Capital Markets And Securities Laws - Icsi
STUDY MATERIALEXECUTIVE PROGRAMMECAPITAL MARKETSANDSECURITIES LAWSMODULE IIPAPER 6ICSI House, 22, Institutional Area, Lodi Road, New Delhi 110 003tel 011-4534 1000, 4150 4444 fax 91-11-2462 6727email info@icsi.edu website www.icsi.edui
THE INSTITUTE OF COMPANY SECRETARIES OF INDIATIMING OF HEADQUARTERSMonday to FridayOffice Timings – 9.00 A.M. to 5.30 P.M.Public Dealing TimingsWithout financial transactions – 9.30 A.M. to 5.00 P.M.With financial transactions – 9.30 A.M. to 4.00 P.M.Phones41504444, fo@icsi.eduLaser Typesetting by AArushi Graphics, Prashant Vihar, New Delhi, andPrinted at M P Printers/October 2017ii
EXECUTIVE PROGRAMMECAPITAL MARKETS AND SECURITIES LAWSThe Indian Capital market has grown exponentially in terms of resource mobilization, number of listed stocks,market capitalization, trading volumes, and investors’ base. Along with this growth, the profiles of the investors,issuers and intermediaries have changed significantly. The market has witnessed a fundamental institutionalchange resulting in drastic reduction in transaction costs and significant improvement in efficiency, transparencyand safety. The measures taken by SEBI such as, market determined allocation of resources, rolling settlement,sophisticated risk management and derivatives trading have greatly improved the framework and efficiencyof trading and settlement, making the Indian capital market qualitatively comparable to many developedmarkets.This study material has been published to aid the students in preparing for the Capital Market and SecuritiesLaws paper of the CS Executive Programme. It is part of the educational kit and takes the students step by stepthrough each phase of preparation stressing key concepts, pointers and procedures. Company Secretaryshipbeing a professional course, the examination standards are set very high, with emphasis on knowledge ofconcepts, applications, procedures, for which sole reliance on the contents of this study material may not beenough. Besides, as per the Company Secretaries Regulations, 1982, students are expected to be conversantwith the amendments to the laws made upto six months preceding the date of examination. The materialmay, therefore, be regarded as the basic material and must be read alongwith the original Bare Acts, Rules,Regulations, Academic Guidance etc. This study has been updated upto October, 2017.The subject of Capital Market and Securities Laws is inherently complicated and is subject to constant refinementthrough new primary legislations, rules and regulations made thereunder. It, therefore becomes necessary forevery student to constantly update himself with the various legislative changes made from time to time byreferring to the Institute’s journal ‘Chartered Secretary’ as well as other professional journals.In the event of any doubt, students may write to the Directorate of Studies for clarification at academics@icsi.edu.Although care has been taken in publishing this study material yet the possibility of errors, omissions and/ordiscrepancies cannot be ruled out. This publication is released with an understanding that the Institute shall notbe responsible for any errors, omissions and/or discrepancies or any action taken in that behalf.Should there be any discrepancy, error or omission noted in the study material, the Institute shall be obliged ifthe same is brought to its notice.This study material is based on those sections of the Companies Act, 2013 and the rules made there underwhich have been notified by the Government of India and came into force w.e.f. April 01, 2014.iii
SYLLABUSPAPER 6: CAPITAL MARKETS AND SECURITIES LAWS (100 Marks)Level of Knowledge: Expert KnowledgeObjective: To acquire knowledge and understanding of securities laws and the regulatory framework of capitalmarkets.Contents:Part A: Capital Markets (60 Marks)1. Overview of Capital Market Indian Capital Market Authorities Governing Capital Markets in India Profile of Securities Market Securities Market Reforms and Regulatory Measures to Promote Investor Confidence Features of Developed Capital Market: IOSCO Overview of Depository System in India2. Capital Market Instruments and Rating Capital Market Instruments: Equity, Debentures, Preference Shares, Sweat Equity, Non-Voting Shares,Share Warrants Pure, Hybrid and Derivatives Rating and Grading of Instruments: Concept, Scope and Significance, Regulatory Framework Rating Agencies in India, Rating Methodologies3. Securities Market Intermediaries Primary Market and Secondary Market Intermediaries: Role and Functions, Merchant Bankers, StockBrokers, Syndicate Members, Registrars, Underwriters, Bankers to an Issue, Portfolio Managers,Debenture Trustees, Foreign Institutional Investors, Depositories, Depositories Participants, Custodians,Credit Rating Agencies, Venture Capitalists4. Market Infrastructure Institutions - Stock Exchanges Functions and Significance of Stock Exchanges Operations and Trading Mechanism of Stock Exchanges Settlement of Securities, Stock Market Indices, Risk Management, Surveillance Mechanism at StockExchanges, Straight through Processing Demutualization of Stock Exchanges SME Exchange5. Debt Market Debt Market: Instruments, Listing, Primary and Secondary Segment6. Money Market Growth of Money Market in India – Structure and Institutional Mechanismiv
Money Market Instruments: Treasury Bills, Commercial Bills, Commercial Paper, Factoring Agreements& Discounting of Bill7. Mutual Funds Mutual Fund: Introduction, Definitions, Schemes, Risks Involved, Setting Up of Mutual Funds, Role inFinancial Market Advantage of Investment in Mutual Fund Concept of Trustee and Asset Management Company Legal & Regulatory Framework Offer Document, Accounting Valuation & Taxation Investment Management: Equity & Debt Portfolio, Measuring & Evaluating Mutual Fund Performance Investor’s Rights and Obligations8. Venture Capital Concept of Venture Capital Registration, Investment Conditions and Restrictions Foreign Venture Capital Investors Private Capital Funds9. Collective Investment Schemes Regulatory Framework Restrictions on Business Activities Submission of Information and Documents Trustees and their Obligations10. Resource Mobilization in International Capital Market Listing of Securities Issued Outside India Foreign Currency Convertible Bonds Global Depository Receipts American Depository Receipts External Commercial Borrowings Procedure for Issue of Various Instruments11. Indian Depository Receipts Indian Depository Receipts: Procedure for Making Issue of IDRs, Conditions for Issue of IDRs, Listingof IDRs12. Foreign Portfolio Investors Concept of FPIs, Registration of FPIs, Offshore Derivative Instruments (ODIs), Obligation of FPIs andDDP & Inspection & Investigation.13. Non-Convertible Redeemable Preference Shares Issue and listing of Non-convertible Redeemable Preference Shares, Obligations of the Issuer andLead Merchant Banker, Issuance & Listing of Non-Equity Regulatory Capital Instruments by Banksand Inspection and Power of SEBI.v
14. Real Estate Investment Trusts Registration of Real Estate Investment Trusts, Rights and Responsibilities of Parties to the REIT,Valuer Sponsor and Auditor, Issue and Listing of Units, Investment conditions, related party transactions,Borrowing and valuation of assets, Rights and Meetings of Unit Holders and Disclosures15. Infrastructure Investment Trusts Registration of Infrastructure Investment Trusts, Rights and Responsibilities of Parties to the InvIT,Project Manager, Sponsor, Valuer and Auditor, Offer of Units of InvIT and Listing of Units, Investmentconditions, Related Party Transactions, Borrowing and valuation of assets, Rights and Meetings ofUnit Holders and DisclosuresPart B: Securities Laws (40 Marks)16. Securities Contracts (Regulation) Act, 195617. SEBI Act, 1992 Objective, Power and Functions of SEBI Securities Appellate Tribunal, Appeals, Appearance before SAT18. Depositories Act, 1996 Definitions, Setting up of Depository, its type, Role and Functions Depository Participants Admission of Securities Difference between Dematerialization & Rematerialisation Depository Process Inspection and Penalties Internal Audit and Concurrent Audit of Depository Participants19. Issue and Listing of Securities Listing of Securities Issue of Capital and Disclosure Requirements (ICDR) Procedure for Issue of Various Types of Shares and Debentures Employee Stock Option Scheme and Employee Stock Purchase Scheme Delisting of Securities20. Regulatory Framework relating to Securities Market Intermediaries Primary Market and Secondary Market Intermediaries: Role and Functions, Merchant Bankers, StockBrokers, Syndicate Members, Registrars, Underwriters, Bankers to an Issue, Portfolio Managers,Debenture Trustees, Foreign Institutional Investors, Custodians, Credit Rating Agencies, VentureCapitalists21. An Overview of Law relating to Insider Trading and Takeovers22. Investor Protection Investors’ Rights and Responsibilities, types of grievances and dealing authority, Investor Educationand Protection Fund (IEPF) under SEBI Regulations and Companies Act, 2013, Financial Education,Investor Grievance Redressal Mechanism at SEBI etc.vi
LIST OF RECOMMENDED BOOKSPAPER 6 : CAPITAL MARKETS AND SECURITIES LAWSREADINGS1.E. Gordon &K. Natarajan:Capital Market in India; Himalaya Publishing House, Ramdoot,Dr. Bhalerao Marg, Girgaon, Mumbai - 400004.2.Sanjeev Aggarwal:Guide to Indian Capital Market; Bharat Law House, 22, Tarun Enclave,Pitampura, New Delhi – 110 034.3.V.L. Iyer:SEBI Practice Manual; Taxman Allied Service (P) Ltd., 59/32, New RohtakRoad, New Delhi-110005.4.M.Y. Khan:Indian Financial Systems; Tata McGraw Hill, 4/12, Asaf Ali Road, NewDelhi – 110 002.5.S. Suryanarayanan &V. Varadarajan:SEBI – Law, Practice & Procedure; Commercial Law Publishers (India)Pvt. Ltd., 151, Rajindra Market, Opp. Tis Hazari Court, Delhi - 1100546.Mamta Bhargava:Compliances and Procedures under SEBI Law; Shreeji Publishers, 8/294, Sunder Vihar, New Delhi – 110 0877.Taxmann:SEBI Manual8.Asim Kumar Mishra:Venture Capital Financing in India; Shipra Publications, 115A, Vikas Marg,Shakarpur, Delhi-110092.9.Shashi K GuptaNishja Aggarwal:Financial Institutions and Markets ; Kalyani Publishers, 4863/2B, BharatRam Road, 24, Daryaganj, New Delhi -110002:Capital Markets and Securities Laws simplified, Lawpoint Publication,6C, R.N. Mukherjee Road, Kolkata-700001Neeti Gupta10.Vishal SaraogiREFERENCES1.SEBI Annual Report:SEBI, Mumbai.2.Indian SecuritiesMarket - A Review:NSE Yearly NALS1.SEBI and CorporateLaws:Taxmann, 59/32, New Rohtak Road, New Delhi-110 005.2.Corporate Law Adviser:Corporate Law Adviser, Post Bag No. 3, Vasant Vihar, New Delhi-110052.vii
3.SEBI Monthly Bulletin:SEBI, Mumbai.4.NSE News:National Stock Exchange of India Ltd., Mahindra Towers, Worli, Mumbai400018.Note : Students are advised to read relevant Bare Acts and Rules and Regulations relating thereto. E-Bulletin‘Student Company Secretary’ and ‘Chartered Secretary’ should also be read regularly for updating the knowledge.viii
ARRANGEMENT OF STUDY LESSONSPART A1.Overview of Capital Market2.Capital Market Instruments3.Credit Rating and IPO Grading4.Market Infrastructure Institutions - Stock Exchange Trading Mechanism5.Debt Market6.Money Market7.Mutual Funds8.Alternative Investment Fund9.Collective Investment Schemes10.Resource Mobilization in International Capital Market11.Indian Depository Receipts12.Foreign Portfolio Investors13.Non-Convertible Redeemable Preference Shares14.Real Estate Investment Trusts15.Infrastructure Investment TrustsPART B16.Regulatory Framework Governing Stock Exchanges17.Securities and Exchange Board of India18.Depositories19.Listing and Delisting of Securities20.Issue of Securities21.Regulatory Framework relating to Securities Market Intermediaries22.Insider Trading- An overview23.Takeover Code- An Overview24.Investor ProtectionTEST PAPERix
CONTENTSPART A : CAPITAL MARKETS (60 MARKS)LESSON 1OVERVIEW OF CAPITAL MARKETIntroduction2Organisational structure of financial system3Financial Markets3Need for capital market4Functions of the capital market4Securities Market5Products and Market Participants5Functions of Securities Market6Securities Market and Economic Growth7Profile of Securities Market8Market Regulation9Securities Market Reforms & Regulatory Measures to Promote Investor Confidence10Features of Developed Capital Market: The International Organization of Securities Commissions (IOSCO)14Membership15Multilateral Memorandum of Understanding Concerning Consultation and Co-OperationAnd Exchange of Information (MMoU)16Over View of Depository System in India16LESSON ROUND UP17GLOSSARY17SELF TEST QUESTIONS17LESSON 2CAPITAL MARKET INSTRUMENTSIntroduction20Classification of Instruments20Equity Shares20Shares with Differential Voting Rights21Preference Shares22Debentures24x
PageSweat Equity Shares27Secured Premium Notes28Equity Shares with detachable warrants28Dual Option Warrants28Debt Instruments with Debt Warrants29Debt for Equity Swap29Indexed Rate Notes29Extendable Notes29Level Pay Floating Rate29Zero Coupon Convertible Notes30Deep Discount Bond30Disaster Bonds30Option Bonds30Easy Exit Bonds30Pay in Kind Bonds30Split Coupon Debentures30Floating Rate Bonds and Notes30Clip and Strip Bonds31Dual Convertible Bonds31Stepped Coupon Bonds31Industrial Revenue Bonds31Commodity Bonds31Carrot and Stick Bond31Capital Indexed Bonds31Inflation indexed bonds or Inflation Indexed National Savings Securities32Tax Free Bonds32Global Depository Receipts32Foreign Currency Convertible Bond (FCCB)33Indian Depository Receipts33Tracking Stocks34Mortgage Backed Securities35Futures36Options36Hedge Funds36xi
PageExchange Traded Funds39Fund of Funds (FoFs)39LESSON ROUND UP41GLOSSARY42SELF TEST QUESTIONS42LESSON 3CREDIT RATING & IPO GRADINGIntroduction46Rating Methodologies49Regulatory framework52Transparency & Disclosure Norms for Credit rating agencies61Rating Symbols and Definitions65IPO Grading68LESSON ROUND UP69GLOSSARY70SELF TEST QUESTIONS70LESSON 4MARKET INFRASTRUCTURE INSTITUTIONS – STOCK EXCHANGE TRADING MECHANISMIntroduction74Stock Exchange Trading Mechanism74Market Making77Securities Lending78Securities’ Lending and Borrowing (‘SLB’)78Short Selling and Securities Lending and Borrowing79Bombay Stock Exchange Ltd.83Basket Trading System84Settlement system at BSE85National stock exchange of India ltd. (NSEIL)91Trading and Settlement at NSE93Straight Through Processing95Direct Market Access (DMA)96Demutualization of Stock Exchanges98Small and Medium Enterprise (SME) exchange99xii
PageAlgorithmic Trading101LESSON ROUND UP102GLOSSARY103SELF TEST QUESTIONS103LESSON 5DEBT MARKETIntroduction106Debt Market Instruments106Investors in debt market108Debt Market Intermediaries/Participants109Debt Market – Regulatory Framework109SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009110SEBI (Issue and Listing of Debt Securities) Regulations, 2008114Conditions for Private Placement120Listing and Trading of Debt Securities122Green Debt Securities126Securitised Debt Instrument128SEBI (Public Offer and Listing of Securitised Debt Instruments) Regulations, 2008128Municipal Bonds133SEBI (Issue and Listing of Debt Securities by Municipalities) Regulations, 2015133Compliances under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015137Listing of NCRPS/ NCDs through a Scheme of Arrangement148LESSON ROUND UP149GLOSSARY150SELF TEST QUESTIONS150LESSON 6MONEY MARKETIntroduction154Features of Money Market154Money Market vs. Capital Market155Growth of Money Market155Structure and Institutional Development156xiii
PageMoney Market Instruments157Certificates of Deposits161Inter-Corporate Deposits163Commercial Bills163Commercial Paper163Factoring166Bills Rediscounting169LESSON ROUND UP169GLOSSARY170SELF TEST QUESTIONS170LESSON 7MUTUAL FUNDSIntroduction174An overview of trends in Mutual Funds174Advantages of Mutual Funds174Schemes according to Maturity Period175Investment Strategies177Offer document of Mutual Fund Schemes178Additional mode of payment through applications supported by blocked amount in mutual funds178Risks involved in Mutual Funds178Calculation of Net Asset Value (NAV)178Mutual Fund Costs179Transaction Charges179Roll Over of a Scheme179Switch over one scheme to another180Annualized Returns180Asset Management Company (AMC)180Restriction on redemption in Mutual Funds180SEBI (Mutual Fund) Regulations, 1996181Code of Conduct for Mutual Funds187General Due Diligence and Specific Due Diligence by trustees187Independent Directors’ Responsibilities188Procedure for launching of schemes188xiv
PageAdvertisements code for Mutual Funds189In principle approval from recognised stock exchange(s)189Listing of Close Ended Scheme190Repurchase of Close Ended Scheme190Offering Period190Allotment of units and refund of money191Transfer of units191Guaranteed Returns191Capital Protection Oriented Schemes191Infrastructure Debt Fund Schemes196Gold Exchange Traded Funds199Real Estate Mutual Fund Schemes (REMFS)201Compliances under SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015202LESSON ROUND UP202GLOSSARY203SELF TEST QUESTIONS203LESSON 8ALTERNATIVE INVESTMENT FUNDIntroduction206Existing Venture Capital Funds206SEBI (Alternative Investment Funds) Regulations, 2012206Important Definitions207Key Features of AIF Categories212Guidelines on disclosures, reporting and clarifications under AIF Regulations215SEBI (Foreign Venture Capital Investors) Regulations, 2000217LESSON ROUND UP220GLOSSARY220SELF TEST QUESTIONS220LESSON 9COLLECTIVE INVESTMENT SCHEMESIntroduction224SEBI (Collective Investment Schemes) Regulations, 1999 – An Overview225Restrictions on Business Activities225xv
PageObligations of Collective Investment Management Company227Rights and Obligations of the trustee228Termination of Trusteeship230Termination of the Agreement with the Collective Investment Management Company230Winding up of Scheme232Requirements with respect to the listing of units or any other instrument of a CIS on arecognised stock exchange.233Penal Provisions237LESSON ROUND UP237GLOSSARY238SELF TEST QUESTIONS238LESSON 10RESOURCE MOBILISATION IN INTERNATIONAL CAPITAL MARKETIntroduction240Regulatory Framework in India240Depository Receipts240ADR & GDR241Depository Receipts Scheme, 2014242Provisions of Companies Act, 2013 relating to issue of GDR246Procedure for Issuance of GDR/FCCBs247Appointment of Intermediaries249Principal Documentation250Preand Post Launch – Additional Key Actions251Foreign Currency Exchangeable Bonds255Foreign Currency Convertible Bonds258FCCB and ordinary shares (through depository receipt mechanism) scheme, 1993258External Commercial Borrowings (ECB)259LESSON ROUND UP266GLOSSARY266SELF TEST QUESTIONS267LESSON 11INDIAN DEPOSITORY RECEIPTSIntroduction270Regulatory Framework of IDRs – An Overview271xvi
PageRule 13 of the Companies (Registration of Foreign Companies) Rules, 2014273SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009279Rights Issue of Indian Depository Receipts282Compliances under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015283LESSON ROUND UP287GLOSSARY287SELF TEST QUESTIONS288LESSON 12FOREIGN PORTFOLIO INVESTORSIntroduction290SEBI (Foreign Portfolio Investors) Regulations, 2014290Registration of Foreign Portfolio Investors290Approval of Designated Depository Participant293Investment Conditions and Restrictions295Offshore Derivative Instruments (ODIs)297Obligations and Responsibilities of Foreign Portfolio Investors (FPIs)298Obligations and Responsibilities of Designated Depository Participants (DDPs)300Procedure for Inspection and Investigation302Action in Case of Default304LESSON ROUND UP304GLOSSARY304SELF TEST QUESTIONS305LESSON 13NON-CONVERTIBLE REDEEMABLE PREFERENCE SHARESIntroduction308SEBI (Issue and Listing of Non-Convertible Redeemable Preference Shares) Regulations, 2013308Definitions308Issue of Non-Convertible Redeemable Preference Shares309Conditions for Private Placement312Listing and Trading of Non-Convertible Redeemable Preference Shares313Obligations of the issuer, lead merchant banker, etc.313Issuance and Listing of Non-Equity Regulatory Capital Instruments by banks314Inspection by SEBI314xvii
PageLESSON ROUND UP314GLOSSARY315SELF TEST QUESTIONS315LESSON 14REAL ESTATE INVESTMENT TRUSTSIntroduction318SEBI (Real Estate Investment Trust) Regulations, 2014318Registration of Real Estate Investment Trusts320Issue and Listing of Units322Guidelines for Public Issue of Units of REITs325Investment Conditions, Related Party Transactions, Borrowing and Valuation Of Assets328Rights and Meetings of Unit Holders333Disclosures335Liability for Action In Case Of Default337LESSON ROUND UP337GLOSSARY338SELF TEST QUESTIONS338LESSON 15INFRASTRUCTURE INVESTMENT TRUSTSIntroduction340SEBI (Infrastructure Investment Trusts) Regulations, 2014340Registration of Infrastructure Investment Trusts342Offer of Units OF InvIT and listing of units344Guidelines for public issue of units of InvITs347Investment Conditions, Related Party Transactions, Borrowing and Valuation of Assets351Rights and Meetings of Unit Holders355Disclosures358Inspection360Liability for Action In Case Of Default361LESSON ROUND UP362GLOSSARY362SELF TEST QUESTIONS362xviii
PageLESSON 16REGULATORY FRAMEWORK GOVERNING STOCK EXCHANGESIntroduction366Securities Contracts (Regulation) Act, 1956366Corporatisation and Demutualisation of Stock Exchanges369Procedure for Corporatisation and Demutualisation370Contracts in Securities377Public Issue and Listing of Securities378Penalties and Procedures381Penalties382Offences385Rights of Investors386Securities Contract (Regulation) (Stock Exchange and Clearing Corporations) Regulations, 2012390Securities Contracts (Regulation) Rules, 1957395Requirements of listing of securities with recognised stock exchanges402Rule 19(2)403Continuous Listing Requirement407Delisting of securities408LESSON ROUND UP409GLOSSARY409SELF TEST QUESTIONS410LESSON 17SECURITIES AND EXCHANGE BOARD OF INDIAIntroduction412Objective of SEBI412SEBI Act, 1992412Powers and Functions of SEBI413Investigations Procedure416Securities Appellate Tribunal (SAT)423SEBI (Settlement of Administrative & Civil Proceedings) Regulations, 2014430SEBI (Procedure for Search and Seizure) Regulations, 2014434LESSON ROUND UP434GLOSSARY434SELF TEST QUESTIONS434xix
PageLESSON 18DEPOSITORIESIntroduction438Benefits of Depository System438Depository System - An Overview439Legal Linkage440Legal Framework442The Depositories Act, 1996443Bye-Laws of a Depository454SEBI (Depositories and Participants) Regulations, 1996455Governance of Depository457Internal Audit of Operations of Depository Participants459Concurrent Audit459Establishment of Connectivity with NSDL and CDSL460Appointment of Common Agency for Share Registry Work460In-Person Verification (IPV)461Designated Depository Participant (DDP)461Basic Services Demat Account (BSDA)462Single Registration for Depository Participants463Saral Account Opening Form for Resident Individuals464LESSON ROUND UP464GLOSSARY465SELF TEST QUESTIONS465LESSON 19LISTING AND DELISTING OF SECURITIESIntroduction468Types of Listing468Benefits of Listing469Legal Provision on Listing469Compliances under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015469Corporate Governance493Corporate Governance under SEBI (LODR), 2015495Delisting513xx
PageSEBI (Delisting of Equity Shares) Regulations, 2009514Voluntary Delisting515Delisting From All Recognised Stock Exchanges519Procedure for Delisting519Special provisions for small companies and delisting by operation of law521Compulsory Delisting523Schedule III523LESSON ROUND UP525GLOSSARY526SELF TEST QUESTIONS526LESSON 20ISSUE OF SECURITIESIntroduction530Issue of Equity Shares530Meaning of Draft Offer Document, Letter of Offer and Red Herring Prospectus533Fast Track Issues534Pricing536Promoters’ 540Reservation on Competitive Basis545Allocation in Net Offer to Public547Book Building551Anchor Investors558Application Supported By Block Amount559Green Shoe Option Facility560Procedure for Issue of Securities563Rights Issue568Bonus Shares571Preferential Issue by Existing Listed Companies574Qualified Institutions Placement582Institutional Placement Programme585Listing on Institutional Trading Platform587xxi
PageIssue of Securities by Small and Medium Enterprises590Listing of Securities on Stock Exchanges593Exit Opportunity to Dissenting Shareholders594SEBI (Share Based Employee Benefits) Regulations, 2014596LESSON ROUND UP606GLOSSARY607SELF TEST QUESTIONS607LESSON 21REGULATORY FRAMEWORK RELATING TO SECURITIES MARKET INTERMEDIARIESIntroduction610Merchant Bankers611SEBI (Merchant Bankers) Regulations, 1992612Registrars and Share Transfer Agent618SEBI (Registrars to an Issue and Share Transfer Agents) Regulations, 1993620Underwriters621SEBI (Underwriters) Regulations, 1993622Bankers to an Issue624SEBI (Bankers to an Issue) Regulations, 1994624Debenture Trustees626SEBI (Debenture Trustees) Regulations, 1993627Syndicate Members632Stock Brokers & Sub-Broker632SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992632A Case Study on Fraudulent Dealings643Certification by Practising Company Secretary643Portfolio Managers644SEBI (Portfolio Managers) Regulations, 1993644Eligible Fund Managers651Custodians652SEBI (Custodian of Securities) Regulations, 1996653Investment Adviser658SEBI (Investment Advisers) Regulations, 2013659xxii
PagePART BGuidelines on Anti-Money Laundering Measures662SEBI (Intermediaries) Regulations, 2008666Research Analysts675SEBI (Research Analyst) Regulations, 2014676SEBI {KYC (Know Your Client) Registration Agency (KRA)}, Regulations, 2011685List of SEBI Registered Intermediaries685Functions and Obligations of an Intermediary687In-Person Verification (IPV)688SEBI (Self-Regulatory Organisations) Regulations, 2004688LESSON ROUND UP695GLOSSARY695SELF TEST QUESTIONS696LESSON 22INSIDER TRADING – AN OVERVIEWIntroduction700Provisions relating to Insider Trading in Companies Act, 2013701SEBI (Prohibition of Insider Trading) Regulations, 2015702Communication or Procurement of UPSI703Trading When In Possession of UPSI704Trading Plans704Disclosures of Trading By Insiders705Disclosures of Interest by Certain Persons705Codes of Fair Disclosure and Conduct706Penalty Provisions for violations of the Regulations710Appeal to Securities Appellate Tribunal712Role of Company Secretary in Compliance Requirements712LESSON ROUND UP713GLOSSARY714SELF TEST QUESTIONS714LESSON 23TAKEOVER CODE – AN OVERVIEWIntroduction716SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011716xxiii
PageApplicability719Trigger Point for Making an Open Offer byan Acquirer719Open Offer720Public Announcement722Provision of escrow726Mode of Payment727Obligations of the target company729Obligations of the Acquirer730Disclosures731Exemptions732LESSON ROUND UP740GLOSSARY741SELF TEST QUESTIONS741LESSON 24INVESTOR PROTECTIONIntroduction744Legal Framework for Investor Protection in India748Investor Education and Protection Fund752Section 125 of the Companies Act, 2013752SEBI (Investor Protection and Education Fund) Regulations, 2009754Financial Education756Investor Grievance Redressal Mechanism at SEBI758SEBI (Informal Guidance) Scheme, 2003760LESSON ROUND UP761GLOSSARY762SELF TEST QUESTIONS763TEST PAPERS765xxiv
Lesson 1Overview of Capital MarketLesson 1Overview of Capital MarketLESSON OUTLINELEARNING OBJECTIVES– IntroductionThe Capital Market is a market for financialinvestments that are direct or indirect claimsto capital. It embraces all forms of lending andborrowing, whether or not evidenced by thecreation of a negotiable financial instrument.The Capital Market comprises the complex ofinstitutions and mechanisms through whichintermediate term funds and long term fundsare pooled and made available to business,government and individuals. The CapitalMarket also encompasses the process bywhich securities already outstanding aretransferred.– Organisational Structure of FinancialSystem– Functions of Securities Market– Securities Market and Economic Growth– A Profile of Securities Market– Market Regulations– Securities Market Reforms andRegulatory Measures to promote InvestorConfidence– International Organisation of SecuritiesCommission (IOSCO)This lesson will enable the students tounderstand the basics of Capital Market, themajor securities market reforms taken by SEBI,the role of IOSCO in securities market regulationand the overview of depository system in India.– Overview of Depository System in India– LESSON ROUND UP– GLOSSARY– SELF TEST QUESTIONS11
2 EP-CM&SLINTRODUCTIONEvery modern economy is based on a sound financial system which helps in production, capital and economicgrowth by encouraging savings habits, mobilising savings from households and other segments and allocatingsavings into productive usage such as trade, commerce, manufacture etc.Financial system covers both credit and cash transactions. All financial transactions are dealt with by cashpayment or issue of negotiable instruments like cheque, bills of exchanges, hundies etc. Thus a financial systemis a set of institutional arrangements through which financial surpluses are mobilised from the units generatingsurplus income and transferring them to the others in need of them. The activities include production, distribution,exchange and holding of financial assets/instruments of different kinds by financial institutions, banks and otherintermediaries of the market. In a nutshell, financial market, financial assets, financial services and financialinstitutions const
Resource Mobilization in International Capital Market 11. Indian Depository Receipts 12. Foreign Portfolio Investors 13. Non-Convertible Redeemable Preference Shares 14. Real Estate Investment Trusts . OVERVIEW OF CAPITAL MARKET Introduction 2 Organisational structure of financial system 3 Financial Markets 3 Need for capital market 4 .
Capital markets are markets for buying and selling equity securities (i.e. shares) and debt securities (i.e. bonds). Capital markets include primary markets, where new stock and bond issues are sold to investors, and secondary markets, where existing securities are traded Key participants: buyers, sellers and financial intermediaries
20. Registration of Securities Exchanges and Capital Trade Points. 21. Registration e.t.c. 22. Revocation of certificate of a Securities Exchange or Capital Trade Point. 23. Approval of amendments to Listing Rules. 24. Securities Exchange or Capital Points to give notice of disciplinary actions, etc. 25. Disciplinary actions by a Securities .
laws, foreign investment is governed by laws of general application (e.g., company laws, contract laws, environmental protection laws, land-use laws, laws guaranteeing compensation for expropriation of property, etc.), along with sector-specific laws, which govern the admission of new investment in sectors
M V B N CAPITAL MARKETS AND o t e s t o [SECURITIES LAWS FOR CS-EXECUTIVE] 4 P a g e d. Insurance organizations: They provide insurance and allied services. Insurance coverage is for life and non-life business. Eg. Public sector owned (LIC, GIC, National insurance, NIA), Private sector owned (ICICI prudential, Birla sun life, Tata AIG)
Introduction 2021 Capital Markets Fact Book Page 7 US Capital Markets Are the Largest in the World The U.S. capital markets are largest in the world and continue to be among the deepest, most liquid, and most efficient. Equities: U.S. equity markets represent 38.5% of the 105.8 trillion in global equity market cap, or 40.7 trillion; this
JORDAN CAPITAL MARKETS Building a Modern Securities Market in Jordan Ideas for Today and Tomorrow FINAL REPORT Deliverable for Capital Markets Component Development Planning Task No. 5.1.2 Jordan Capital Markets Technical Assistance on IT Contract No. 278-C-00-98-00029-00 October 10, 1999
capital markets are crucial to the efficient allocation of credit and investment. To be most beneficial, capital markets must be able to function freely, rewarding strong performers and penalising those who are unable to deploy capital effectively. Looking forward to 2020, capital markets will play an increasingly important role in providing
COVID-19 - Potential implications on Banking and Capital Markets 06 Capital markets Overview of Ghana’s capital market Ghana’s capital market is gradually playing a pivotal role in attracting long-term capital financing for economic activities. The largest capital market i
