 14.3

2 Private CorporateSaving 4,17,467 5,40,955 6,19,370 6,44,473 7.4 8.4 7.9 7.2

3 Public Sector Saving 54,280 10,585 1,99,662 1,17,097 1.0 0.2 2.6 1.34 Gross Domestic Saving 18,02,619 21,82,338 26,51,934 27,65,291 32.0 33.7 34.0 30.8

6 Gross Domestic CapitalFormation 19,31,379 23,63,132 28,71,649 31,41,465 34.3 36.5 36.8 35.0

7 Total ConsumptionExpenditure (a+b) 38,64,617 44,78,717 52,40,922 60,98,896 68.6 69.1 67.2 68.0a) Private Final

Consumption Expenditure 32,49,284 37,07,566 43,49,889 50,56,219 57.7 57.2 55.8 56.3

b) Government Final Consumption Expenditure 6,15,333 7,71,151 8,91,033 10,42,677 10.9 11.9 11.4 11.6

Memo ItemsSaving-InvestmentBalance (4-6) -1,28,760 -1,80,794 -2,19,715 -3,76,174 2.3 2.8 2.8 4.2Public Sector Balance# -4,77,450 -5,82,203 -4,54,297 -5,88,111 8.5 9.0 5.8 6.6Private Sector Balance# 3,52,179 5,29,599 3,86,653 4,14,944 6.3 8.2 5.0 4.6a) Private Corporate

Sector -2,18,847 -2,45,154 -4,21,681 -3,04,585 3.9 3.8 5.4 3.4b) Household Sector 5,71,026 7,74,753 8,08,334 7,19,529 10.1 12.0 10.4 8.0

7


The savings-investment gap has widened to 4.2 percent of GDP at market prices in 2011-12, up from being 2.8 percent in the

decreased, there has not been a proportionate decrease in investment in recent times, a result of which has been heavy reliance

to be reduced to stimulate public savings, domestic savings would also need to be channelized to meet the growing investment

India currently encounters the dilemma

in the stride of growth as nation progressed, lately the burgeoning number has posed a number of problems both for the economy and polity alike. Given the Indian economy’s resurgent nature, a comfortable level of both is desired as well essential.

Current Account Deficit (CAD) was 4.8 percent (USD 87.8 billion) of GDP, way above its comfortable range of 2.5 – 3.0 percent. However, Financial Inflows to the tune of USD 85.4 billion during the

exchange reserves. It may be noted that

flows have increased when compared to the corresponding period of previous year (USD 80.7 billion). The surge in portfolio investments has outperformed the decline in direct investment hence causing the net

The burgeoning CAD has been fuelled by soaring Oil and Coal Imports, Gold Rush and Slowdown in exports. Oil bill contributes

majorly to the imports. With oil marketing

prices along with the move to cap the number of subsidized cylinders during the year would ensure some relief in the near future. Hike in Gold Import duties is a stepping stone to contain India’s increasing appetite of gold. With respect to Coal imports, it would be interesting to note that while India ranks 5th with 7.0 percent of global coal reserves, it remains the fourth biggest importer of the fuel. An upturn in the mining sector is hence not only imperative for the import bill to decline but also for the manufacturing sector to gain momentum in India from the current lag.

High CAD may also symbolize the gap in Savings and Investments in the country. While Savings in general and financial savings in particular have decimated, the investment has not decreased proportionately. This in turn has been at the root of higher

to higher demand which is being viciously supported by imports instead of domestic capacity development and exports.

As against the Revised Estimates 2012-13 `

for 2012-13 constituted 94 percent and as a

at 4.9 percent of GDP as against the Revised Estimates of 5.2 percent. Revenue Deficit

points to a higher revenue expenditure. Over the years while revenue expenditure has been increasing as proportion of GDP (12.8 percent of GDP as per Revised Estimates 2012-13), the Capital Expenditure seems to have shrunk. This combined with dependence of CAD

a potential cause of concern for the policy makers. Interest payments and subsidies add

8


and an improvement seems to be due.

The foreign exchange reserves stood at USD 292.6 billion in end March 2013 compared to USD 294.4 billion as of end March 2012.

Indian scene in the wake of these two deficits is apprehensive of the financial instability in the economy. CAD in absolute terms pose no risk of any kind but when seen against the backdrop of varied factors may be a potential weak spot. In Indian context,

the situation remains balanced but given the

any adverse global development may trigger abrupt stoppage in inflows which would affect the Consumption, Investment and Expenditure. Notwithstanding the fact that

foreign exchange reserves, depreciated but stable currency and healthy credit growth, it still remains crucial for the economy to be proactively monitoring the developments.

Liquidity

Liquidity conditions altered during the year 2012-13 that started with tighter liquidity conditions prevalent in the economy. The past measures of policy rate cuts in the previous fiscal yielded results in the latter part of Q1 2012-13 through Q2 but the liquidity conditions tightened again in November 2012 driven by buildup of government cash balances and the gap in credit and deposits growth. The global fears of tighter liquidity in the event of withdrawal of any quantitative easing have also added to the prevalence of tighter liquidity predictions ahead. The

in the policy rates apart from the 100 basis points cut undertaken in 2012-13.

In absence of policy cuts, the cash reserve ratio (CRR) and statutory liquidity ratio (SLR) have been tuned to adjust the state of liquidity. In 2012-13, CRR was reduced by 75 basis points while SLR was reduced by 100 basis points. The open market operations (OMO) injected primary liquidity of ` 1.5 trillion.

Credit Growth

Non food credit growth registered a growth of 14.0 percent in 2012-13 when compared with 16.6 percent recorded in 2011-12, indicating a slower pace of credit growth. The credit to Industry slowed to 15.7 percent in 2012-13 from 20.3 percent in 2011-12 on

by the industry. Credit to the Agriculture meanwhile increased by 8.1 percent in FY 13 as compared to 13.3 percent in FY 12 while that to the Services sector increased by 13.6 percent as compared to 14.4 percent in the respective periods.

Tighter liquidity conditions along with the slowdown in economic activity have prevented the credit growth to pick up. Deposit growth

falling short of the RBI projections.

Post the monetary tightening measures, the wholesale price index (WPI) showed some

for 2012-13 was at 7.3 percent as against 8.9 percent registered for 2011-12.

at 9.8 percent in 2011-12 as well as 2012-13.

declined from 7.3 percent in 2011-12 to 5.4

9


percent in 2012-13. The fuel group meanwhile showed a decrease in inflation from 13.9

dropped.

2013 stands at 10.4 percent compared to 9.4 percent as of March 2012. The index is

demand pressures which are currently

Along with these developments in the path of taming inflation, the sticky food

the policymakers. The figure for March 2013 was as high as 8.7 percent. Persistent

distribution, storage and productivity hold the key to the issue in the medium and long term.

Trade Balance

Exports for 2012-13 stood at USD 300.6 billion, with a decline of 1.8 percent when compared with a growth of 21.3 percent recorded in the same period of the previous year when the exports were USD 305.9 billion. During 2012-13, Imports registered a mild increase of 0.4 percent compared with a

in FY12.

Fall in exports occurred on account of the global uncertainties. Demand from the advanced as well as the Emerging market and developing economies (EMDEs) fell in wake of the subdued economic activity in these regions. Import growth softened

with decreasing gold and non-gold non-oil imports coming steadily at the back of a hike in customs duty on gold from 4 to 6 percent.

Exchange Rate

The exchange rate declined to ` 54.39 per USD on March 28, 2013, depreciating 6.32 percent over March 30, 2012 when the rate was ` 51.16 per USD which was a further decrease from ` 44.65 per USD in March 31, 2011. The average value of rupee per USD touched an all-time low of ` 57.22 on June 27, 2012.

the Indian rupee vulnerable amidst the Euro zone uncertainties and modest recovery in the US.

Capital markets

Indian securities market started the year 2012-13 on a low note following the global economic signals of 2011-12. The reform measures undertaken by the government as well as slender improvements visible in the global economic condition have however uplifted the mood in the domestic securities market. The Sensex which closed at 17,404 on March 30, 2012 reached 18,836 as on March 28, 2013. It touched the 20,000 mark during the year, which was last seen in October 2010. Nifty, too, touched the 6,000 mark while closing at 5,683 on March 28, 2013 while the

Sensex registered a growth of 8.2 percent, Nifty recorded a growth of 7.3 percent. Indian markets also witnessed the establishment of a third stock exchange in the country with nationwide terminal with MCX-SX going live in equities and equities derivatives segment on February 11, 2013. The benchmark index, SX40, is however yet to be disseminated. The development is testimony to the expanding Indian markets and their potential and would

10


help in further strengthening the participation of investors across the country.

The market capitalisation of BSE stood at ` 63, 87, 887 at end-March 2013 compared to ` 62, 14,941 crore as of end-March 2012 while its ratio to GDP stood at 63.7 percent for 2012-13. The market capitalisation of NSE was ` 62,39,035 at end-March 2013 compared to ` 60, 96,518 crore as of end-March 2012 while its ratio to GDP stood at 62.2 percent for 2012-13 The number of demat accounts at the two depositaries grew by over 5 percent

companies at NSE and BSE continued to rise. (Table 1.5)

The turnover in the Equity derivative segment displayed an increase of 20.4 percent and reached ` 3,87,04,572 crore in 2012-13. The Currency derivative segment however declined by 12 percent to ` 87,10,504 crore in 2012-13 despite volatile rupee. (Table 1.6)

The derivative segment developments may be seen in the light of the Futures Industry Association (FIA) Annual Volume Survey 2012 which has reported the “biggest and broadest decline in at least a decade” in the global listed derivatives market. The total number of futures and options contracts traded on the exchanges world over in calendar year 2012 has declined by 15.3 percent. The survey, nonetheless, highlights the BSE’s volume explosion, which moved from just three million contracts in calendar year 2011 to 243.76 million contracts in calendar year 2012. NSE meanwhile is ranked third among the top thirty derivative exchanges in terms of number of contracts traded or cleared in the calendar year 2012. Nifty Options have retained their rank as the world’s second most traded option in calendar year 2012 as well. In the category “Foreign Exchange Futures & Options Contracts” the U.S. Dollar/Indian Rupee

and second position respectively.

The foreign investments in India contributed by the FII and FDI own assets under custody valued at ` 15, 77,288 crore for 2012-13, up from ` 13, 39,240 crore in 2011-12. (Table 1.7).

Table 1.5 (a): Demat Statistics

NSDL CDSL Demat Demat

Year Quantity Quantity (million shares) (million shares)

2010-11 4,71,304 1,05,310

2011-12 5,79,801 1,33,570

2012-13 6,86,476 1,51,792

Source: NSDL & CDSL

Table 1.5 (b): No. of Listed CompaniesYear NSE BSE

No. of No. ofCompanies Companies

listed listed

2010-11 1,574 5067

2011-12 1,646 5133

2012-13 1,666 5,211

Source: NSE & BSE

Table 1.6 : Growth of Turnover in Various Segments of Indian Stock Market

Turnover (` crore)

Cash Equity CurrencyYear Segment Derivatives Derivatives

(All India) (NSE+BSE+ (NSE+MCX-MCX-SX) SX+USE)

2010-11 46,82,437 2,92,48,375 76,43,805

2011-12 34,78,391 3,21,58,208 98,96,413

2012-13 32,57,087 3,87,04,572 87,10,504

Source: BSE, NSE, MCX-SX & USE

11


Investor protection has been at the forefront of the objectives of SEBI and policy measures have been undertaken in this regard during the FY13. Framework for registration and regulation of Investment Advisors has been notified, SME platforms for equity

reforms in FII investments and many other policy measures which are discussed in the forthcoming section.

2. REVIEW OF POLICIES AND PROGRAMMES

ever changing, the need for an active and evolving regulatory regime is integral. SEBI has initiated many policies and programmes in FY13 which are presented in this Section.

The developments are categorized under eleven major heads viz., Primary Securities Market, Secondary Securities Market, Corporate Debt Market, Mutual Funds, Alternative Investment Fund, Investment Advisors, Portfolio Managers, Foreign Institutional Investors, Takeovers, Investor Assistance and Education and Legal Framework. The section concludes with ‘Retrospect and Prospects’.

I. Primary Securities MarketPrimary markets play the role of

mobilizing the capital to the corporate both

stability that further accentuates the investor

markets have seen a revival in the activity

the global scenario. Resources mobilized in the primary market have risen by around 20 percent in the wake of the renewed economic fervor. A total of ` 15,474 crore of Equity capital has been raised in 2012-13 through 49 issues, compared with ` 12,857 crore raised through 51 issues in 2011-12. Certain reforms in policies have been undertaken to

major policy initiatives related to the primary

A. Manner of Dealing with Audit Reports Filed by Listed Companies

A mechanism has been put in place to process qualified annual audit reports filed by the listed companies with stock exchanges and annual audit reports where accounting irregularities have been pointed out by the Financial Reporting Review Board of the Institute of Chartered Accountants of India (ICAI-FRRB). In order to enhance the

companies, it has been, inter-alia,

a. Listed companies would be required to

Table 1.7: Assets under the Custody of Custodians

FIIS/SAs Foreign FDI Foreign VentureYear Depositories Investments Capital Investments

Amount (` crore) Amount (` crore) Amount (` crore) Amount (` crore)

2010-11 11,06,550 1,85,931 1,46,231 24,002

2011-12 11,07,399 1,43,370 2,31,841 35,041

2012-13 13,36,557 1,57,159 2,40,731 54,144

Source: SEBI

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exchanges along with the applicable

‘Subject To’ / ‘Except For Audit Report’).

b. After preliminary scrutiny and based on materiality, the stock exchanges would

c. QARC represented by ICAI, stock exchanges, etc. shall review the cases received from the stock exchanges and

annual audit reports referred by the stock exchanges

d. Cases, wherein the qualifications are significant and explanation given by the company is unsatisfactory, would be referred to the Financial Reporting Review Board of ICAI (ICAI-FRRB). If

financial accounts by way of revised

to the shareholders through stock exchange(s). However, the financial

in the annual accounts of the subsequent

B. Mandating Inclusion of Business Responsibility Report as Part of Annual Report

SEBI has mandated the top 100 listed companies to include Business Responsibility Report as part of Annual Reports with a focus on the Environmental, Social and Governance issues. The report would also include compliance with the nine principles for business responsibility reporting to assess compliance with Environmental,

Social and Governance norms. The said reporting requirement is in line with the ‘National Voluntary Guidelines on Social, Environmental and Economic Responsibilities

July 2011. (Box 1.1 may be referred for details)

Listed companies have been mandated to update their disclosures in the prospectus on an annual basis and to ensure that the same is available in public domain. Such consolidated public disclosures can be used

through appropriate hyper-links without requiring a repetition of such disclosures.

D. Revised Timeline for Disclosing Financial Information Prior to Issue Opening

Disclosure of price band along with relevant financial information shall be published by way of an advertisement at

days prescribed earlier in order to ensure

the issue before investing. This information

forms available for download from websites of the stock exchanges.

E. Revised Requirements for the Stock Exchanges and Listed Companies in Respect of Scheme of Arrangement under the Companies Act, 1956

Pursuant to a scheme of reconstruction or amalgamation being sanctioned by the Hon’ble High Court under sections 391-394 or 101 of the Companies Act, 1956, the companies desirous of getting their equity shares listed after merger/de-merger/

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amalgamation, etc. without making an

to seek an exemption from SEBI from the requirements of rule 19(2) (b) of Securities Contracts (Regulation) Rules, 1957. In terms of rule 19(7) of SCRR, SEBI has been granting

to the public under SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 to such listed companies on a case to case basis.

However, in the recent past, SEBI has received certain applications, seeking exemption, containing, inter alia, (a) inadequate disclosures, (b) convoluted schemes of arrangement, (c) exaggerated valuations, etc. In order to avoid such situations and in the interest of investors, the requirements have been streamlined by mandating, inter alia, requirements of obtaining comments of SEBI on the draft

Box 1.1 : Business Responsibility Report

At a time and age when enterprises are increasingly seen as critical components of the social system, they are

society which is also its stakeholder. Hence, adoption of responsible business practices in the interest of the social

Considering the larger interest of public disclosure regarding steps taken by listed companies from a Environmental, Social and Governance (ESG) perspective, SEBI, vide circular dated August 13, 2012, mandated inclusion of Business Responsibility Reports (BR Reports) as part of the Annual Reports, initially for top 100 listed companies based on market capitalization as on March 31, 2012. Other listed companies may voluntarily disclose BR Reports as part of their Annual Reports.

details of the company, details about subsidiaries, details of directors responsible for BR and also compliance with

Businesses should conduct and govern themselves with Ethics, Transparency and Accountability

Businesses should provide goods and services that are safe and contribute to sustainability throughout their life cycle

Businesses should promote the wellbeing of all employees

Businesses should respect the interests of, and be responsive towards all stakeholders, especially those who are disadvantaged, vulnerable and marginalized

Businesses should respect and promote human rights

manner

Businesses should support inclusive growth and equitable Development

Businesses should engage with and provide value to their customers and consumers in a responsible manner

The companies are required to report their compliance with the above principles.

stakeholders based on internationally accepted reporting frameworks need not prepare a separate report for the purpose of these guidelines but only furnish the same to their stakeholders along with the details of the framework under which their BR Report has been prepared and a mapping of the principles contained in these guidelines to the disclosures made in their sustainability reports.

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schemes of arrangement, disclosure of draft schemes and observation letters of stock exchanges on websites for wider dissemination, furnishing a report on complaints received on draft schemes, to the stock exchanges prior to obtaining

F. Manner of achieving Minimum Public Shareholding Requirements

In accordance with the provisions of Securities Contracts (Regulation) Rules, 1957, SEBI had specified certain means for the listed companies to achieve minimum public shareholding requirements. Additionally,

rights or bonus issues to public shareholders, with promoters/promoter group shareholders forgoing their entitlement for the purpose of achieving compliance. Further, it has also been prescribed that listed entities desirous of achieving the minimum public shareholding requirement through other means / relaxation from the available methods may approach SEBI with appropriate details.

G. Mandatory Authentication by Listed Companies on SEBI Complaints Redress System (SCORES)

With a view to facilitate the processing of investor complaints in the centralized web based complaints redress system ‘SCORES’,

shares listed on the stock exchanges were mandated to obtain authentication on SCORES, before listing approval is granted by the stock exchange.

H. Formats for Disclosure of Financial Results

disclosure of Balance Sheet under Schedule

amendments regarding interim disclosure of

exchanges were carried out in the Listing Agreement.

Listing Agreement

It came to the notice of SEBI that certain listed companies were giving monthly disclosure of their sales/turnover/production figures to their respective trade bodies/industry associations and the same was not disclosed to the stock exchanges. It

or material information which will have a bearing on the performance / operations of the company as well as price sensitive

stock exchanges as required under clause 36 of the Listing Agreement.

J. Extending the Reach of ASBA Facility

To make the application process more convenient for investors, it was decided to extend the reach of Application Supported by Blocked Amount (ASBA) by mandating

provide the facility in all their branches in a phased manner.

K. Application Supported by Blocked Amount (ASBA) Facility against Funded Deposit Account

were advised to ensure that for applications made by an investor using Application Supported by Blocked Amount (ASBA) facility, the SCSBs shall block the application amount only against/in a funded deposit account and also ensure that clear demarcated funds are available for ASBA applications. Further,

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SCSBs were also directed to ensure that for making applications on own account using ASBA facility, they should have a separate account in own name with any other SCSB.

L. Public Issues in Electronic Form and Use of Nationwide Broker Network of Stock Exchanges for Submitting Application FormTo widen the distribution network of

public issues, in addition to the existing channels, the nationwide broker network of stock exchanges at more than 1000 locations have been made available for distributing public issues in electronic form. This mechanism can be used by the investors to submit both ASBA and non-ASBA applications. (Box 1.2 may be referred for details)

M. Eligibility Criteria for IPOs

Eligibility criteria for making initial

and non-profit making issuers have been reviewed. The revised criteria require the

` 15 crore, to be eligible to come out with IPOs through

not meeting with this requirement may come out with IPOs, if the issuer undertakes to

N. Eligibility Criteria for Further Public

Fast-Track Route

One of the eligibility conditions for well-established listed companies to come out with

the fast-track route is to have a minimum level of average market capitalisation of

Box 1.2 : Public issues in electronic form and use of nationwide broker network

reach more retail investors in small towns. To achieve this, in addition to the existing IPO process, I propose to make it mandatory for companies to issue IPOs of Rs.10 crore and above in electronic form through nationwide broker network of stock exchanges”.

Pursuant to the above, in consultation with various market participants, SEBI introduced a new mechanism (e-IPO facility) to submit application forms in public issues. It is an additional mode for investors to submit applications using the nationwide stock broker network of Stock Exchanges and where there is a presence of the brokers’ terminals (broker centre), who may not be the syndicate or sub-syndicate members in an issue.

Investors can submit both ASBA and non-ASBA applications using e-IPO facility. Application forms can be downloaded from the Stock Exchanges’ websites/broker terminals. This will enable the investors to download / print the forms directly and submit the same to any registered stock broker of the Stock Exchange.

The e-IPO facility to submit applications has been made available in more than 1000 locations. The Stock Exchanges have disclosed the list of such broker centres, where the applications can be accepted. This has resulted in enabling investors to submit applications in more than 1000 locations as against less than 100 centers available earlier. This has enabled small investors in small towns to participate in public issues and also assisted the companies reach more number of retail investors.

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public shareholding. This has been brought down from ` 5000 crore to ` 3000 crore.

O. Minimum Promoters’ Contribution by AIFs

Minimum promoters’ contribution in IPOs is required to be at least 20 percent of the post-issue capital. In order to facilitate capital raising by companies founded by

it has been decided that in case the post-issue shareholding of the promoter is less than 20 percent, the Alternative Investment Funds (AIFs) may contribute for the purpose of meeting the shortfall in minimum contribution, subject to a maximum of 10 percent of the post-issue capital.

P. Flexibility to the Issuers and Better Transparency in Disclosure of Objects of the Issue

changes up to 20 percent in the amount proposed to be raised under the objects of the issue at the red herring prospectus (RHP) stage, as against the erstwhile 10

SEBI. Further, deletion of objects of the issue

except in certain cases where SEBI retains

in case of apparent exacerbation of risk. Moreover, to bring more transparency in capital raising, ‘General Corporate Purposes’ as an object of the issue has been capped at 25 percent of the proceeds raised by the issuer.

Q. Investment by BRLMs and their Associates in Public Issues

A Book Running Lead Manager (BRLM) which is also an associate of the issuer shall have the restricted role of marketing the issue, and accordingly declare itself as a ‘Marketing

Lead Manager’ in the offer document. However, all the BRLMs to the issue, including the Marketing Lead Managers, will

bring in ample clarity on the role of a BRLM who may be an associate of the issuer by way of adequate disclosures.

R. SEBI Framework For Rejection of Draft

In order to protect the interest of investors who may not always be in a position to assess the risks associated with a business model due to complexities involved therein and to ensure that only reasonably credible issuers with adequate disclosures in

the public issuances route, a framework for

illustrative list of objective criteria for the purpose and consequences of rejection has been put in place by SEBI.

The draft offer documents would be scrutinized by SEBI based on broad criteria including, existence of circular building up of capital, showcasing enhanced prospects for issuer by changing accounting policies etc.

S. Decentralisation of Processing of Draft Offer Documents to the Regional

A s a f u r t h e r s t e p t o w a r d s decentralisation, Regional Offices of SEBI

documents in respect of issues of size up to ` 500 crore. Merchant Bankers were

documents / offer documents with the

estimated issue size.

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T. Revision in Pricing for Qualified Institutions Placements

To provide flexibility to issuers on

(QIPs), a maximum discount of 5 percent has

the SEBI (ICDR) Regulations, 2009, subject

is expected to help issuers carry out QIPs during volatile markets.

U. Amendments to SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and Equity Listing Agreement

Listed companies were mandated to

securities of the company only in accordance with the SEBI (ESOS and ESPS) Guidelines, 1999. The companies whose schemes are not in conformity with the same, have been given time to align their schemes with the said guidelines. Further, such schemes have been prohibited from acquiring securities of the company from the secondary market.

V. Amendment to SEBI (ICDR) regulations in Respect of Infrastructure Sector

In order to harmonize the SEBI (ICDR) Regulations relating to Infrastructure Sector with the amended Securities Contracts (Regulation) Rules, 1957, consequential amendments to SEBI (ICDR) Regulations pertaining to minimum public shareholding and minimum subscription requirements were carried out whereby, such relaxations granted to infrastructure companies / sector were withdrawn.

W. Enabling Shareholders to Electronically Cast their Vote

In order to enable wider participation

of shareholders in corporate proposals, top 500 listed companies were mandated to enable e-voting facility to their shareholders, in respect of those businesses which are transacted through postal ballot by the listed companies.

X. Partial Two-Way Fungibility of Indian Depository Receipts

In order to encourage more number of foreign companies to issue Indian Depository Receipts (IDRs) in the Indian market and also to enable the investors to take informed investment decision, it was decided to enable partial two-way fungibility of IDRs through detailed guidelines providing a roadmap for the future IDR issuances as well as for the existing listed IDRs.

Y. Minimum Allotment to Retai l Individual Investors

All retail individual investors (RIIs) shall

size, subject to availability of shares in the RII category. This would encourage wider retail participation in public issues. The remaining available shares, if any, shall be allotted on a proportionate basis. The minimum application size for all investors has also been increased to ` 10,000 - 15,000 as against ` 5,000 - 7,000 prescribed earlier.

Z. Revision of Bidding by Investors

To avoid any misleading signals to retail investors about the extent of subscription in the issue, no withdrawal or lowering

retail investors at any stage. However, retail

allotment.

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II. Secondary Securities MarketSecondary markets are often referred

to as the barometer to a nation’s health. The stock prices in FY13 started on a low note carrying forward the fluctuations of the

year saw the indices scaling new height and achieving the pre crisis levels. Initiatives have

and participation which was dampened in the previous year on global cues. The policy initiatives taken in the secondary securities

A. Centralisation of KYCs of Investors

The system for centralized database of the KYC records of the clients was made applicable for new clients who opened accounts with the intermediaries from January 1, 2012. But, for convenience of clients registered prior to January 1, 2012 (hereinafter referred to as ‘existing clients’) and to expand the database of the KYC records of the entire securities market, it was decided to upload the KYC details of the existing clients of the intermediaries in the system of KYC Registration Agencies (KRAs), in a phased manner.

The information about the existing client which is not available as per earlier KYC norms shall be highlighted in the KRA system. When the existing client approaches another intermediary, it shall be the responsibility of that intermediary which downloads the data of that client from the KRA system, to update the missing information on the KRA system. (Box 1.3 may be referred for details)

B. Rationalisation of Know Your Client (KYC) Requirements

During the year, SEBI rationalized the

process of KYC in the interest of investors, the

a. KYC Requirements for Foreign Investors

The foreign investors viz. Foreign Institutional Investors and their Sub Accounts

certain difficulties while complying with KYC requirements because of their status of overseas location. SEBI vide circular dated

such requirements by issuing necessary

shall conduct ongoing client due diligence based on the risk profile and financial position of the clients as prescribed in SEBI Guidelines.

With a view to bring about operational

account number provided by Income Tax

the intermediaries may verify the PAN of their clients online at the Income Tax website instead of insisting on the original PAN cards from the investors - domestic and foreign investors.

c. Accepting ‘Aadhaar’ as Proof of Address

For the convenience of investors, SEBI

Authority of India (UIDAI), Government of India, provided vide circular dated August 13, 2012, that the Aadhaar Letter issued by UIDAI shall be admissible as Proof of Address also. It was already being recognized as Proof of Identity. As a result, ‘Aadhaar’ can now be used as a proof of identity as well as of address.

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Box 1.3 : Single One Time KYC

requirements for investors at the time of opening accounts with the intermediaries in securities markets. This has also reduced the cost of compliance for both clients and brokers.

Establishment of a centralized KYC Registration Agency (KRA) :

Registration Agency) Regulations, 2011 which provided the framework for the establishment of KYC Registration Agency (KRA). KRA is an agency which maintains KYC records of the clients of an intermediary at a central place. This system is compliant with FATF standards and PMLA guidelines.

for centralization of the KYC records in the securities market. Once the client has done KYC with one SEBI registered intermediary, he need not undergo the same process again with another. When customer shifts from

KRA.

intermediary or mutual fund as compared to 7-10 days earlier. The client can start trading or investment immediately.

ensured by the KRA.

carrying out KYC requirements.

enhanced due diligence of their clients.

from January 1, 2012. Subsequently, SEBI implemented the system for the KYCs of the existing clients also by issuing guidelines vide circular dated April 13, 2012. The time lines were given to the intermediaries to upload the KYCs of the existing clients in the KRA system in a phased manner.

(CVL), NSDL Database Management Limited, DotEx International Limited (DotEx), CAMS Investor Services Private Limited and Karvy Data Management Services Ltd. KYCs of approximately 1.6 crore investors have been uploaded / registered on the KRA system. The focus is to provide faster access to the data to all the intermediaries and easy sharing of information between the KRAs. The same has been achieved through inter-operability among the systems of KRAs. The inter-operability provides an online medium of exchange of client records between the KRAs.

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d. Facilitating Electronic Uploading of KYC Documents

The Regulations prescribe that the KYC Registration Agencies (KRAs) shall require the intermediary to send original KYC documents of the clients to the KRAs. Considering the issues faced in furnishing original KYC documents to the KRA viz. cost of retrieval, logistics involved, loss in transit, etc., the KRA Regulations were amended for doing away with the requirement for sending original KYC documents of the clients to the KRAs. Instead, the intermediaries would upload documents electronically on the systems of KRAs with proper authentication.

C. S t r e n g t h e n i n g K Y C N o r m s -

SEBI has been taking steps to prevent money laundering and terrorist financing through the securities markets. With a view to further strengthen the existing framework and to tackle the risk presented by the misuse of complex legal structures, such as, companies, partnerships, trusts etc., in facilitating money

has made it mandatory for its intermediaries

to take all reasonable steps to verify the identity of such BOs for clients who are legal persons/arrangements. SEBI vide circular dated January 24, 2013 issued guidelines to

ownership. These guidelines are in line with the revised Financial Action Task Force (FATF) standards released in February 2012.

In order to simplify the procedure of change of name in individual Beneficial Owner’s (BO) account, the depositories were directed that an individual BO may be

allowed to change his / her name subject to the submission of following documents at the time of change of name of the individual in

Change in name Document to be

of Passport showinghusband’s name orpublication of name change

Reasons other than Publication of name change

Change in father’s Publication of name change

E. Prevention of Unauthorised Trading

SEBI had earlier mandated that the stock exchanges shall send details of the transactions in cash and derivative segments to the investors, by the end of trading day, through SMS and E-mail alerts. This was introduced with an objective to prevent the complaints by investors of unauthorized trading in their accounts by the stock brokers. As the progress of registration of clients with

made in the scheme in consultation with the stock exchanges. As a result, the number of trade alerts sent through SMS/emails by stock exchanges has increased manifold.

F. Reduction of Time-line for Transfer of Equity Shares and Prescription of Time-line for Transfer of Debt Securities

The listing agreement for equity shares prescribed under the Securities Contracts

period of one month for registering transfer of shares from the date of lodgment. With a view to expedite the transfer process in the interest of the investors, the time-line

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for registering the transfer of shares was reduced to 15 days vide SEBI circular dated July 05, 2012, in consultation with Registrars Association of India (RAIN), stock exchanges and market participants. The same time-line has also been made applicable for transfer of debt securities. This circular came into force

G. Enhanced Level of Compliance by the Intermediaries

In order to strengthen the monitoring mechanism through periodic reporting by intermediaries, a revised reporting format was prescribed by SEBI for Bankers to the Issue (by circular dated March 29, 2012), Merchant Bankers (vide circular dated May 14, 2012) and Registrar to an Issue and Share Transfer Agent (vide circular dated July 05, 2012). Such format was earlier prescribed for debenture trustees. The revised formats along with directives issued to these intermediaries specify the accountability of their boards in respect of (a) review of compliance of all regulatory requirements on half-yearly basis (b) review of the status of redressal of investor complaints (c) corrective measures initiated to

As this step taken by SEBI requires placing of reports before the boards for their review before sending to SEBI along with their comments, this would enhance

organisation of the intermediary and as a result would improve regulatory compliance

investors.

H. Policy of Inspection of Stock Brokers b y S t o c k E x c h a n g e s / C l e a r i n g Corporations

SEBI took a number of steps during the year 2012-13 to improve the inspection

systems of the stock exchanges / clearing

a. The stock exchanges and the Clearing Corporations are required to inspect their active members in various segments every year. SEBI has reviewed the policy of inspection with a view to enhance focus on risk related issues and adopt risk based approach to such inspections. SEBI, vide circular dated December 07, 2012, has advised Stock Exchanges and Clearing Corporations that their policy for annual inspection of their members in various segments, shall also cover various kinds of risks posed to the investors and market at large on account of the activities/business conduct of their members. The revised policy would ensure that the members who pose higher risks to the system are adequately supervised by the Stock Exchanges.

of supervision of members, SEBI, vide circular dated December 07, 2012, also advised the stock exchanges to establish an information sharing mechanism among themselves, to share the important outcomes/adverse observations of their inspections of members who hold multiple membership with the stock exchanges.

c. Stock exchanges are empowered under their Byelaws to impose monetary penalties on their stock brokers for violations/non-compliances based on findings of their inspections and regular monitoring. SEBI reviewed the penalty structure in consultation with stock exchanges. The stock exchanges have framed the revised penalty structure which is more deterrent in

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commensurate with the seriousness of violations and repetitions of violations. The revised penalty structure is proposed to be implemented in the Financial Year 2013-14.

I. Requirement of Base Minimum Capital for Stock Broker and Trading Member

The Base Minimum Capital (BMC) deposit requirement for Stock Broker and Trading Member (BMC) has been prescribed to be commensurate with the risks, other than market risk, that the broker may bring to the system. BMC is the deposit given by the member of the exchange against which no exposure for trades is allowed.

Over the years the market structure has undergone significant structural changes. The various technological changes and the increased speeds of trading have brought to fore the greater quantum of risks arising during the course of execution of transactions. In light of this, based on deliberations at various forums, SEBI has realigned the BMC

stock brokers / trading members in cash / derivative segment of the stock exchange.

In terms of the said circular, the Base Minimum Capital (BMC) deposit shall be introduced for members holding registration as “trading member” in any derivative segment and shall be enhanced for members holding registration as “stock-broker” in cash segment. Stock brokers / trading members shall maintain the prescribed BMC based

trading without Algorithmic trading (Algo) (2)Trading only on behalf of Client (without proprietary trading) and without Algo. (3) Proprietary trading and trading on behalf of Client without Algo.(4) All Trading Members/Brokers with Algo.

J. Enhancing the Competency Level of the Employees of the Market Intermediaries

competency levels of the employees of the market intermediaries and with a view to improve the quality of intermediation services in the securities market, SEBI mandated the requirement of obtaining the

a. Equity Derivative Certification Examination (“EDCE”) for associated persons functioning as approved users and sales personnel of the trading members of an equity derivative exchange or equity derivative segment of a recognized stock exchange.

b. Securities Intermediaries Compliance

(“SICCE”) for associated persons functioning as compliance officers of intermediaries registered with the Board as stock brokers, depository participants, merchant bankers, underwriters, bankers to the Issue, or debenture trustees or credit rating agencies.

K. Sharing of Information Regarding Issuer Companies between Debenture Trustees and Credit Rating Agencies

Debenture Trustees (DTs) and Credit Rating Agencies (CRAs) collect and have access to information about the issuer companies in their respective capacity.

SEBI Regulations on both of these groups of intermediaries to protect the interests of debenture holders. It was felt that there is a need for these two intermediaries to have

23


discharge of duties by them by taking action on timely basis.

SEBI issued guidelines for sharing of the following information among the DTs and

and rationale, non cooperation by issuer on sharing information for monitoring

any, on the asset in respect of which security has been created, adequacy of asset cover, any defaults in interest/ redemption payments, delay in creation of security, restructuring of terms of issue, grievances in respect of the debentures issued, and non cooperation in furnishing information to DT etc.

c. Any other information as required.

L. Mini Derivative (Futures & Options) Contract on Index (Sensex & Nifty)

With a view to ensure that small/retail

segment, SEBI discontinued mini derivative contracts (having contract size of ` 1 lakh) on Index (Sensex and Nifty). The existing

till expiry and new strikes could also be introduced in the existing contract months. Accordingly, the last expiry available on mini derivative (Futures & Options) contract on Index (Sensex & Nifty) was in January 2013.

M. Revision of Eligibility Criteria for Stocks in Derivatives Segment

In order to improve market integrity, in consultation with stock exchanges, tightened the eligibility and exit criteria for stocks in derivatives segment. Accordingly, the

minimum Median Quarter Sigma Order Size (MQSOS) requirement for a stock to be eligible for introduction in derivatives segment has been revised from ` 5 lakh to ` 10 lakh. The minimum Market wide position limit (MWPL) requirement for a stock to be eligible for introduction in derivatives segment has been revised from ` 100 crore to ` 300 crore. Further, minimum MWPL requirement for a stock to be retained in derivatives segment has been revised from ` 60 crore to ` 200 crore. The minimum MQSOS requirement for a stock to be retained in derivatives segment has been revised from ` 2 lakh to ` 5 lakh.

An additional criterion of ‘stock derivatives to have average monthly turnover in derivatives segment for last three months of ` 100 crore has also been decided to be implemented for a stock to be retained in derivatives segment.

N. Revised Position Limits for Trading Member (Banks) in Exchange Traded USD:INR Derivative Contracts

SEBI Circular dated July 30, 2010, inter alia, provides for position limits applicable for

norms applicable to Trading Member (Banks).

RBI/2011-12/569 dated May 21, 2012 on ‘Risk Management and Inter-bank dealings’ which revised norms on position limits for Authorized Dealers Category – I (AD

II, para-3 of page 5 of the above stated SEBI Circular dated Jul 30, 2010, as “Gross open positions of the bank across all contracts (both futures and options contracts) not to exceed 15 percent of the total open interest or USD 100 million whichever is lower”.

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O. Corporate Bonds and Government Securities as Collateral

The Hon’ble Finance Minister, in his announcement in the Union Budget for the year 2013 -14, has proposed, inter-alia, to permit FIIs to use their investment in corporate bonds and Government securities as collateral to meet their margin requirements towards their transactions on the recognized stock exchanges in India.

Reserve Bank of India vide Circular

collaterals, their investments in corporate bonds as collateral in the cash segment and government securities and corporate bonds as collaterals in the F & O segment.

FIIs to offer the following collaterals - government securities, corporate bonds, cash and foreign sovereign securities with AAA ratings, for their transactions in both cash and F&O segments. In this regard, the stipulations

the acceptance of various collaterals shall be adhered to.

P. Comprehensive Guidelines on Offer For Sale (OFS) of Shares by Promoters through the Stock Exchange Mechanism

In order to achieve minimum public shareholding in listed companies and to allow promoters to dilute their shareholding in transparent manner ensuring wider

stock exchange mechanism was introduced on February 01, 2012.

Subsequently, based on the experience and feedback received from market participants, the OFS framework was reviewed and revised guidelines were issued

on July 18, 2012. The following major changes

promoter(s)/promoter group entities with respect to the purchase / sell shares of the company was relaxed such that, within the cooling off period of ±12

/ Institutional Placement Programme (IPP) with a gap of 2 weeks between

b. The size of offer was allowed to be less than ` 25 crore so as to achieve minimum public shareholding in a single tranche.

c. An option was given to the issuer to

disclosure in the notice and advance pay-in of shares.

bids were allowed during the last 60

sale as against the earlier provision of last 30 minutes.

e. The stock exchanges were advised to disclose indicative price only during the last 60 minutes of the duration of the OFS.

f. Option was given to institutional investors to place bids/orders with either 100 percent margin or 25 percent margin.

g. It was advised that the dissemination

notice as against the earlier provision.

price, the price may be disclosed after the close of business hours on (T-1) day.

h. Additional half an hour time was provided to custodian during post close

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bids, subject to the condition that the bids and payments have been received before closure of the bidding process.

Further, in order to align OFS with secondary market trades, the guidelines were further revised on January 25, 2013 and the

a. The eligible seller may be all promoters/promoter group entities of top 100 companies by market capitalisation in any of the last four completed quarters as against last completed quarter as per earlier provisions.

OFS-i. Orders with 100 percent of margin

paid upfront by institutional investors and non-institutional investors. Such orders can be

during the trading hours.ii. Orders without paying upfront

margin by institutional investors only. Such orders cannot be modified or cancelled by the investors or stock brokers, except for making upward revision in the price or quantity.

c. Cumulative bid quantity is made avai lable onl ine to the market

intervals in respect of orders with 100 percent upfront margin and separately in respect of orders placed without any upfront margin. Indicative price shall be disclosed to market throughout the trading session. The indicative price is calculated based on all valid bids/orders.

d. Clearing Corporation collects 100 percent margin in cash from non-institutional

investors. In case of institutional investors who place orders/bids with 100 percent of margin upfront, custodian confirmation shall be within trading hours. In case of institutional investors who place orders without upfront

the existing rules for secondary market transactions.

trade basis. For non-institutional orders/bids and for institutional orders with 100

on T+1 day. In case of orders/bids of institutional investors with no margin,

secondary market.

Q. Activation of ISIN in Case of Additional Issue of Shares / Securities

In order to curtail the transfer of additional issue of shares / securities

rights issue, preferential allotment and bonus issue, etc., of the listed company, prior to receipt of final listing/ trading approval, the Depositories were advised to allot such additional shares/securities under a new temporary ISIN which would be kept frozen.

It was further advised that, upon receipt

the exchange for such additional shares / securities, the shares / securities credited in the new temporary ISIN shall be debited and the same would get credited in the pre-existing ISIN for the said security. Thereafter, the additional securities shall be available for trading. Further, in case of issuance of equity shares by a company listed on multiple stock exchanges, the concerned stock exchanges shall synchronize their effective dates of listing / trading approvals.

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R.(DMA)

the following extent in light of the feedback received from the market participants and measures prescribed by SEBI to simplify and rationalize “Trading Account Opening

a. The facility of DMA provided by the stock broker shall be used by the client or an investment manager of the client. A SEBI registered entity shall

manager on behalf of institutional clients. In case the facility of DMA is used by the client through an investment manager, the investment manager may execute the necessary documents on behalf of the client(s).

b. In order to bring uniformity on the requirement of documentation for trading account opening process, the

the purpose of DMA shall be replaced with the “Terms and Condition” that shall be provided to the client or investment manager acting on behalf of a client(s) for availing the DMA facility.

c. Exchange shall specify from time to time the categories of investors to whom the DMA facility can be extended. Currently, this facility is available for institutional clients. Brokers shall specifically authorize clients or investment managers acting on behalf of clients for providing

Client requirements and carrying out necessary due diligence. The broker shall maintain proper records of such due diligence.

S. Facility for a Basic Services Demat Account (BSDA)

With a v iew to achieve wider financial inclusion, encourage holding of demat accounts and to reduce the cost of maintaining securities in demat accounts for retail individual investors, all depository participants (DPs) were advised to provide a “Basic Services Demat Account” (BSDA) with limited services. The salient features of the

who have or propose to have only one demat account where they are the

have a BSDA provided that the value of securities held in the demat account does not exceed Rupees two lakh at any point of time. An individual can have only one BSDA in his/her name across all depositories.

b. Charges / Annual Maintenance Charges (AMC)i. Upto ` 50,000 there will be NIL

Annual Maintenance Charge (AMC), and,

ii. for value of holding from ` 50,001to ` 2,00,000 AMC will be upto ` 100.

The value of holding shall be determined by the DPs on the basis of the daily closing price or NAV of the securities or units of mutual funds. If the value of holding in such BSDA exceeds the prescribed criteria at any date, the DPs may levy charges as applicable to regular accounts (non-BSDA) from that date onwards.

Further, in order to reduce the cost of compliance of DPs, following rationalisation

27


a. Accounts with zero balance and nil

shall send one physical statement of holding annually to such BOs and shall resume sending the transaction statement as and when there is a transaction in the account.

b. Accounts which become zero balance

transaction statement may be sent for the duration when the balance remains nil. However, an annual statement of holding shall be sent to the BO.

accounts with credit balance but no transactions during the year, one statement of holding for the year shall be sent to the BO.

T. Review of Margining with Respect to Exchange Traded Funds (ETFs)

of index ETFs that track broad based market indices, it was decided that VaR margin computation for such ETFs shall be computed as higher of 5 percent or three times sigma of

use of margin capital by market participants, it was decided to extend cross margining facility to ETFs based on equity index and

a. ETFs and constituent stocks (in the

b. ETFs and constituent stock futures (in

c. ETFs and relevant Index Futures to the

U. Review of the Securities Lending and Borrowing (SLB) Framework

Securities Lending and Borrowing (SLB)

facility for any lender or borrower who wishes to extend an existing lent or borrow position. Further, Liquid Index Exchange

under SLB.

V. Rajiv Gandhi Equity Savings Scheme, 2012Rajiv Gandhi Equity Savings Scheme,

of domestic capital market by bringing in new investors. SEBI, in this regard, directed stock exchanges, depositories and mutual funds to implement the scheme.

Allotment of Units of Mutual Fund Scheme Eligible under Rajiv Gandhi Equity Savings Scheme, 2012 (RGESS)

For mutual fund schemes eligible under RGESS, the maximum period for which initial

was extended from the existing stipulation

within which Mutual fund/ AMC should allocate the units, refund money and issue statements of accounts, was extended from

from the closure of the initial subscription

subscription.

X. Guidelines for providing Dedicated Debt Segment on Stock Exchanges

With an objective to develop corporate bond markets and encourage trading on stock exchange trading platform, it was

28


decided that the stock exchanges may create a separate debt segment to provide for trading, reporting, membership, clearing and

and other necessary provisions. (Box 1.4 may be referred for details)

Box 1.4 : Dedicated Debt segment on stock exchanges

With an objective to develop corporate bond markets and encourage trading on stock exchange trading platform, it was decided that the stock exchanges may create a separate debt segment to provide for trading, clearing,

b. Government Securities, Treasury Bills, State Government loans, SLR and Non-SLR Bonds issued by Financial Institutions, municipal bonds, single bond repos, basket repos and CBLO kind of products subject to RBI

(i)

quote, negotiated trades etc.

b. The debt segment shall provide separate platforms for the markets described below -

i. Retail market - which shall be a market for listing of and trading in publicly-issued debt instruments and where participation by registered trading members can be on their own account or for execution of orders placed their clients.

ii. Institutional market - which shall be a market for non-publicly-issued debt instruments with a market lot size of minimum ` 1 crore.

(ii)

government securities as issued by RBI.b. The day count convention of Actual/Actual shall be followed for calculating interest rates.c. The stock exchange shall facilitate availability of price quotes on clean price, dirty price and yield.d. There shall be no shut period during which trades/ transfers are restricted for payment of interest or part

redemptions. For other corporate actions such as redemptions / put-call options, issuers may choose to specify a shut period.

displayed on trading terminal by stock exchanges.f. In case of negotiated trades by members of the debt segment, the trades shall be reported to stock

exchange within 30 minutes of the trade.

(iii)

members shall be self clearing members or may clear through a clearing member.

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Y. Pre-Trade Risk Controls

In view of the need to put-in place additional risk control measures to mitigate disruption of trading at the exchanges on account of erroneous orders, stock exchanges were directed to implement various pre-trade risk controls such as order-level check(s), dynamic price bands and risk reduction mode.

Z. Liquidity Enhancement Schemes for Illiquid Securities in Equity Cash market

In view of the demand from the market participants for a scheme similar to the Liquidity Enhancement Schemes (LES) in derivatives segment to enhance liquidity of illiquid securities in their Equity Cash market,

a. Securities having a mean impact cost greater than or equal to 2 percent for an order size of ` 1 lakh, where mean impact cost of the security on the stock exchange is calculated over the past 60 trading days.

b. Securities introduced for trading in the

Further, stock exchanges were also directed that LES may be continued till such time as the security achieves mean impact cost of less than 2 percent for an order size of ` 1 lakh on the stock exchange during the last 60 trading days.

Box 1.4 : Dedicated Debt segment on stock exchanges (contd.)

DVP-II or DVP-III basis for this market in future and shall put in place appropriate risk management framework for the same.

guarantee.

(iv)

a. For retail market, a uniform margin rate of 10% shall be applicable on debt instruments with rating of AA or above (or with similar rating nomenclature) by recognised credit rating agencies and 25% for all other debt instruments. Further, in case of shortages, there shall be compulsory close-out with a markup of 5% in case of debt instruments which are assigned a credit rating of AA and above and 10% in case of other debt instruments.

may be prescribed after approval by SEBI.

c. The clearing corporation shall specify appropriate risk management framework for each market, wherein it shall, inter-alia, provide for computation and collection of margins, capital adequacy norms and collateral

Further, in order to enable direct membership of institutional participants, SEBI Board inter-alia approved the following amendments in SEBI (Stock-Brokers and Sub-Brokers) Regulations, 1992 to-

commercial banks, primary dealers, pension funds, provident funds, insurance companies, mutual funds and

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Box 1.5 : Pre-trade Risk Controls

In view of the need to put-in place additional risk control measures to mitigate the risk of disruption in trading at the exchanges on account of erroneous orders, it was decided that stock exchanges shall implement the following

i. Minimum pre-trade risk controls for all categories of orders placed on Stocks, Exchange

a.

i. Any order with value exceeding ` 10 crore per order shall not be accepted by the stock exchange for execution in the normal market.

ii. In addition, stock exchange shall ensure that appropriate checks for value and / or quantity are

iii. Stock exchange to ensure that stock brokers put-in place a mechanism to limit the cumulative value of all unexecuted orders placed from their terminals to below a threshold limit set by the stock brokers.

b. Stock exchanges shall enhance monitoring of the operating controls of the stock brokers to ensure

at the end of stockbroker in implementing such checks.

ii. Dynamic Price Bands (earlier called Dummy Filters or Operating Range)

a. It was decided to tighten the initial price threshold of the dynamic price bands such that stock exchange

i. Stocks on which derivatives products are available,

ii. Stocks included in indices on which derivatives products are available,

iii. Index futures,

iv. Stock futures.

b. Further, in the event of a market trend in either direction, the dynamic price bands shall be relaxed by the stock exchanges in increments of 5%. Stock exchanges shall frame suitable rules with mutual consultation for such relaxation of dynamic price bands.

iii. Risk Reduction Mode

a. Stock brokers to be mandatorily put in risk-reduction mode when 90% of the stock broker’s collateral available for adjustment against margins gets utilized on account of trades that fall under a margin system.

i. All unexecuted orders shall be cancelled once stock broker breaches 90% collateral utilization level.

iv. Non-margined orders shall not be accepted from the stock broker in risk reduction mode.

b. The stock broker shall be moved back to the normal risk management mode as and when the collateral of the stock broker is lower than 90% utilization level.

ZA. Introduction of Periodic Call Auction for Illiquid Scrips and Extension of Pre-Open Session to all Scrips

SEBI in consultation with Secondary

to introduce trading in illiquid shares through periodic call auction. Accordingly, the guideline for trading in illiquid scrips was issued on February 14, 2013 and stock exchanges were advised to implement the

31


same from April 01, 2013. Around 2000 scrips at BSE and around 260 scrips at NSE would

would not be available for trading under continuous market. Further, the framework

of Pre-open call auction session was extended from the scrips forming part of Nifty and

April 01, 2013. (Box 1.6 may be referred for details)

Box 1.6 : Periodic Call Auction for Illiquid scrips and Extension of Pre-Open Call Auction Session

SEBI introduced Call Auction in Pre-open session for scrips forming part of Nifty and Sensex on July 15, 2010 on pilot basis at NSE and BSE. Further the framework was subsequently extended to IPO scrips and re-listed scrips on January 20, 2012. Based on the experience & in consultation with SMAC, it was decided to introduce trading in illiquid scrips through periodic call auction. Accordingly, the guidelines for trading in illiquid scrips were issued on February 14, 2013 which was implemented from April 08, 2013. Following are the key features of periodic call

1. Trading in illiquid scrips in the equity market shall be conducted only through periodic call auction sessions.

3. Entry into periodic call auction mechanism – Stock exchanges shall identify illiquid scrips at the beginning of every quarter and move such scrips to periodic call auction mechanism.

4. Exit from periodic call auction mechanism – Stock exchanges shall move scrips from periodic call auction

a. The scrip has remained in periodic call auction for at least two quarters

5. Notice to market – For entry and exit of scrips in the call auction mechanism, a notice of two trading days shall be given to the market.

6. Number of auction sessions – Periodic call auction sessions of one hour each shall be conducted throughout

7. Session duration - The call auction session duration shall be one hour, of which 45 minutes shall be allowed

the transition to next session. The session shall close randomly during last one minute of order entry between the 44th & 45th minute. Such random closure shall be system driven.

8. Un-matched orders- All un-matched orders remaining at the end of a call auction session shall be purged.

9. Price band – A maximum price band of 20% shall be applicable on the scrips through the day. Exchanges may reduce the price bands uniformly based on surveillance related concerns.

10. If the Market wide Index Circuit Breaker gets triggered at any time during the periodic call auction session, the session shall be cancelled and all orders shall be purged. The periodic call auction session shall be resumed at the nearest half hour after the normal market resumes.

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ZB. Usage of Electronic Payment Modes for making Cash Payments to the Investors

of electronic payment systems in the last decade, it was decided that companies whose securities are listed on the stock exchanges shall use, either directly or through their RTI & STA, any Reserve Bank of India (RBI) approved electronic mode of payment such as ECS [LECS (Local ECS) / RECS (Regional ECS) / NECS (National ECS)], NEFT, etc for making cash payments to the investors.

In order to ensure this, companies were directed to maintain requisite bank details of their investors - either directly for the investors that hold physical shares / debentures certificates or by seeking relevant bank details from the depositories for investors that hold shares / debentures in demat mode.

(SMAC)

SMAC recommends measures, for changes and improvements in the market structure, for improving market safety, efficiency, transparency and integrity, and for reducing transaction costs. SMAC

facility for a Basic Services Demat Account, margining with respect to ETFs, rollover facility in SLB, periodic call auction for illiquid scrips, extension of pre-open session to all scrips, etc. Some of the policy decisions taken in 2012-13 based on the SMAC

i. Exit Policy for De-recognized / Non-operational Stock Exchanges.

ii. Review of Margining with respect to

Box 1.6 : Periodic Call Auction for Illiquid scrips and Extension of Pre-Open Call Auction Session (contd.)

11. Penalty for certain trades - In the event where maximum of buy price entered by a client (on PAN basis) is equal to or higher than the minimum sell price entered by that client and if the same results into trades, a penalty shall be imposed on such trades. The penalty shall be calculated and charged by the exchange and collected from trading members on a daily basis. Trading members may recover such penalty from clients. The penalty so collected shall be deposited to Investor Protection Fund. Penalty for each such instance per session

a. 0.50% of the trade value for sale and 0.50% of trade value for the buy, resulting in 1% penalty for the client on PAN basis.

OR

b. 2500/- for the buy trade and 2500/- for the sell trade, resulting in penalty of 5000/- for the client on PAN Basis.

12. In addition to this, SEBI in consultation with SMAC decided to extend the call auction mechanism in pre-open session from scrips forming part of SENSEX and NIFTY to all liquid scrips. Accordingly guidelines issued on

a. Pre-open call auction session shall be applicable to all exchanges with active trading and for all scrips that

b. Price bands in pre-open session shall be as applicable in the normal market.

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that track broad based market index as higher of 5% or three times sigma of the ETF.

facility in respect of offsetting positions in ETFs based on equity indices and constituent stocks, stocks futures and relevant index futures.

iii. Review of the Securities Lending and

Exchange Traded Funds (ETFs) under the SLB scheme.

iv. Introduction of trading through periodic call auction for illiquid scrips in equity market.

v. Extension of the pre-open session to all liquid scrips in the equity market

Technological advancements have brought to the fore several challenges associated with the use and adoption of technology in the securities market. TAC, comprising of technological experts,

challenges so as to keep pace with such technological advancements and frame appropriate policies thereof. Some of the policy decisions taken in 2012-13 based on the

i. Guidelines for Business Continuity Plan (BCP) and Disaster Recovery (DR) of the depositories and the stock exchanges having nation-wide terminals.

checks, Dynamic Price Bands and Risk Reduction Mode.

(RMRC)

RMRC was consulted on the matters related to the risk management framework of cash and derivatives market with the view to align the extant risk management framework with the need of current market infrastructure. RMRC gave policy

Order-level checks, Dynamic Price Bands and Risk Reduction Mode.

ZD. Issuance of Guidelines on Business Continuity Plan (BCP) and Disaster Recovery (DR) to Stock Exchanges and Depositories.

Stock Exchange and Depositories are critical infrastructure providers and therefore any disruptions (major or minor) in their activities have the potential to threaten the stability / integrity of markets. Keeping in view of the same, broad guidelines to stock exchange and depositories for Business continuity and Disaster recovery was issued in the month of April 2012 with main objective to ensure that all critical operations are restored within 4 hours, with maximum permissible data loss of 30 minutes.

III. Corporate Debt Market

Debt markets play an important role in

debt market is immense in India and with the concerted efforts of SEBI, the market has begun seeing encouraging trends. In the corporate debt market, ` 3,61,462 crore were raised through 2,489 issues by way of private placement listed at BSE and NSE in 2012-13 as compared to ` 2,61,282 crorethrough 1,953 issues raised in 2011-12, mirroring the stronger growth sentiments in the market.

34


A. Standardisation of the Application Form and Abridged Prospectus for Public Issue of Debt Securities

In order to make the public issue application form more investor friendly and provide meaningful information in a simple manner, in July 2012, SEBI prescribed the structure, design, format, contents and organisation of information in the Application Form and Abridged Prospectus so as to standardize it and to make it uniform for public issues of debt securities.

B. Online System for making Application to Public Issue of Debt Securities

In July 2012, SEBI issued guidelines in order to facilitate a system for making online applications for public issue of debt securities and to reduce the timelines of the issue process for public issue of debt securities. This also assists in wider public participation, reducing issuer cost while enabling listing of securities in a faster and time bound manner.

C. Standardized Offer Document/Memorandum in Public Issue & Listing of Non-Convertible Debt as well as Privately Placed Debt Securities which are Listed or Proposed to be Listed.

A standardized format on the bond offering documentation was put in place to facilitate the better understanding and preparation of such documents by issuers as well as ease investors’ decision making

documents may also increase the tradability of these corporate bonds among players and can support secondary market liquidity.

for Issuance and Listing of Redeemable Non-Convertible Preference Shares

For providing a comprehensive

regulatory framework for issuance and listing of non-convertible redeemable preference shares, SEBI Board approved the SEBI (Issue and Listing of Non-Convertible Redeemable Preference Shares) Regulations, 2013. As in case of SEBI (Issue and Listing of Debt Securities) Regulations, 2008, the proposed Regulations provide framework for public issuance of non-convertible redeemable preference shares and also listing of privately placed redeemable preference shares. Considering the risks involved in the instrument, certain requirements like minimum tenure of the instruments (3 years), minimum rating (“AA-” or equivalent)

issuances. For listing of privately placed non-convertible redeemable preference shares, minimum application size for each

per Basel III norms, Banks can issue non-equity instruments such as Perpetual Non-Cumulative Preference Shares and Innovative Perpetual Debt Instruments, which are in compliance with the specified criteria for inclusion in Additional Tier I Capital. The proposed Regulations would also be applicable to aforesaid instruments issued by banks, subject to compliance with the provisions of Companies Act, 1956 or/ and any other applicable laws and such other

subject to making adequate disclosures and

IV. Mutual FundsThe year 2012-13 proved to be an

eventful year for mutual funds, ushering various changes aiming at re-energising growth, development and regulation of the mutual fund industry. The changes indeed exemplified the philosophy of SEBI of fusing development, regulation and investor protectio

35


The developmental approach was

(TER),additional expense ratios allowed to be charged for penetration beyond the major

investment and advisory fees by the scheme over and above the maximum limit of the total expense ratio, introducing a new cadre

and registration requirements, introduction of a separate plan for direct investments, requirement of setting aside a portion of the daily net assets for investor education,

schemes, allowing distributors to opt in/out of transaction charges based on type of product, enabling participation of mutual funds in credit default swaps as users or protection buyers, changes in the framework for participation of mutual funds in repo in corporate bonds, for RGESS compliant mutual fund schemes - extending the timeline of

allotment and dispatch of account statement and enabling Gold Exchange Traded Funds to invest in the Gold Deposit Schemes of banks.

On the regulatory and investor protection

exit loads charged to the scheme, claw back of the additional expense ratios charged on

if the investment is redeemed within a year, disclosures in the half yearly report of Trustees

increase geographical penetration of mutual funds and the details of opening of new branches, launch of schemes under a single plan and ensuring that all new investors are subject to a single expense structure, creation of a Unique Identity Number by Association of Mutual Funds in India (AMFI) for sales persons of distributors, inclusion of mis-

selling of mutual fund units as a ‘fraudulent and unfair trade practice’ under the relevant

Regulatory Organisation for distributors, harmonizing applicability of net asset values across schemes, directing the mutual funds to disclose monthly portfolio for all their schemes in a standard format on their respective website , prudential limits and disclosures on portfolio concentration risk in debt oriented schemes, disclosures on distributor wise

management (AUM) and ratio of AUM to

labelling in mutual funds.

A detailed description of the steps

A. Total Expense Ratio (TER)

Fungibility of TER was enabled by removal of the sub-limits on investment management and advisory fees within the TER.

In order to enhance penetration of mutual funds beyond the top 15 cities, it was decided that additional TER can be charged up to 30 basis points on daily net assets of the scheme as per regulation 52 of SEBI (Mutual

from beyond top 15 cities are at least (a) 30

or (b) 15 percent of the average assets under management (year to date) of the scheme, whichever is higher.

is less than the higher of (a) or (b) above, additional TER on daily net assets of the scheme shall be charged on a proportionate basis.

The top 15 cities shall mean top 15 cities based on Association of Mutual Funds in

36


India (AMFI) data on ‘AUM by Geography – Consolidated Data for Mutual Fund Industry’

Further, the additional expenses,

under the Regulations, not exceeding 20 bps of daily net assets of the scheme, were allowed to be charged to the scheme.

In case of a fund of funds scheme, the total expenses of the scheme including weighted average of charges levied by the underlying schemes shall not exceed 2.50 percent of the daily net assets of the scheme.

a. Clawback of Additional TER and Disclosures on Penetration

The additional TER on account of

shall be clawed back in case the same is redeemed within a period of 1 year from the date of investment. Mutual funds/AMCs shall make complete disclosures in the half yearly report of Trustees to SEBI regarding

geographical penetration of mutual funds and the details of opening of new branches, especially at locations beyond top 15 cities.

b. Credit of Exit Load to the Scheme

It was decided that the exit load charged, if any, would be credited to the scheme.

c. Service tax

It was mandated that Mutual funds /AMCs may charge service tax on investment and advisory fees to the scheme in addition to the maximum limit of TER as prescribed in regulation 52 of the SEBI (Mutual Funds) Regulations, 1996. Service tax on other than investment and advisory fees, if any, shall be borne by the scheme within the maximum limit of TER as per regulation 52 of the Regulations.

Service tax on exit load, if any, shall be paid out of the exit load proceeds and exit load net of service tax, if any, shall be credited to the scheme. Service tax on brokerage and transaction cost paid for asset purchases, if any, shall be within the limit prescribed under regulation 52 of the Regulations.

d. Brokerage and Transaction Cost

The brokerage and transaction cost incurred for the purpose of execution of trade may be capitalized to the extent of 12 bps and 5 bps for cash market transactions and derivatives transactions respectively. Any payment towards brokerage and transaction cost, over and above the said 12 bps and 5 bps for cash market transactions and derivatives transactions respectively may be charged to the scheme within the maximum limit of TER as prescribed under regulation 52 of the SEBI (Mutual Funds) Regulations, 1996. Any expenditure in excess of the said prescribed limit (including brokerage and transaction cost, if any) shall be borne by the AMC or by the trustee or sponsors.

B. Investor Education and Awareness

It was decided that Mutual Funds/AMCs shall annually set apart at least 2 basis points on daily net assets within the maximum limit of TER as per regulation 52 of the Regulations for investor education and awareness initiatives. Mutual Funds shall make complete disclosures in the half yearly trustee report to SEBI regarding the investor education and awareness initiatives undertaken.

C. Single Plan Structure for Mutual Fund Schemes

It was mandated that Mutual funds/AMCs shall launch schemes under a single plan and ensure that all new investors are

37


subject to single expense structure. Existing schemes with multiple plans based on the amount of investment (i.e. retail, institutional, super-institutional, etc) shall accept fresh

plans will continue till the existing investors remain invested in the plan.

D. Separate Option for Direct Investments

It was decided that Mutual funds/AMCs shall provide a separate plan for direct investments, i.e., investments not routed through a distributor, in existing as well as new schemes. Such separate plan shall have a lower expense ratio excluding distribution expenses, commission, etc., and no commission shall be paid from such plans. The plan shall also have a separate NAV.

E. New Cadre of Distributors

A new cadre of distributors, such as postal agents, retired government and semi-

equivalent) with a service of at least 10 years, retired teachers with a service of at least 10

at least 10 years, and other similar persons (such as Bank correspondents) as may be

shall be allowed to sell units of simple and performing mutual fund schemes. Simple and performing mutual fund schemes shall

maturity plans (FMPs) and index schemes

than their scheme benchmark returns during each of the last three years. These distributors

F. Unique Identity Number (UIN) for Employees of Distributors

AMFI shall create a UIN of the

employee/ relationship manager/ sales person of the distributor interacting with the investor for the sale of mutual fund products, in addition to the AMFI Registration Number (ARN) of the distributor. The application form for mutual fund schemes shall have provision for disclosing the UIN of such sales personnel along with the ARN of the distributor.

G. Harmonizing applicability of Net Asset Value(NAV) across schemes

It was decided that in respect of purchase of units of mutual fund schemes (other than liquid schemes), the closing NAV of the day on which the funds are available for utilisation shall be applicable for application amount equal to or more than 2 lakh, irrespective of the time of receipt of such application.

H. Monthly Portfolio Disclosures

It was mandated that Mutual funds/AMCs shall disclose portfolio (along with ISIN) as on the last day of the month for all their schemes on their respective website on or before the tenth day of the succeeding month in a user-friendly and downloadable format (preferably in a spreadsheet). Further, the format for monthly portfolio disclosure shall be same as that of half yearly portfolio disclosures. Also, Mutual funds/AMCs may disclose additional information (such as ratios, etc.) subject to compliance with the Advertisement Code.

I. Cash Investments in Mutual Funds

In order to help enhance the reach of mutual fund products amongst small investors, who may not be tax payers and may not have PAN/bank accounts, such as farmers, small traders/businessmen/workers, it was decided that cash transactions in

38


mutual funds to the extent of 20,000 per

shall be allowed subject to compliance with Prevention of Money Laundering Act, 2002 and Rules framed there under, the SEBI Circular(s) on Anti Money Laundering (AML) and other applicable AML rules, regulations

procedures in place. Repayment in the form of redemptions, dividend, etc. with respect to aforementioned investments shall be paid only through banking channel.

J. Prudential Limits and Disclosures on Portfolio Concentration Risk in Debt- Oriented Mutual Fund Schemes

It was decided that Mutual funds/AMCs shall ensure that total exposure of debt schemes of mutual funds in a particular sector (excluding investments in Bank CDs, CBLO, G-Secs, T-Bills and AAA rated securities issued by Public Financial Institutions and Public Sector Banks) shall not exceed 30 percent of the net assets of the scheme.

services sector (over and above the limit of 30 percent) not exceeding 10 percent of the net assets of the scheme shall be allowed by way of increase in exposure to Housing Finance Companies (HFCs)only. Also, the additional exposure to such securities issued by HFCs are rated AA and above and these HFCs are registered with National Housing Bank (NHB) and the total investment/ exposure in HFCs shall not exceed 30 percent of the net assets of the scheme. Existing schemes shall comply with the aforementioned requirement within a period of one year from the date of issue of this circular. During this one year, total exposure of existing debt schemes of mutual funds in a particular sector should not increase from the levels existing (if above 30 percent) as on the date of issuance of this circular.

K. Transaction ChargesIt was decided that distributors shall also

have the option to either opt in or opt out of levying transaction charge based on type of the product.

L. Disclosure with Respect to Half Yearly Financial ResultsMutual funds/AMCs shall make half

results on their respective website in a user-friendly and downloadable format (preferably in a spreadsheet).

M. Additional DisclosuresMutual funds/AMCs shall, in addition

to the total commission and expenses paid to distributors, make additional disclosures regarding distributor-wise gross inflows (indicating whether the distributor is an associate or group company of the sponsor(s)

assets under management and ratio of

website on an yearly basis. In case the data mentioned above suggests that a distributor has an excessive portfolio turnover ratio, i.e. more than two times the industry average, AMCs shall conduct additional due-diligence of such distributors. Mutual Funds / AMCs shall also submit the said data to AMFI and the consolidated data in this regard shall be disclosed on AMFI website.

N. Participation of Mutual Funds in Credit Default Swaps (CDS) Market as Users (“Protection Buyers”)It was decided to permit mutual funds

to participate in CDS market, as per the guidelines issued by RBI from time to time,

a. Mutual funds shall participate in CDS transactions only as users (protection

39


buyer ). Thus, mutual funds are

to hedge their credit risk on corporate bonds they hold. They shall not be allowed to sell protection and hence not

the CDS contracts. However, they shall

positions, subject to para d below.b. Mutual funds can participate as users

in CDS for the eligible securities as reference obligations, constituting from within the portfolio of only Fixed Maturity Plans (FMP) schemes having tenor exceeding one year.

c. Mutual funds shall buy CDS only from a market maker approved by the RBI and enter into Master Agreement with the counterparty as stipulated under RBI Guidelines. Exposure to a single counterparty in CDS transactions shall not exceed 10 percent of the net assets of the scheme.

d. The cumulative gross exposure through credit default swap in corporate bonds along with equity, debt and derivative positions shall not exceed 100 percent of the net assets of the scheme.

e. The total exposure related to premium paid for all derivative positions, including CDS, shall not exceed 20 percent of the net assets of the scheme.

f. Before undertaking CDS transactions,

policy on participation in CDS approved by the Board of the Asset Management Company and the Trustees as per the

The policy shall be reviewed by mutual funds, at least once a year.

g. To enable the investors in the mutual funds schemes to take an informed

decision, the concerned Scheme Information Document (SID) shall disclose the intention to participate in CDS transaction in corporate debt securities in accordance with directions issued by RBI and SEBI from time to time, and related information as appropriate in this regard.

h. Mutual funds shall also disclose the details of CDS transactions of the scheme in corporate debt securities in the monthly portfolio statements as well as in the half yearly trustee report, as per the prescribed format. Further, mutual funds shall disclose the scheme-wise details of CDS transactions in the notes to the accounts of annual report of the mutual fund as per the prescribed format.

i. Mutual funds participating in CDS transactions, as users, shall be required to comply with the guidelines issued by

No.5053/14.03.04/2010-11 dated May 23, 2011 and subsequent guidelines issued by RBI and SEBI from time to time.

O. Participation of Mutual Funds in Repo in Corporate Debt SecuritiesIn order to encourage growth of the

corporate bond market, it was decided that the base of eligible securities may be expanded, for mutual funds to participate in repo in corporate debt securities, from AAA rated to AA and above rated corporate debt securities.

P. Investment by Gold Exchange Traded Funds (ETFs) in Gold Deposit Schemes (GDS) of banksGDS of banks was designated as a gold

related instrument eligible for investment by

40


a. The total Investment in GDS will not exceed 20 percent of total AUM of such schemes.

policy with regard to investment in GDS with due approval from the Board of the Asset Management Company and the Trustees, which should have provision to make it necessary for the mutual funds to obtain prior approval of their trustees for each investment proposal in GDS of any Bank. The policy shall be reviewed by mutual funds, at least once a year.

c. Gold certificates issued by Banks in respect of investments made by Gold ETFs in GDS shall be held by the mutual funds only in dematerialized form.

Q. Product Labeling in Mutual Funds

In order to address the issue of mis-selling, it was decided that all the mutual funds shall ‘Label’ their schemes on the

a. Nature of scheme such as to create wealth or provide regular income in an indicative time horizon (short/ medium/ long term).

b. A brief about the investment objective (in a single line sentence) followed by kind of product in which investor is investing (Equity/Debt).

c. Level of risk, depicted by colour code

i. Blue – principal at low risk.

ii. Yellow – principal at medium risk.

iii. Brown – principal at high risk.

d. A disclaimer that investors should

are not clear about the suitability of the product.

Further, the product label would be disclosed in the Scheme Information Documents (SIDs), Key Information Memorandums (KIMs), front page of initial application forms, common application forms and scheme advertisements in a prominently visible manner.

The Circular is applicable from July 01, 2013 to all existing schemes and schemes launched thereafter.

R. Inclusion of Mis-Selling of Units of Mutual Fund Schemes as a Fraudulent and Unfair Trade Practice

The SEBI(Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) (Amendment) Regulations, 2012 were

inclusion of mis-selling of units of mutual fund schemes as a fraudulent and unfair

sale of units of a mutual fund scheme by any person, directly or indirectly, by -

a. making a false or misleading statement, or

the scheme, or

c. concealing the associated risk factors of the scheme, or

d. not taking reasonable care to ensure suitability of the scheme to the buyer.

Organisation (SRO) for Distributors

To enable the setting up of an SRO for distributors, the SEBI (Self Regulatory Organisations) (Amendment) Regulations,

stated that distributors shall be deemed as intermediaries. Further, by a notification dated January 08, 2013 under sub-regulation (2) of regulation 1 of the SEBI (Self Regulatory

41


Organisations) Regulations, 2004, the date of

which the Regulations shall come into force in relation to distributors engaged by asset management companies of mutual funds. A public notice was issued on March 21, 2013 inviting applications from any group or association of intermediaries which are desirous of being recognized as a Self Regulatory Organisation in terms of SEBI (Self Regulatory Organisations) Regulations, 2004 for distributors of mutual fund products, by making an application as prescribed in the said Regulations.

V. Alternative Investment Funds

A. Regulations Notification of SEBI (Alternative Investment Funds) Regulations, 2012

In May 2012, the SEBI (Alternative Investment Funds) Regulations, 2012 (“AIF

of framing the regulations, market comments were also elicited on a concept paper prepared and placed on SEBI website for public comments. The Regulations require all pooling vehicles /funds such as Private Equity Funds, Real Estate Funds, Hedge Funds, etc. to register with SEBI. The Regulations endeavor to extend the perimeter of regulation to unregulated funds, enhance

encouraging formation of new capital and investor protection. The regulations also seek to address regulatory gaps with respect to oversight requirements under the venture capital regulations.

VI. Investment Advisors

A. Notification of SEBI (Investment Advisors) Regulations, 2013

In January 2013, the SEBI (Investment

thereby providing a framework for registration and regulation of Investment Advisors. The Regulations require all individuals, body corporate and partnership

investment advice to investors for consideration to be registered and regulated under these Regulations. The regulations

VII. Foreign Institutional Investors (FIIs)

A. Qualified Foreign Investors (QFI) Framework

In line with the union budget speech 2011 and subsequent press release by Government of India, it was decided to allow

Investors (QFI), who meet the prescribed KYC norms, to invest in Indian equity shares, mutual funds and corporate debt subject to the prescribed terms and conditions. Vide SEBI circulars dated August 9, 2011 and January 13, 2012, the framework for QFI investment in mutual funds and equity shares has been prescribed. Subsequently, the QFI framework has been liberalised/ revised vide circulars dated June 07, 2012, July 18, 2012 and July 20, 2012.

The revision in QFI framework primarily

to include resident of a country which is a member of group which is a member of FATF and who is a signatory to IOSCO MMoU or a signatory of a bilateral MoU with SEBI.

b. QFIs are allowed to invest in debt schemes of Indian mutual funds and corporate debt.

42


c. QFIs can open a single non-interest bearing rupee account with any AD Category-1 bank in India for making investment through this route, subject to the conditions as may be prescribed by RBI from time to time.

d. The QFI has been extended the option to appoint custodian of securities for clearing and settlement of its transactions, provided such custodian is

e. A separate investment limit of USD one billion created for QFI investment in corporate debt.

f. A separate investment limit of USD three billion created for QFI investment in Mutual Fund Infrastructure Debt Scheme.

B. K n o w Yo u r C l i e n t ( K Y C ) –

the Know Your Client (KYC) requirements for foreign investors making investment through the portfolio route. The prominent relaxations

by Global Custodian (GC), if Power

b. The requirement to provide names, residential address, photograph, proof of identity and proof of address of individual promoters, partners/trustees, whole time directors of foreign investor has been waived if the Global Custodian (GC) gives an undertaking to provide the documents as and when requested

c. Special exemptions have been made for SWF entities, Foreign Govt. Agencies,

Central Bank, Govt. pension funds and International or Multilateral Agencies.

C. Introduction of Auction Calendar

Vide circular dated April 27, 2012 it was decided that the auction of debt limits would be conducted on 20th of every month (if 20th is holiday, auction shall be done on the next working day), based on availability of free limits at the end of respective previous month. The auction shall be conducted if the free limit in any category (Government debt long term, corporate debt old and Corporate Debt Long Term Infra) is more than ` 1,000

Particulars DetailsDuration of bidding:Access to platform Trading members or

custodiansMinimum bid ` 1 croreMaximum bid ` 250 cr. or one-tenth of free

limit whichever is higherTick Size ` 1 croreAllocation Price time priorityMethodologyPricing of bid ` 1000

or bid price whichever is higher

Bidding date 20th of every month (if 20th is holiday, auction shall be done on next working day)

Time period for 90 days for corporate debtutilisation of the old and corporate debt longlimits term infra category and 45

days for Government debt old and Government debt long term category

Auction Platform Alternatively on BSE & NSE

D. FII Investments in Government Debt Long and Corporate Debt Long Term Infra Categories

a. Government Debt Long Term category was enhanced to USD 10 billion. The residual maturity requirement for

43


investment in this category was reduced uniformly from 5 years to 3 years

b. For the Corporate Debt Long Term Infra category, the lock-in period for investments was uniformly reduced to one year while the residual maturity

c. The additional limit for FIIs investments in Government debt long term category and the limits for corporate debt long term infra category (with one year lock-in and 15 months residual maturity), were allocated through a special auction on July 04, 2012.

E. FII Debt Investment Provisions: Relaxations

a. SEBI had provided the facility of re-investment up to two years from the date of the circular or to the extent of twice the size of the debt portfolio, to those FIIs and sub-accounts that had already acquired limits and /or invested in debt in the manner prescribed in the said circular. With a view to provide

01, 2014, it has been decided that the FIIs/ Sub-Accounts can re-invest during each calendar year to the extent of 50 percent of their debt holdings at the end

b. The time period for utilisation of the Government debt limits (for both old and long term limits) allocated through bidding process was reduced to 30 days while the time period for utilisation of the corporate debt limits (for both old and long term infra limits) allocated through bidding process shall be 60

c. FII/sub-accounts may avail limits in the Corporate Debt Long Term Infra category without obtaining SEBI approval till the overall FII investments reaches 90 percent, after which the auction mechanism shall be initiated for allocation of remaining limits. SEBI will put in place a mechanism to monitor the utilisation of the limit.

F. FII Debt Limits: Operational Flexibility

to those FIIs / sub-accounts which did not hold debt investment limits as on January 03, 2012 and purchased debt limits thereafter, it was decided that they shall be allowed a cumulative re-investment facility to the extent of 50 percent of their maximum debt holding at any point of time during the calendar year 2013. The circular in this regard was issued on January 01, 2013.

G. FII Debt Limits: Increase in Limits and Relaxation in Lock-In and Residual Maturity

each was made available under the Government – Long Term category and Corporate Bond – Old (non infra) category respectively.

b. The requirement of 3 years residual maturity under the Government – Long Term category was done away with. However, FIIs cannot invest in short term papers such as treasury bills under this category.

c. The requirement of initial maturity of 5 years and lock-in period of 12 months under Corporate – Long Term Infra category was done away with.

44


H. Reporting of Offshore Derivative Instruments (ODIs)/ Participatory Notes (PNs) ActivityFor streamlining the reporting of

PNs (Participatory Notes)/ODIs (Offshore

the FIIs issuing ODIs/PNs shall submit details of ODI/PN transaction report along with the monthly summary report by 10th of every month for previous month’s ODI transactions.

Committee on Rationalisation of Investment Routes and Monitoring of Foreign Portfolio Investments

SEBI Board in its meeting held on October 06, 2012 has decided that SEBI will prepare a draft guideline based on the guidance of the Working Group on Foreign Investment (WGFI), for consideration of the Government of India (GoI). It was also decided that SEBI/RBI will create necessary regulatory framework based on the guidelines, which will be laid down by the GoI.

Accordingly, in order to implement the above Board’s decision, SEBI has formed a “Committee on rationalisation of investment routes and monitoring of foreign portfolio investments”, under the Chairmanship of Shri K. M. Chandrasekhar, comprising of representatives from GoI, RBI and various market participants to review, make recommendations and to prepare a draft guideline and regulatory framework for an integrated policy on foreign investments, keeping as a starting point, the recommendations of the Working Group on Foreign Investment in India (WGFI), for consideration of the Government.

The committee held its meetings on February 18, 2013 and March 19, 2013. The

on Treatment of Foreign Investments.

Amendments to SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011

SEBI reviewed the provisions of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (‘Takeover Regulations’) in respect of which certain concerns were raised during implementation.

a. It is now clarified that if the voting rights of a shareholder, increase beyond the prescribed threshold limit pursuant to buyback by the target company, he shall be exempt from the obligation to make open offer if the voting rights are brought below the threshold limit within 90 days from the date on which the voting rights was increased and the period of 90 days will be reckoned from

triggered pursuant to an agreement or otherwise in combination of any modes of acquisition, the ‘relevant date’ for making the Public Announcement and determination of offer price shall be the earliest date on which obligations are triggered subject to appropriate d i s c l o s u r e s o f t h e s u b s e q u e n t

c. The relevant date for making the Public Announcement pursuant to an acquirer acquiring shares, voting rights or control in target company subsequent to the

the date on which the Board of Directors of the target company authorize such preferential issue.

45


d. In order to bring parity in disclosure requirements among various SEBI regulations, the disclosure requirement with regard to buy or sell of two percent by persons holding more than five percent as specified in Takeover Regulations has been modified in line with SEBI (Prohibition of Insider Trading) Regulations, 1992.

e. It is clarified that acquisition made

stock exchange can be completed in

process applicable to the stock exchange mechanism subject to such shares being kept in an escrow account.

IX. Investor Assistance and Education

A. SCORES

SEBI issued a circular on August 13, 2012 directing all companies whose securities are listed on stock exchanges to obtain SCORES authentication by September 14, 2012, in accordance with the terms of earlier dated June 3, 2011. SEBI, vide this circular, also directed the companies to take appropriate necessary steps within seven days of receipt of complaint by the concerned company through SCORES, so as to resolve the complaint within 30 days of receipt of complaint and also keep the complainant duly informed of the action taken thereon. In case of failure to comply with the circular, it was informed that SEBI would be constrained to initiate enforcement actions as per the law as may be deemed appropriate.

X. Legal Framework

a. SEBI had issued a circular dated April

20, 2007 on the framework for arriving at

b. On the basis of the experience gained and with the purpose of providing more clarity on its scope and applicability and for making the mechanism more transparent by providing standard guidelines/ formulae for arriving at the

25, 2012.

c. The salient features of the modified

i. Certain defaults including insider trading, front running, failure to make an open offer, mandated disclosures, non-redressal of investor grievances and non-response to the summons issued by SEBI would be excluded from the consent process. The defaults falling in the category of fraudulent and unfair trade practices, which in the opinion of SEBI are very serious and/or have caused substantial losses to the investors, are also held to be non consentable.

ii. No consent application is to be considered, if any violation is

years from the date of any consent order. However, if the applicant has already obtained more than two consent orders, no consent application shall be considered for a period of three years from the date of the last order.

iii. No consent application is to be considered by SEBI before the completion of investigation /

46


inspection, if any.

iv. In respect of proceedings pending before the SEBI, no consent application is to be considered if

of the service of the show cause notice.

d. The consent terms shall be determined

referred to in the modified circular, which inter alia, provide for the following objective parameters for

i. A minimum Benchmark Amount for each category of default

for which the show cause notice is issued or may be issued.

ii. The Benchmark Amount to take into consideration the penalty imposed by the Adjudicating

by the Whole Time Member (WTM) as the case may be.

iii. Additional amounts for previous defaults/track record of the applicant.

iv. Weightage given to the stage of the proceeding, nature of the default/violation, gravity of the default/violation, volume traded, price

nature of disclosure not made, its impact, etc.

e. The consent terms also provides for non

of ill-gotten profits, etc if considered necessary.

(HPAC)/ Panel of WTMs is empowered

to enhance or reduce the settlement amount considering the seriousness of the cases as per the scheme of the Act, or even refuse to consider the case under the consent process.

g. The circular also provides for non-consideration of subsequent application with respect to the same default which has been rejected earlier and disposal of the consent application expeditiously preferably within a period of six months from the date of registration of the consent application.

XI. Retrospect and Prospects

A. Retrospect

The economy was exposed to the vagaries of turmoil and pressure receding from the

in the FY13. However the reform agenda

hopes of the upturn. The estimates of GDP growth stood at 5 percent for FY13, mirroring the lowest rate in a decade and backed by the weakening activity in industry and services sector. IIP growth has declined further to only 1.0 percent when compared with a growth of

too declined along with the agriculture thus shrinking the total output of the economy.

The savings rate declined in 2011-12 to

of the household being only 8 percent, the lowest over a decade. The gap in savings and investments widened to 4.2 percent of GDP,

nine months of FY13. The policy reforms, hike in gold import duties and reducing subsidy on diesel and LPG have nonetheless paved

47


the path to recovery as indicated by the swing in financial markets. Liquidity conditions and credit growth remain subdued in wake

is still sticky.

The global scenario touched upon the Indian trade and the exports are expected to register a mild decline in 2012-13. Imports reduced marginally on account of high customs duty on gold. Exchange rate too

followed by policy easing is anticipated to

The securities market remained well reflective of the progression in global economic state. The Sensex which closed at 17, 404 on March 30, 2012, touched 20,000 level, ended at 18,836 on March 28, 2013, registering a growth of 8.2 percent compared to a decline of 10.5 percent seen in the

the uneven trends and closed at 5,683 on

30, 2012 was at 5,296. The index registered a growth of 7.3 percent against a decline in

The launch of MCX-SX into equity and equity derivative segment was a welcome development in the securities market. World Federation of Exchanges (WFE) figures also outline India turning to be a better performing market in the calendar year 2012 owing to renewed investor faith on back of government reforms.

While the turnover in cash market at both the exchanges decreased, the market capitalisation increased by 2.8 percent at BSE and 2.3 percent at NSE. The market capitalisation to GDP ratio of BSE was 63.7 percent while it was 62.2 percent for NSE for

The turnover at both NSE and BSE in equity derivatives segment showed an increase in 2012-13 while that at the currency derivative segment declined at two of the exchanges. The explosion in the number of contracts at BSE remains a major highlight in the FIA Annual Survey 2012.

The financial year 2012-13 also saw the primary market picking up. The total amount of equity issues mobilised in the primary market stood at ` 15,474 crore in 2012-13 as against ` 12,857 crore in 2011-12.

Institutions’ Placement Mode (QIP) and Institutional Private Placement (IPP) ascended from 16 issues raising ` 2,163 crore in 2011-12 to 45 issues raising ` 15,996 crore during 2012-13.

Mutual funds saw a continuing trend

resources, mutual funds in 2012-13 saw a net ` 76,539

crore as against ` 22,024 crore in 2011-12. FII invested ` 1,68,367 crore in the Indian market in 2012-13 compared to ` 93,725 crore in 2011-12. The cumulative net investment by FII stood at USD 1,71,529 million. The various measures in the securities market signaled a healthy growth over the previous year and resonated the strong fundamentals of the market.

B. Prospects

India, as an economy has made massive leaps in its growth path in the past decade buttressed by impressive savings and investment rates. While demographics and resources have been at the root of the advantage India enjoys over its peers, the execution of the policy and reform measures that have been taken also need to be given

48


due credit. The strong fundamentals have

World Economic Outlook by IMF, April 2013, while the Emerging market and developing economies are anticipated to grow by 5.3 percent in 2013, India is projected to grow at

equal contributors to India’s growth trajectory and continue remaining so reinforced by sound infrastructure, well laid out regulatory framework and strong risk management practices. Thus, despite the recent reduction in the stellar growth rates, the fact remains that India is still one of the fastest growing economies and has a positive outlook.

Securities market in India has evolved in the wake of a number of reforms and evolving economic conditions. While the macro economic prospects currently may

have assured of positive growth. SEBI has

supervision and proactive regulations. The basic infrastructure for disclosure, surveillance and trading are robust and synchronized with global standards.

been witnessing technological transformation which calls for a more vigilant and progressive combination of regulations. Of late, there have been instances of grey

be brought into the purview of regulation. Incidents such as unauthorized capital mobilisation from the gullible investors are in the cognizance of the authorities and commensurate steps have been taken. As the regulatory framework for such activities is still under construction, it is imperative for the investors to be well informed of the financial decisions they take. Today world over the investors as well as entities

have become vulnerable to the possibility of fraud through sheer ingeniousness and innovativeness of perpetrators. The only antidote to this is increasing the access to banking and regulated financial services and awareness of investors and continuous fine-tuning of regulations to address any regulatory lacunae. SEBI is committed to the promotion of awareness of financial markets in the public domain and would be

protecting investors through workshops, Grievance Redressal Mechanism Centre,

To this end, FSDC has released its draft National Strategy of Financial Education to

India. It aims at undertaking a massive Financial Education campaign to help people

financial products and services through regulated entities with fair and transparent machinery for consumer protection and grievance redressal.

SEBI has also been easing the process for investors to enter the securities market. KYC Centralisation, norms for e-IPOs, guidelines on Rajiv Gandhi Equity Saving Scheme, dedicated debt segment on the stock exchanges, introduction of trading through periodic call auction for illiquid scrips and extending the pre-open session to all other scrips in the equity market are some of the steps undertaken by SEBI to ensure more investor participation into the securities market. The surveillance system

and aberrations are investigated to ensure a free and fair market. In its endeavour to widen and deepen the markets, SEBI would consistently pursue the market developments and take proactive policy measures.

49


While the Indian securities market is deemed to be secure and regulated, an area of concern for the regulator is the lack of involvement by retail participants. More and more of domestic savings have been channelized into physical assets of late and

decline. Shares and Debentures have seen even a lower proportion primarily on account of perceived intricate processes, want of financial awareness in addition to the global concerns. Increasing the individual participation would be precedent to the further development of our markets. Measures like introduction of Anchor investors in IPOs, prohibiting non-retail investors to withdraw or lower bid size, discontinuation of mini derivative contracts on index have been timely taken to take care of the interests of retail investors in the market and such measures as and when required would be adequately taken in the future as well.

In addition to investor participation, provision of capital for start-ups and early venture companies is a priority area. Recent SEBI initiatives for angel and venture funds

needed beginning in addressing the paucity of resources for start-up companies across the country.

Budget announcements related to use of government and corporate bonds as collateral by FII, infrastructure debt funds, and dedicated debt segment on stock exchanges

Exchange is working on the proposal to allow SMEs to list on the SME exchange platform

and amendment of SEBI Act to strengthen

of norms related to foreign investments in

capital markets is also underway under

The budget proposals like allowing AMFI registered mutual fund distributors to become members of the mutual fund segment on stock exchanges, permitting pension and provident funds to invest in ETFs/debt mutual funds and asset backed securities would go a long way in encouraging and revitalizing the mutual fund industry.

Amendments to Insider Trading Regulations to fortify the framework that protects fair market place is also in progress. The unleashing of one of the biggest Insider trading scandal in US has shifted the regulatory focus to the menace of insider trading and additional powers to regulators alike. In the Indian context, the extant regulatory regime on insider trading would be reviewed and realigned with the best practices adopted globally under the

International co-operation is well sought to integrate the mainstream markets with the best practices across the globe. Apart from strengthening regulatory co-operation through MoUs with various countries, SEBI is also an active member of IOSCO while also being an integral member of the Internal Working Groups in wider association with G-20 and FSB. Our openness to the global markets has seen embracing active work on contemporary issues of international relevance like high frequency trading and social media norms for dissemination of information by listed companies in the present. High frequency trading has engaged attention of regulators worldwide and in India too, guidelines have been framed to ameliorate the risks posed by HFT and to

The assurance to ongoing reforms during

50


the roadshows at various global destinations, along with measures introduced by SEBI have ensured renewed interest of the foreign investors in Indian market

As we preserve our healthy markets, it is also crucial to promote fair practices that align with the best in class through stronger enforcement measures and in harmony with the technological developments worldwide. While some segments of the market may require constantly evolving vigil due to their

immediate intervention. Investor Education

though various measures would continue to remain a priority area for SEBI. SEBI in its keenness to promote, protect and deepen the markets would incessantly strive to maintain the market integrity.

To sum up, the way forward for securities market is to create an atmosphere of trust in the market, confidence in the

need, therefore, to work towards stricter and

education and upgrading technology.

51

Part Two: Trends and Operations in Securities MarketsPART TWO: TRENDS AND OPERATIONS IN SECURITIES MARKETS

1. PRIMARY SECURITIES MARKETThe primary markets continued to

remain subdued in 2012-13. The muted

the negative returns recorded by many

is expected to reinvigorate primary market activities.

I. Resource Mobilisation through Public and Rights Issues

the primary market and raised `

`

in the primary market activities in 2011-12

2011-12. The amount raised through IPOs

` `

`

Table 2.1: Resource Mobilisation through Public and Rights Issues

2011-12 2012-13* Percentage share inParticulars total amount

No. of Amount No. of Amount* 2011-12 2012-13 issues (` crore) issues (` crore)

1 2 3 4 5 6 7

1. Public Issues (i)+(ii) 55 46,105 53 23,510 95.1 72.435 10,482 33 6,528 21.6 20.1

(Equity/ PCD /FCD) of which

1 4,578 0 0 9.4 0.0(Bond / NCD) 20 35,611 20 16,982 73.5 52.3

2. Rights Issues 16 2,375 16 8,945 4.9 27.6Total Equity Issues (1(i)+2) 51 12,857 49 15,473 26.5 47.7Total Equity and Bond (1+2) 71 48,468 69 32,455 100.0 100.0

5 2,054 4 1,589 4.2 4.9

52


A. Resource Mobilisation via SME Platform

`

`

Chart 2.1: Share of Broad Category of Issues in Resource Mobilisation

Per

cen

t

Table 2.2: SME PlatformYear/Month Total

No. of Amount issue (` crore)

1 2 32012-13 24 239

Nov-12 0 0Dec-12 2 33

53

Part Two: Trends and Operations in Securities Markets

B. Sector-wise Resource Mobilisation

issues in 2011-12. The amount raised by `

crore compared to `

amount.

Table 2.3: Sector-wise Resource Mobilisation

2011-12 2012-13 Percentage share inSector total amount

No. of Amount No. of Amount 2011-12 2012-13 issues (` crore) issues (` crore)

1 2 3 4 5 6 7

Total 71 48,468 69 32,455 100.0 100.0

Chart 2.2: Sector-wise Resource Mobilisation

73.8

94.7

77.3

100.

0

45.9

43.5

29.5

54.5

26.2

5.3

22.7

0.0

54.1 56.5

70.5

45.5

0.0

20.0

40.0

60.0

80.0

100.0

120.0

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

Private Public

54


C. Size-wise Resource Mobilisation

Issues above `

`

` `

` `

` `2012-13.

`

`

year.

`

``

D. Industry-wise Resource Mobilisation

years.

Table 2.4: Size-wise Resource Mobilisation

2011-12 2012-13 Percentage share inIssue Size total amount

No.of Amount No. of Amount 2011-12 2012-13 issues (` crore) issues (` crore)

1 2 3 4 5 6 7

< `

` `

` `

` `

` `

`

Total 71 48,468 69 32,455 100.0 100.0

55


Table 2.5: Mega Issues in 2012-13*

Type of Type of Date of PercentageNo. Name of the entity issue instrument opening (` crore) share in

of issue totalamount

1 2 3 4 5 6 7

Total 28,885

`

56


Box 2.1 : Impact Analysis of policy measures introduced in Primary Market

Participation of retail investorsDetails of the study

investors.

Results of the study

times.` `

Impact of other policy measures

depressed market conditions.

57


II. Resource Mobilisation through QIP and IPP

A. QIP and IPP

to minimize the excessive dependence

`higher than `

Table 2.6: Industry-wise Resource Mobilisation

2011-12 2012-13 Percentage share inIndustry total amount

No. of Amount No. of Amount 2011-12 2012-13issues (` crore) issues (` crore)

1 2 3 4 5 6 7

Total 71 48,468 69 32,455 100.0 100.0

58


``

Mechanism

exchanges.

III. Resource Mobilisation through Preferential Allotment

Table 2.7: Resource Mobilisation through QIP and Conforming to MPS through IPP

Year/MonthNSE BSE Common Total

No. of Amount No. of Amount No. of Amount No. of Amount issues (` crore) issues (` crore) issues (` crore) issues (` cror

1 2 3 4 5 6 7 8 9

Oct-12 0 0 0 0 0 0 0 0

Exchange Mechanism to conform to MPSYear No. of Companies

1 22011-12 22012-13 33

59


`

raised `

IV. Resource Mobilisation through Private Placement of Corporate Debt

raising debt money by the corporate entities.

Table 2.9: Resource Mobilisation through Preferential Allotment

Year/ MonthNSE BSE Common Total

No. of Amount No. of Amount No. of Amount No. of Amountissues (` crore) issues (` crore) issues (` crore) issues (` crore)

1 2 3 4 5 6 7 8 92010-11 83 1,393 156 12,072 134 17,046 373 30,5112011-12 133 2,820 88 4,166 90 18,723 311 25,7092012-13 188 7,442 87 12,729 145 26,768 420 46,939

Table 2.10: Private Placement of Corporate Bonds Reported to BSE and NSE

Year/ MonthNSE BSE Common Total

No. of Amount No. of Amount No. of Amount No. of Amount issues (` crore) issues (` crore) issues (` crore) issues (` cror

1 2 3 4 5 6 7 8 9

60


`

compared to `

mechanism.

2. SECONDARY SECURITIES MARKET

I. Equity Markets in India

domestic economic scenario.

heightened conce

by advanced economies. The BSE Sensex

corporate earnings.

61


in 2012-13.

Chart 2.3: Movements of Benchmark Stock Indices

0

1000

2000

3000

4000

5000

6000

7000

0

5000

10000

15000

20000

25000

Ap

r-12

May

-12

Jun

-12

Jul-12

Au

g-12

Sep

-12

Oct-12

No

v-12

Dec-12

Jan-13

Feb

-13

Mar-13

S&

PC

NX

Nif

ty

BS

ES

en

sex

Sensex Nifty

62


Table 2.11: Major Indicators of Indian Stock MarketsPercentage Variation over the

Item 2011-12 2012-13 Previous Year2011-12 2012-13

1 2 3 4 5A. Indices

BSE Sensex

B. Annualised Volatility (percent)

C. Total Turnover (`

of which

of which

D. Market Capitalisation (`

E. No. of Listed Companies

E. P/E Ratio

priced compared to emerging and other

compared to the previous year.

63


Instruments such as Exchange Traded Notes

64


II. Performance of Major Stock Indices and Sectoral Indices

Table 2.12: Major Stock Indices and their Percentage VariationYear/ BSE Percentage BSE Percentage CNX Percentage CNX Percentage CNX Percentage

Month Sensex Variation 100 Variation Nifty Variation Mid-cap Variation 500 Variation1 2 3 4 5 6 7 8 9 10 11

65


Table 2.13: Sectoral Stock Indices and their ReturnsYear/ CNX Percentage CNX Percentage CNX Percentage BSE Oil Percentage BSE Percentage

Month IT Variation Bank Variation PSE Variation and Gas Variation FMCG Variation1 2 3 4 5 6 7 8 9 10 11

2008-09 2319 -55.3 4133 -22.2 2454 -1.2 7053 9.9 2036 17.12009-10 5856 152.6 9460 128.9 3766 53.5 10159 44.0 2831 39.12010-11 7148 22.1 11705 23.7 3567 -5.3 10241 0.8 3596 27.02011-12 6516 -8.8 10213 -12.8 2900 -18.7 8088 -21.0 4493 24.92012-13 7219 10.8 11362 11.3 2748 -5.2 8327 3.0 5919 3.0

66


III. Turnover in Indian Stock Market

` `

Table 2.14: Exchange-wise Cash Segment Turnover(`

Stock Exchange 2010-11 2011-12 2012-13 Percentage Share1 2 3 3 4

Recognized Stock Exchanges

Total 46,85,034 34,84,381 32,61,701 100.00

67


together

transaction on other stock exchanges. The

BSE and NSE together recorded the highest

Table 2.15: Turnover at BSE and NSE: Cash SegmentBSE NSE Total

Year / Month Turnover Percentage Turnover Percentage Turnover(` crore) Variation (` crore) Variation (` crore)

1 2 3 4 5 6

2008-09 11,00,074 -30.3 27,52,023 -22.5 38,52,0972009-10 13,78,809 25.3 41,38,023 50.4 55,16,8332010-11 11,05,027 -19.9 35,77,410 -13.5 46,82,4372011-12 6,67,498 -39.6 28,10,893 -21.4 34,78,3902012-13 5,48,774 -17.8 27,08,279 -3.7 32,57,054

68


turnover at NSE during 2012-13 compared to

during 2012-13.

IV. Market Capitalisationpercent to ``

Table 2.16: City-wise Turnover of Top 20 Cities in Cash Segment during 2012-13

BSE NSE

Percentage PercentageCity Turnover Share in City Turnover Share in

(` crore) Cash (` crore) Cash Turnover Turnover

1 2 3 4 5 6

Sahibabad

Total 4,55,212 83.0 26,46,056 97.7

69


increased by 2.3 percent to ``

compared to the previous year. The market

Table 2.17: Market Capitalisation at BSE(`

Year/ All Listed Percentage BSE Percentage BSE- Percentage Bankex Percentage BSE PercentageMonth Companies Variation Sensex Variation Teck Variation Variation PSU Variation

1 2 3 4 5 6 7 8 9 10 11

2008-09 30,86,075 -39.9 15,07,742 -32.2 4,10,923 -39.7 2,33,895 -38.0 9,49,211 -17.7

2009-10 61,65,619 99.8 26,17,900 73.6 7,40,817 80.3 5,54,127 136.9 17,33,662 82.6

2010-11 68,39,084 10.9 29,44,451 12.5 8,69,794 17.4 6,89,751 24.5 19,48,555 12.4

2011-12 62,14,941 -9.1 14,59,141 -50.4 3,45,958 -60.2 3,90,614 -43.4 16,03,085 -17.7

2012-13 63,87,887 2.8 16,07,224 10.1 3,91,259 13.1 4,40,395 12.7 14,38,155 -10.3

70


V. Stock Market Indicators

and mid-cap indices.

Table 2.18: Market Capitalisation at NSE(`

Year/ All listed Percentage CNX Percentage CNX Percentage CNX Percentage CNX PercentageMonth Companies Variation Nifty Variation Mid Cap Variation IT Variation Bank Variation

1 2 3 4 5 6 7 8 9 10 11

2008-09 28,96,194 -40.4 18,92,629 -33.6 2,73,627 -40.9 2,01,810 -37.5 2,24,132 -36.12009-10 60,09,173 107.5 15,25,162 -19.4 3,17,619 16.1 2,28,558 13.3 3,17,351 41.62010-11 67,02,616 11.5 17,55,468 15.1 3,12,736 -1.5 2,78,848 22.0 4,03,234 27.12011-12 60,96,518 -9.0 16,32,058 -7.0 3,18,794 1.9 2,55,463 -8.4 3,59,370 -10.92012-13 62,39,035 2.3 18,22,965 11.7 2,84,721 -10.7 2,94,435 15.3 4,19,220 16.7

71


Table 2.19: Select Ratios Relating to Stock Market

BSE Market NSE Market Total Turnover to GDP RatioYear Capitalisation to Capitalisation to

GDP Ratio GDP Ratio Cash Segment Derivatives Segment (All-India) (BSE+NSE)

1 2 3 4 5

Table 2.20: Price to Earnings Ratio

Year/ BSE Sensex BSE 100 S&P CNX CNX IT CNX Bank CNX PSEMonth CNX Nifty Mid Cap

1 2 3 4 5 6 7 8

2008-09 13.7 15.3 14.3 9.8 11.5 7.7 18.12009-10 21.3 21.1 22.3 15.0 23.5 17.7 15.32010-11 21.2 20.7 22.1 17.7 26.6 18.5 15.02011-12 17.8 18.8 18.7 18.1 20.9 15.3 15.42012-13 16.9 16.0 17.6 16.7 19.3 13.6 9.9

72


VI. Volatility in Stock Markets

Table 2.21: Price to Book-Value RatioYear/ BSE Sensex BSE 100 CNX CNX CNX IT CNX Bank CNX PSE

Month Nifty Mid Cap1 2 3 4 5 6 7 8

2008-09 2.7 2.5 2.5 1.3 3.5 1.2 2.22009-10 3.9 4.0 3.7 2.7 7.2 2.5 3.12010-11 3.7 3.7 3.7 2.3 7.4 2.8 2.82011-12 3.5 3.1 3.0 1.9 5.9 2.3 2.12012-13 2.9 2.5 3.0 1.7 5.8 2.3 1.8

73


throughout the year.

Table 2.22: Average Daily Volatility of Benchmark Indices

Month BSE Sensex CNX Nifty BSE 100 BSE Small CNX 500 CNX Nifty CNX Cap Junior BANK

1 2 3 4 5 6 7 8

Annualised 12.5 12.9 12.7 12.8 12.4 13.6 19.2Volatility

74


Table 2.23: Trends in Daily Volatility of International Stock Market Indices during 2012-13

Country Index Apr. May. Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

DEVELOPED MARKETS

EMERGING MARKETS

India BSE Sensex

Ann

ualis

edV

olat

ility

75


VII. Trading Frequency

stock exchanges in 2012-13 over the previous

percent at NSE in 2012-13.

market turnover in 2012-13 at NSE and BSE

cash market turnover in 2012-13 at NSE and

Table 2.24: Trading Frequency of Listed Stocks

Trading2011-12 2012-13

Frequency BSE NSE BSE NSE(Range of No. of Percentage No. of Percentage No. of Percentage No. of Percentage

Days) Shares of Shares of Shares of Shares of Traded Total Traded Total Traded Total Traded Total

1 2 3 4 5 6 7 8 9Above 10091-10081-9071-8061-7051-6041-5031-4021-3011-201-10Total 3,923 100.0 1,627 100.0 4,146 100.0 1,637 100.0

76


VIII. Activities of Stock Exchanges

``

Table 2.25: Share of Brokers, Securities and Participants in Cash Market Turnover (2012-13)

S. No. Particulars Percentage Share

NSE BSE

Total of (i) to (v) 100.0 100.0

77


IX. Dematerialisation

preservation.

Table 2.26: Trading Statistics of Stock Exchanges

Stock Shares Value of Shares Delivered Exchange Traded (lakh) Delivered (lakh) (` crore)

2011-12 2012-13 2011-12 2012-13 2011-12 2012-131 2 3 4 5 6 7

Recognized Stock Exchanges

0.00 0.00 0.00

Total 22,61,023 22,09,936 7,00,611 7,04,195 9,69,086 9,68,355

78


Table 2.27: Turnover of Subsidiaries of Stock Exchanges

Stock No. of Name of the Subsidiary

Turnover of Subsidiary Percentage Exchange Subsidiary/ (` crore) Variation

ies 2011-12 2012-13

1 2 3 4 5 6

Recognised Stock Exchanges

Total 2,06,472 2,22,019 7.5

Table 2.28: Depository Statistics

NSDL CDSLParticulars

2011-12 2012-13 2011-12 2012-131 2 3 4 5

`

`

79


`in 2011-12 to `

`2011-12 to `

`

` `

2011-12.

Table 2.29: Depository Statistics: Debentures / Bonds and Commercial Paper

Debentures / Bonds Commercial Papers

Particulars 2011-12 2012-13 2011-12 2012-13

NSDL CDSL NSDL CDSL NSDL CDSL NSDL CDSL

1 2 3 4 5 6 7 8 9

Instruments

`

Table 2.30: Cities according to Number of DP Locations: Geographical Spread

NSDL CDSLNo. of DP Locations

2011-12 2012-13 2011-12 2012-131 2 3 4 5

Total 1,554 1,581 2,104 1,594

80


X. Derivatives Segment

markets.

A. Equity Derivatives Segment

in the Indian securities market. Over the

``

81


`2011-12. The open interest in the derivative

``

segment at NSE recorded a mixed trend

`` `

percent to ``

`

Table 2.31: Trends in Turnover and Open Interest in Equity Derivatives Segment

Turnover Open Interest at the End of the Year / Month

Year/Month No. of Contracts (` crore) No. of Notional TurnoverContracts (` crore)

NSE BSE NSE BSE NSE BSE NSE BSE

1 2 3 4 5 6 7 8 9

2008-09 65,73,90,497 4,96,502 1,10,10,482 11,775 32,27,759 22 57,705 02009-10 67,92,93,922 9,026 1,76,63,665 234 34,89,790 0 97,978 02010-11 103,42,12,062 5,623 2,92,48,221 154 36,90,373 4 1,01,816 02011-12 120,50,45,464 3,22,22,825 3,13,49,732 8,08,476 33,44,473 28,176 89,049 7362012-13 113,14,67,418 26,24,43,366 3,15,33,004 71,63,519 30,41,192 90,075 85,952 2,299

82


Table 2.32: Product-wise Derivatives Turnover at NSE and BSE

Year / Month Index Futures Index Options Single Stock Single Stock Total Options Futures

1 2 3 4 5 6

2008-09 32.4 33.9 2.1 31.6 100.02009-10 22.3 45.5 2.9 29.4 100.02010-11 14.9 62.8 3.5 18.8 100.02011-12 11.7 72.6 3.0 12.7 100.02012-13 6.8 77.0 5.2 10.9 100.0

83


``

` `

in India during the recent years.

Table 2.33: Trends in Index Futures at NSE and BSE

Open Interest at the End ofYear/ No. of Contracts Notional Turnover the Year / Month

Month (` crore) No. of Notional TurnoverContracts (` crore)


1 2 3 4 5 6 7 8 9

2008-09 21,04,28,103 4,95,830 35,70,111 11,757 8,28,369 22 12,060 0.32009-10 17,83,06,889 3,744 39,34,389 96 5,81,510 0 14,979 02010-11 16,50,23,653 5,613 43,56,755 154 6,18,576 4 16,941 0.12011-12 14,61,88,740 70,73,334 35,77,998 1,78,449 5,71,933 11,693 14,341 3052012-13 9,61,00,385 47,04,602 25,27,131 1,22,374 2,97,198 2,080 8,503 59

84


Table 2.34: Trends in Single Stock Futures at NSE and BSE

Open Interest at the End of theYear/ No. of Stocks No. of Notional Turnover Year / Month

Month Traded Contracts (` crore) No. of Notional Turnover Contracts (` crore)

NSE BSE NSE BSE NSE BSE NSE BSE NSE BSE1 2 3 4 5 6 7 8 9 10 11

2008-09 250 3 22,15,77,980 299 34,79,642 9 5,11,334 0 15,722 0.02009-10 190 0 14,55,91,240 6 51,95,247 0 9,90,917 0 32,053 0.02010-11 223 0 18,60,41,459 0 54,95,757 0 11,26,190 0 28,354 0.02011-12 217 219 15,83,44,617 3,26,342 40,74,671 10,216 8,86,326 19 24,663 12012-13 146 122 14,77,11,691 1,16,933 42,23,872 3,418 7,90,886 417 22,168 12

Table 2.35: Trends in Index Options at NSE and BSE

Open Interest at the End ofYear/ No. of Contracts Notional Turnover the Year / Month

Month (` crore) No. of Notional TurnoverContracts (` crore)


1 2 3 4 5 6 7 8 92008-09 21,20,88,444 373 37,31,502 9 18,09,483 0 27,402 0.02009-10 34,13,79,523 5,276 80,27,964 138 18,19,841 0 47,808 0.02010-11 65,06,38,557 0 1,83,65,366 0 18,90,463 0 55,022 0.02011-12 86,40,17,736 2,47,75,644 2,27,20,032 6,18,342 17,96,546 16,464 47,540 4302012-13 82,08,77,149 25,72,33,961 2,27,81,574 70,27,481 18,48,581 34,729 52,523 981

85


Table 2.36: Trends in Stock Options at NSE and BSE

Open Interest at the End ofYear / No. of No. of Notional Turnover the Year / Month

Month Stocks Contracts (` crore) No. of Notional Turnover Contracts (` crore)

NSE BSE NSE BSE NSE BSE NSE BSE NSE BSE1 2 3 4 5 6 7 8 9 10 11

2008-09 250 115 1,32,95,970 0 2,29,227 0 78,573 0 2,521 0.02009-10 190 98 1,40,16,270 0 5,06,065 0 97,522 0 3,137 0.02010-11 223 89 3,25,08,393 0 10,30,344 0 55,144 0 1,499 0.02011-12 216 217 3,64,94,371 47,505 9,77,031 1,469 89,668 0 2,504 02012-13 146 146 6,67,78,193 3,87,870 20,00,427 10,246 1,04,527 52,849 2,758 1,247

Table 2.37: Shares of Various Classes of Members in Derivative Turnover at NSE and BSETurnover (` crore) Percentage Share

Year / Month Trading Trading Trading Total Trading Trading Trading Members cum cum Self Members cum cum Self Clearing Clearing Clearing Clearing Members Members Members Members

1 2 3 4 5 6 7 82008-09 33,99,848 1,24,60,554 61,84,083 2,20,44,486 15.4 56.5 28.12009-10 48,99,892 2,02,12,013 1,02,15,902 3,53,27,807 13.9 57.2 28.92010-11 75,50,080 3,35,63,069 1,74,04,062 5,85,17,211 12.9 57.4 29.72011-12 79,81,555 3,45,47,595 2,05,54,043 6,30,83,193 12.7 54.8 32.62012-13 96,14,647 2,08,51,487 3,25,99,875 6,30,66,008 15.2 33.1 51.7

86


87


B. Trend in Currency Derivatives Market

its operations in the currency derivatives

``

`

Table 2.38: Trends in the Currency Derivatives Segment

MCX-SX NSE USEMonth / No. of Turnover Open No. of Turnover Open No. of Turnover Open

Year Contracts (` crore) interest Contracts (` crore) interest Contracts (` crore) interest Traded at the Traded at the Traded at the end of end of end of Month Month Month (` crore) (` crore) (` crore)

1 2 3 4 5 6 7 8 9 10

2008-09 2,98,47,569 1,48,826 990 3,27,38,566 1,62,563 1,313 Na Na Na2009-10 40,81,66,278 19,44,654 1,951 37,86,06,983 17,82,608 1,964 Na Na Na2010-11 90,31,85,639 41,94,017 3,706 74,96,02,075 34,49,788 13,690 16,77,72,367 7,62,501 1092011-12 77,03,25,229 37,32,446 4,494 97,33,44,132 46,74,990 15,328 31,53,95,543 14,88,978 1252012-13 59,73,10,766 33,03,179 7,389 95,92,43,448 52,74,465 20,101 2,37,66,846 1,32,861 292

88


Table 2.39: Product-wise market share in Currency Derivatives Volume

USD-INR EURO-INR GBP-INR JPY-INR USD-INR Futures Futures Futures Futures Options

2011-12 82.0 2.7 0.9 0.7 13.72012-13 76.4 1.7 0.8 0.9 20.2

Table 2.40: Trends in Interest Rate Derivatives at NSE

Year/ Month Total Open Interest at the end of the year / month No. of Contracts Turnover (` crore) No. of Contracts Turnover (` crore)

2009-10 1,60,894 2,975 758 142010-11 3,348 62 1 02011-12 2,15,200 3,959 0 02012-13 12 0.22 0 0

Sep-12 0 0 0 0Oct-12 0 0 0 0Nov-12 0 0 0 0Dec-12 0 0 0 0

C. Trends in Interest Rates Derivatives trends in turnover and open interest in

to 0.2 crore in 2012-13.

89


3. TRENDS IN THE BOND MARKET

I. Corporate Bond Market

Indian debt markets are dominated by the government securities markets. In the recent

`

``

` `

90


``

Table 2.41: Secondary Market: Corporate Bond Trades

Month / BSE NSE FIMMDA TotalYear No. of Amount No. of Amount No. of Amount No. of Amount

Trades (` crore) Trades (` crore) Trades (` crore) Trades (` crore)

1 2 3 4 5 6 7 8 9

2008-09 8,327 37,320 4,902 49,505 9,501 61,535 22,730 1,48,3612009-10 7,408 53,323 12,522 1,51,920 18,300 1,95,955 38,230 4,01,1982010-11 4,465 39,581 8,006 1,55,951 31,589 4,09,742 44,060 6,05,2742011-12 6,424 49,842 11,973 1,93,435 33,136 3,50,506 51,533 5,93,7832012-13 8,639 51,622 21,141 2,42,105 36,603 4,44,904 66,383 7,38,632

NSE BSE Total

` ` ` crore)1 2 3 4 5 6 7

2009-10$ 8,922 1,20,006 464 5,482 9,386 1,25,4882010-11 30,948 4,32,632 1,714 17,492 32,662 4,50,1232011-12 34,697 3,91,120 2,916 10,680 37,613 4,01,8002012-13 36,902 4,35,114 7,415 42,977 44,317 4,78,090

91


II. Wholesale Debt Market

` `

``

`

Table 2.43: Business Growth on the Wholesale Debt Market Segment of NSE

No. of Net Traded AverageMonth/Year Trades Value Daily (` Value (`

1 2 3 42008-09 16,129 3,35,950 1,4192009-10 24,069 5,63,816 2,3592010-11 20,383 5,59,447 2,2562011-12 23,447 6,33,179 2,6492012-13 39,280 7,92,214 2,248

Table 2.44: Instrument-wise Share of Securities Traded in the Wholesale Debt Market Segment of NSE

Month/ Year Govt. Dated Securities Treasury Bills PSU / Institutional Bonds Others

2008-09 69.7 16.9 8.9 4.42009-10 58.2 16.5 15.4 10.02010-11 54.5 17.6 19.6 8.32011-12 50.4 22.0 19.6 8.02012-13 51.6 23.7 16.3 8.3

92


4. MUTUAL FUNDS

over the previous year.

Table 2.45: Share of Participants in Turnover of Wholesale Debt Market Segment of NSE

Month Trading Fls / MFs / Primary Indian Foreign Members Corporates Dealers Banks Banks

1 2 3 4 5 6

2008-09 44.7 3.4 6.6 18.1 27.32009-10 49.2 2.6 4.6 19.8 23.7

2010-11 53.5 2.4 4.2 13.1 26.8

2011-12 53.3 4.2 3.7 16.4 22.5

2012-13 53.4 4.3 3.7 16.5 22.1

93


` `crore during the previous year indicating an

``

Table 2.46: Mobilisation of Resources by Mutual Funds(`

period

94


`

`

`against `

Sector-wise Resource Mobilisation

``

``

recorded in 2011-12. The net resources raised

`crore and `

previous year.

amounting to `

`

the previous year. The highest percentage

`` 20 crore in the previous year.

Table 2.47: Sector-wise Resource Mobilisation by Mutual Funds during 2012-13(`

Particulars Private Sector MFs Public Sector MFs UTI MF Grand

Open- Close- Interval Total Open- Close- Interval Total Open- Close- Interval Total Total

ended ended ended ended ended ended

1 2 3 4 5 6 7 8 9 10 11 12 13 14

Mobilisationof Funds

Repurchases /Redemption

Funds

95


percent compared to the previous year. This

to `

`

schemes at `

`

Table 2.48: Scheme-wise Resource Mobilisation and Assets under Management by Mutual Funds as on March 29, 2013

Schemes (` crore) (` crore) Funds as on March over March (` crore) 31, 2013 30, 2012 (` crore)

1 2 3 4 5 6 7

A. Income/ Debt Oriented Schemes

Subtotal (i+ii+iii) 857 72,13,578 71,23,396 90,183 4,97,451 32.7B. Growth/ Equity Oriented Schemes

Subtotal (i+ii) 347 43,364 57,951 -14,587 1,72,508 -5.3C. Balanced Schemes

D. Exchange Traded Fund

Subtotal (i+ii) 37 5,052 3,850 1,202 13,124 14.2E. Fund of Funds Investing Overseas

investing overseasTOTAL (A+B+C+D+E) 1,294 72,67,885 71,91,346 76,539 7,01,443 19.45

`

96


schemes.

dominant investors in the debt market than

Table 2.49: Number of Schemes by Investment Objective as on March 29, 2013Schemes Open-ended Close-ended Interval Total

1 2 3 4 5

A. Income/ Debt Oriented Schemes

Subtotal (i+ii+iii) 334 481 42 857(326) (512) (34) (872)

B. Growth/ Equity Oriented Schemes

Subtotal (i+ii) 328 19 0 347(335) (17) (0) (352)

C. Balanced Schemes

D. Exchange Traded Fund

Subtotal (i+ii) 37 0 0 37(35) (0) (0) (35)

E. Fund of Funds Investing Overseas

TOTAL (A+B+C+D+E) 751 501 42 1294(745) (530) (34) (1309)

97


`to `

`net investments in the debt segment rose to `

``

securities market.

Table 2.50: Trends in Transactions on Stock Exchanges by Mutual Funds(`

Equity Debt Total

Period Gross Gross Net Gross Gross Net Gross Gross Net Purchase Sales Purchase/ Purchase Sales Purchase/ Purchase Sales Purchase/ Sales Sales Sales

1 2 3 4 5 6 7 8 9 10

2008-09 1,44,069 1,37,085 6,985 3,27,744 2,45,942 81,803 4,71,814 3,83,026 88,7872009-10 1,95,662 2,06,173 -10,512 6,24,314 4,43,728 1,80,588 8,19,976 6,49,901 1,70,0762010-11 1,54,217 1,74,018 -19,802 7,62,644 5,13,493 2,49,153 9,16,861 6,87,511 2,29,3522011-12 1,32,137 1,33,494 -1,358 11,16,760 7,81,940 3,34,820 12,48,897 9,15,434 3,33,4632012-13 1,13,758 1,36,507 -22,749 15,23,393 10,49,934 4,73,460 16,37,150 11,86,440 4,50,711

98


5. PORTFOLIO MANAGEMENT

taking discretionary and non-discretionary

`

mutual funds as on March 31,2013

Percentage PercentageCategory to Total to Total

Folios Net Assets1 2 3

Total 100.00 100.00

March 31, 2013

Category Percentage to Percentage to Total Folios Total Net Assets

1 2 3

1 Private Sector Mutual Fund 65.21 82.60

2 Public Sector Mutual Funds 34.79 17.40(including UTI Mutual Fund)

Total (1+2) 100 100

99


`

percent in 2012-13 over the previous year. The

by both sectors.

6. FOREIGN INSTITUTIONAL INVESTMENT

investments needs.

`crore compared to `

in 2012-13. The combined gross purchases

percent to ``

percent to ` `crore during the same period in previous

by 220.1 percent to ``

``

`` `

Table 2.53: Assets Managed by Portfolio Managers No. of Clients AUM (` crore)

Discretio- Non- Advisory Total Discretio- Discretio- Non- Advisory Total nary Discretio- nary nary Discretio- nary (EPFO/ (Non nary PFs) EPFO/PFs)

100


Table 2.54: Investment by Foreign Institutional lnvestorsGross Purchase Gross Sales Net Net Cumulative

Year (` crore) (` crore) Investment Investment Investment (` crore) (USD mn.) (USD mn.)

1 2 3 4 5 6

Table 2.55: Investments by Mutual Funds and Foreign Institutional lnvestors(`

Net Investment by Mutual Funds Net Investment by FllsYear / MonthEquity Debt Total Equity Debt Total

1 2 3 4 5 6 72008-09 6,984 81,803 88,787 -47,706 1,895 -45,8112009-10 -10,512 1,80,588 1,70,076 1,10,220 32,438 1,42,6582010-11 -19,802 2,49,153 2,29,352 1,10,121 36,317 1,46,4382011-12 -1,358 3,34,820 3,33,463 43,738 49,988 93,7252012-13 -22,749 4,73,460 4,50,711 1,40,033 28,334 1,68,367

101


``

`

`and `

Table 2.56: QFI Investments during 2012-13

Gross Gross Net Net CumulativeYear Instrument Purchase Sales Investment Investment Investment

(` crore) (` crore) (` crore) (US $ mn.) * (US $ mn.)

2012-13

Debt`

Table 2.57: Allocation of Debt Investment limits to FIIs and Sub-accounts during 2012-13 (`

Date Govt. Debt Old Govt. Debt Long Corporate Corporate Debt Corporate Debt Term Debt Old Long Term Infra Long Term

102


``

highest at ``

``

``

Table 2.58: Debt Utilisation Status as on March 31, 2013S.No. Type of Instrument Upper Limit Limit Investment Limit Free limit Cap (in acquired (` crore) available (in ` crore) (in USD ` crore) by the with the as on March bn) entity entity 31, 2013 (including (in ` crore)

investment) (in ` crore)

2

Total 76.5 3,71,062 2,18,540 1,90,117 43,285 1,37,659

103


Table 2.59: Notional Value of Open Interest of Foreign Institutional investors in Derivatives during 2012-13

(`

Items Apr. May. Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar.

1 2 3 4 5 6 7 8 9 10 11 12 13

Options

Options

Interest rate 0 0 0 0 0 0 0 0 0 0 0 0

Total 13,43,092 16,04,586 16,01,743 17,90,345 18,53,714 17,39,582 18,71,304 18,60,611 16,98,898 20,26,144 17,25,070 17,38,526

openposition

Table 2.60: Notional Value of Participatory Notes (PNs) Vs Assets under Management of FIIsTotal value of Total value of Assets Under Total value of Total value of

PNs on Equity PNs on Equity Custody of FIIs (B) PNs on Equity PNs on Equity &Year/Month & Debt & Debt excluding (`

including PNs PNs on PNs on derivatives PNs on derivatives on derivatives derivatives as % of B as % of B

(` `

2008-09 69,445 55,640 3,91,954 17.7 14.22009-10 1,45,037 1,32,557 9,00,869 16.1 14.72010-11 1,75,097 1,33,098 11,06,550 15.8 12.02011-12 1,65,832 1,15,332 11,07,399 15.0 10.42012-13 1,47,905 1,04,229 13,36,557 11.1 7.8

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7. ALTERNATIVE INVESTMENT FUNDS

experience in advanced countries have

I. Category I AIF

II. Category II AIF

III. Category III AIF

` `

``

Table 2.61: Cumulative Net Investments by VCFs and FVCIs

(`

Year VCFs FVCIs Total (*)

Note:

105


8. CORPORATE RESTRUCTURING

cross-border takeovers by Indian companies

improvising the provisions so as to promote

investors. The data pertaining to the market

`

Table 2.62: Category-wise Investors in VCFs

CategoryNumber of Percentage to Cumulative Percentage to totalinvestors total investors Investments investments

(`

Total 40,339 100.00 48,294 100.0

106


Table 2.63: Trends in Corporate Restructuring

Objectives Total Change in Control Consolidation of Substantial No. of Amount of Management Holdings Acquisition issue (` crore) No. of Amount No. of Amount No. of Amount issue (` crore) issue (` crore) issue (` crore)

1 2 3 4 5 6 7 8 92008-09 80 3,713 13 598 6 400 99 4,7112009-10 56 3,649 14 1,761 6 448 76 5,8582010-11 71 10,251 17 8,902 14 145 103 18,7482011-12 57 18,726 8 286 6 294 71 19,3052012-13 14 836 34 8,284 27 2,904 75 12,024

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Part Three: Regulation of Securities MarketPART THREE: REGULATION OF SECURITIES MARKET

1. INTERMEDIARIES

I. Streamlining the Process of Initial / Permanent Registration of IntermediariesThe process for streamlining the

registration and approvals by enhancing the transparency continued during the year 2012-13. The policy of sending response to the applicants, in a time-bound manner i.e., within 30 days was adhered to. The status of processing of each application for Initial/Permanent registration of intermediaries while clearly indicating why it is pending and also whether pending with SEBI or with the intermediary, was displayed on SEBI website on a monthly basis. With a view to ensure higher level of transparency and accountability within SEBI, it is also mentioned on the website that in case any application

hesitate to approach the concerned Division Chief or the Executive Director of the Market Intermediaries Regulations and Supervision Department. The respective e-mail IDs of

The practice of seeking details of corrective measures taken by the applicants where administrative and quasi-judicial actions have been initiated by SEBI against them or their associate companies, at the time of processing the applications for registration or other approvals, has greatly improved the compliance culture among the intermediaries.

II. Registered Intermediaries Other than Stock Brokers and Sub-BrokersPursuant to the amendment to the

respec t ive Regula t ions in 2011-12 , applicants found eligible are granted “initial

Section 11 of the SEBI Act, 1992

applicant. Before the expiry of their initial registration, if they so desire, they may apply for “permanent registration” in order to continue their business.

During 2012-13, 11 merchant bankers, three registrars to an issue and share transfer agents, 38 depository participants, four bankers to an issue and two debenture trustees were granted new/ initial registration. Further, 62 merchant bankers, 29 registrars to an issue and share transfer agents, 176 depository participants, one credit rating agency, one underwriter, 24 bankers to an issue and 12 debenture trustees were granted permanent registration. Thus, overall 58 new entities were granted initial registration whereas 305 existing entities were given permanent registration (Table 3.1 and 3.1a).

To bring uniformity in the KYC Requirements for the securities market and set up a mechanism wherein one or more SEBI regulated KYC Registration Agency (KRA) shall undertake KYC for all clients in the securities market. As on March 31, 2013,

3.1).

It was decided to allow Qualified Foreign Investors (QFI), to directly invest in Indian equity market in order to widen the

reduce market volatility and to deepen the Indian capital market. These investments can be made by opening a demat account with SEBI registered Depository Participants who meet the prescribed eligibility criteria and have got prior approval from SEBI. These

108


on March 31, 2013, there are 31 DPs at CDSL and 29 DPs at NSDL who have got the prior approval to act as QDP. (Table 3.1)

III. Registration of Stock BrokersDuring 2012-13, 1,081 new stock brokers

were registered with SEBI in cash segment compared to 256 in 2011-12. Further, there

were 260 cases of cancellation/ surrender of brokers in 2012-13 compared to 184 in 2011-12. The total number of registered stock brokers as on March 31, 2013, increased to 10,128 from 9,307 in 2011-12 (Table 3.2). Applications of brokers and sub-brokers in the process of registration are given in Table 3.2a.

Table 3.1: Registered Intermediaries other than Stock Brokers and Sub-Brokers(Number)

Type of Intermediary As on March 31 Absolute Percentage2012 2013 Variation Variation

1 2 3 4 5Registrar to Issue and Share Transfer Agent 74 72 -2 -2.7Merchant Banker 200 199 -1 -0.5Underwriter 3 3 0 0.0DPs - NSDL 287 288 1 0.3

of which that acts as QDP Na 29 29 NaDPs - CDSL 567 577 10 1.8

of which that acts as QDP Na 31 31 NaCredit Rating Agency 6 6 0 0.0Bankers to an Issue 56 57 1 1.8Debenture Trustee 32 32 0 0.0KYC (Know Your Client) Registration Agency (KRA) 0 5 5 NA

Table 3.1a: Intermediaries other than Stock Brokers and Sub-Brokers in the Process ofRegistration

Registration GrantedApplication received During the Year 2012-13 Pending as on

during the Year (including those March 31,Type of Intermediary 2012-13 applications received 2013

in previous year)Initial Permanent Initial Permanent Initial Permanent

1 2 3 4 5 6 7Registrar to Issue and Share Transfer Agent 5 38 3 29 3 15Merchant Banker 10 38 11 62 7 15Underwriter 0 2 0 1 0 1Depository Participant 31 103 38 176 11 37Credit Rating Agency 0 0 0 1 0 0Bankers to an Issue 5 34 4 24 5 12Debenture Trustee 1 12 2 12 0 4Total 52 227 58 305 26 84

109

Part Three: Regulation of Securities Market

The stock exchange MCX SX was granted permission by SEBI to commence trading in equities during the year 2012-13. 458 Stock Brokers were granted registration for trading on this exchange.

The number of registered brokers was highest in NSE (1,416) followed by BSE (1,361), Inter-Connected Stock Exchange (ISE) (883) and Calcutta Stock Exchange (CSE) (869) (Table 3.3). The number of corporate brokers were also highest in NSE (1,261) followed by BSE (1,162) and OTCEI (496). Corporate brokers constitute 89.1 percent of the total stock brokers at NSE whereas the corporate brokers constituted 85.4 percent and 76.7 percent at BSE and OTCEI, respectively. Highest number of stock brokers in ‘proprietorship’ category was at CSE (616), followed by ISE (537). Stock brokers in ‘partnership’ category were highest in NSE (81), followed by CSE (43). Bhubaneswar and Coimbatore Stock Exchanges did not have any brokers in the ‘partnership’ category

In equity derivative segment, 34 trading members (TM), three clearing members (CM) and eight self-clearing members (SCM) were granted registration at NSE Futures and Options (F&O) segment during 2012-13. In case of BSE F&O segment, the

three respectively. 313 trading members and 72 clearing members were granted registration at MCX-SX in Futures and Options (F&O) segment during the same period. Further, four trading members were granted registration at Madras Stock Exchange (MSE), 59 trading members were granted registration at Madhya Pradesh Stock Exchange (MPSE) and 17 trading members

Exchange (CSE) during 2012-13 (Tables 3.4).

In the currency derivatives segment, total number of registered members with NSE, BSE, MCX-SX and USE in various categories were 1,074, 189, 1,040 and 473 respectively at the end of March 31, 2013 (Table 3.5).

Table 3.2: Registered Stock Brokers(Number)

Details 2011-12 2012-131 2 3

Registered Stock Brokers in the beginning of the year 9,235 9,307Addition during the Year 256 1,081Reconciliation / Cancellation/ Surrender of Memberships 184 260Registered Stock Brokers as on March 31 9,307 10,128

Table 3.2a: Stock Broker and Sub-Broker Applications under the Process of Registration*(Number)

Category of Application Number of Applications under Process1 2

Registration – Brokers in Cash Segment 96Registration – Brokers in Equity Derivatives Segment 148Registration – Brokers in Currency Derivatives Segment 81Sub-broker 42

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Proprietorship Partnership Corporate** TotalStock Exchange 2012 2013 2012 2013 2012 2013 2012 2013

Nos. Percent Nos. Percent Nos. Percent Nos. Percent Nos. Percent Nos. Percent Nos. Nos.1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Ahmedabad 137 40.3 137 40.4 21 6.2 22 6.5 182 53.5 180 53.1 340 339Bangalore 134 49.1 127 48.7 6 2.2 6 2.3 133 48.7 128 49.0 273 261BSE 181 13.2 171 12.6 30 2.2 28 2.1 1,164 84.6 1,162 85.4 1,376 1,361Bhubaneswar 195 91.1 185 91.6 0 0.0 0 – 19 8.9 17 8.4 214 202

Cochin 350 79.4 320 78.6 9 2.0 9 2.2 82 18.6 78 19.2 441 407Coimbatore 88 64.7 87 64.4 0 0.0 0 0.0 48 35.3 48 35.6 136 135Delhi 190 38.2 183 37.8 32 6.4 30 6.2 275 55.3 271 56.0 497 484Gauhati 90 95.7 59 95.2 1 1.1 1 1.6 3 3.2 2 3.2 94 62ISE 552 60.2 537 60.8 28 3.1 27 3.1 336 36.6 319 36.1 917 883Jaipur 447 94.9 434 94.8 6 1.3 6 1.3 18 3.8 18 3.9 471 458Ludhiana 215 70.3 213 70.1 2 0.7 2 0.7 89 29.1 89 29.3 306 304MPSE 162 77.9 187 73.1 1 0.5 1 0.4 45 21.6 68 26.6 208 256Madras 112 51.9 104 52.5 14 6.5 13 6.6 90 41.7 81 40.9 216 198NSE 72 5.1 74 5.2 80 5.6 81 5.7 1,269 89.2 1,261 89.1 1,423 1,416OTCEI 145 21.0 135 20.9 18 2.6 16 2.5 528 76.4 496 76.7 691 647Pune 123 67.6 117 67.6 7 3.9 7 4.1 52 28.6 49 28.3 182 173UPSE 244 77.0 210 75.0 3 1.0 3 1.1 70 22.1 67 23.9 317 280Vadodara 245 78.3 242 78.1 3 1.0 3 1.0 65 20.8 65 21.0 313 310MCX-SX 0 0.0 20 4.4 0 0.0 10 2.2 0 0.0 428 93.5 0 458

* As on March 31 of the respective year.

Note: Percent ownership represents category-wise percent share for a particular exchange.

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Table 3.4: Number of Registered Members in Equity Derivatives Segment(Number)

NSE BSE MSE MPSE CSE MCX-SX Regis- Regis- Regis- Regis- Regis- Regis- Regis- Regis- Regis- Regis- Regis- Regis-

Type trations trations trations trations trations trations trations trations trations trations trations trationsof granted at the granted at the granted at the granted at the granted at the granted at the

Member during end of during end of during end of during end of during end of during end of 2012-13 March 2012-13 March 2012-13 March 2012-13 March 2012-13 March 2012-13 March 2013 2013 2013 2013 2013 2013

1 2 3 4 5 6 7 8 9 10 11 12 13TradingMember 34 1,374 63 993 4 30 59 89 17 17 313 313ClearingMember 3 270 7 148 0 0 0 0 0 0 72 72SelfClearingMember 8 454 3 41 0 0 0 0 0 0 0 0

Total 45 2,098 73 1,182 4 30 59 89 17 17 385 385

Table 3.5: Number of Registered Members in Currency Derivatives Segment(Number)

NSE BSE MCX-SX USEType of Registration Registrations Registrations Registrations Registrations Registrations Registrations RegistrationsMember during at the end of during at the end of during at the end of during at the end of

2012-13 March 2013 2012-13 March 2013 2012-13 March 2013 2012-13 March 20131 2 3 4 5 6 7 8 9

Trading Member 45 878 0 158 91 864 12 414Clearing Member 5 186 0 31 8 163 0 56Self-clearing Member 2 10 0 0 12 13 0 3Total 52 1,074 0 189 111 1,040 12 473

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IV. Registration of Sub-brokersThe number of registered sub-brokers

has declined by 9.1 percent from 77,165 as on March 31, 2012 to 70,178 as on March 31, 2013. However, the number of Authorised Persons (APs) as approved by the stock exchanges in accordance with SEBI Guidelines, has increased substantially (27.1 percent) during the year (from 98,533 as on March 31, 2012 to 1,25,273 as on March 31, 2013). Stock brokers were allowed to provide market access to clients through APs, in addition to sub-brokers, with a view to expand the reach of the markets for exchange traded products, vide SEBI circular dated November 6, 2009. Thus, while number of sub-brokers has come down, the increased

presence of APs has ensured the increase in reach of the markets for exchange traded products, as intended while introducing the concept of APs (Table 3.6).

V. Recognition of Stock ExchangesThe stock exchanges are granted

recognition by SEBI under Section 4 of the Securities Contracts (Regulation) Act, 1956. Presently, there are 21 stock exchanges recognised under SC(R)A. Out of which, eight stock exchanges have permanent recognition. (Table 3.7) During the year, renewal of recognition was granted to 12 stock exchanges. Application of Coimbatore Stock Exchange Ltd. for exit is under examination. Beside, the Hyderabad Securities

Table 3.6: Registered Sub-brokers*2012 2013

Stock Exchange Number Percentage of Total Number Percentage of Total1 2 3 4 5

Ahmedabad 81 0.1 77 0.1Bangalore 158 0.2 158 0.2Bhubaneswar 16 0.0 14 0.0BSE 33,852 43.9 31,635 45.1

Cochin 41 0.1 41 0.1Coimbatore 20 0.0 20 0.0Delhi 222 0.3 200 0.3Gauhati 4 0.0 4 0.0Interconnected 1 0.0 0 0.0Jaipur 30 0.0 30 0.0Ludhiana 28 0.0 21 0.0Madhya Pradesh 5 0.0 5 0.0Madras 107 0.1 103 0.1NSE 42,327 54.9 37,600 53.6OTCEI 14 0.0 14 0.0Pune 156 0.2 156 0.2

Vadodara 29 0.0 27 0.0

Total 77,165 100 70,178 100

* As on March 31 of the respective year.

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and Enterprises Ltd (erstwhile Hyderabad Stock Exchange) has been granted exit by SEBI vide order dated January 25, 2013. (Table 3.8)

VI. Memorandum of Understanding

Pursuant to Section 13 of Securities Contracts (Regulation) Act, 1956, stock exchanges can enter into an MoU for trading. In this regard, Madhya Pradesh Stock Exchange operationalised trading under such MoU with NSE and BSE. Further, Madras

Sr. No. Exchanges Recognition1 2 31 Ahmedabad Stock Exchange Permanent2 Bangalore Stock Exchange Permanent3 Bombay Stock Exchange Permanent

5 Delhi Stock Exchange Permanent6 Madhya Pradesh Stock Exchange Permanent7 Madras Stock Exchange Permanent8 National Stock Exchange of India Permanent

Sr. Exchanges Date of Period

1 2 3 4

1. Ludhiana Stock Exchange Apr 27, 2012 Apr 28, 2012 – Apr 27, 20132. Gauhati Stock Exchange Apr 30, 2012 May 1, 2012 – Apr 30, 2013

4. Bhubaneswar Stock Exchange Jun 05, 2012 Jun 05, 2012 – Jun 04, 20135. OTC Exchange of India Aug 22, 2012 Aug 23, 2012 – Aug 22, 20136. Pune Stock Exchange Aug 29, 2012 Sept 02, 2012 – Sept 01, 20137. MCX Stock Exchange Ltd. Sept 11, 2012 Sept 16, 2012 – Sept 15, 20138. Cochin Stock Exchange Nov 6, 2012 Nov 08, 2012 – Nov 07, 20139. Interconnected Stock Exchange of India Nov 09, 2012 Nov 18, 2012 – Nov 17, 2013

10. Vadodara Stock Exchange Dec 26, 2012 Jan 04, 2013 – Jan 03, 201411. Jaipur Stock Exchange Jan 8, 2013 Jan 09, 2013 – Jan 08, 201412. United Stock Exchange of India Mar 20, 2013 Mar 22, 2013 – Mar 21, 2014

operationalised trading with NSE.

VII. Registration of Foreign Institutional InvestorsSub-accounts and CustodiansDuring 2012-13, there was a decrease in

the number of Foreign Institutional Investors (FIIs) registered with SEBI. As on March 31, 2013, there were 1,757 FIIs registered with SEBI as compared to 1,765 a year ago, showing a decrease of eight (in number) during the year. However, the number

114


of registered sub-accounts has increased marginally to 6,335 as on March 31, 2013 compared to 6,322 as on March 31, 2012 (Table 3.9).

VIII. Registration of Collective Investment Schemes (CIS)

As on March 31, 2013, there was only

Investment Management Company Ltd. which was registered during 2008-09.

IX. Registration of Mutual Funds

As on March 31, 2013, 52 mutual funds were registered with SEBI, of which 45 were in the private sector and seven (including UTI) were in public sector. During 2012-13,

Fund, SREI Mutual Fund, IIFCL Mutual Fund and IL&FS Mutual Fund were granted registration of which SREI Mutual Fund, IIFCL Mutual Fund and IL&FS Mutual Fund are dedicated Mutual Funds for Infrastructure Debt Fund (IDF).

During 2012-13, Fidelity Mutual Fund was acquired by L&T Mutual Fund following which registration of Fidelity Mutual Fund was cancelled. AIG Mutual Fund sold its entire stake to PineBridge Investments

Table 3.9: Number of Registered FIIs, Sub-accounts and Custodians

(Number)As on As on

Particulars March March31, 2012 31, 2013

1 2 3Number of FIIs 1,765 1,757Number of Sub-accounts 6,322 6,335Number of Custodians 19 19

fresh FIIs were registered. Further, 581 fresh sub-account were registered with SEBI during

have been registered by SEBI out of which USA has the maximum number of 578, followed by UK (207), Luxembourg (125), Mauritius (101), Canada (79) and Singapore (75) respectively. Status of registration of FIIs, sub-accounts and custodians during 2012-13 is provided in Table 3.9a.

Table 3.9a: Status of Registration of FII, Sub-accounts and Custodians during 2012-13FII Sub Account Custodian

Particulars Fresh Fresh FreshRegi- Total Regi- Total Regi- Total

stration stration stration1 2 3 4 5 6 7 8 9 10

I. Application received for fresh registration / renewal 106 422 528 571 1458 2029 0 17 17a. Applications

registered / renewed 78 384 462 581 1416 1997 0 16 16b. Applications pending# 26 79 105 107 277 384 2 1 3c. Application rejected /

returned* 3 0 3 5 0 5 NA NA NA

got subsequently registered or rejected.

applications which were received before FY 2012-13.

115


Japan Co. Ltd following which registration of AIG Mutual Fund was cancelled and it was renamed to PineBridge Mutual Fund. Bank of India acquired 51% stake in Bharti AXA Mutual Fund, pursuant to which its name was changed to BOI AXA Mutual Fund. Invesco Hong Kong Limited acquired 49 percent stake in Religare Mutual Fund(Table 3.10).

SEBI notified Alternative Investment Funds (AIFs) Regulations, 2012 (AIF Regulations, 2012) on May 21, 2012. AIF are basically funds established or incorporated in India for the purpose of pooling in capital from Indian and foreign investors for investing. During 2012-13, 42 AIF have been registered with SEBI.

Out of 42 registered Alternative Investment Funds (AIFs), Category I, II and III AIFs are 13, 22 and 7 respectively. Further, out of the 13 AIFs registered in Category I,

VCF, Infrastructure, SME and Social AIFs respectively.

XI. Fees and Other Charges

Details of the amount of fees and other charges (un-audited) collected by SEBI from market intermediaries on both recurring and non-recurring basis is provided in Table 3.12. During 2012-13, the total amount of fees and other charges received was ` 149 crore (unaudited) as against ` 154.5 crore in 2011-12 (audited). The recurring fee was 59.4 percent in 2012-13 as compared to 55.9 percent in 2011-12. The largest amount of ` 34.8 crore which was fully recurring in nature was collected from derivatives members’ registration, while the second largest recurring fee of ` 20 crore was collected from stock brokers and sub-brokers. In non recurring fee category, the highest fee was collected from FIIs (` 11.6 crore) followed by fees from mutual funds (` 11.2crore), takeover fees (` 10.3 crore), and sub-accounts (` 10.2 crore).

SEBI(Number)

As on As onSector March March

31, 2012 31, 2013

1 2 3

Public Sector (including UTI) 5 7

Private Sector 44 45

Total 49 52

Table 3.11: Registered Venture Capital Funds / AIFs

(Number)As on As on

VCFs March March31, 2012 31, 2013

1 2 3

VCF 207 211

FVCI 175 182

AIFs Na 42

X. Registration of Venture Capital FundsThere were 211 domestic and 182 foreign

venture capital funds registered with SEBI as on March 31, 2013 compared to 207 and 175 funds respectively registered with SEBI as on March 31, 2012 (Table 3.11).

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Table 3.12: Fees and other Charges(` crore)

2011-12 2012-13 (Unaudited)Recu- Non-re- Total Recu- Non-re- Total

Particulars rring curring Fees rring curring Feesfees fees Received fees fees Received

# ## # ## (Un-audited)

1 2 3 4 5 6 7

Merchant Bankers 1.5 2.6 4.1 3.0 2.0 5.0Underwriters 0.0 0.0 0.0 0.1 0.0 0.1Portfolio Managers 3.4 3.6 7.0 2.8 2.5 5.2Registrars to an Issue and Share Transfer Agents 0.1 0.0 0.1 0.4 0.1 0.5Bankers to an Issue 0.1 0.2 0.3 1.1 0.8 1.9Debenture Trustees 0.1 0.2 0.3 0.5 0.4 0.9Takeover fees 0.0 6.5 6.5 0.0 10.3 10.3Mutual Funds 2.3 11.9 14.2 2.4 11.2 13.6Stock Brokers and Sub-Brokers 14.4 0.0 14.4 20.0 0.0 20.0Foreign Institutional Investors 0.0 14.1 14.1 0.0 11.6 11.6Sub Account – Foreign Institutional Investors 0.0 11.2 11.2 0.0 10.2 10.2Depositories 0.2 0.0 0.2 0.0 0.2 0.2Depository Participants 0.1 0.9 1.0 0.1 2.2 2.3Venture Capital Funds 0.0 1.7 1.7 0.0 0.2 0.2Custodian of Securities 9.2 0.0 9.2 10.0 0.2 10.2Approved Intermediaries under Securities Lending Scheme 0.1 0.0 0.1 0.0 0.0 0.0Credit Rating Agencies 0.3 0.1 0.4 0.1 0.0 0.1Listing Fees Contribution from Stock Exchanges 7.1 0.0 7.1 6.9 0.0 6.9Alternative Investment Scheme 0.0 0.0 0.0 0.0 2.8 2.8KYC Registration Agency 0.0 0.1 0.1 0.0 0.1 0.1Foreign Venture Capital 0.0 1.2 1.2 0.0 0.8 0.8Derivatives Members registration 39.5 0.0 39.5 34.8 0.0 34.8Informal Guidance Scheme 0.0 0.1 0.1 0.0 0.0 0.0Regulatory Fees 8.2 0.0 8.2 6.4 0.0 6.4

Total 86.5 68.1 154.5 88.5 60.5 149.0

Notes:# Recurring fees: Fees which is received on annual / 3-yearly / 5-yearly basis (includes Fee / Service Fee / annual fee

/ Listing Fees from exchanges / Regulatory Fees from stock exchanges).

Fee / Application Fee / Takeover Fees / Informal Guidance Scheme / FII Registration and FII Sub – Accounts Registration.

Note:1. Since the amount realised by way of penalties on or after 29.10.2002 has been credited to the Consolidated Fund

of India, therefore, the same has not been included in the fees income of SEBI since 2003-04.2. Stock brokers and sub-brokers fee includes annual fees and turnover fees.3. Stock brokers and derivatives fees are of recurring nature and depend on the trading turnover of the stock brokers

and members of derivatives segment.

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2. CORPORATE RESTRUCTURING

I. Substantial Acquisition of Shares and TakeoversAs on March 31, 2012, total 32 draft

Regulations) and observations were issued on

for issuance of observations as on March 31, 2013 (Table 3.13).

Regulation 4 of Takeover Regulations deals with applications for seeking exemption from open offer obligations provided in Chapter III of Takeover Regulations (referred as Takeover Panel Applications). A total of 22 applications were examined during 2012-13, of which, in 10 applications, exemption was

applications were returned/ withdrawn/ rejected (Table 3.13). There were nine Takeover Panel applications pending as on March 31, 2013.

offers were launched for fulfilling open

3.14)

for Open Offers filed under Regulat ion 18(1) of SEBI (SAST) Regulations, 1997 {Old Takeover Regulations} and under Regulation 16(4) of SEBI (SAST)

Regulations} during 2012-13

Status Numberof cases

1 2

under Old Takeover Regulations 2

under New Takeover Regulations 74

Total 108Observations issued by SEBI during 2012-13 87

March 31, 2013 21Takeover Panel ApplicationsApplications as on March 31, 2012 10Applications received during 2012-13, under New Takeover Regulations 12

Total Applications 22Applications disposed of during 2012-13 13Applications in process as on March 31, 2013 9

(Number) Exemption

1 2 32009-10 76 182010-11 101 162011-12 71 92012-13 80 10

II. BuybackThe total of 20 buyback offers were

received during 2012-13 indicating a decrease

during 2011-12. Out of the 17 cases filed during the year for buyback through open market purchase method, three cases were opened and closed and 14 cases were opened but did not close. Further, there were three

opened and also closed during 2012-13 (Table 3.15).

118


and closed during 2012-13 as compared to

` 1,277 crore as ` 13,058

crore in 2011-12 indicting a decrease of 90.2 percent over the previous year. It was also

opened and closed during 2012-13 that there

completely utilised.

3. SUPERVISIONSupervision of intermediaries through

adjudications in case of violation of rules and regulations and administrative and statutory actions are essential features of effective enforcement by SEBI.

SEBI conducts inspections directly as well as through organisations like stock exchanges, depositories, etc. Inspections on a periodic basis were conducted to verify the compliance levels of intermediaries. Special purpose i.e. theme based inspections were also conducted on the basis of investor complaints, references, surveillance reports, specific concerns, etc. Special purpose inspections of major stock exchanges as well as the depositories were also carried out in

of their audit/inspections and the action taking process.

I. Promotion and Regulation of Self Regulatory OrganisationsSEBI (Self Regulatory Organisations)

19, 2004 with the objective to promote organisation of intermediaries representing a particular segment of the securities market as a self regulated entity / organisation. For recognition of organisation of intermediaries as SROs, SEBI held discussions with various bodies like Association of Merchant Bankers of India (AMBI), Association of NSE Members of India (ANMI) and Registrars Association of India (RAIN). The various measures taken in 2012-13 for promotion and regulation of Self Regulatory Organisations are:

distributors, SEBI (Self Regulatory O r g a n i s a t i o n s ) ( A m e n d m e n t s ) Regulations, 2013 w.e.f. January 7,

of distributor and issuer, revised the

that a distributor shall be deemed to be an intermediary.

B. Under Regulation 14 of SEBI (Investment Advisers) Regulations, 2013, SEBI may recognise any body or body corporate

Table 3.15: Buyback cases during 2012-13

Buy-back Cases No. of Cases Buy-back Size Actual amount utilized for (` crore) buy-back of securities (`crore)

1 2 3 4

Buy-back through Open MarketCases Received, Opened and Closed 3 332 264.1Cases Received, Opened but not Closed 14 753.2 Na

Cases Received, Opened and Closed 3 191.6 191.6

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for the purpose of regulating investment advisers and delegate administration and supervision of investment advisers to such body or body corporate. As decided in the Board Meeting in which the Regulations were approved, SEBI will directly register and regulate the Investment Advisors till such time an SRO is recognised for the purpose.

II. Inspection of Market IntermediariesThe number of inspect ions has

substantially increased from 111 in the

year 2012-13. The inspection process of intermediaries has been further streamlined with a view to improve the quality such as selection of themes for inspections, questionnaire for inspections and follow up action.

considering the comments of intermediaries,

where improvement was required by them. They were also required to report to SEBI about the corrective steps taken by them and also place the same before their board/partners/proprietor, as the case may be. These steps taken by SEBI have improved the level of compliance among the intermediaries. Administrative and quasi-judicial actions

intermediaries.

A. Inspection of Stock Brokers

During the year 2012-13, 162 stock brokers have been inspected as against 69

risk-based inspections were carried out during the year. The focus of the inspections included themes such as compliance of norms regarding Anti-money Laundering,

basis, Segregation of clients and proprietary funds/securities, KYC norms, clearing operations, etc. During inspections, the compliance of specific provisions of SEBI

of inspection of stock brokers and sub-brokers carried out are given in Table 3.16.

Table 3.16: Inspection of Stock Brokers/Sub-brokers

Particulars 2011-12 2012-13

1 2 3

Inspections Completed – 69 162Stock Brokers

Inspections Completed – 12 39Sub - brokers

Total 81 201

Table 3.16a: Inspection by Stock Exchange/ Clearing Corporation(Number)

Year NSE BSE MCX-SX USE1 2 3 4 5

2011-12 1,044 746 133 992012-13 1,384 936 245 89

In compliance with the requirement of inspecting all active members by the stock exchanges, the number of entities inspected by the stock exchanges is given in Table 3.16a:

Additionally, stock brokers/clearing members are required to carry out complete internal audit on a half yearly basis by independent auditors. By and large, all the

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active stock brokers/clearing members of the four major stock exchanges (NSE, BSE, USE

audit reports for the half year ended March 31, 2012 and September 30, 2012, to the respective stock exchanges.

The system of internal audits of stock brokers by outside professionals, inspections by stock exchanges and by SEBI has improved the compliance level of stock brokers.

B. Inspection of Other Intermediaries

Special focus inspections of inter-mediaries are undertaken by SEBI to ascertain

SEBI carried out inspection of merchant bankers to check the due diligence exercised in respect of pre-issue and post-issue activities. Apart from such due diligence inspections, inspections of merchant bankers were also carried out to ascertain compliance with SEBI Circular on disclosure of track record of public issues managed by merchant bankers.

Inspection of registrars to an issue was carried out to check the allotment process followed and the redressal of investor complaints. Besides, inspections of share transfer agents including in-house share transfer agents were conducted to ascertain the process followed by them in executing investor requests such as transmission, etc. and the Disaster Recovery and Business Continuity Plan (DR&BCP) adopted by them.

SEBI conducted inspections of debenture trustees based on the number of public issues

with the applicable regulatory and statutory requirements with focus on their systems and controls with respect to monitoring of payment of interest/ redemption amount, processing of investor grievances and action

taken in case of defaults by issuer companies.

Inspection of Portfolio Managers were conducted so to ascertain various compliance requirements including the Know Your Client (KYC) due diligence carried out by the Portfolio Manager. A total of seven inspections were carried out. Further, 58 pre-registration/renewal visits of portfolio managers were conducted. This was primarily done to check the general compliance level in the portfolio managers.

During 2012-13, inspections were completed for 51 depository participants, 16

10 debenture trustees and 17 RTI & STA. The total number of inspections conducted by SEBI of these intermediaries has increased substantially during the year, from 30 in 2011-12 to 99 in 2012-13 (Table 3.17). There was special focus on follow-up action after the inspections so that corrective steps are taken by the intermediaries.

Table 3.17: Inspection of other Market Intermediaries

(Number)

Particulars 2011-12 2012-2013

1 2 3

Debenture Trustee 3 10

Registrar to Issue and Share Transfer Agent (RTI&STA) 2 17

Merchant Banker 7 16

Depository Participant 13 51

Credit Rating Agency 5 5

Total 30 99

III. Inspection of DepositoriesDuring the inspection of depositories,

a review of the market operations,

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control of the depository is conducted to ascertain as to whether:-a. The procedures and practices of the

depository are in compliance with the Depositories Act 1996, SEBI (Depositories and Participants), Regulations, 1996, SEBI circulars, the bye-laws etc.

b. The book of account are being maintained by the depository, in the

and Participants), Regulations, 1996c. The complaint received by depositories

from participants, issuers, issuer’s agent,

are redressed;

During 2012- 13, comprehensive inspection of Central Depository Services (India) Limited (CDSL) was conducted to ascertain the systems, procedures and practices in conducting the inspection of depository participants by depositories and desirability of adopting the practices by depositories.

IV. Inspection of Stock ExchangesDuring the inspect ion of s tock

exchanges, a review of market operations,

control of the stock exchange is conducted to ascertain as to whether :-

and growing market to the investors ,

in accordance with the SC(R) Act , 1956 and rules framed there under,

guidelines and instructions issued by SEBI/ Government of India (GoI) from time to time and

any, imposed on it at the time of renewal

/ grant of its recognition under section 4 of the SC(R) Act, 1956.

During the year 2012-13, comprehensive inspections were carried out at the following stock exchangesa. MCX Stock Exchange (MCX-SX)b. United Stock Exchange (USE)

d. Bombay Stock Exchange (BSE)

year 2012-13, compliance inspections were carried at the following stock exchanges:-a. Pune Stock Exchange (PSE)b. Inter-connected Stock Exchange of India

(ISE)c. Cochin Stock Exchanged. Ludhiana Stock Exchange (LSE)e. Gauhati Stock Exchange (GSE)f. Jaipur Stock Exchange (JSE)g. OTC Exchange of India (OTCEI)

The Compliance inspect ions of exchanges were carried out for the purpose of renewal of recognition of stock exchange.

V. Prevention of Money Laundering

as one of the largest threats posed to the financial system of a country. The fight

emerging threat with grave consequences for both the political and economic standing of a jurisdiction. Rapid developments and

together with improvements in technology and communication channels continue to pose serious challenges to the authorities and institutions dealing with anti-money laundering and combating financing of terrorism (AML and CFT).

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The Prevention of Money Laundering Act, 2002 (PMLA) and the rules framed there-under, which have been brought into force

the global war against money laundering and

been amended in December 2012 so that the legislative and administrative framework

capable of handling new evolving threats in

of terror.

As in the past, during 2012-13, SEBI has

risk emanating from money laundering and

The following steps have been taken in this regard:

To further tackle the risk posed by the misuse of complex legal structures, such as, companies, partnerships, trusts, etc. in

SEBI, vide circular dated January 24, 2013 has made it mandatory for its intermediaries

take all reasonable steps to verify the identity of such BOs for clients who are legal persons/arrangements. These guidelines are in line with the revised Financial Action Task Force (FATF) standards. (Box 3.1 may be referred for details)

B. Inspections on AML/CFT related issues

SEBI has appropriately included the AML/CFT risks as part of its inspection

of intermediaries, such as, stock brokers, depository participants and mutual funds. SEBI has also carried out specific theme based inspections of intermediaries focusing on compliance with KYC norms (which includes Client Due Diligence) and AML/

purpose inspections of stock brokers to check their compliance with KYC norms, which were conducted last year, in 2012-13 SEBI has carried out 40 special purpose inspections of stock brokers to check their compliance with the AML/CFT framework that has been put in place. Further 35 inspections of stock brokers and six depository participants focusing on compliance with KYC norms have also been carried out in 2012-13. In addition to the special purpose inspections conducted by SEBI, compliance with AML/CFT norms is also

during their inspections of stock brokers and depository participants and also at the time of half yearly internal audits by independent professionals. Depository participants are also required to undergo concurrent audits with respect to their operations, which includes account opening/KYC/AML norms. Appropriate sanctions are applied where AML/CFT violations/discrepancies are observed. Further, the penalty structure of the stock exchanges has been recently reviewed and the penalties imposed for KYC and AML/CFT discrepancies/violations have been suitably enhanced.

The table given below provides data on the number of members/participants against whom action for AML/CFT discrepancies has been taken by the exchanges and depositories in 2012-13:

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Table 3.18: Actions against AML / CFT Violations / DiscrepanciesParticular NSE BSE CDSL NSDL

1 2 3 4 5No. of members where AML discrepancies were observed and action taken 62 310 * 57 34of whichAdvice issued 58 308 * 57 30Fines levied 4 16 * 1 5

`) 35,000 3,68,000 * 2,500 3,700

31, 2013 irrespective of the period in which inspection was conducted

(contd.)

and/or persons on whose behalf a transaction is being conducted, and includes a person who exercises ultimate

For clients other than individuals or trusts: Intermediaries are required to take reasonable measures to verify the identity of the:

i. natural person, who, whether acting alone or together, or through one or more juridical person, exercises control through ownership or who ultimately has a controlling ownership interest in the client Controlling ownership interest means ownership of/entitlement to:

company,

partnership, or

is an unincorporated association or body of individuals

ii. In cases where there exists a doubt as to whether the person with the controlling ownership interest, as

interests, the identity of the natural person exercising control over the juridical person through other means.

a) Control through other means can be exercised through voting rights, agreement, arrangements or in any other manner.

Exemption in case of listed companies: Where the client or the owner of the controlling interest is a company listed on a stock exchange, or is a majority-owned subsidiary of such a company, it is not necessary to identify and

Applicability for foreign investors:

All registered market intermediaries have been directed to review their Know Your Client (KYC) and Anti-Money Laundering (AML) policies accordingly.

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Stock exchanges and depositories also conducted trainings/seminars for their

need to ensure continuous compliance with it.

C. International co-operation on AML/CFT related issues:

SEBI has consistently been in touch with the global bodies and other Indian regulators

for AML robust in the Indian securities

Government delegation participated in the plenary and working group meetings of FATF and ‘Eurasian Group on Combating

(EAG)’, which is a FATF-style regional body (FSRB) and sets standards and promotes

and operational measures for combating

other related threats to the integrity of the

In order to protect the international financial system from money laundering

to encourage greater compliance with the AML/CFT standards, the Financial Action

The names of these jurisdictions are made public as part of a FATF Public Statement. As required by the FATF Recommendations, the Ministry of Finance, Government of India (GoI) circulates the FATF Public Statements to all regulators with an advice to disseminate

their supervision for applying enhanced due diligence measures when dealing with

clients from these high-risk jurisdictions. In the year 2012-13, SEBI circulated three such FATF Public Statements dated June 22, 2012, October 19, 2012 and February 22, 2013 to registered intermediaries for their compliance.

The Eurasian Group (EAG) had instituted a typology research project on topic “Money Laundering through the Securities Market” and Securities and Exchange Board of India (SEBI) was assigned leadership of this project in March 2011. In this regard,

based on information received from various member jurisdictions, in the meetings of EAG plenary held in May 2012 and November 2012.

4. SURVEILLANCE

I. Market Surveillance MechanismThe key objective of surveillance is the

prevention and investigation of abusive, manipulative or illegal trading practices in the securities markets. Market surveillance aims to ensure orderly markets, where buyers and sellers are willing to participate because they

transactions. In Indian context, the primary responsibility of market surveillance has been entrusted to the stock exchanges and in order

independent surveillance cells have also been established in stock exchanges. The objective of surveillance is to ensure that these cells

manner.

At SEBI, the Integrated Surveillance Department (ISD) is in charge of overall market surveillance and scope of its activities includes monitoring market movements and detecting potential breach of Regulations,

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analysing the trading in securities and initiation of appropriate action wherever warranted.

II. Integrated Market Surveillance System (IMSS)Integrated Market Surveillance System

(IMSS) continues to provide SEBI assistance in monitoring the securities market and in discharging its regulatory functions

aberrations and generates alerts on a daily

for investigation and for further action. The purpose of this exercise is to promote market integrity and to ensure orderly conduct of the market.

During the year, SEBI upgraded the IMSS system to handle more than 2 billion records in a day. To further enhance the system capability and performance of alert generation process, implementation of rolling

are underway.

III. Data Warehousing and Business Intelligence System (DWBIS)

intelligence and surveillance capabilities and comprises of data warehouse, data mining and business intelligence tools. It consists of three phases as:

and enables users to generate multi dimensional reports dynamically.

modules and predictive modeling scenarios.

research initiatives.

Presently Phase I and II are fully operational. Phase III is also complete and has been released for User Acceptance Test (UAT).

during 2012-13Major market movements in terms of

percentage change are given below:

a. On July 26, 2012, few mid cap scrips fell by 20 percent, while the scrip M/s. Tulip

of 46.5 percent.

b. On October 05, 2012, Nifty fell from 5815 to 4888 (15.9 percent) intraday due to placement of erroneous sell order by one of the member of NSE. However, Nifty recovered later during the day to close at 5747.

c. On February 25, 2013, few mid cap scrips fell in the range of 17 to 32 percent, while the scrip M/s. Core Education &

fall of 66.5 percent.

V. Surveillance ActionsDuring financial year 2012-13, NSE

initiated preliminary examination and investigation in 85 cases and BSE initiated preliminary examination and investigation in 885 cases. Apart from above, as surveillance

shifted 336 scrips to trade to trade (T to T) segment and similarly BSE shifted 1,151 scrips to trade to trade (T to T) segment. In this

mandatory delivery and no netting off positions are allowed. This leads to reduction in the amount of speculation as only those who can deliver the securities can enter into sale transactions and thereby speculation is reduced. Further, with a view to dampen the amplitude of prices, scrips shifted to

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T to T segment attract applicable circuit filters. NSE reduced circuit filter in 693 instances and BSE in 1,652 instances. Further,

respectively (Table 3.19). MCX-SX being a new exchange in equities, has not initiated

13 except shifting of one scrip from rolling

VI. Surveillance MeasuresSEBI conducts meetings at regular

intervals with stock exchanges to monitor their surveillance activities and market movements. In consultation with the stock exchanges, the following surveillance measures have been taken:

a. SEBI has advised the Exchanges to put a penalty of ` 10,000 (Rupees ten thousand only) on brokers who are

and PAN details.

b. Companies are required to make disc losures in respect of pr ice sens i t ive in format ion to s tock exchanges particularly flowing from SEBI (Prohibition of Insider Trading (PIT)) Regulations, 1992 and Listing agreement. SEBI advised the exchanges

of information so that the authenticity of the source of the information is ascertained by the exchanges before disseminating the same.

c. In order to discharge their surveillance responsibil i t ies effectively, SEBI has reviewed and strengthened the Surveillance Committee of the stock exchanges.

d. SEBI has mandated all Exchanges to disseminate for each derivative stock, the combined open position of group of connected entities on the respective Exchange website twice a month without disclosing the individual names. The criteria for determining connected entities and methodology for dissemination of combined positions have also been prescribed by SEBI.

e. In order to arrest any further misconduct in the market by trading entities, it was decided that the exchanges shall issue

entities whose behaviour is found to be aberrant and prima facie does not appear to be in conformity with the extant securities law governing the securities market.

Table 3.19: Surveillance Actions during 2012-13Nature of Action NSE BSE MCX-SX

1 2 3 4Scrips shifted to Trade to Trade segment 336 1,151 1

(311) (1,053) (Na)No. of scrips in which price bands were imposed 693 1,652 41(2 percent, 5 percent & 10 percent) (613) (885) (Na)Preliminary Investigations taken up 85 885 Nil

(116) (914) (Na)

(104) (115) (Na)* Note: Figures in parentheses pertains to 2011-12

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f. SEBI advised the exchanges to put in place systems to prevent leakage of information.

g. As a surveillance measure the exchanges were advised to apply price bands on stocks which do not have derivative products available on them but are forming part of the index on which derivative products are available, in case such stock witness sharp intraday movements.

VII. Enforcement Actions

A. Interim orders:

in certain scrips on July 26, 2012

On July 26, 2012, SEBI noticed an abrupt downward movement in prices of certain scrips namely M/s. Pipavav Defence and Offshore Eng. Ltd., M/s. Parsvanath Developers Ltd., M/s. Tulip Telecom Ltd. and M/s. Glodyne Technoserve Ltd. as compared to their closing prices on July 25, 2012 at NSE and BSE. After preliminary analysis, SEBI, vide its order dated August 03, 2012 banned 19 entities from accessing securities market and prohibiting them from buying, selling or dealing in securities in any manner whatsoever, till further directions

considering the submissions made by these 19 entities, against eight entities.

b. Interim order in the matter of M/s. Ruchi Soya Industries Ltd.

SEBI carried out an examination in the scrip of M/s. Ruchi Soya Industries Ltd. in view of surveillance alerts regarding ‘marking

the closing price in cash market, which acts

is known as ‘marking the close’ in common parlance. Examination, prima facie, revealed that certain connected entities indulged in ‘marking the close’ by moving the closing price of the said scrip in the cash market in

and thereby made unlawful gain on the long positions held by them in futures of the scrip.

SEBI, passed an interim order dated February 15, 2013 against nine connected entities restraining them from accessing securities market and prohibiting them from buying, selling or dealing in securities in any manner whatsoever, till further directions in

to these entities to submit their submissions in

c. Interim order in the matter of M/s. Zenith Infotech Ltd.

SEBI observed that M/s. Zenith Infotech Ltd. (ZIL) raised US$ 33 & US$ 50 million by issuing ‘FCCBs which were due for redemption in September 2011 and August 2012, respectively. ZIL in its EGM held on January 29, 2011 took approval from its shareholders to sell its assets for repayment/redemption of FCCBs due for maturity. On September 26, 2011, ZIL announced to exchanges that it has sold one of its divisions, (Managed Services Division) MSD, to Zenith RMM LLC.

Examination, prima facie, revealed that the substantial portion of sale proceeds of MSD Division of ZIL was diverted in a

promoters and/or directors and subsidiaries which was not remotely connected to the

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the assets of a listed company directly and

of entities owned and controlled by them, thereby causing loss to shareholders.

SEBI, passed an interim order dated March 25, 2013 against 6 promoters of ZIL restraining them from accessing securities market and prohibiting them from buying, selling or dealing in securities in any manner whatsoever, till further directions in the

is directed to furnish, within 30 days, bank guarantee(s) of a minimum tenure of one year, for USD 33.93 million (i.e. the amount of sale proceeds of MSD Division that has been diverted), in the name of SEBI, without using the funds of ZIL or creating any charge on assets of ZIL. The bank guarantee may be invoked in case any adverse inference is

to the actions of Board of directors/promoters of ZIL in diverting the sale proceeds of MSD Division and SEBI deems it necessary to compensate.

B. Adjudication Orders:

M/s. S J Corporation Ltd.

Adjudication orders dated April 30,

S J Corporation Ltd. was passed wherein, a penalty of `only) each on M/s. India Advantage Securities Ltd. and M/s. Inventure Growth & Securities Ltd. were imposed for violation of provisions of clause A (2) of the code of conduct for

with regulation 7 of SEBI (Stock Brokers and Sub-brokers) Regulations, 1992.

DFM Foods Ltd.

Adjudication order dated November 29,

was passed wherein a penalty of ` 1,50,000/

Mohit Satyanand was imposed for violation of Regulation 13(4) read with13(5) of SEBI (PIT) Regulations, 1992 and Clause 4.2 of Schedule I of Model Code of Conduct for Prevention of Insider Trading for Listed Companies.

A V Cotex Ltd.

Adjudication order dated May 28, 2012

passed wherein a penalty of ` 25,000 (Rupees

Dhawan, M/s. Conchem Construction Pvt. Ltd, M/s. Lee Infratech Pvt. Ltd. (Erstwhile, M/s. Lee Hotels Pvt. Ltd.), Ms/. Jas Expoship Pvt. Ltd., M/s. ADB Trade Services Pvt. Ltd. and Ms/. Competent Surveyors Pvt. Ltd. was imposed for violation of Regulation 13 (1),(3) &(4) read with regulation 13(5) of SEBI (PIT) Regulations, 1992.

GHCL Ltd.

Adjudication order dated August 17,

passed wherein a penalty of ` 25,000 (Rupees

Mr. Pramod Jain for violation of Regulation 13(2) & (4) of SEBI (PIT) Regulations, 1992.

e. Adjudication orders against four entities in the matter of M/s. Fact Enterprises Ltd.

Adjudication orders dated January 11,

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M/s. Fact Enterprises Ltd. were passed wherein a penalty of ` 1,00,000 (Rupees one lakh only)

Chander Mohite and Mrs Urmila Lakhotia and ` 1,75,000 (Rupees one lakh seventy

Kashyap was imposed for violation of SEBI (PIT) Regulations, 1992 and SEBI (SAST), 1997.

M/s. Clutch Auto Ltd.

Adjudication orders dated August 17,

M/s. Clutch Auto Ltd. were passed wherein a penalty of ` 1,00,000 (Rupees one lakh only) was imposed on Mr. Hari Krishna Yannam for violation of Regulation 4(2) (b) and 4(2)(g) of SEBI (Prohibition Of Fraudulent And Unfair Trade Practices relating to Securities Market (PFUTP)) Regulations, 2003.

Sigrun Holdings Ltd.

Adjudication order dated January 18,

Ltd. was passed wherein a penalty of ` 2,00,000 (Rupees two lakh only) was imposed on Mr. C R Rajesh Nair for violation of Reg. 13(4) of SEBI (PIT) Regulations, 1992.

Concurrent (India) Infrastructure Ltd.

Adjudication order dated November

(India) Infrastructure Ltd. was passed wherein a penalty of ` 50,000 (Rupees

imposed for violation of Clause 35 of the Listing Agreement read with Section 21 of the Securities Contracts Regulations Act (SCRA), 1956. Penalty of ` 3,25,000 (Rupees

Ms. K Nirmala for violation of Regulations 8(A)(2) and 8(A)(3) of SEBI (SAST) Regulations, 1997; Regulations 29(2) read with 29(3), 31(2) read with 31(3) of SEBI (SAST) Regulations, 2011; and Regulations 13(3) read with 13(5),13(4A) read with 13(5) of SEBI (PIT) Regulations, 1992. Penalty of ` 3,00,000(Rupees three lakh only) was imposed on Mr. K Nirupama for violation of Regulations 8(A)(2) and 8(A)(3) of SEBI (SAST) Regulations, 1997; and Regulations 13(3) read with 13(5) of SEBI (PIT) Regulations, 1992.

Adjudication order dated March 5, 2013

was passed wherein a penalty of ` 5,00,000

Sanjay Bajranglal Sharma for violation of Regulation 7(1),(2) of SEBI (SAST) Regulations and Regulation 13(3), (5) of SEBI (PIT) Regulation, 1992.

Livingroom Lifestyle Ltd.

Adjudication order dated October

Lifestyle Ltd. was passed wherein a penalty of `

Avishek Bose and ` 45,000 (Rupees fourty

Private Ltd was imposed for violation of SEBI (SAST) and SEBI (PIT) Regulations, 1992.

Veer Energy Infrastructure Ltd.Adjudication order dated February

Infrastructure Ltd. was passed wherein a penalty of ` 1,00,000 (Rupees one lakh only) each was imposed on Mr. Dhrenendra Shah

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for violation of Regulation 13(4) read with Regulation 13(5) of SEBI (PIT) Regulations, 1992 and Mr. Jaswantilal Shah for violation of Regulation 13(3) read with Regulation 13(5) of the SEBI (Prohibition of Insider Trading) Regulations, 1992.

Allied Computers International (Asia) Ltd.

Adjudication order dated June 06, 2012 in the matter of M/s. Allied Computers International (Asia) Ltd. was passed wherein a penalty of ` 3,00,000 (Rupees three lakh only) was imposed on Mr. Hirji Kanji Patel for violation of Section 15A (b) of SEBI Act and provisions of Regulation 7(1A) read with Regulation 7(2) of SEBI (SAST) Regulations, 1997 and Regulation 13(4) read with Regulation 13(5) of SEBI (PIT) Regulations.

Adjudication order dated February 18, 2013 in the matter of M/s. Ind-Swift Laboratories Ltd. was passed wherein a penalty of ` 10,00,000 (Rupees ten lakh only) was imposed on Mr. Balwinder Singh for violation of provisions of Regulation 3 and Reg. 4(2)(g) of the SEBI (PFUTP) Regulations, 2003.

Atlanta Ltd.

Adjudication order dated February 20, 2013 was passed wherein a penalty of ` 48,26,500 (Rupees fourty eight lakh twenty

on Mr. Shadilal Chopra who failed to comply with the directions issued by SEBI under section 11B of the SEBI Act, 1992 read with Regulation 11 of SEBI (PFUTP) Regulations, 2003.

5. INVESTIGATIONTimely completion of investigation cases

action in case of violations of established securities laws is important for protection of investors’ interest and ensuring fair, transparent and orderly functioning of the market. It is also vital for improving the

market. SEBI is therefore constantly striving to upgrade its investigative skills by making use of Information Technology. Importance

has also been underscored by IOSCO in its “Principles for the Enforcement of Securities Regulation”.

Keeping the above objectives and principles of securities regulations in view, SEBI initiates investigation to examine alleged or suspected violations of laws and obligations relating to securities market. The possible violations may include price manipulation,

capital issue related irregularities, takeover related violations, non-compliance of disclosure requirements and any other misconduct in the securities markets.

I. Initiation of InvestigationThere are various sources of information

for initiation of investigation. SEBI initiates investigation based on reference received from sources such as stock exchanges, internal surveillance department, other government departments, information submitted by market participants and complainants. In appropriate cases, investigation may also be initiated suo-moto, where there are reasonable grounds to believe those investors’ interests are being adversely

the provisions of the securities laws.

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investigations have been completed. Apart from enforcement action, an important attendant benefit resulting from such investigations is contribution to the policy changes with a view to further strengthen the regulatory and enforcement environment. During 2012-13, 155 new cases were taken up for investigation and 119 cases were completed (Table 3.20 and Chart 3.3).

A. Nature of Investigation Cases Taken Up

During 2012-13, about 55 percent of the cases taken up for investigation pertain to market manipulation and price rigging, as against about 47 percent of such cases in the previous year. Other cases pertain to insider trading, takeover violations, irregularities in capital issues, and other violations of securities laws. Since, several investigation cases involve multiple allegations of

II. Process of Investigation

The steps involved during investigation process include an analysis of market data (order and trade log, transaction statements etc.) and static data (KYC documents obtained from brokers, depository participants etc.,

major corporate developments etc.) The purpose of such investigation is to gather evidence and to identify persons/ entities behind irregularities and violations so that appropriate and suitable regulatory action can be taken, wherever required. Outcome of investigation in the form of enforcement action is a clear signal to the market players to comply with the law and expected standards of conduct in the market.

III. Trends in Investigation Cases

Since 1992-93, SEBI has undertaken 1,772 investigation cases. In 1,539 cases,

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charge / violations (Table 3.21 and Chart 3.4).

Table 3.20 Investigations by SEBI(Numbers)

Year Cases Taken up Cases for Investigation Completed

1 2 31992-93 2 21993-94 3 31994-95 2 21995-96 60 181996-97 122 551997-98 53 461998-99 55 601999-00 56 572000-01 68 462001-02 111 292002-03 125 1062003-04 121 1522004-05 130 1792005-06 159 812006-07 120 1022007-08 25 1692008-09 76 832009-10 71 742010-11 104 822011-12 154 742012-13 155 119Total 1772 1539

B. Nature of Invest igat ion Cases Completed

During 2012-13, about 44 percent of the cases completed pertain to issue related to manipulation and 34 percent of the cases completed pertain to market manipulation and price rigging. Other cases in which investigation was completed pertain to insider trading, takeovers etc. The details of investigation cases taken up and completed are provided in Table 3.21, Chart 3.4 and Chart 3.5.

IV. Regulatory ActionAfter completion of investigation, penal

action is initiated as approved by the competent authority wherever violations of laws and obligations relating to securities market is observed. Action is decided based on the principles of objectivity, consistency, materiality and quality of evidence available, after thorough analysis and appreciation of facts.

The action included issuing warning letters, initiating enquiry proceedings for registered intermediaries, initiating adjudication proceedings for levy of monetary penalties, passing directions under Section 11

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Table 3.21: Nature of Investigations taken up and completed(Number)

Particulars Investigations Taken up Investigations Completed2011-12 2012-13 2011-12 2012-13

1 2 3 4 5Market manipulation and price rigging 73 86 37 41"Issue" related manipulation 35 43 4 52Insider trading 24 11 21 14Takeovers 2 3 2 2Miscellaneous 20 12 10 10Total 154 155 74 119

of SEBI Act, 1992, and initiating prosecution and referring matter to other regulatory agencies.

SEBI issued 168 Prohibitive directions during the year 2012-13. These directions have the strong and salutary effect of

to deal with emergent situations requiring a timely and faster response. A detailed break up of all regulatory actions is given in Table 3.22 and Chart 3.6.

Further, proceedings under Section 11 of SEBI Act, 1992 were initiated against 128 entities, and proceedings under Intermediaries Regulations were initiated

Table 3.22: Type of Regulatory actions taken during 2012-13

Particulars Numberof Entities

1 2

Suspension 31Warning issued 9Prohibitive directions issued under 168Section 11 of SEBI Act (other than consent orders)Cancellation 3Adjudication orders passed 485Administrative warning / warning

Total 764

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against 19 entities and adjudication proceedings were initiated against 713 entities in 2012-13. In addition to above, Show Cause Notices were issued against 206 entities for the proceedings under Section 11 of SEBI

orders have been passed by SEBI in 2012-13.

A. Orders under Section 11B of SEBI Act, 1992

a. Based on the complaints received regarding cheating and misappropriation of several crores of Rupees by M/s Stock Guru India, SEBI had initiated examination in the said matter. The activity of M/s Stock Guru appeared to be a Multi Level Marketing (MLM) Scheme. However, SEBI found that one of its group companies, M/s. SGI Research and Analysis Ltd., issued convertible preference shares of ` 10/- each at a premium of Rs.1,500 per share to more than 50 investors, thereby, violating Regulation 4(2), 5(1), 5(7), 6, 7, 25, 26, 46 and 59 of SEBI (ICDR) Regulation and Regulation 3(b), 4(1) and 4(2)(r) of SEBI(PFUTP) Regulations. Thereafter, 11B Order was passed on January 11,

2013 restraining M/s SGI Research and Analysis Ltd. and its 7 directors from accessing the securities market and further prohibited from buying, selling or otherwise dealing in securities and being associated with the securities market directly or indirectly for a period of 10 years. The Order further directed the company and its directors to refund the money collected towards subscription of convertible preference shares to the subscribers of M/s. SGI Research and Analysis Ltd. along with the interest of 15 percent per annum.

b. M/s Sarang Chemicals Limited was debarred for a period of two years in the matter of M/s Sarang Chemicals Limited for publishing misleading corporate announcements, incorrect financial results, wrong shareholding

relevant disclosures regarding change in shareholding as required by the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 and SEBI (Prohibition of Insider Trading) Regulations, 1992, etc.

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B. Adjudication Orders

a. The promoters of Bank of Rajasthan (BoR) in compliance with RBI Guidelines disclosed that they have reduced their shareholding in BoR from 44.18 percent in June 2007 to 28.61 percent in December 2009 of the issued capital. However, in the garb of reduction, they had transferred

Yadav / Silvassa Group entities who were their PACs (persons acting in concert). Instead of reduction from 44.18 percent to 28.61 percent the promoters along with PACs (Tayal, Silvassa and Yadav Groups) increased their shareholding from 44.18 percent in quarter ended June 2007 to 63.15 percent in quarter ended December 2009. The disclosures of the so called reduced promoters holding were disseminated in the market by way of

Summons were issued to all promoter of BoR, M/s Tayal Group, M/s Yadav Group and M/s Silvassa Group entities however they did not co-operate with the investigation. Adjudication proceedings were initiated against 142 entities for violation of SEBI (PFUTP) Reg., SEBI (SAST) Reg., SEBI (PIT) Reg. and non compliance of summons. Adjudication proceedings were completed against 141 entities and a total penalty of Rs 29,97,50,000 was imposed.

b. SEBI had levied penalty of ` 5 lakh in

M/s Betala Global Securities Limited for unfair trade practices indulged in by Mr. Jalaj Batra through brokers in connivance with other entities of M/s Mahesh Mistry Group.

C. Enquiry Proceedingsa. Based on the reference received from the

of Police, Crime Branch, New Delhi stating that Mr. B B Sharma, the promoter

disclosed the details of stock exchanges

purchase of the tickets of various stock exchanges was diverted from the money collected from the public by the M/s

proceedings were initiated against several brokers including M/s. Spurt Fincap Ltd.

b. Investigation revealed that the funds for purchase of LSE tickets by M/s. Spurt

Order Share Shoppe. M/s. Spurt Fincap Ltd. had acted in collusion with M/s

of LSE and is associated /linked with the

and proper person’ within the benchmark prescribed in regulation 3(2) (a) and 3(2)(h) of the Fit and Proper Persons, Regulations, 2004 as well as Schedule II of the Intermediaries Regulations, 2008. M/s. Spurt Fincap Ltd. has violated regulation 5(e) and regulation 5A of the Stock Brokers Regulations read with Fit and Proper Persons, Regulations, 2004 and Schedule II read with regulation 38(3) of the Intermediaries Regulations. Therefore, the certificate of registration granted to the stock broker, M/s Spurt Fincap Ltd. Member, Ludhiana Stock Exchange Limited and having SEBI registrationno. INB 120944137 has been cancelled vide order dated March 25, 2013.

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Registration of M/s. Shri Parshwa Finance

Bhogilal Stock Brokers Pvt. Ltd. was cancelled. The noticee and its connected entities created false and misleading appearance of trading in the securities market thereby inducing the sale or purchase of the shares of the company. The noticee was also found to be repeated defaulter.

Vide Order dated 30/01/2013, M/s Angel Broking Limited was prohibited from taking up any new assignment (i.e. not to take up any new clients) for a period of two weeks. The noticee had aided

violation of the provisions of Regulation 4(b) and (d) of the PFUTP Regulations.

Order dated 30/01/2013, certificate of registration of M/s NCJ Share and Stock Brokers Ltd. was suspended for a period of one week. The noticee while trading in its proprietary account has dealt in the scrip of SIL in a manner detrimental to the interest of investors. Such acts threaten the market integrity and orderly development of the market and call for regulatory intervention to protect the interest of investors as the same pose serious threat to the price discovery mechanism of the stock exchange and the safety of the securities market mechanism.

After completion of investigation, the Investigation Department is also actively

involved in post-investigation enforcement actions and quasi-judicial proceedings. Such actions include issuing show cause notices to the entities, examining their replies, organising and participating in the hearings of the entities before the Whole Time Members of SEBI, co-ordination with Enforcement Department (EFD), preparing draft orders, issuing press releases after orders are

replying to their queries, co-ordination with Enforcement Department in the proceedings before Securities Appellate Tribunal (SAT) and before courts, co-ordination with Prosecution Department for cases filed in the courts, follow-up for collection of penalty after orders

prosecution for non-payment of penalties, processing of consent proposals filed by the entities, etc. Timely and qualitative completion of such actions is also important

measures taken by SEBI.

6. ENFORCEMENT OF REGULATIONS

Effective enforcement in the form of

I. Enforcement Mechanisms

that SEBI uses in case of any violation(s) pertaining to the laws regulating the securities market. Age-wise analysis of

u/s 11, 11B and 11D of SEBI Act, enquiry proceedings, adjudication proceedings, prosecution proceedings and summary proceedings as on March 31, 2013 are provided in Tables 3.23 to Table 3.23d.

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A. Section 11/11B ProceedingsUnder section 11/11B of SEBI Act, 1992,

SEBI may issue directions or prohibitive orders such as debarment from accessing the securities market or not to deal in securities. In 2012-13, 142 cases under section 11/11B

year, 184 fresh cases under the caption provision of law were initiated by SEBI. The cumulative pending cases as on March 31, 2013 were 1,016 (Table 3.23).

B. Enquiry Proceedings

of registration of an intermediary through Enquiry Regulations on the recommendation

appointed for that purpose. It may also issue warning to an intermediary if it considers that

does not warrant suspension or cancellation

or registration.

In the financial year 2012-13, 36 cases were disposed by SEBI after the due completion of enquiry proceedings. In the same financial year, 27 fresh cases were initiated where enquiry proceedings are being followed. The cumulative pending cases as on March 31, 2013 stands at 114. (Table 3.23)

C. Adjudication Proceedings

Under Chapter VIA of SEBI Act, 1992,

conducting enquiry and imposing penalties. In 2012-13, 485 cases were disposed by SEBI under adjudicating proceedings. In the

initiated under adjudicating proceedings. The cumulative pending cases as on March 31, 2013 stands at 2,333 (Table 3.23b).

D. Prosecution

SEBI Act as on March 31, 2013

No. Number of Actions Disposed of Ac- Aggre- Pen-

Year tions 1995- 1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009- 2010- 2011- 2012- gate ding Initi- 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 Dis- Cases ated posal

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 221995-96 0 0 0 0 01996-97 3 3 0 0 3 01997-98 85 6 15 9 34 1 14 4 0 0 83 21998-99 51 9 9 26 7 0 0 0 51 01999-00 83 13 12 10 20 19 1 5 3 0 0 83 02000-01 461 269 18 45 49 28 1 2 2 15 0 3 4 0 436 252001-02 441 390 32 12 1 3 2 0 0 1 0 441 02002-03 321 58 74 30 21 8 21 30 24 7 25 0 298 232003-04 713 30 135 45 94 197 47 52 33 25 5 663 502004-05 522 2 38 39 168 105 85 19 46 3 505 172005-06 196 1 12 31 65 69 18 0 0 196 02006-07 402 34 67 65 119 54 15 1 355 472007-08 374 58 75 61 61 48 6 309 652008-09 75 8 44 23 0 0 75 02009-10 376 30 69 114 45 258 1182010-11 346 30 87 37 154 1922011-12 348 10 35 45 3032012-13 184 10 10 174Total 4,981 0 0 6 3 28 299 427 215 192 196 107 189 561 412 493 320 375 142 3,965 1,016

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March 31, 2013



1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 221995-96 8 8 0 8 01996-97 20 1 12 7 0 20 01997-98 66 3 48 7 5 1 2 0 66 01998-99 335 48 116 12 154 2 3 0 335 01999-00 69 27 1 18 19 1 1 0 2 69 02000-01 267 6 33 204 6 9 2 1 5 0 1 267 02001-02 204 35 83 49 16 11 4 6 0 0 204 02002-03 371 141 56 27 27 60 20 16 4 14 6 0 371 02003-04 476 21 71 115 82 83 28 48 14 8 6 476 02004-05 190 3 17 3 57 70 30 10 0 0 190 02005-06 80 9 31 19 8 13 0 0 80 02006-07 122 4 8 28 22 27 20 3 112 102007-08 89 3 11 8 14 4 11 51 382008-09 20 4 3 1 2 10 102009-10 23 1 5 0 4 10 132010-11 24 8 1 5 14 102011-12 8 0 0 0 82012-13 27 2 2 25Total 2399 0 9 15 103 150 24 87 603 134 127 172 164 216 172 125 108 40 36 2285 114

March 31, 2013



1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 221995-96 2 1 1 2 01996-97 5 1 2 1 1 5 01997-98 16 3 2 1 1 7 2 16 01998-99 33 2 7 1 1 1 8 2 1 2 0 0 0 0 25 81999-00 32 9 7 3 2 4 2 2 3 0 0 0 0 32 02000-01 77 4 17 1 6 8 5 4 5 23 0 0 4 0 77 02001-02 64 16 14 4 14 2 6 5 0 1 1 0 63 12002-03 150 10 11 62 19 15 8 6 3 5 0 0 139 112003-04 577 52 344 55 66 8 27 9 3 0 0 564 132004-05 418 8 137 126 45 28 17 21 23 2 0 407 112005-06 283 27 47 22 66 23 56 10 6 257 262006-07 578 34 82 102 120 106 18 5 467 1112007-08 1215 4 20 152 373 295 47 8 899 3162008-09 546 70 101 255 42 51 519 272009-10 644 114 229 121 80 544 1002010-11 571 284 257 30 571 02011-12 609 143 118 261 3482012-13 1548 187 187 1361Total 7368 0 0 1 6 9 16 43 29 85 581 242 218 181 473 764 1257 645 485 5035 2333

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Section 24 of the SEBI Act, 1992 empowers SEBI to launch prosecution against any person for contravention of any provision of the SEBI Act, 1992 or any rules or regulations made there under before a court of criminal jurisdiction. In 2012-13, 22

by courts and 75 new cases were initiated. The cumulative pending cases as on March 31, 2013 stands at 988. (Table 3.23c)

E. Summary Proceedings

Chapter VA of the SEBI (Intermediaries) Regulations, 2008 provides the power to conduct summary proceedings in certain

proceedings were disposed as well as initiated by SEBI. The cumulative pending cases as on March 31, 2013 stands at 83 (Table 3.23d).

II. Enquiry and Adjudication

During 2012-13, SEBI initiated 1,548 adjudication and 27 enquiry proceedings (Table 3.24).

Further, during 2012-13, 498 orders

cases were adjudication proceedings and 13 cases were enquiry related. During 2012-13, SEBI issued 658 show cause notices and conducted 876 hearings (Table 3.24a).

As on March 31, 2013, 114 enquiry proceedings and 2,333 adjudication proceedings are pending with enquiry and

During 2012-13, SEBI issued 59 warning/deficiency/advice letters to other intermediaries of which 29 were issued against Depository Participants, 17 against

Agencies and four each against Debenture

March 31, 2013



1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 221995-96 9 1 1 1 3 61996-97 6 1 1 2 41997-98 8 1 1 1 1 4 41998-99 11 1 1 1 3 81999-00 25 1 1 1 2 5 202000-01 28 1 1 2 4 242001-02 95 3 4 4 1 2 14 812002-03 229 1 5 17 6 5 2 5 5 46 1832003-04 480 1 5 29 29 5 15 15 33 11 143 3372004-05 86 1 13 6 2 3 3 1 29 572005-06 30 3 2 1 6 242006-07 23 0 232007-08 40 1 1 2 382008-09 29 0 292009-10 30 0 302010-11 17 1 1 162011-12 29 0 292012-13 75 0 75Total 1250 0 0 0 0 1 2 2 2 2 6 6 43 65 19 24 25 43 22 262 988

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Act as on March 31, 2013



1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 221995-961996-971997-981998-991999-002000-012001-022002-032003-04 47 2 3 19 4 2 30 172004-052005-06 2296 230 79 11 1820 90 2230 662006-07 1 1 1 02007-08 1 1 1 02008-09 91 91 91 02009-10 02010-11 02011-12 02012-13 0Total 2436 232 82 11 1932 94 2 2353 83

Trustees and RTI & STAs. Moreover, SEBI has initiated adjudication proceedings against one Debenture Trustees. There wasn’t any enquiry

Table 3.24: Enquiry and Adjudication Proceedings Initiated during 2012-13

Particulars No of Cases1 2

Enquiry Related 27Adjudications 1,548Total 1,575

Table 3.24b: Pending Enforcement Actions as on March 31, 2013

1 2Enquiry Related (excluding 114summary proceedings)Adjudications 2,333Total 2,447

Table 3.24a: Enquiry and Adjudication during 2012-13

Particulars Enquiry Adjudication Total

1 2 3 4

Orders Passed /

Hearings Conducted 12 864 876Show Cause Notices Issued 12 646 658

proceedings initiated during 2012-13 against other intermediaries (Table 3.25).

III. Regulatory Actions against CIS

A. M/s. MPS Greenery Developers Ltd. (MPS)

The company was granted provisional registration on August 21, 2009 for a period of two years, subject to compliance of various conditions stipulated in Regulation 71 of the SEBI (CIS) Regulations, 1999, hereinafter referred as the Regulations.

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due to the investors as per the terms of the

date of this order, failing which:

a. SEBI would initiate prosecution proceedings against MPS under Section 24 of SEBI Act, 1992.

b. The promoters/ directors/ managers/ persons in charge of the business of the scheme(s) of MPS would be restrained from accessing the capital market and prohibited from buying, selling or otherwise dealing in the securities market till all the monies are refunded.

c. A reference would be made to the State Government/ local police to register a civil/ criminal case against MPS and its promoters/ directors for apparent offences of fraud, cheating, criminal breach of trust and misappropriation of public funds.

d. A reference would be made to the

the process of winding up of MPS.

B. M/s. NGHI Developers India Ltd. (NGHI):

It came to the notice of SEBI that NGHI and its promoters/ directors are engaged in

obtaining registration from SEBI. Vide an ad interim ex-parte order dated July 09, 2012 (hereinafter referred to as the ‘interim order’), SEBI directed NGHI and its promoters and directors to immediately stop collecting money, directly or indirectly, from investors

any further plans/ schemes in the nature of a CIS. The order further directed the NGHI to deposit the money collected from the

Table 3.25: Enquiry and Adjudication Proceedings Initiated against other Intermediaries during 2012-13

Adjudi- Warning/

advice

1 2 3 4

Registrar to an Issue & Share Transfer Agents 0 0 4Merchant Bankers 0 0 17Depository Participants 0 0 29Credit Rating Agencies 0 0 5Debenture Trustees 1 0 4Total 1 0 59

SEBI also instructed MPS not to launch any new scheme or raise any money from the investors, even under the existing schemes,

the Board.

MPS failed to comply with certain important conditions of the provisional registration and also continued raising money from the public. SEBI, therefore, directed MPS, vide an ex-parte order dated May 11, 2012, to deposit an amount of ` 1,169 crore, raised by MPS through its Collective Investment Schemes in an escrow account

any reply from the company regarding the said order, which was to be treated as a Show Cause Notice by MPS.

Meanwhile, several litigations were

development executives seeking injunctions against MPS and/or SEBI orders. MPS also

public. Therefore, vide order dated December 06, 2012, directed MPS to wind up its

Schemes and refund the money collected by it under the scheme(s) with returns which are

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investors in a separate bank account within a period of 3 days. Thereafter, on request of the company, various hearings were granted and it was concluded that the transactions between NGHI and its customers are not real estate transactions simpliciter; rather they

under Section 11AA of the SEBI Act, 1992.

Accordingly, an order dated November 06, 2012 was passed against the above company for violation of SEBI (CIS) Regulations, 1999. The company was directed to wind up its scheme(s) identified as Collective Investment Schemes in this order and refund the money collected by it under the scheme(s) with returns which are due

within a period of one month from the date of this order, failing which the following actions would follow:

a. SEBI would initiate prosecution proceedings against NGHI under Section 24 of SEBI Act, 1992.

b. The promoters/ directors/ managers/ persons in charge of the business of the scheme(s) of NGHI would be restrained from accessing the capital market and prohibited from buying, selling or otherwise dealing in the securities market till all the monies are refunded.

c. A reference would be made to the State Government/ local police to register a civil/ criminal case against NGHI and its promoters/ directors for apparent

breach of trust and misappropriation of public funds.

d. A reference would be made to the

the process of winding up of NGHI.

C. M/s. Nicer Green Forests Ltd (NGFL)

public and pooled it to purchase large tracts of land at low cost to develop the same and sell the land/produce to the investors at low price. The investors were given estimated

the end of the term and they are also given

as per the terms of the scheme. Therefore, in accordance with the scheme, the investors made payment, and were entitled to receive

such scheme or arrangement without having any day to day control over the investments, thus satisfying the requirements of Section 11AA of SEBI Act, 1992.

The company was found to be carrying out CIS activities without obtaining SEBI registration. Accordingly, vide order dated November 09, 2010, SEBI directed the company to wind up its existing collective investment scheme(s) and refund the money collected by it under the scheme(s) with returns which are due to the investors as

one month from the date of the said order. However, even after repeated reminders, the company failed to submit the required WRR, and hence its claim regarding completion of repayments in compliance with order dated November 9, 2010 could not be verified/ ascertained. In view of the same, SEBI issued a Show Cause Notice (SCN) dated June 27, 2012 to NGFL and its promoters/ directors/ persons in charge of business of its scheme(s){hereinafter referred to as ‘the noticees’} calling upon them to show cause as to why appropriate actions in terms of SEBI Act, 1992 and SEBI (CIS) Regulations, 1999 should not be taken against it and its promoters/ directors/ persons in charge of the business of its scheme(s) for failing to comply with the

143


order dated November 9, 2010. The noticees were thereafter granted various opportunities for personal hearing but the noticees did not avail any of them. Accordingly, vide order dated March 12, 2013; the following directions

a. The company and its 7 promoters/ directors are restrained and debarred from accessing the securities market and further prohibited from buying, selling or dealing in securities market, directly or indirectly, in any manner whatsoever till the schemes of the NGFL is wound up

its collective investment schemes are refunded to the satisfaction of SEBI.

b. The company and the 7 promoters/

funds under any schemes or arrangement, existing or future, as defined under section 11AA of SEBI Act, 1992.

D. M/s. Maitreya Services Pvt. Ltd. (MSPL)

The Income Tax alleging contravention of the SEBI Act and Regulations against MSPL, SEBI sought information from the company regarding its activities. From the examination of the information received, it appeared that the company is carrying out the activities of CIS and not those of real estate, as claimed by the company. Accordingly, a Show Cause Notice was issued to the company and its directors on October 14, 2011 asking them to show cause as to why suitable action should not be initiated against them for violation of regulation 3 of SEBI (CIS) Regulations, 1999 read with section 11AA of the SEBI Act. Thereafter, on request of the company, various hearings were also granted to the company and its directors where they made various submissions regarding their business.

On examination of the same, it was found that the company is carrying out CIS activities and hence, an order dated March 25, 2013 was passed against the company directing it to wind up its existing collective investment schemes and refund the money collected by it under the schemes with returns which are

within a period of three months from the date of this order and submit a winding up and repayment report to SEBI in accordance with the CIS regulations failing which the following actions shall follow:

proceedings against MSPL under Section 24 of SEBI Act, 1992.

persons in charge of the business of the scheme(s) of MSPL would be restrained from accessing the capital market and prohibited from buying, selling or otherwise dealing in the securities market till all the monies are refunded.

Government/ local police to register a civil/ criminal case against MSPL and its promoters/ directors for apparent

breach of trust and misappropriation of public funds.

the process of winding up of MSPL.

7. PROSECUTION

I. Trends in Prosecution

A. Number of Prosecutions Launched

During 2012-13, 75 prosecution cases were launched against 150 persons/ entities as compared to 29 prosecutions launched against 60 persons/entities in 2011-12. (Table 3.26)

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Till 2012-13, region-wise, the highest number of prosecutions were launched in

by the Northern Region (346) (Table 3.27).

B. Higher Court Proceedings

During 2012-13, 21 applications/petitions

Courts, High Courts and Supreme Court. During the period 11 cases were disposed and a total of 116 cases are pending.

C. Important Court Pronouncements in

a. SEBI vs. M/s. PPL Pink Harvest Ltd. and others (C.C. no. 1318/2002)- Before Hon’ble Addl. Sessions Judge, Delhi

It has been held that SEBI has proved its case beyond reasonable doubt and accordingly held guilty M/s. PPL Pink Harvest Ltd. (A-1) and Mr. Anurag Bisaria (A-4) for the violation of Section 12 (1B) of SEBI Act and Regulation 5 and 73 of SEBI (CIS) Regulations, 1999. During the trial proceedings Mr. M.L. Saxena (A-2) and Smt. Asha Saxena (A-3) were abated on account of their death.

The court sentenced the A-4 for a period

` 1,00,000 (Rupees one lakh only) in default convict shall undergo SI for a period of two

24(1) of the SEBI Act, 1992. The A-1 was ` 3,00,000 (Rupees

under Section 24(1) of the SEBI Act, 1992. The

A-2. Since, company was not represented by

b. SEBI vs. M/s. Pioneer Forests India Ltd.

C.C. 135/05)- Before Hon’ble Addl. Sessions Judge, Delhi

It was held that SEBI has proved its case beyond reasonable doubt and accordingly held guilty Mr. Balwinder Singh,

Table 3.26: Prosecutions Launched No. of cases in No. of persons/

launched has been launched1 2 3

Up to and including1995-96 9 671996 - 1997 6 461997 - 1998 8 631998 - 1999 11 921999 - 2000 25 1542000 - 2001 28 1282001 - 2002 95 5122002 - 2003 229 8642003 - 2004 480 2,4062004 - 2005 86 4322005 - 2006 30 1012006 - 2007 23 1522007 - 2008 40 1852008 - 2009 29 1142009 - 2010 30 1092010 - 2011 17 672011 - 2012 29 602012 - 2013 75 150

Total 1,250 5,702

Cases as on March 31, 2013 Number Exemption

Region of PercentageCases of Total

1 2 3

Western Region 709 56.7Northern Region 346 27.7Southern Region 96 7.7Eastern Region 99 7.9Total 1,250 100.0

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The Ld Court vide Judgment dated 06/06/2012 held that SEBI has proved its case beyond reasonable doubt and accordingly held Accused Nos. 1 Company, Sanjay Kr. Sinha, Virendra Sinha, Atul Kishore Gupta, Lalit Awasthi liable for the above said violations. Convict company was burdened

` 4,00,000 (Rupees four lakh only) and convict number two and three were sentenced to rigourous imprisonment for a

` 2, 00,000 (Rupees two lakh only) each.

and Others- C. C. no. 1232/03- Before Hon’ble Addl. Sessions Judge, Delhi

was filed by SEBI on December 15, 2003 against Flawless Plantations Ltd (A-1) and its directors before the Court of ACMM for the violation of SEBI Act, 1992 read with SEBI (CIS) Regulations, 1999 which is punishable under Section 24(1) read with Section 27 of the SEBI Act, 1992. They mobilised an amount of ` 17,25,000 (Rupees seventeen lakh twenty

Proceedings for Mr. Chandra Kishore Asthana were abated on account of his death. Further, Mr. Manoj Kumar and Mr. Samsher

Order dated 12/04/2007. The Ld Court, vide Judgment dated 11/10/2012 held that SEBI has proved its case beyond reasonable doubt and accordingly held A-1 Company, Mr. Sunil Kumar Asthana (A-2) and Mr. Pawan Kumar Verma (A-3) liable for the above said violations. Convict company was burdened

` 4, 00,000 (Rupees four lakh only) and A-2 & A-3 were sentenced to rigourous imprisonment for a period of four

` 2, 00,000 (Rupees two lakh only) each.

Mr. Kulwinder Singh, Mr. Gurudev Singh Saini, Mr. Hardyal Singh, Shir Ajay Kumar Sharma for the violation punishable under Section 24(1) of SEBI Act, 1992.

During trial the company was deleted from the array of the parties vide court order dated September 13, 2007, Mr. Surinder Singh and Mr. Manjit Singh and Mr. Jatinder Singh were declared PO vide court order dated Setptember 26, 2007.

The court sentenced the Mr. Balwinder Singh and Mr. Kulwinder Singh rigorous imprisonment for a period of one year and

`each in default further three months SI for the

Section 27(1) & 27(2) of under Section 24(1) of the SEBI Act, 1992 whereas Mr. Gurudev Singh Saini, Mr. Hardyal Singh and Mr. Ajay Kumar Sharma were burdened with a

` 2, 00,000 (Rupees two lakh only)

punishable under Section 24(1) r/w Section

amount was paid by all the convicts in the court.

c. SEBI vs. M/s. Nexus Farms Ltd. & Ors.-

01/11- Before Hon’ble Addl. Sessions Judge, Delhi

was filed by SEBI on December 21, 2002 against M/s. Nexus Farms Ltd (A-1) and its directors before the Court of ACMM for the violation of SEBI Act, 1992 read with SEBI (CIS) Regulations, 1999, which is punishable under Section 24(1) read with Section 27 of the SEBI Act, 1992. They mobilised an amount of ` 29,00,000 (Rupees twenty nine lakh only) from the general public.

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against erring CIS entities, criminal prosecution cases have been launched by SEBI against CIS entities. Since then, court judgments have been obtained in a total of 171 CIS entities (Table 3.29).

Mr. Ashutosh Kr. Asthana and Mr. Girish Kr. Srivastava and observed that merely being the promoter/share holders, it cannot be held that they were in charge of and responsible to the conduct of Convict No. 1 company.

II. Nature of ProsecutionTable 3.28 represents the nature of

prosecutions launched under various sections

by SEBI under the SEBI Act, 1992, Companies Act, 1956, Depositories Act, 1996, SC(R) Act, 1956 and the Indian Penal Code. As on March

Table 3.28: Nature of Prosecutions Launched as on March 31, 2013

Nature of Prosecution NumberLaunched of Cases

1 2

Securities and Exchange Board of India Act, 1992 (SEBI Act) 1,053SEBI Act & Securities Contracts (Regulation) Act, 1956 (SCRA) 91SEBI Act, SCRA & Companies Act 1SEBI Act & Companies Act 3SEBI Act & Indian Penal Code 5Companies Act, 1956 70Securities Contracts (Regulation)Act, 1956 5Depositories Act, 1996 14Indian Penal Code 8Total 1,250

8. LITIGATIONS, APPEALS AND COURT PRONOUNCEMENTS

cumulative 642 such cases are pending, where SEBI was a party (Table 3.30 and 3.30a).

before Securities Appellate Tribunal (SAT), whereas 62 appeals were dismissed and as on March 31, 2013, 86 appeals are pending (Table 3.31).

Against the orders of SAT, 12 appeals

filed against SEBI in the Supreme Court during 2012-13 under section 15Z of the SEBI Act (Table 3.32).

As on March 31, 2013, six appeals were

pending against SEBI in the High Court (Table 3.32a).

Table 3.29: Number of Prosecution Cases decided by the Courts as on March 31, 2013

Type of Decision Non-by the Courts CIS CIS Total

1 2 3 4

Convictions 138 10 148Compounded (fully)* 7 52 59Abated 0 4 4Dismissed/Discharged 24 23 47Withdrawn 2 2 4Total 171 91 262

III. Disposal of Prosecution Casesi) 262 cases were disposed by the Courts till 2012-13, out of which, 148 cases resulted in convictions and 59 cases were fully compounded (Table 3.29).

ii) Disposal of Prosecution Cases in case of Collective Investment Schemes (CIS)

Since the start of launch of prosecution

147


Filed Disposed Pending asSubject during during on March

2012-13 2012-13 31, 2013

1 2 3 4

Issue and Listing 23 15 57Takeover 3 0 28Secondary Market 9 2 61Mutual Fund 2 6 22Collective Investment Schemes 24 25 107Surveillance & Investigations 14 3 43Stock Broker Registration Fee 1 1 61DepositoryParticipants 1 0 7Intermediaries 0 0 37Cases relating to Investor Complaints 18 8 78Right to Information(RTI) 5 4 18General Services Department 0 0 11Miscellaneous 42 22 112Total 142 86 642

Note: This table includes all the cases pending before any judicial / quasi judicial forums pertaining to respective

SAT and Hon’ble Supreme Court under SEBI Act/SCRA/Depositories Act.

Table 3.30a:

Filed Disposed Pending asForum during during on March

2012-13 2012-13 31, 2013

1 2 3 4

Supreme Court 11 9 36High Court 86 57 341Civil Courts 7 1 67Criminal Courts (other than prosecution cases

Consumer Forums 12 12 117Company Law Board 1 1 5BIFR/ AAIFR 18 5 61Labour Commissioner / Labour Court 4 0 10Green Tribunal 1 0 1Total 142 86 642

Table 3.31: Status of Appeals before the Securities Appellate Tribunal

Status of Appeals Number of Appeals1 2

Appeals Pending as on March 31, 2012 64Appeals Filed during 2012-13 225Appeals Dismissed 62Appeals Remanded 10Appeals Allowed 58SEBI Order upheld with

Appeal Withdrawn 28Appeals Pending as on March 31, 2013 86

Table 3.31a: Disposals of Appeals by Securities Appellate TribunalAppeals 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16No.of Appeals Dismissed 1 2 7 20 15 16 29 46 139 40 81 86 134 90 62No.of Appeals

No.of Appeals Withdrawn 0 0 0 3 2 1 8 NA NA NA 17 19 29 16 28No.of Appeals Allowed 1 2 6 8 23 13 19 72 71 32 39 30 77 44 58Total 2 4 14 38 40 40 114 219 226 99 138 154 285 191 193

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9. CONSENT AND COMPOUNDINGDuring 2012-13, SEBI has received 193

applications for consent and compounding. Further, 189 consent applications and six compounding applicat ions were rejected during the year. In addition, 35 applications for consent and compounding were withdrawn by the applicants. The number of applications in rejection and withdrawal categories may include the

approved by SEBI under the consent and

kinds of enforcement actions and collected an amount of ` 14,73,44,244 (Rupees fourteen crore seventy three lakh fourty four thousand two hundred fourty four only)towards

charges. Month-wise details of applications received and disposed under the consent and compounding scheme during 2012-13 are provided in Table 3.33.

185 applications were received during 2012-13 for consent, 64 applications were disposed by passing orders whereas 189

applications were rejected. During the year, SEBI collected ` 14,71,44,244 (Rupees Fourteen crore seventy one lakh fourty four thousand two hundred fourty four only)

through consent mechanism (Table 3.34).

Further, eight applications were received for compounding during 2012-13 and, one application was partly compounded, for an amount of ` 2,00,000 (Rupees two lakh only).

compounding during 2012-13 are given in Table 3.35.

10. INVESTOR ASSISTANCE AND EDUCATION

I. Redressal of Investor GrievancesSEBI has been taking various regulatory

measures to expedite the redressal of investor grievances. The grievances lodged by investors are taken up with the respective listed company or intermediary and continuously monitored. Grievances pertaining to stock brokers and depository participants are taken up with concerned stock exchange and depository for redressal

Table 3.32: Status of Appeals before the Hon'ble Supreme Courts

1 2 3 4 5

Total 124 50 13 161

Table 3.32a: Status of Appeals before the Hon’ble High CourtsSubject Case pending Cases dismissed / Case pending as on

1 2 3 4

Total 17 2 15

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Table 3.33: Receipt and Disposal of applications under Consent and Compounding Process

received passing orders Charges (`) (`) (`) (`)

1 2 3 4 5 6 7

2007-08 698 101 2,69,07,850 40,00,950 0 3,09,08,800

2008-09 692 440 37,29,30,786 54,90,000 8,27,84,906 46,12,05,692

2009-10 702 363 49,17,39,617 45,69,500 18,98,33,101 68,61,42,218

2010-11 359 177 70,44,96,771 4,76,500 1,71,20,811 72,20,94,082

2011-12 272 105 16,49,04,875 97,000 0 16,50,01,875

2012-13 193 65 12,44,71,413 3,00,000 2,25,72,831 14,73,44,244

Apr-12 15 7 37,00,000 0 0 37,00,000

May-12 11 6 17,10,000 0 0 17,10,000

Jun-12 14 0 0 0 0 0

Jul-12 30 1 7,00,000 0 0 7,00,000

Aug-12 29 0 0 0 0 0

Sep-12 21 5 23,50,000 0 0 23,50,000

Oct-12 11 13 3,59,00,000 0 0 3,59,00,000

Nov-12 10 12 2,04,52,282 0 1,92,31,831 3,96,84,113

Dec-12 8 8 50,74,625 3,00,000 0 53,74,625

Jan-13 27 10 43,90,000 0 33,41,000 77,31,000

Feb-13 12 2 8,92,500 0 0 8,92,500

Mar-13 5 1 4,93,02,006 0 0 4,93,02,006

No. of Consent No. of application Consent Charges No. of ApplicationApplication disposed of by (`) rejected

received passing order1 2 3 4

185 64 147,144,244 189

No. of Compounding No. of applications compounded^ Compounding charges No. of Application

1 2 3 4 58 0 1 2,00,000 6

and monitored by the concerned department through periodic report obtained from them. Grievances pertaining to other

intermediaries are taken up with them directly for redressal and continuously monitored by concerned department of SEBI.

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The company/intermediary is required to respond in prescribed format in the form of Action Taken Report (ATR). Upon the receipt of ATR, the status of grievances is updated. If the response of the company/intermediary is

initiated. SEBI takes appropriate enforcement actions (Adjudication, 11B directions, Prosecution etc) as provided under the law where progress in redressal of investor grievances is not satisfactory.

The following paragraphs highlight SEBI’s performance and measures taken in the year 2012-13 for expediting the redressal of investor grievances.

II. SEBI Complaints Redress SystemSEBI has received 42,411 complaints

54,852 grievances cumulatively as compared to 46,548 grievances received and 53,841 grievances resolved in the year 2011-12(Table 3.36).

As on March 31, 2013, there were 11,410 complaints pending resolution as compared to 23,725 pending grievances cumulative as on March 31, 2012. The net reduction in pending complaints has been 12,315 in 2012-13 as compared to 4,928 in 2011-12.

SCORES enables the investor to directly

lodge the complaints online and such complaints are considered as ‘e-complaints’. During 2012-13, a total of 26,195 e-complaints were rece ived compared to 10 ,635

an increase of 146.3 percent over the previous year. This indicates that the SCORES system has been working satisfactorily and has helped in making the complaint handling and

III. R e g u l a t o r y a c t i o n a g a i n s t Companies and their Directors for non-redressal of Investor GrievancesSEBI takes appropriate enforcement

actions (adjudication, directions, prosecution etc) as provided under the law where progress in redressal of investor grievances is not satisfactory.

a. The 11B orders were passed during the last three years, against the companies and its directors debarring them from accessing the securities market and from buying, selling or dealing in securities directly or indirectly, in whatsoever manner, till all the investor’s grievances against the company are resolved by them. (Table 3.37)

During the year 2012-13, the following four companies and its directors were

Table 3.36: Status of Investor Grievances Received and Redressed

Financial Year Grievances Received Grievances Redressed Pending Actionable

1 2 3 4 5 62008-09 57,580 26,74,560 75,989 25,03,560 49,1132009-10 32,335 27,06,895 42,742 25,46,302 37,8802010-11 56,670 27,63,565 66,552 26,12,854 28,6532011-12 46,548 28,10,113 53,841 26,66,695 23,7252012-13 42,411 28,52,524 54,852 27,21,547 11,410

* excludes complaints against whom regulatory actions are initiated. Further, the above data does not include

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restrained from accessing the securities market till all the pending investor grievances are resolved (Table 3.38).

SEBI has levied penalty against ten companies through adjudication proceedings during the year 2012-13, for their failure to redress investor grievances. (Table 3.40)

Further regulatory actions have been initiated against companies for their failure to redress investor grievances. During 2012-

Table 3.37: Failure to Redress Investor Grievances: Order passed under section 11B

Number of companies

of grievances1 2 3 41 2010-11 18 12 2011-12 7 53 2012-13 4 2

Table 3.38: Companies Restrained From Accessing the Securities Market

S. No. Name of the Company1 21 Alpine Industries Ltd.2 Shukla Data Technics Ltd.3 Top Telemedia Limited4 International Hometex Ltd.

Table 3.39: Failure to Redress Investor Grievances: Adjudication Proceedings

S. Number of PenaltyNo. Year companies amount (`)

1 2 3 41. 2010-11 3 42,00,0002. 2011-12 5 61,30,0003. 2012-13 10 40,35,000

b. SEBI has imposed penalty against the companies through adjudication proceedings during the year, for their failure to redress investor grievances. (Table 3.39)

Table 3.40: Companies Penalised for their failure to Redress Investor Grievances

S. Name of the PenaltyNo. Company Amount (`)

1 2 31. Kanel Oil & Export Industries Ltd. 2,00,0002. Roselabs Industries Ltd. 12,00,0003. Satguru Agro Industries Ltd. 2000004. Simco industries Ltd. 1500005. Jord Engineers India Ltd. 200000

7. Earnest Healthcare Ltd. 10,00,0008. Gujarat Aqua Industries Ltd. 100009. Gujarat Filaments Ltd. 500000

10. Lohia Polyester Ltd. 500000

* M/s Sabero Organics Gujarat Ltd. resolved all pending complaints and also paid ` 6,80,000 under consent proceedings. (Order dated 29/11/2012).

13, Proceedings under section 11B of SEBI Act, 1992 have been initiated against 146 companies and their directors for their failure to redress investor grievances. Adjudication proceedings under section 15C has been approved against 459 companies for levying monetary penalty for their failure to redress investor grievances.

Companies raising capital through public issue of securities are required to deposit one percent of the issue amount with the designated Stock Exchange. This deposit is released by the Stock Exchange only

(NOC). SEBI issues NOC to companies after satisfactory redressal of complaints received by SEBI against the Companies.

During the year 2012-13, NOCs were issued to 73 applicant companies. NOCs to 47 companies were not issued as the applications were incomplete or due to unsatisfactory redressal of investor grievances.

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was initially available on all working days from Monday to Friday from 9:30 a.m to 5:30 p.m (excluding declared holidays).

has extended its toll free helpline service (1800 22 7575 / 1800 266 7575) to Saturday and Sunday also. The services on Saturday and Sunday are available to investors from 9:30 a.m. to 5:30 p.m presently in English, Hindi, Marathi and Gujarati only. The number of calls received on Toll Free Helpline during the Financial Year 2012-13 is given in following chart below.

V. SEBI Toll Free Helpline

To facilitate replies to various queries

securities market, SEBI had launched toll free helpline service number 1800 22 7575/1800 266 7575 on December 30, 2011.

The toll free helpline service is available to investors from all over India and is in

Gujarati, Tamil, Bengali, Malayalam, Telugu, Urdu, Oriya, Punjabi, Kannada, Assamese and Kashmiri. The toll free helpline service

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Helpline introduced an option of receiving a feedback from the callers and based on the feedback received various measures have been adopted for improvement of the helpline services.

VI. Investor AssistanceSEBI provides assistance / guidance to

investors by replying to their queries received through the following modes

[email protected])

SEBI replied 1,874 queries during April 1, 2012 to Mar 31, 2013. Assistance so rendered to investors was augmented by gathering details from the FAQs, Circulars etc available on SEBI website, and from the details gathered through e-mail, phone calls from market intermediaries.

VII. Investor Education - Multimedia Campaign

In December 2012, SEBI launched a Multi-media Investor Education and Awareness Campaign, with objective of giving important messages, creating general awareness among the investors and prospective investors across the nation, regarding various relevant topics of investor

respect of schemes which promises unrealistic returns, grievance redressal mechanism, awareness regarding the products /

Mutual Fund, investment through Primary and Secondary Market etc.

Campaign is being carried at pan India level in Hindi, English and 11 major regional languages, with an idea of spreading

awareness among maximum people across

nation. As part of the above Campaign, advertisements related to topic “Investor Grievance Redressal Mechanism at SEBI” intending to create awareness regarding SEBI’s SCORES and Toll Free helpline, have been broadcast in mass media (TV, Radio and Print) during December 2012 to February 2013.

Education and awareness along with the grievance redressal had been the thrust areas as a part of capacity building and to make

in securities market.

WorkshopsVarious investor awareness programs

have been conducted by SEBI with the help of Exchanges, Depositories and various trade bodies like AMFI etc. SEBI also reimburses the cost of the approved programs conducted by Investor Associations recognised by SEBI, subject to certain limits. The topic for all

Grievance Redressal Mechanism in Securities Market.

Workshops Conducted by SEBIFinancial 2007- 2008- 2009- 2010- 2011- 2012-

Year 08 09 10 11 12 13

1 2 3 4 5 6 7

Numberofprograms 15 26 40 149 175 216

A. Regional Seminars

This initiative started in 2011-12 has been extended to reach out to more people and concentrating primarily on Tier II and Tier III cities. As on March 31, 2013, 44 regional seminars have been conducted in places like

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Sultanpur, Rourkela, Sambalpur, Rangpo, Gangtok, Satara, Dehradun, Rajkot, Varanasi, Akola, Guwahati, Durg, Rajnandgaon, Bilaspur, Corba, Thiruvananthapuram, Hyderabad, Port Blair, Jamnagar, Porbandar, Pune, Nagpur, Kolhapur, Tiruchirapalli, Aurangabad, Indore, Ranchi, Bhopal, Raipur, Ujjain, Jabalpur, Bhubaneswar, Gwalior, Thrissur, Patna, Meerut, Agra, Lucknow, Chennai, Jaipur, Amritsar, Jamshedpur, Aligarh, Bareilly, Silchar, Durgapur, Kanpur, Mysore, Mangalore, Chandigarh, Jodhpur, Kharagpur, Shillong, Salem, Agartala, Vishakhapatnam. (Table 3.42)

awareness across various topics in securities market. An in-house video on ‘How to lodge a complaint in SCORES’ has been developed and few more are in the pipeline.

D. Financial EducationWith the aim of spreading financial

literacy, SEBI has taken up various programs across the country. The resource person model developed by SEBI has been well appreciated internationally as well as by other regulators and various ministries.

E. School Programs

named ‘Pocket Money’ for school students jointly with National Institute of Securities Market (NISM) in 2008-09 and positioned it as an important life skill at the school level targeting mainly 8th and 9th standard students.

Under the Pocket Money programme, financial literacy was imparted to school students. It includes orientation programmes for the School Principals, training programmes for teachers followed by the teachers conducting

covered in the pocket money programme to the students. At the end of the programme, examination is conducted for the students and

During the year 2012-13, twenty-five programs being conducted, benefiting a total of 1,180 Teachers were conducted. The programme could reach to 150 schools covering 5,072 students during the year. Programme was also conducted in schools in Kerala, Karnataka, Mumbai and Tamil Nadu.

F. Through SEBI trained Resource PersonsSEBI launched a financial education

drive through Resource Persons (RPs) in

Table 3.42: Regional Seminars Conducted by SEBI during 2012-13

Financial Year 2011-12 2012-13 Total

1 2 3 4

Number of Seminars 47 44 91

B. Dedicated Investor Website

S E B I m a i n t a i n s a n u p d a t e d , comprehensive website for education of investors (www.investor.sebi.gov.in). The website has been revamped to make it more user friendly and the educative material is being updated. The schedule of various programmes is also updated on the website. SEBI Investor website have been rated four

to evaluate regulator websites on investor

popularise Rajiv Gandhi Equity Savings Scheme (RGESS) through the website. A dedicated link for the RGESS has been provided in the SEBI investor website.

C. Educative Material for Investor

SEBI is in the process of updating various materials relating to investor education and

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June 2010, where teachers and lecturers were trained and empanelled for conducting

deliberations at various levels, the eligibility criteria for being empanelled as Resource Persons has been broadened. The revised eligibility criterion presently is as follows:

economics, management, law, science and graduates in engineering & medicine

b. Employment:

XII, Graduates and Post Graduate course of college.

state government, various regulators, PSUs and ex-defence persons.

c. ExperienceWorking experience of at least three

years.

Apart from the above eligibility criteria, the empanelled RP is also required to abide by the terms and conditions and code of conduct. The workshops conducted through the Resource Persons are usually for 2 to 3 hrs duration where the SEBI study material is distributed free of cost to the participants.

The study material developed for the above target groups is presently available in 10 vernacular languages covering various topics.

rounds of empanelment and training were conducted taking the number of RPs on panel from 297 in 2011-12 to 911 as on March 31, 2013, from around 313 districts covering 26 states and four union territories. Through

education workshops in around 335 districts covering 25 states and 4 union territories have been conducted during the financial year 2012-13. (Table 3.44)

Table 3.43: School Programs Conducted by SEBI during 2012-13No. of No. of No. of No. of training the

Year Schools Teachers Students trainer Programs Covered trained Covered Conducted

1 2 3 4 52008-09 151 230 0 82009-10 10 161 3,876 52010-11 31 110 4,311 22011-12 360 631 50,946 142012-13 150 1,180 5,072 25Total 702 2,312 64,205 54

Table 3.44: Trends in Financial Education Programs through Resource Persons (RPs)

Financial Year 2010-11 2011-12 2012-13 Total

1 2 3 4 5

Total 176 3,089 5,934 9,199

G. Through SEBI Officers as Resource Persons

As a part of SEBI’s financial literacy initiative and to further expand our activities, it was decided that SEBI officers may be allowed to conduct financial education programs and investor education campaigns

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voluntarily empanelled themselves as RPs and have conducted 71 programs across the

IX. Visit to SEBISEBI invites students from schools,

colleges and professional institutes who are interested to learn about SEBI and its role as a regulator of securities markets. The program was started in February 2011 and has been quite popular. Till date SEBI had conducted 80 such visits; and participants visiting from different parts of the country (Amritsar, Pondicherry, Goa, Bareilly, Thrissur etc.) and

Management, Commerce, Banking, Law, Arts, science etc.). Educational institutions from

under this program.

11. RESEARCH ACTIVITIESSection 11(2) (l) of the SEBI Act enshrines

SEBI to undertake research activities for effectively fulfilling its functions. The Department of Economic and Policy Analysis (DEPA) assumes its role primarily from Section 11 (2) (l) and Section 18 of SEBI Act,

1992 and actively embarked many studies along with making mandatory reports as per the Act.

DEPA is responsible to maintain a repository of data for entire capital/ securities market, collection of data from various sources, verifying their accuracy and continuously maintaining/ updating the data. During 2012-13, SEBI has published SEBI Annual Report 2011-12, Handbook of Statistics on Indian Securities Market 2012 and SEBI monthly Bulletin which are available in the publication section of SEBI website (www.sebi.gov.in). SEBI has been distributing these publications to various stakeholders in the market like research institutions, investor associations, mutual funds, banks, etc on gratis. Apart from the publication, SEBI was responsible for providing weekly-monthly report on Indian Securities Markets and Monthly Report on

of Finance (MoF). SEBI is contributing the capital market segment on Red Book Payment System in India (published by Bank of International settlement (BIS)), Economic Survey for India and Government of Maharashtra.

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I. Research InputsSEBI has launched the SEBI DRG Study

project by inviting research proposals through

was constituted for short listing proposals received from the applicants. The Selection

proposals and the studies are in progress:

a. Impact of Increased Derivatives Trading in India on the Price-Discovery Process,

b. Penetration of Mutual Fund Industry in India; and

c. Foreign Investment in the Indian Government Bond Market.

SEBI has also initiated research activities related to primary market, secondary market and institutional participations in the Indian capital markets for the market development. Further, SEBI is trying to identify the data

of data disseminated to help the market participations. SEBI has also conducted study on cross-country experience in risk management framework in equity cash and

derivatives segment like ‘ Cross Border Transaction of Capital among SAARC

Kathmandu.

II. Market InteractionsSEBI invites renowned scholars and

financial market practitioners, to deliver lecture/talk on the topics related to securities markets, economics and finance. During 2012-13, SEBI invited experts to speak on the topics such as : “Foreign Trade and

and Challenges”, “Post Crises Reforms: Financial Regulation Issues, Dodd Frank

Indian equity markets”, “Business cycles

(Arbitrage, Speculation, and Hedging)”, “Market Liquidity: Asset Pricing, Risk, and

and “How should we present India story to Investors (Domestic as well as Foreigner)”.

Programme to get futuristic inputs on

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various issues important for development and regulation of securities market such as raising of capital, corporate bond market, mutual funds, etc. The programme was held in Mumbai on February 11, 2013. The program involved interaction with the experts, academicians, market participants, industrialists etc.

III. Risk ManagementSEBI has set up Systemic Stability

Unit (SSU) to assess systemic risks, if any,

coordinated assistance/inputs from SEBI to FSDC in monitoring Systemic Risks in respect of Securities Market and monitoring of Systematically Important Financial Institutions (SIFI) under the jurisdiction of SEBI. SSU is also coordinating with RBI and concerned Departments in SEBI in respect of circulation of agenda notes, minutes,

and providing inputs and write up from the securities market related perspective for Financial Stability Report (FSR) published by RBI.

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Part Four: Regulatory ChangesPART FOUR: REGULATORY CHANGES

The SEBI Board has taken various regulatory measures to protect the interests of investors in securities market, for the development of the securities market and to regulate the securities markets. Various amendments to the existing regulations were

made is as follows:

1. REGULATORY DEVELOPMENTS

I. New Regulations

A. SEBI (Alternative Investment Funds) Regulations, 2012 w.e.f. May 21, 2012

The Securities and Exchange Board of India (Alternative Investment Funds) Regulations (“AIF Regulations”) repealed the SEBI (Venture Capital Funds) Regulations, 1996 (“VCF Regulations”) . The AIF Regulations were introduced with a view

unregulated funds, encouraging formation of new capital and consumer protection. The AIF Regulations are the outcome of the Concept Paper, issued in August 2011, which was drafted with a view to shift SEBI’s regulatory strategy from the existing facilitative regime to a mandatory regime.

A significant requirement of the AIF

raising capital from investors unless they

regime: (i) Venture Capital Funds; (ii) Private

Infrastructure Equity Funds; (vi) Real Estate Funds; (vii) Small and Medium Enterprises Funds; (viii) Social Venture Funds; (ix) Strategy Funds; and (x) Residual category (including hedge funds).

in the form of a trust or a company or a LLP

from investors, whether Indian or foreigner

investment policy. Mutual funds under the SEBI (Mutual Funds) Regulation, 1996 and collective investment schemes under SEBI (Collective Investment Schemes) Regulations, 1999, family trust, ESOP trusts, employee welfare trusts, holding companies, etc. are expressly excluded.

launch any new scheme or raise any capital

corpus unless they seek registration.

Before raising any funds, AIFs are required to state their investment strategy,

launch of the scheme giving material detail

the following three categories:

a. Category I include those AIFs for which certain incentives or concessions might

of India or other regulators in India and which shall include Venture Capital Funds, SME Funds, Social Venture Funds, and Infrastructure Funds.

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do not fall in Category I and III and which do not undertake leverage or

operational requirements and cannot engage in derivatives investments.

c. Category III has those AIFs including hedge funds which trade with a view to make short term returns and may employ leverage including through investment in l isted or unlisted derivatives.

AIF Regulations include:

a. The AIF shall not accept from an investor an investment of value less than one crore.

crore.

c. The manager or sponsor for a Category I and II AIF shall have a continuing interest in the AIF of not less than 2.5 percent of the initial corpus or five crore whichever is lower. For Category III Alternative Investment Fund, the

whichever is lower.

memorandum with SEBI along with

ended and shall have a minimum tenure

ended.

f. No scheme of the AIF shall have more than one thousand investors.

B. Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012 w.e.f. June 20, 2012

The Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012 (“SECC Regulations”) were framed to provide for the ownership and governance norms for stock exchanges and clearing corporations.

Previously, ownership aspects of stock

(Manner of Increasing and Maintaining

Exchanges) Regulations, 2006 (“MIMPS

applied to those stock exchanges that were corporatized and demutualised in terms of schemes prepared in pursuance of the power under section 4B of the Securities Contracts (Regulation) Act, 1956 (“SCRA”). The SECC Regulations were framed to provide a

exchanges and clearing corporations, repealed

the aspects of MIMPS Regulations dealing with shareholding restriction and fit and proper criteria. Since Securities Contracts (Regulation) Rules, 1957 (“SCRR”) already provided for the aspects of recognition, the SECC Regulations cross refer to the SCRR with regard to these aspects.

SECC Regulations are as follows:

a. Mandatory recognition of clearing corporations: The SECC Regulations makes it mandatory for those entities

recognition as clearing corporations.

Corporatized and Demutualised entity: Stock exchanges and clearing

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Part Four: Regulatory Changes

corporate entities. Trading and clearing

clearing corporations. Further, the SECC Regulations provide for a minimum 51

c. Adequate dispersal of shareholding: No single entity or person can acquire

percent in the case of institutions like

paid up equity capital of a recognised stock exchange or clearing corporation.

d. Fit and proper criteria: All shareholders, directors and key management personnel

good reputation etc.

e. Net worth: Taking into account the central role that stock exchanges and clearing corporations play in the securities market and the risk that these institutions need to manage, net worth

within which these requirements need

provided.

f. Manner, conditions and terms of appointment of directors: Taking into account the need to ensure healthy management of stock exchanges and clearing corporations, the SECC Regulations provide for the manner of appointment of directors and also

such as code of conduct, regulation of compensation policy, etc.

g. Corporate Governance: The SECC Regulations provide for methods to promote good corporate governance.

are mandated. Also, provisions for

mandated. Further, clearing corporations and stock exchanges are mandated to ensure equal, unrestricted, transparent and fair access to all persons without

entities.

h. Listing of securities: Recognised stock

of its securities on any recognised stock exchange other than itself.

C. S E B I ( I n v e s t m e n t A d v i s e r s ) Regulations, 2013 w.e.f. January 21, 2013

The SEBI (Investment Advisers)

were framed to provide a framework for registration and regulation of investment advisers. Only the act of giving advice is regulated under the IA Regulations, whereas the regulation of selling of products, if

the product regulators like IRDA, RBI and PFRDA.

corporate (including LLPs) and partnership

to investors or other persons or group of persons and includes, any person who holds

name called. The salient features of the IA Regulations are as follows:

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a. Exemption from registrations

exempted from registration:

i. Person giving general comments relating to securities market in good faith;

advisers advising solely in insurance products/ pension products and registered with IRDA/ PFRDA respectively;

registered with an association of asset management companies of mutual funds, providing any investment advice to its clients incidental to its primary activity;

iv. Advocates, solicitors, law firms,

Actuarial Society of India providing investment advice to their clients incidental to their professional service;

intermediaries shall comply with the

provisions of the Regulations)

vi. Any person who provides investment

Indian or Person of Indian Origin will fall within the purview of the IA Regulations;

vii. Any representative and partner of an investment adviser which is registered under the IA Regulations: and

b. Banks/Body corporates

segregated from other activities. Moreover,

execution services.

c. Compensation

any remuneration or compensation from

advised, in respect of the underlying products or securities for which advice is provided.

d. Name

individual, registered under the regulations is required to use the words “investment adviser” in their name.

e. General responsibility

The IA Regulations provide for code of

advice.

f. Obligations of investment advisers

include:

i. An investment adviser is required to

interest of its clients.

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ii. An investment adviser shall not divulge

client without prior permission, except

made in compliance with any law.

iii. An investment adviser is required to act

in the IA Regulations.

iv. An investment adviser is required to conduct risk profiling and risk assessment of the investor.

v. An investment adviser is required to

the client.

vi. An investment adviser is required to

of 5 years.

vii. An investment adviser is required to conduct yearly audit in respect of compliance with the IA Regulations.

An investment adviser is required to maintain proper system and procedure for redressing grievances of clients.

II. Amendments to Existing Rules/ Regulations

A. SEBI (Issue of Capital & Disclosure Requirements) (Third Amendment) Regulations, 2012 w.e.f. August 24, 2012

The SEBI (Issue of Capital & Disclosure Requirements ) (Third Amendment ) Regulations, 2012 implement the following

1. To align the ICDR Regulations with

(Regulation) Rules, 1957; and

Placement Programme (IPP). A promoter

through IPP or OFS through the stock

programme(s).

B. SEBI (Depositories and Participants) (Amendment) Regulations 2012 w.e.f. September 11, 2012.

In line with the recommendation of

and Participants) Regulations, 1996 were amended to incorporate, inter alia, the norms on shareholding and governance of depositories. The key features of the amendment are as follows:

depository.2. A person whose shareholding exceeds

two percent of the paid up equity share capital of a depository is required to seek

of the acquisition.

a sponsor of any depository is not allowed to hold more than 24 percent of the paid up equity share capital of that depository. Mandate on the sponsor stock exchange to reduce the shareholding to 24 percent within a

appointment of directors.

for directors and key management personnel.

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6. Depositories are now required to have an adequate Business Continuity Plan for data and electronic records to prevent, prepare for, and recover from any disaster.

7. A depository is required to ensure equal, fair and transparent access to all persons

related entities.

depositories to list its securities on a

C. Securities and Exchange Board of India (Mutual Funds) (Second Amendment) Regulations, 2012 w.e.f. September 26, 2012

The SEBI (Mutual Funds) (Second

following regulatory changes:

1. Asset Management Companies (AMCs) are required to disclose half yearly

national English daily newspaper and one regional newspaper.

allowed.

quantum of investment and advisory

and provided the same are fully

4. In the case of fund of funds schemes,

to determine the individual proportions

charged, including the weighted average

5. Brokerage and transact ion cost

of trade are capped to the extent of 12

6. To improve the geographical reach of

money from smaller towns, AMCs are allowed to charge additional Total

depending upon the extent of new

or 15 percent of the average assets under management (year to date) of the scheme, whichever is higher. In case of

7. In order to encourage long term holding and to reduce churn and align the

that of the investors:

credited to the scheme while the

and

top 15 cities) is provided to the extent the investments are redeemed within a period of one year.

D. Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) (Fourth Amendment) Regulations, 2012 w.e.f. October 12, 2012

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following regulatory changes:

a. For enhancing the participation of retail investors, share allotment system has

applicant, irrespective of his application

aggregate. The system will satisfy more

increased to ` ` 15,000, as against the existing ` ` 7,000.

and simplification of fund raising

entrepreneurs, rationalize disclosures in

market capitalization reduced from ` 5,000 crore to `

(FPOs) and rights issues through

ii. To encourage professionals and

Alternative Investment Funds such as SME Funds, Infrastructure

to a cap of 10 percent.

issuers, changes upto 20 percent

the existing 10 percent, will not

iv. To facilitate QIPs even in a falling

percent to the price calculated as per the SEBI Regulations.

v. To provide updated information to investors, listed companies have

disclosures in the prospectus on

purpose of FPOs / Rights Issue

links without requiring a repetition of such disclosures.

of fer ings and enhance investor

to access the capital market through either the SME platform or compulsory

participation of 75 percent, as against the existing 50 percent.

d. To avoid any misleading signals to retail

in the issue, no withdrawal or lowering

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at least five working days prior to opening of the issue, as against the current provision of two working days in the case of IPOs. This will provide more time to the market to analyze the issue.

issuer as against existing no cap.

associate of the issuer, these amendment regulations mandate that it shall disclose

‘Marketing Lead Manager’ and its role

issue.

E. Securities and Exchange Board of India (Issue and Listing of Debt Securities) (Amendment) Regulations, 2012 w.e.f. October 12, 2012

The key features of these amendment

a. Disclosures in relation to privately placed bonds: The amendment regulations introduced a standard template for disclosures on terms of the issue, financial information and

additional disclosures that have now

1. Shelf disc losure document for private placement of debt secur i t ies : The amendment regulations permitted issuers to have Shelf Disclosure Document

amended regulations, an issuer is not required to file a Shelf Disclosure Document again if the

the Shelf Disclosure Document.

respect to each tranche, containing details of the private placement and material changes, if any, in the information provided in Shelf Disclosure Document.

F. SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) (Amendment) Regulations, 2012 w.e.f. December 11, 2012

regulation (2) of regulation 4 of the SEBI

Practices relating to Securities Market)

fraudulent or an unfair trade practice.

G. Securities and Exchange Board of India (Self Regulatory Organisations) 2004 (Amendment) Regulations, 2013 w.e.f January 7, 2013

These amendment regulations were

Regulatory Organisations (SRO) that

of mutual funds and portfolio managers.

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The SRO Regulations were notified on

force. Notification issued pursuant to the

portfolio managers.

H. Securities and Exchange Board of India (Issue of Capital and Disclosure R e q u i r e m e n t s ) ( A m e n d m e n t ) Regulations, 2013 w.e.f February 27, 2013

In order to provide liquidity in the domestic markets, the amendment regulations

Depository Receipts (IDRs). Now, IDRs shall

to time.

I. Securities and Exchange Board of India ({KYC (Know Your Client) Registration Agency} (Amendment) Regulations, 2013 w.e.f. March 22, 2013

The SEBI (KRA) Regulations, 2011 were amended to provide that physical

the KRA. The KYC information is required

proper authentication, on the system of the KRA. Physical copies of the KYC documents

J. Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers (Amendment) Regulations, 2013 w.e.f. March 26, 2013

Taking note of concerns raised during

Acquisition of Shares and Takeovers) Regulations, 2011 (“Takeover Code”), the following changes were made to the Takeover Code:

a. Public announcement in case of combined modes of acquisition:

rights is completed either through an agreement and one of the other specified modes, or through one or

was made. This exception shall apply only when the acquirer discloses in the

Public announcement in case of preferential allotment: Earlier, the date on which the special resolution approving the preferential allotment was

After the amendment, the date on which

not allowed to withdraw such an open

successful.

c. Disclosure requirements: The disclosure

of Insider Trading) Regulations, 1992. The revised clause clarifies that any person who acquires shares or voting rights of the target company is required to disclose any change in shareholding

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exceeding two percent, even if such change results in the shareholding falling

d. Relevant date in case of buy-back of shares: Earlier, a shareholder, who was

his shareholding within 90 days of

regulations have altered this requirement to state that the period of 90 days shall

e. Completion of market purchases during the offer period: As per the earlier provisions, an acquirer could not acquire shares or voting rights which triggered

amendment regulations, acquisition of shares of the target company may now

completed only if such shares are kept in an escrow account and the acquirer doesn’t exercise any voting rights over such shares.

2. SIGNIFICANT COURT PRONOUNCEMENTS

I. Supreme Court

A. M/s . Sahara India Real Estate Corporation Ltd. vs. SEBI (Civil Appeal. No. 9813/2011); M/s. Sahara Housing

Investment Corporation Ltd. vs. SEBI (Civil Appeal. No. 9833/2011)

a.order held that the issue of OFCDs to more than 50 persons fell within

directed to provide the monies raised

was directed to refund the investors along with interest after undertaking proper verification of the documents and genuineness of the investors. The court fixed a period of 10 days for provision of all the documents and three months for providing monies to SEBI. SEBI was directed to take appropriate

of its directions. Justice B N Agrawal (Retd.) was appointed to oversee the entire process.

b.with the SC directions citing various pretexts. SEBI accordingly filed its status reports (three as on date) with

applications in SAT with a view to

documents and the refund amount to

SAT, with a direction to approach SC for

of the Saharas, Supreme Court directed Saharas to immediately deposit ` 5,120

B. M/s. P.G.F. Ltd. vs. Union of India (Civil Appeal No. 6572 of 2004)

a.

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and development of agricultural land,

were all collective investment schemes. It further directed that since the M/s

the statutory requirement as provided under the SEBI (Collective Investment

Limited shall neither collect any money from investors nor launch any new scheme and it shall refund the money collected under the schemes, and failing which threatened to initiate actions as

SEBI (Collective Investment Schemes) Regulation, 1999.

b.order, the appellant preferred an appeal

in its order dated July 26, 2004, upheld the validity of section 11AA of the SEBI Act, 1992.

c.

into the specific activities of sale of agricultural land and its development. Therefore, there was no scope to apply Entry 18 of List II of Seventh Schedule in order to strike down the said provision on the ground of legislative competence.

(2) of section 11AA of SEBI Act, 1992,

scheme, disclosed that it is not restricted

to any particular commercial activity such as a shop or any other commercial

operation or transportation or shipping or entertainment industry etc. The

identify any scheme or arrangement,

funds at the instance of someone else who comes forward to promote such

such scheme or arrangement provides for the various consequences to result there from.

d.Parliament in enacting the SEBI Act itself and in particular the addition of section 11AA was with a view to protect the

and uneducated or retired personnel

group and who seek to invest their hard

such schemes with a view to earn some

that such investment will get appreciated in course of time. In this regard, the

having perpetrated this litigation was frivolous and vexatious in every respect,

11AA of the SEBI Act without any

prolonged this litigation for more than a

defrauding its customers who invested their hard earned money in the scheme of sale of land and its development. As

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that the appellants had not approached the Court with clean hands, it imposed exemplary costs of Rs. 50 lakh, while dismissing the appeal.

e. It further held that the activity of the

and development of agricultural land squarely fell within the definition of collective investment scheme under

section 11AA of the SEBI Act, 1992 and consequently SEBI’s order was perfectly

Supreme Court directed the Central Bureau of Investigation as well as the Department of Income Tax to conduct

Supreme Court also directed SEBI to proceed with its investigation/enquiry

carried out in accordance with law, take necessary steps for ensuring the refund

Limited in connection with the sale and development of land to its various customers.

II. High Courts

A. M/s. Ram Kaashyap Investment Ltd (RKIL) vs. SEBI & Shri Venkataramani vs SEBI (W. P. Nos. 1214/2013 & 1292/2013) - Before Hon’ble Madras High Court

a.petitioners (the company and its

dealing in the securities, directly or indirectly, for a period of two years from the date of the order under section 11

of alleged violations with respect to the rights issue of M/s RKIL.

b. The company M/s RKIL is listed in

Stock Exchange. It came out with rights issue. The issue opened on 18.11.2010 and closed on 16.12.2010. SEBI noticed several complaints from

Composite Application Forms (CAFs) during the routine inspection of Knack Corporate Services Private Limited, the Registrar to an issue (RTI) of the rights issue of M/s RKIL and it was noticed during inspection that CAFs were not dispatched as mentioned in the

the RTI had produced forged records/documents with regard to proof of dispatch of CAFs and further M/s RKIL

in the rights issue and the promoter of M/s RKIL A Venkataramani had failed

closure of the rights issue. It was also

provisions of the ICDR Regulations, 2009 and DP Regulations, 1996, concealment of material information and making misleading disclosures with regard to the rights issue and thus violating

the petitioners herein.

c.dismiss the writ petitions on the ground

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since the statutory appellate remedy is

d. The petitioners argued that one man

cannot take up the appeal as it lacks the necessary forum and that Rule 5(2) of the SAT (Procedure) Rules, 2000 deals with

e. “the order

before the Appellate Tribunal and Section 29 of the Act enables the Government to make Rules for carrying out the purpose

the Central Government under Rule 5(2) is valid in law. The Petitioners herein have

issued thereunder..........The contention that only one member that too, a non-judicial member is functioning as on today would not hold water as the Appellate Tribunal is functioning as on today and discharging its functions as per law. Any rule has to be read meaningfully and what is applicable to two members is applicable to one member. It is a necessity which has to be accepted.”

“unfortunately the arguments advanced on behalf of the petitioners are a competency of a single member Appellate Tribunal which is not the issue in the writ petition. Both the petitioners have not challenged nor questioned the functioning of the single member Appellate Tribunal. The issue raised before him is that whether alternative remedy

of appeal as provided in the Act is a bar to entertain these writ petitions. On a perusal of the Act and the rules made thereunder, I

appeal is provided under the Act, that too, with a member having special and technical knowledge in the relevant field. In such

waive on the appeal remedy and to entertain the writ petition.”

B. Shri Sandeep Jain vs. Union of India and Others (W.P. No. 5847 of 2012) – Before Hon’ble High Court of Bombay

a. A writ petition under Article 226 of the Constitution of India was filed

SEBI. From this order, the petitioner

this writ petition, the petitioner had

in SAT for hearing appeals including

petitioner also prayed for a writ of

b. The Court ruled that there was no impediment in the petitioner’s appeal

over SAT, in accordance with SAT

of the SEBI Act and the SAT (Procedure)

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for a short period and that such an

regular presiding officer retires or is

C. SEBI Vs. M/s. A.P.L Industries Ltd. (C.W. P NO. 1261/02)-Before Hon’ble High Court of Delhi

a.

and also seeking a direction to the Respondent company to comply with

and refund all the monies collected in

b.` 10

08, 1996. On the date of closure the

May 22, 1998 directed the company to refund the application moneys to investors. The said order was challenged

the said order of the appellate authority

refund the collected amount with the

regard to the aforesaid, I am of the view that the order of the SAT deserves to

the Chairman SEBI dated 22.05.1998

directions contained therein for refund of the money to the share applicants

ordered accordingly. The SEBI shall ensure that refund is made to the share

recourse to the relevant provisions of law...”

D. M/s. DLF Ltd. vs. SEBI and ors. (L.P. A No. 100 of 2012)- Before Hon’ble High Court of Delhi

of 2011. The Ld. Single Judge vide the said order was pleased to upheld SEBI

investigation was ordered.

b.

order of SEBI held that investigations

dated 04.06.2007 and 19.07.2007 made

Krishna Singha, against M/s DLF, and M/s Sudipti Estates Private Limited, the third respondent (hereafter “Sudipti”). SEBI’s order indicated that investigations

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the alleged violations of the erstwhile SEBI (Disclosure and Investor Protection)

read with the relevant provisions of the Companies Act, 1956. SEBI also indicated that an investigating authority would

the SEBI’s order, and would complete investigations expeditiously, and if any

proceeded with in accordance with law.

c.violations of a particular Section of the

are mentioned and it does not vitiate the

appoint an Investigating Authority to further determine the veracity of these

of the SEBI, as long as a deferential review does not reveal any extraneous circumstances. On this aspect too, this

interference.

III. Securities Appellate Tribunal

A. Shri Victor Fernandes & another vs. NSE & Others (Appeal No. 219 of 2012) - Before Hon’ble Securities Appellate Tribunal

a.the decision of NSE, viz circular dated

and trading approval of the equity

M/s Network 18, pursuant to its rights

as Respondent no. 9 in the appeal.

b.(SAT) noted that the grievance of the appellants was that they made multiple representations to various entities

violation of various rules and regulations

Network 18 Media & Investment Limited and M/s TV 18 Broadcast Limited, respectively, relating to the said right issue; the concerned entities have failed to take action necessary to protect the interest of investors.

c.

aggrieved as they have participated and

the appellants have made no prayer for

rights issue.

d.

Bashir Ahmad & Ors [(AIR (1976)

SAT in Appeal no. 142 of 2008 – Mr.

was of the view that the appellants have failed to show how the listing

impugned circular has affected their legal rights or caused legal wrong or

the impugned circular of NSE.

e. SAT was of the view that the appellants

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decision of some of the respondents on its various representations. It has also noted that the various representations made to SEBI were examined and appropriately responded to the appellants and if the

response/reply received it could have availed appropriate remedy against those responses.

f.appellants are seeking multiple reliefs against various respondents which are in the nature of a direction not covered

Securities Contracts (Regulations) Act, 1956 and thus dismissed the appeal

B. (A) Dipak Patel Vs. SEBI (Appeal No. 216/2011); (B) Kanaiyalal Baldevbhai Patel Vs. SEBI (Appeal No. 74/2012);

Vs. SEBI (Appeal No. 78/2012 )- In the matter of Passport India Investment (Mauritius) Limited- Before Hon’ble Securities Appellate Tribunal

a. The captioned appeals were filed

imposing a penalty of five crore on each of the appellants captioned at

Trade Practices Relating to Securities

to have acted in manipulative manner

Passport India Investment (Mauritius) Ltd. (“Passport”) to the appellant at B, who was a connected entity. The

activities akin to a front running, qua the

sensitive information. The appellant at C was held to have acted as a conduit to the other two appellants and had acted

b.appeals and set aside the orders of the

following grounds:

i. The Securities and Exchange Board

to Securities Market) Regulations,

dealing in the securities market.

Securities and Exchange Board of India Act, 1992, (“SEBI Act”), rules

intermediary, the appellants could

as they were not intermediaries under the SEBI Act or any rules or regulations.

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said to have acted as a fraud on the securities market as a whole, especially so when all the trades of the appellants were executed

system and at the then prevailing market prices.

Supreme Court of India on several grounds of law and the decision of the apex court in this regard is awaited.

C. Mr. V. K. Kaul and Mrs. Bala Kaul ……Appellant versus The Adjudicating

of India…… Respondent

a.appellants guilty of violating Section 12A (d) and (e) of the Securities and Exchange Board of India Act, 1992 (the Act) and imposing a penalty of ` 50 lakh and ` 10 lakh respectively under Section

b.

M/s Solrex Pharmaceuticals Limited (Solrex). SEBI had investigated the dealings in the scrip of M/s Orchid Chemicals and Pharmaceuticals Ltd. (the target company). Solrex made large investments in the scrip of the target company. It was noted that Mrs. Bala Kaul wife of Mr. V. K. Kaul had traded in the scrip of the target company ahead

the target company. The funds for the

Kaul. This trading was allegedly done on

to invest large amounts in the scrip of the target company.

c.

of trading in the scrip of the target

Regulation 2(c) (i) of the Securities and

Insider Trading) Regulations, 1992, was

wife in the scrip of the target company

thus, violated Section 12A (d) and (e) of the Act.

d.

has erred in holding that the decision of Solrex to purchase shares of the target

of ‘price sensitive information’ under Regulation 2(ha) of the regulations, only

treated as price sensitive information. Further, in terms of Regulation 2(k),

target company and the target company

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according to him, information relating to a third party investor seeking to

regarding the target company.

e. The respondent argued that the term

the regulations is wide enough to include any information relating directly or indirectly to a company. The regulations

the possession of or in the knowledge of the company in whose securities the insider deals. If an insider deals in the securities of a company listed on any stock exchange when in possession of

Regulation 2(ha) of the regulations

mean any information which relates directly or indirectly to ‘a company’

make it clear that the information must relate to ‘a company’ and not necessarily ‘the company’ which is dealing into the shares.

f. SAT accepted that the term price s e n s i t i ve i n f o r m a t i o n u s e d i n regulation 2(ha) is wide enough to include information relating directly or indirectly to ‘a company’. The Solrex had decided to purchase shares of the target

and Target Company is ‘a company’. The decision of Solrex to purchase shares of the target company is likely to

of the target company. Only the insiders

of the company. If the insiders of Solrex are allowed to trade in the shares of the target company ahead of purchase of

The decision of Solrex to purchase shares

for the insiders of Solrex and they are

the target company till such information

of ‘the company’ deals in the securities of ‘a company’ listed on any stock

relating to that company, the provisions

D. Shri N. Narayanan vs. SEBI

Theatre Ltd, investigations revealed that the financial results contained

stock exchanges contained inflated

the company resulted in price rise of the scrip of the company and the promoters

also alleged that the company and its

making investment decision while the

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the company, was found to have violated

Practices Relating to Securities Market)

Therefore, monetary penalty of ` 50 lakh was imposed on Shri N Narayanan

selling or dealing in securities in any manner whatsoever or accessing the securities market directly or indirectly

company for a period of two years. The

directions.

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Annual Report 2012-13PART FIVE: ORGANISATIONAL MATTERS

1. SEBI BOARDDuring the financial year 2012-13,

Shri Prashant Saran, Whole Time Member,

Time Member, SEBI on expiry of his term of appointment on May 17, 2012. He was again appointed as Whole Time Member of SEBI under clause (d) of sub-section (1) of Section 4 of the SEBI Act, 1992 by Government of

Shri Saran assumed charge as Whole Time Member on August 9, 2012.

Dr. Arvind Mayaram, Secretary, Ministry

Government of India was nominated as one of the Members on the SEBI Board in terms

August 24, 2012 in place of Dr. Thomas Mathew.

Shri Prakash Chandra Chhotaray, was nominated as a Part-Time Member of SEBI, under clause (d) of sub section (1) of Section 4 of the SEBI Act, 1992 by Government of India

Shri S. Raman, Whole Time Member, was appointed as Whole Time Member of SEBI under clause (d) of sub-section (1) of Section 4 of the SEBI Act, 1992 by

charge as Whole Time Member on the same day.

During the year 2012-13, SEBI Board met

of the meetings are presented in Table 5.1.

2. AUDIT COMMITTEEIn pursuit of high standards of

governance and transparency, the SEBI Board, in its 127th meeting held on September

process and disclosure of its financial information.

The Committee comprises three members nominated by the Board. The tenure of the members of the Committee is two

Shri V.K. Jairath. Shri Rajeev Kumar Agarwal (WTM, SEBI) and Shri Prakash Chandra Chhotaray (Part-time member, SEBI) are the other two members.

Shri Prakash Chandra Chhotaray was

place of Dr. Thomas Mathew. During the

Table 5.1: Board Meetings during 2012-13Number of Number of

Particular Meetings Meetings

1 2 3

(i) ChairmanShri U. K. Sinha 6 6

(ii) Whole Time MemberShri Prashant Saran 5* 6Shri Rajeev K. Agarwal 6 6Shri S. Raman 2* 2

(iii) MembersDr. Arvind Mayaram 3* 1Shri Naved Masood 6 4Shri V. K. Jairath 6 5Shri Anand Sinha 6 4Shri P. C. Chhotaray 5* 5

* Number of meetings held after assuming the charge.Note:

Part-Time Member.

assuming charge again as Whole Time Member on August

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four meetings.

responsibilities:

a. Reviewed the internal audit reports with the management and the internal auditors

b. Reviewed the action taken by the

implement suggestions as pointed out by the internal auditors

c. Reviewed the investment policy of SEBI

d. Reviewed and discussed the Quarterly statement of accounts of SEBI for the quarters ended June, September and December 2012.

Pursuant to the suggestions made by

closing of accounts and e-payment to suppliers, contractors etc. The Committee

and the internal auditors and helped in bringing the improvement of the internal control systems.

the annual statement of accounts of SEBI for the year 2012-13 with the management of SEBI and internal auditors. Relying on the review and discussions conducted with the management and internal auditors, the

statement of accounts is fairly presented in conformity with the Generally Accepted Accounting Principles (GAAPs) in all material

internal control systems put in place and expressed its satisfaction with the same.

among themselves, without the management or the internal auditors being present,

the information disclosed in the Annual Statement of Accounts. The Committee

its charter.

3. ORGANISATIONAL RESTRUCTURING CELL

SEBI Board in its meeting held on March 25, 2011 had suggested SEBI to explore the

the investor should get the services of SEBI at his door step to promote a balanced, pan India securities market. Physical proximity of SEBI

promote deepening and broadening of the securities market. Accordingly it was felt that:

a. there is a need to strengthen the regional offices by delegating the additional activities/works to them, and

b.various state capitals to service investors in the locality.

Board had approved the proposal relating to

in state capitals. The implementation of the

phases, the details of which are below:

Guwahati and Lucknow.

13 were opened at Jaipur, Chandigarh, Indore, Bengaluru, Kochi, Patna and Bhubaneshwar.

it has been decided to open the local

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other than North-East. The state capitals included Ranchi, Raipur, Panaji, Shimla, Dehradun and Srinagar.

following activities:

a. Redressal of investor grievances received directly from investors in writing and through online mechanism of SCORES and taking them with listed companies and intermediaries in their state.

in their territorial jurisdiction.

c. Monitoring and processing payment etc. of empanelled Resource Persons.

d. Organize and participate in Seminars, Conferences on investor awareness and

e. Gathering market intelligence from local media or through other sources.

f. Assisting in investigation, inspection and litigation related activities.

II. Redesigning SEBI’s RoleSEBI felt the need to revisit its

organisational capabilities to ensure that these are relevant in the dynamic market environment. Accordingly, SEBI Board approved the proposal to engage an independent reputed consultant to revisit the structural and organisational issues, re-prioritize areas of focus and look at the technological and man power needs with the emphasis on attracting and retaining good quality talent. Consequently, for the appointment of consultant, a Consultant

by SEBI. Based on the recommendations of CEC, M/s. Oliver Wyman was appointed for “Redesigning SEBI’s Functions, Role, Structure & Vision”.

For the monitoring of the project a Project

on July 17, 2012 to look into a) Overall project management and communication, b) issues resolution, c) advice and counsel to project team and consultants; and d) thought leadership and expert input. The designated Consultant, M/s. Oliver Wyman started working on the project since July 23, 2012. The Consultant had several rounds meetings with the PSC also one-on-one meeting with Whole Time Members and Executive Directors of SEBI for guidance from time to time. A

constituted as per the Ministry of Finance/Central Vigilance Commission’s guidelines.

To make the project successful, the consultant was facilitated to get inputs from

all functions and seniority levels and to make presentations to the SEBI Board and International Advisory Board of SEBI. The consultant also met external stakeholders’ which includes brokerage houses, wealth managers, global and domestic banks active in institutional broking and merchant banking, leading investor associations, stock exchanges and former SEBI Chairmen. The consultant discussed the preliminary recommendations with Dy. Governor, Reserve Bank of India, Shri Anand Sinha on December

K. Nair, Whole Time Member, Insurance Regulatory and Development Authority on December 26, 2012. The Consultant also had audience of Hon’ble Finance Minister on March 13, 2013 on their recommendations.

4. HUMAN RESOURCESHuman Resources Development (HRD)

Division continued to play an important

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role with prime focus on implementation of policies on capacity building, training, promotions, placement and transfers.

Deputation

Grade B and one in Junior Assistant Grade

various areas. As on March 31, 2013, SEBI has a total of 666 employees in various grades

Many benefits have been extended or introduced during the year for staff members. Scheme for purchasing computers / computer-related items has been introduced for all staff members including those on contract/deputation. Paternity leave has been introduced for male staff members. Entitlements of lodging allowance and halting allowance have been introduced for staff members transferred at the Board’s instance. Entitlement limit towards reimbursement of vehicle maintenance expenses has been revised for Executive Directors; also reimbursement towards driver’s salary has

cadre of Junior Assistants and to secretarial

also been introduced to provide financial assistance for meeting a part of medical

HRD division always endeavours to encourage the employees of the Board to pursue higher studies and upgrade their skills. As such, collaborations were made with

and with XBRL International Inc. for the

made for the CFA course and 15 for the XBRL course during the year under the collaborations. The courses of study available

also been revised and updated.

III. PromotionsPromotion exercise has been completed

for the post of Executive Director, CGMs, GMs, DGMs and AGMs. The exercise of

has also been initiated and is in progress.

No. ofFrom To persons

promoted

1 2 3

Chief General Executive Director 1ManagerGeneral Manager Chief General 2

ManagerDeputy General General Manager 4ManagerAssistant General Deputy General 6Manager ManagerManager Assistant General 77

Manager

at Guwahati, Hyderabad, Bhubaneswar,

of SEBI during the year.

V. Job RotationHRD division undertook the exercise

of job rotation during the year. A total of 222 officers were rotated among different

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During the year, one staff member has been placed under suspension in terms

Securities and Exchange Board of India (Employees’ Service) Regulations, 2001.

VII. Training and DevelopmentIn order to enhance and widen the

knowledge base and perspective as well as “soft skills” including motivation, communication

deputed to various behavioural and functional training programmes both domestic and international. Several training initiatives were undertaken during the year to enhance the

A. DOMESTIC TRAINING

Around 404 SEBI officials attended various domestic training programmes at NISM and reputed Institutes like ISB, IIM, MDI, ASCI, XLRI, IMF, NIT, BSE

related issues like Derivatives and Forex Risk Management, Credit Default Swaps, Advanced Derivatives, BSE Training Programmes. Training Programmes related to other diverse areas like Network Security, Banking operations and Fiscal Laws Management, HR related issues, Contract Labour Management related trainings, Management Development Programmes for

Advanced Excel, Judiciary etc. were also

sent to Conferences and Summits on Mergers and Acquisitions, Finance, Legal Framework etc. The major training programmes arranged/ conducted during the year were as follows:

Time Members and Executive DirectorsMedia Training Workshops were arranged for Chairman, Whole Time Members and Executive Directors.

b. Leadership & People Management Programme for Executive Directors and CGMs

Programme on Leadership & People Management at the Indian School of Business, Hyderabad.

c. ‘Leadership for Professional Excellence’ programme for GM and DGM level

-ed an Executive Education Programme on Leadership for Professional Excel-lence at the Management Development Institute, Gurgaon.

d. Training in Advanced Excel

on Advanced Excel organized by HRD division.

e. Workshop on Securities Market RegulationsA programme on Securities Market Regulations was held in co-ordination with the NISM and the Enforcement Directorate wherein around 20 SEBI

a cross regulatory perspective.

f. Executive Development Program on Advanced Derivatives

Development Program on Advanced Derivatives organised in collaboration with NISM.

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B. FOREIGN TRAINING

attended various International Training/ Seminar/ Meeting/ Conference etc.

VIII. InternshipSEBI, as an integral part of its policy,

students of reputed management schools and

students from such schools during the year.

IX. Extracurricular activities within SEBISelf-defense course for women staff,

women’s day celebrations, Independence Day and Republic Day celebrations, Diwali and Christmas celebrations were organised at

members and their family members. SEBI also

X. Prizes wonMs. Vishakha More, AGM, was recently

felicitated with the National Award in the Category of Best Employee by the Ministry of Social Justice and Empowerment, Government of India.

XI. Initiatives in the realm of corporate social responsibilitySEBI Shakti, in association with

Mahatma Gandhi Seva Mandir Blood Bank, organised a blood donation drive. It received an overwhelming response from staff members with about 90 donors voluntarily giving blood. Visits were made to NGOs like

XII. Scheme for recognizing and rewarding academic excellence of children of employees

SEBI employees were rewarded for academic excellence in 10th /12th standards. They were

the Chairman on Republic Day.

5. NATIONAL INSTITUTE OF SECURITIES MARKETS (NISM)

I. School for Securities Education (SSE) & School for Securities Information and Research (SSIR)In 2012-13, the School for Securities

Education (SSE) continued to strive towards fulfilling NISM’s vision “To be a hub of knowledge initiatives for playing a strategic role in quality enhancement and capacity building, for transforming the securities

Activities and initiatives encompassed the following:

A. Education

In Academic Year 2012-13, the student

PGPSM (25), PGCSM (20) and CFERM (31) and CSL (9). The School successfully concluded Batch II (2011-12) of its One-year fulltime Post Graduate Programme in Securities Markets (PGPSM), with 27 out of

Batch III (2012-13), 25 students were selected

Campus interviews are in progress, with

on date, students have found employment with Darashaw, India Nivesh, HDFC Bank and LKP Finance, to name a few. NISM has launched the admission process for the Batch

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IV. In addition to the NISM Online Admission Test, the selection basket has been enhanced by accepting test scores such as GMAT and XAT. NISM had guest faculty from leading organisations such as Edelweiss, IndiaFirst Life, ING, KBC Bank, Prabhudas Liladher, NSE, and Principal Retirement Advisors

their expertise. During the year, pedagogical initiatives included Simulated Trading, Case Studies from Harvard and other resources, Reviews of Financial Books and Financial Films, exposure to Database Software such as CMIE Prowess, Bloomberg and Statistical Software such as SAS and WINRATS. The library added several new titles pertaining to

the impressive collection.

Law (CSL) as a part-time programme for working executives, across 26 Saturdays, at Nariman Point. NISM had received recognition as a Research Centre for PhD studies, by the Symbiosis International University, Pune and a dialogue has been initiated with Goa University.

B. Training

A two-day programme on Advanced Derivatives was conducted for 20 SEBI

programme held in March 2012. NISM designed and customized the programme, weaving it with insights from practitioners from rating agencies, stock exchanges, b r o k e r a g e h o u s e s a n d c o n s u l t i n g organisations. A book by derivatives expert Prof. Satyajit Das was a part of the course material. The programme was well received.

SSE provided support for a 5-day

trained on various aspects of securities markets.

C. Research

Research becomes a crucial ingredient in

and knowledge dissemination is supported by knowledge creation. NISM’s faculty-members have been active in Research Papers and Project Research. To name a few, activities carried out in Academic Year 2012-13 are as under.

Research papers:

a. Uses and Abuses of Credit Default Swaps in the Sub-prime Crisis Period – A Critique published in the referred journal International Research Journal,

Analyses and Actuarial Computations

in the June 2012 issue. This was after a double-blind review process.

b. Published in the International Economics and Finance Journal (IEFJ), a peer-reviewed publication, Peking University, a paper “Government Securities Auctions in India – A Study on the Price Discovery Process”, in the July-December 2012 issue. The publication is listed in EconLit by the American Economic Association.

c. Published in the International Economics and Finance Journal (IEFJ), a peer-reviewed publication, Peking University, for their paper “Indian Corporate Bond Market – An Issuer’s Perspective”, in the July-December 2012 issue. The publication is listed in EconLit by the American Economic Association

Project Research:

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NISM faculty is engaged in the following research projects:

a. Completion of Phase II of SEBI Project “Identifying Colluding Groups in Market, Using Trade Log”.

b. Quarterly Performance Review of the top 100 companies in India (Q1 2012-13).

studies each quarter.

c. Quality of Disclosures by Merchant Bankers.

d. The NISM academic team was also engaged as researchers for the Financial Sector Legislative Reforms Commission (FSLRC). NISM and its team-members have an honorable mention in the Report of March 2013.

NISM actively engaged with the securities markets participants by organizing various conferences. The 3rd India Securitization Summit, a Round Table on IPOs and a Round Table on Corporate Bonds were three major events conducted during the year.

II. School for Investor Education and Financial Literacy (SIEFL)The School for Investor Education &

Financial Literacy has been undertaking two important activities viz. (a) providing capacity building support to SEBI Financial Education Resource Persons Programme and

under the programme – Pocket Money.

A. Capacity Building Support to SEBI Financial Education Resource Person Programme:

During the year 2012-13, NISM has aggressively moved to empanel new resource persons for SEBI Financial Education. Two

rounds of empanelment have been conducted,

in the second half of 2012-13. The strategy followed during the year was to focus more on the unrepresented districts in the country, and as a result, resource persons were empanelled from the unrepresented districts.

In the first round, empanelment interview and workshops were conducted at Navi Mumbai, New

Delhi, Chennai, and Kolkata and 244 Resource Persons were empanelled. In the second round, the programme was held at seven centres viz. Bangalore, Patna, Ahmedabad, Lucknow, Bhubaneswar, Chandigarh and Guwahati.

B. Implementation of Financial Literacy in Schools – POCKET MONEY Program

NISM has been reaching the students

program during the last two years. The strategy adopted in this regard was training the teachers and through the teachers

schools. During the year 2012-13, 25 teachers training programmes were conducted

A total of 150 schools have been covered to reach 5072 students. NISM, through the School for Investor Education and Financial Literacy (SIEFL), has organised Financial Literacy Quiz for the schools in Mumbai. The Quiz programme was open to the students studying in class IX and X in any of the recognised schools in Mumbai. Further, during the year, investor education programs were held for the

& Fertilizers (RCF) who are about for superannuation. Four programmes were held in Mahul Village, Mumbai, where in 155

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employees participated. The various risks and rewards were highlighted to the participants to enable them to make sound investment decisions.

III. School for Regulatory Studies and Supervision (SRSS)The School for Regulatory Studies &

Supervision has organised various programs during the year 2012-13. Some of them are:

A. Workshop on Crisis Prevention and Management in Securities Markets

the Ministry of Finance, SEBI, Exchanges, Depositories, Clearing Corporations as well as academicians. Technical sessions on Risk Management at Stock Exchanges and Depositories in India and International Best Practices, Clearing and Settlement Systems: Issues and Way Forward and Crisis Prevention and Management Framework (CPMF) for Securities Markets were held.

B. Workshop on Advanced Derivatives

The program, organised for SEBI

control at exchange derivatives.

C. India Investment Conference 2012-13

The CFA Institute in collaboration with NISM has organised the Third India Investment Conference. The theme of the conference was India and the New Financial Order.

D. Workshop on Securities Market Regulations – An Anti Money Laundering Perspective

Forty two officers from Securities and Exchange Board of India (SEBI) and Enforcement Directorate (ED) attended

the programme. The topics covered under various technical sessions were: Securities Market – Introduction to FEMA/PMLA, Regulatory Environment in Securities Market, Regulations under FEMA as relevant to securities market, Foreign Investments by FIIs/QFIs, AML and KYC Issues, Trading Practices & Settlement and Offences under section 12A of SEBI Act – A PMLA Perspective.

Intermediaries (SCI)

Securities Markets

NISM launched the following mandatory

2012-13. These are:

Intermediaries Compliance (Non-Fund)

NISM has also launched the following

Foundation Certification Examination (Voluntary)

Distributors (Level 2) Certification Examination (Voluntary)

NISM has also launched the following certification examinations on a voluntary

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basis and is awaiting regulatory approval to make these examinations mandatory for certain segments/ associated persons of the securities market:

As a part of its periodic examination review, NISM launched revised exams for

and Share Transfer Agents (Mutual

and

and Risk Management Certification Examination

NISM is currently developing various certification examinations for market

of development. These include:

Advisers

function across market intermediaries

Compliance for Issuers

B. Development & Administration of Continuing Professional Education (CPE)

NISM launched the following two-day

examinations are available:

1. NISM Series-I: Currency Derivatives

2. NISM Series-II-A: Registrars and

Examination3. NISM Series-II-B: Registrars and Transfer

Agents (Mutual Fund) Certification Examination

4. NISM Series-V-A: Mutual Funds

5. NISM-Ser ies -V-B : Mutual Fund

6. NISM Series-VI: Depository Operations

7. NISM-Series-VII: Securities Operations and Risk Management Certification Examination

NISM is currently developing the following CPE Programs which are in

1. N I S M - S e r i e s - I I I - A : S e c u r i t i e s Intermediaries Compliance (Non-Fund)

2. NISM-Series-IV: Interest Rate Derivatives

3. NISM-Series-VIII: Equity Derivatives

During the financial year, NISM along with CPE Providers conducted 443 CPE programs across different segments like Mutual Fund Distributors, Currency Derivatives, Depository Operations, RTA- Corporate and Mutual Fund Foundation. In

CPE Programs.

NISM accredited four CPE Providers viz Center for Investment Education Pvt. Ltd., National Stock Exchange of India Ltd., National Securities Depository Ltd. and Financial Technology Knowledge

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Management Company in the 1st and 2nd round of CPE Providers accreditation. NISM undertook an exercise to increase number of CPE trainers. Accordingly, 119 new CPE trainers were added during the year. NISM is

on e- learning platform.

V. Initiatives on Information and Communication Technology

A. E-learning Department

National Institute of Securities Markets (NISM) believes that technology enabled learning can play a valuable role in its educational, training and literacy initiatives. Drawing from NISM’s existing experience as trainers of securities markets professionals, self study courseware is being developed that can provide high quality, engaging, online learning experience, covering a wide variety of topics.

Currently, NISM is developing content for Mutual Fund Distributors’ (MFDs) module as part of our Continuing Professional Education

customized Learning management system. This course will use a combination of text, image, audio, animation, interactive exercises and assessments to achieve a learning experience that takes advantage of opportunities inherent in online learning.

In future, NISM plans to deliver E-learning courses, covering wide variety of topics in the securities markets, as part of its various initiatives both in the synchronous and asynchronous mode.

B. Skills Registry

A web based application was developed and successfully launched on the institute’s

website to facilitate the stakeholders in the

permitting business license etc. NISM introduced the Skills Registry portal wherein the stakeholders after registration can verify

by candidates after passing examination/undergoing CPE programme. The application provides access to the current and past NISM

C. E m a i l I n t e r f a c e f o r “ O n l i n e

System (ORETS)”

An email interface was developed and successfully interfaced with the current “Online Registration, Enrollment and Testing System (ORETS)”. This interface automatically emails workbooks to candidates enrolled for any certification program. It also emails certificates to the successful

cost savings through this initiative by eliminating paper based workbooks and

D. Patalganga Project

An Agreement to Lease was executed by NISM with MIDC for Plot No. IS-1 and

No. IS-4 admeasuring 39,005 sq. meters at Patalganga Industrial area, District – Raigad for construction of NISM campus.

E. NSFE Project

To strengthen and institutionalize the mechanism for maintaining financial stability and enhancing inter-regulatory coordination, an apex-level Financial Stability and Development Council (FSDC) was set-up in 2010 by the Government of India.

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A Technical Group was set up by the

and Financial Literacy. The technical Group drafted the National Strategy for Financial Education (NSFE).

National Centre for Financial Education (NCFE) under National Institute of Securities Markets (NISM) has been given the responsibility of implementing the National Strategy. The activities envisaged are:

a) Maintenance of Financial Education website

b) Development of content for all regulators

c) Research

d) Data collection and monitoring of Financial Education programmes across the country

6. VIGILANCE CELLVigilance Awareness Week for the

year 2012 was observed from October 29 – November 03, 2012. The observance of the week commenced with the pledge administered by Whole Time Member to the Executive Directors and Division Chiefs, who in turn, administered the pledge to their

four regional offices – Northern Regional Office, Eastern Regional Office, Southern

administered the pledge to their staff. A

prominently displayed outside the office premises at Mumbai and all four regional

7. PROMOTION OF OFFICIAL LANGUAGEIn order to ensure the compliance of

were made during the year 2012-13.

I. BilingualizationDuring the year, various documents,

granted to various market participants, intermediaries, etc., were issued in both the languages, i.e. Hindi and English. All

Further, the reports like Annual Report, Audit Report were also issued in Hindi and English.

II. Rajbhasha Competitions and Functions

for the usage of Hindi in day-to-day official work, various Hindi competitions were announced during the year, namely, Katha Lekhan Pratiyogita, Kavita Lekhan Pratiyogita, Lekh Pratiyogita, Rajbhasha Prachar Banner Pratiyogita, Ashubhashan Pratiyogita, Bolati Tasveer Pratiyogita,

Kaamkaaj Pratiyogita, Hindi Tankan Pratiyogita, Varg Paheli Pratiyogita, Abhinay

members took part in these competitions with zeal. During the year, Rajbhasha Samaroh was also organized to honour the winners of various competitions.

III. Aaj Ka Shabd

with Hindi vocabulary, one new Hindi word daily displayed through SEBI Portal.

IV. Hindi Noting and Hindi QuotesA practice to display one phrase,

generally used in Hindi Noting, and one

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Hindi Quote daily through SEBI portal for

12, has been continued.

V. Rajbhasha Meetings and SeminarsIn order to ensure compliance and

Accordingly, during the year 2012-13, various crucial decisions were taken with regard

work, and follow-up actions were taken to ensure the implementation of these decisions.

part in the Rajbhasha Seminars organized by other institutions.

VI. Hindi MagazineWith a view to publish the contributions

of the winners of Hindi Competitions and to

issue of Hindi Magazine (“Viniyamika”) of SEBI was published during the year.

VII. Information Technology and HindiIn order to provide the facility to work

in Hindi more conveniently, advanced multi-lingual software having Unicode facility was made available on all the computers.

VIII. Investor Website and SCORESEfforts are in progress to make the

investor website available in Hindi and also to ensure bilingualization of SEBI Complaints Redress System (SCORES), so as to make available the investor website and the SCORES for investors in their language.

offices towards compliance of the official

language policy of the Government of India, which includes meetings of the

received in Hindi, correspondence in Hindi, etc. Thus, during the year, besides compliance

be made towards the use of Hindi in day-to-

8. INFORMATION TECHNOLOGYThe major Information Technology

( I T ) i n i t i a t i v e s d u r i n g 2 0 1 2 - 2 0 1 3 include strengthening of IT Security, implementation of new Webmail system with the complete Disaster Recovery (DR) features, implementation of two factor authentication system for secured access to

as part of Document Management System (DMS), etc.

I. Strengthening of IT securityThe existing organisational IT security is

reviewed extensively and the following major steps were taken to strengthen the IT security:

a) Conducted network vulnerability assessment and penetration test

b) Enterprise network architecture was redesigned to include Firewall, Routers, Virtual Private Network (VPN) solution, Secured access to application through two factor authentication

II. Implementation of New Webmail SystemThe new Webmail system was deployed

in High availability mode with complete DR Failover capabilities. The new email systems not only secure but also provide seamless access to corporate email system from

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anywhere, any device. The important features of the project include:

feature to send encrypted emails

emails for compliance

the DR servers

III. Implementation of two factor authentication for secured access to SEBI Web applicationsTo enhance the security of the internet

facing web applications and to mitigate the online security threats, the 2-Factor authentication system is deployed. Users, apart from the regular user id / password, need to provide the two factor authentication code (which is a combination of 4 digit pin number and 6 digit randomly generated token code of the physical hardware token). This system was deployed both at Primary site, Mumbai and DR site, Chennai.

IV. Internet Connectivity to DR site ChennaiTo enable DR Failovers and seamless

connectivity to SEBI applications from the Internet new leased line internet connectivity was provisioned in the DR site Chennai.

IT Infrastructure was set-up at SEBI

including leased line connectivity.

VI. Enterprise Wide PortalDuring the year, Information Technology

Department embarked on integration of various application systems implemented in SEBI. The prime motivation for this activity was to develop a framework for integrating information, people and processes across the organisation. To meet this objective, specifications for the development of Enterprise Wide Portal (EWP) were designed. The planned solution architecture for SEBI’s EWP is highly scalable and performance driven and will ensure rapid deployment and integration of future systems. The EWP is planned to be web driven with multi-channel

policy. The EWP is designed to harness the portlet based technology for aggregation and personalization of information across distributed applications in SEBI.

9. INTERNATIONAL CO-OPERATIONDuring 2012-2013 SEBI played a vital

role in the international arena through meaningful and significant contributions towards its avowed objectives of promoting fairness, transparency and efficiency of securities markets. SEBI participated and

myriad activities of the standard setting bodies, both at the regional and international level. Being an active and committed member of the International Organisation of Securities Commissions (IOSCO), the globally

securities markets, SEBI had the opportunity to take up several critical and challenging leadership roles in the past year, further helping SEBI to consolidate its image as a

securities market community.

SEBI also actively engaged in co-operation on investigation / enforcement/

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supervisory matters with other overseas regulators under the framework of mutual collaboration provided under the IOSCO Multilateral Memorandum of Understanding (MMoU) and several bilateral MoUs. Its engagement with the IOSCO apart, SEBI continued to make a meaningful contribution as a member of the leading international bodies and forum, such as the Financial Stability Board (FSB)- the international body that has been mandated by the G20 to

regulatory reforms in the world, and the Joint Forum (JF), a cooperative cross-sector group established in 1996 to deal with issues common to the banking, securities and insurance sectors, including the regulation of

As a part of i ts other varying commitments as the securities market regulator, SEBI on several occasions, provided inputs to the Government of India on

sector dialogues, supported programmes on technical assistance to developing countries, hosted and organized visits of foreign delegates, international seminars and training programs.

I. Association with IOSCOThe IOSCO Board, the governing

body of the IOSCO, is made up of 32 securities market regulator and SEBI is one of the members of the IOSCO Board. SEBI participates in the various work streams of IOSCO and makes contributions to the policy decisions on the different issues pertaining to the securities market. SEBI has its representations in 5 out of the 7 policy committees of IOSCO. SEBI endeavors to implement the recommendations made by IOSCO through its reports.

SEBI is a member of the IOSCO’s

the exchange of information and to promote the efficiency and development of the emerging securities markets.

A. Chair of the Asia- Pacific Regional

During the financial year 2012-2013, Chairman SEBI, Shri U. K. Sinha was elected

Beijing, China during May 2012.

constituted by the IOSCO to focus on regional issues relating to securities regulation. The APRC comprises 25 members representing securities market regulators from the Asia-

During the year, APRC met twice under the Chairmanship of Shri U.K. Sinha. The first meeting was held in Beijing in May 2012, as part of the IOSCO annual conference. The second meeting took place in Bangkok,

The three day APRC event aimed at further enhancing mutual cooperation and exchange of information among regulators of one of the fastest growing regions of the world. The event also highlighted the important role being played by the regulators of the region in shaping the global policy framework for securities markets and the need to continue

As APRC Chair, SEBI has brought dynamism and a sense of mutual camaraderie into the working of APRC through various initiatives. A few such initiatives are as follows:

a. An industry roundtable for frank and constructive exchange of ideas among

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private sector and regulators of the region. The topic of the roundtable held on November 29, 2012 was ‘identifying and addressing emerging risks in the securities market in the APRC region; particularly in the context of global

The roundtable highlighted the importance of building, nurturing and strengthening investors’ trust and confidence by addressing the emerging risks in a consistent, prudent, timely and a well-nuanced manner. It also underscored the importance of consistency and predictability in regulatory rule making and implementation across jurisdictions and regions. The importance of appropriate regulatory response in the face of possible risk of contagion for

in growth rates world over was also highlighted.

b. Scheduling an Enforcement Directors meeting as part of APRC event, with a view to promote mutual cooperation and share information and insights about enforcement practices and experiences of regulators of the region. This has been well received by members of the APRC jurisdictions.

c. Development of a central enforcement database for sharing of information on the enforcement actions among regulators of the APRC region.

d. Publication of a quarterly APRC Digest, for information sharing on recent trends and regulatory developments in securities market in the region. The objective of the digest is to encapsulate

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such regional information at one place, for information and easy reference. Two volumes of the APRC Digest have been released during the year.

e. Public seminar on thematic issues relevant for the APRC member jurisdictions. Two public panels on a) Opportunities and challenges for SME

b) capitalizing on Regional Growth Prospects: Enlarging Opportunities for Asset Management Companies took place as part of the APRC meeting in Thailand, during November 2012.

f. Promoting greater connect among regulators of the region. Highlighting common issues and concerns relating to APRC member jurisdictions to other international bodies.

SEBI plays a leadership role in the

The AC has been formed in February 2012 to drive IOSCO’s key strategic goal of being

regulation. The main objectives of AC are to identify and assess implementation of IOSCO Principles and Standards and to promote the

of IOSCO Principles and Standards across the IOSCO membership. The main responsibilities of AC are (a) To conduct Thematic Reviews of particular IOSCO Principles and IOSCO Standards across IOSCO’s membership; (b) To conduct Country Reviews and it involves reviewing Self Assessments prepared by IOSCO Members about the implementation

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of IOSCO Principles; and (c) To maintain and periodically update the IOSCO Principles and related Methodology.

on the Implementation of Principles 6 and 7:

Principle 6: The Regulator should have or contribute to a process to monitor, mitigate and manage systemic risk, appropriate to its mandate.

The Regulator should have or contribute to a process to review the perimeter of regulation regularly.

SEBI along with 33 other members have participated in this thematic review. This Review is an opportunity for IOSCO and members participating in the Review to show progress in implementing these

Principles, share experiences of other members’ jurisdictions in implementation and identify and assess whether further guidance is needed from IOSCO to support implementation. Further, SEBI also has its representation as one of its members in the Review Team, which is carrying out this review.

SEBI plays an important leadership role in the various activities of AC such as coordination with the member jurisdictions on their participation for the Country Review Program, developing strategies for AC and its implementations etc.

Emerging Markets Committee (EMC)

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ordinary membership. The EMC members also represent the world’s fastest growing economies and include 10 of the G-20 members. In the near term it is expected that the number of IOSCO members that are emerging economies will increase as new members join. SEBI is a member of EMC – IOSCO. During 2012-13, SEBI responded to various surveys of EMC-IOSCO including surveys on Financing of SMEs through the Capital Markets, 5th Annual Survey by the EMC Chairman’s Task Force and IOSCO-World Bank Joint Mutual Fund Industry Development Survey.

II. Association with G20 / FSBThe Financial Stability Board (FSB) is

an international body established to address

the development and implementation of strong regulatory, supervisory and other

One of the main mandates of the FSB is to implement G20 Policy announcements on

SEBI is a member of the Plenary and Regional Committee Group- RCG (Asia) of the FSB. During 2012-13, FSB Plenary met three times and the FSB RCG Asia met once. SEBI provides comments to the MoF on various FSB issues since the MoF is the principal country member to the FSB from India. SEBI is also a member of Indian Working Group formed by Ministry of Finance on G20. Further, SEBI also provides comments to the IOSCO on FSB mandates.

crisis, the G20 has established core elements of a new global financial regulatory framework that will make the financial

the needs of the real economy. National authorities and international bodies, with the Financial Stability Board (FSB) as a central locus of coordination, have further

based on clear principles and timetables for implementation. Major international policy reforms of FSB have now globally been agreed, to address risks and strengthen

FSB adopts, inter-alia, survey /questionnaire methodologies in order to obtain inputs for recommending policies, ascertaining the feedback and status of the recommended policies. During 2012-13, FSB conducted various surveys/questionnaire including on Client Assets Protection and Resolution Regime Peer Review. SEBI provided responses to these surveys/questionnaires.

III. Joint ForumFollowing the decision of the Joint

Forum Coordination Group, in February, 2012, SEBI became a new member of the Joint Forum (JF), a cooperative cross-sector group which was established in 1996 by its

Banking Supervision (BCBS), the International Organization of Securities Commissions (IOSCO) and the International Association of Insurance Supervisors (IAIS), to deal with issues common to the banking, securities and insurance sectors, including the regulation of

SEBI was nominated by the IOSCO as

of the JF.

IV. Bilateral EngagementsAlong with its engagements at the

multilateral levels, SEBI has also entered into bilateral MoUs with a cross-section of

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jurisdictions. Such bilateral agreements, while further strengthening and consolidating the existing communication channels, pave the way for enhanced mutual cooperation in

supervision, investigation, enforcement and technical assistance in the securities markets.

Until March 2012, SEBI had entered into

Agreement and one Letter of Intent with various overseas jurisdictions for mutual assistance and information sharing. With a view to further strengthen cross border

to explore avenues of bilateral association with several other countries.

V. Ministry References- Contribution to various International Treaties and DialoguesThe ever increasing globalization and

for newer and dynamic levels of regulatory co-operation at varying stages. Towards this objective, SEBI along with the Government of India and other regulatory bodies, was seen to make its own set of contributions.

During the year, SEBI continued to

engagement with the Government of India as regards various international treaties, under consideration by the GoI for areas related to the securities markets.

In this direction, SEBI participated and/or provided its inputs on various issues, agenda items and topics relating to the securities markets, at a number of bilateral dialogues thorough the year. A few such treaties and dialogues include the Indo-US Working Group Meeting held on Oct

9, 2012 and followed by India-Australia FTA Negotiations, India-EU Broad-based Trade and Investment Agreement, India-Canada Comprehensive Economic Partnership Agreement, 2013 and the US-India Regulatory Dialogue, SEBI provided inputs to overseas regulatory agencies on a host of securities markets issues of interest and/or relevance,

Regime’, implications of foreign laws on Indian investments and intermediaries and other such policy oriented issues.

VI. Participation in International ProgramsSEBI officials have been invited to

participate as Speakers/Panelists at many accredited international seminars and conferences. During 2012-13, SEBI nominated

training programs/ conferences/ seminars held by international bodies such as APEC FRTI, MAS Singapore, CMA Kuwait, ADB, programs conducted by other overseas regulators and bodies etc. The purpose to

to share their expertise at renowned forums and to further strengthen the global image of SEBI as reliable source of knowledge and its competent human resources.

VII. MMoU and MoU RequestsAs a crucial part of its commitment

t o w a r d s t h e I O S C O M u l t i l a t e r a l Memorandum of Understanding (MMoU), to which SEBI has been a signatory since April 2003, SEBI continuously strives to provide cooperation and facilitate exchange of information with its counterparts in other jurisdictions.

During the year, SEBI received a total

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of 37 “requests for information” from the overseas securities regulators seeking SEBI’s assistance under the aegis of the IOSCO MMoU or the respective bilateral MoUs. SEBI addressed and executed such requests, subject to the provisions of the MMoU/MoU. Similarly, nine such requests were made by SEBI to the respective regulatory bodies of other countries.

VIII. Foreign Delegations / Dignitaries to SEBI

To promote mutual collaboration and establish deeper levels of regulatory cooperation, and to facilitate a better understanding of the Indian securities markets, SEBI played host to a number of important dignitaries and delegations of overseas regulatory bodies / agencies.

The authorities from which delegations visited SEBI during the year include the –Ministry of Finance, Govt. of Japan; US Department of Treasury; CMA, Saudi Arabia; SC Malaysia; Govt. of Luxembourg; GIZ and

IX. Study tours for Overseas RegulatorsSEBI facilitated four study tours during

the year, on requests made by BSE Training Institute Ltd., BSE Broker’s Forum, etc., for study visits for delegations representing

International programs on Securities Markets. The increasing requests for conducting

India’s growing importance amongst other jurisdictions for its robust regulatory framework and market practices.

10. PARLIAMENT QUESTIONSThe Parliament Cell of SEBI is the nodal

and interface point which coordinates with the various Departments in Government particularly Ministry of Finance and

to Parliament Questions, Assurances to Parliament Questions, References from Honourable Members of Parliament (VIP references), General references received through Ministries and other related activities

During the financial year 2012-13, SEBI furnished information and replies in a time-bound manner to 216 Parliament Questions and 60 points/queries raised by the

During the f inancial year 2012-13, various references, representations, complaints and news articles were received

Members of Parliament (VIPs), Ministries including Ministry of Finance for action/comments. SEBI’s endeavour has been to furnish replies to Parliament Questions, VIP references and other queries in a time bound manner.

Table 5.3: Parliament Queries received/ raised

2012-13 2011-1212 3

No. of ParliamentQuestions received 216 139No. of points/ queries raised by Parliamentary

SEBI representatives attended the meeting of the Standing Committee on Finance on February 13, 2013. The topic of discussion was “Overall Performance of SEBI with particular emphasis on recent measures taken and proposed to strengthen the regulatory mechanism”. The details of

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Whole Time Member, SEBI is the present Appellate Authority. As per the direction of the Central Information Commission (CIC), SEBI has also designated the Transparency Officer and Shri P. K. Nagpal, Executive Director, SEBI, is the present Transparency

Section 4 of the RTI Act casts obligation on every Public Authority to make certain proactive disclosure. SEBI has been proactively making such disclosure and

as well as RTI Act. Since its formation, SEBI always believes in adequate disclosure of the information in the interest of Securities market and the investor. The focus of the disclosure is transparency and better understanding of the functioning of the

Ministry of Finance and replied by SEBI during 2012-13 are as under:

11. RIGHT TO INFORMATION ACTSEBI has been implementing the Right

to Information Act, 2005 (RTI Act) in its true spirit since its enactment in the year 2005. As per the provisions of the RTI Act, SEBI has designated a Central Public Information Officer (CPIO) at its Head

is the present CPIO of the SEBI. In order

manner and keeping the convenience of the information seeker, SEBI has also appointed four Central Assistant Public Information

and Ahmedabad. The role of CAPIOs is to receive the applications for information or appeals under the provisions of the RTI Act and forward them to CPIO. SEBI has

Authority (AA) where appeal can be made against the Order of the CPIO. Shri S Raman,

Table 5.4: Session-wise Parliament Queries received and replied by SEBI during 2012-13

Parliament Session Questions Questionsreceived

1 2 3Monsoon Session (August –

Winter Session (November

Budget Session (February –May, 2013) 55 *** 33Total 216 148

** including 5 notices

Table 5.5: Details on appearance of SEBI representatives before various

Queries/

No. Raised1 2 3

on selection of subjects forexamination during the year2012-13 – Background Note onperformance of SEBI - mechanismfor protection of Investors Rightsand Interests in the Capital Market 0

Technology – Issues related to PaidNews (January 2013) 1

3 List of points raised during the

Finance - Overall Performance ofSEBI with particular emphasis onrecent measures taken and proposedto strengthen the regulatorymechanism – February 2013 32

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Regulator and SEBI registered intermediaries and other market participants.

SEBI has been proactively disclosing lots of information about various aspects of securities market including various activities and policy of the SEBI on its website i.e. www.sebi.gov.in. Also, Frequently Asked Questions (FAQs) have been uploaded on the SEBI website pertaining to different departments / areas to help the investors understand the procedures and terminologies of the securities market. SEBI has provided SEBI Act, 1992 and other Acts as well as various Rules, Regulations. Circulars and guidelines issued there under on its website under the head “Legal Framework”. Further, all the Orders passed by SEBI, orders of Securities Appellate Tribunal (SAT) as well as orders of SEBI Appellate Authority are available on the SEBI website.

SEBI has also been taking various steps for ensuring the transparency in the functioning of the exchanges and other market participants. In order to provide a

market participants and for the development of the markets, it has been SEBI’s endeavor to promote transparency in its decision making.

SEBI’s focus has been on disseminating up-to-date information to the investors / market through various investor education and investor awareness programs. SEBI has through its various Regulations, such as the ICDR Regulations ensured providing maximum disclosure to the investing public in order to take well informed investment decisions. The Insider Trading Regulations and Takeovers Regulations provide the senior officials / major shareholders of companies to disclose their holdings on a regular basis. Further, even though the

provisions of RTI Act are not applicable to the non-public entities, viz. Exchanges / market intermediaries, the disclosure policy of SEBI requires these entities to disclose on their respective websites and otherwise, important details and updated information on the material developments and day-to-day operations including details of redressal of investor grievances.

In respect of RTI applications received by SEBI which are in the nature of complaints

of CPIO voluntary provides guidance to the information seeker. SEBI endeavors for proper and timely redressal of investor complaints for which separate designated website for the investor viz. has been set up. Recent measures taken in this regard include launching of SCORES (SEBI Complaints Redress System), a web-based, centralized grievance redress system for the investors of the securities market where an investor can make complaint / grievances in electronic mode on the SCORES website (www.scores.gov.in) with facility for online tracking of his complaint status.

SEBI has endeavoured to provide the disclosable information within the stipulated time and there is not even a single case of delay, although the information sought, many times, is voluminous and contain large number of issues pertaining to various departments of SEBI in a single application. Wherever felt appropriate, SEBI has provided additional information / guidance voluntarily to the information seeker about the securities market.

The details of RTI applications and First Appeal to SEBI Appellate Authority during 2011-12 and 2012-13 are given as under:

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The details of Appeal before Central Information Commission (CIC) during 2011-12 and 2012-13 are given as under:

Table 5.6: RTI applications and First Appeal to SEBI Appellate Authority

Particulars 2011-12 2012-131 2 3

No. of applications received 1,157 975Total no. of issues raised

No. of appeals receivedby the AppellateAuthority in SEBI 294 216No. of orders passed bythe Appellate Authorityin SEBI 304 225No. of appeals rejected /dismissed by the Appellate

No. of appeals allowed 76 57

Table 5.7: Appeal before Central Information Commission

Particulars 2011-12 2012-131 2 3

No. of appeals received by CIC 24* 74*No. of appeals rejected /dismissed by CIC 7 31No. of appeals with directions by CIC to furnish part of information/to reconsider providing

* on the basis of Appeal Memo/hearing notice received from CIC/Appellant.

During the year 2012-13 also, the Board took various initiatives to maintain transparency in its functions, including disclosure of the information on a regular basis. The Board has also taken various initiatives /measures for investor education and protection of the interest of investors of the securities market. These initiatives/measures also helped in achievement of the objectives of the RTI Act.

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Date Announcements

Contd.

CHRONOLOGY OF MAJOR POLICY INITIATIVES BY SEBI

`

203

Chronology of Major Initiatives by SEBI

Date Announcements

Contd.

204


Date Announcements

Contd.

205


Date Announcements

Contd.

``

206


Date Announcements

Contd.

`

`

207


Date Announcements

Contd.

208


Date Announcements

Contd.