CS – PROFESSIONAL – OPEN BOOK EXAM · FATF Recommendations 2016 29 Lesson 3 Framework of Market...

SIMPLIFIED INDEX – CAPITAL COMMODITY & MONEY MARKET – DEC 2017 BASED ON LATEST ICSI MAT OF MARCH 2017

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CS – PROFESSIONAL – OPEN BOOK EXAM

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Relevant Book for this Subject: ICSI MAT. (This Index is based on the topics provided by ICSI in its Official CS Professional MAT. Hence, you should carry the same along with this “SIMPLIFIED INDEX” in the Examination Hall.)

Topics Page No. LESSON – 1. Economic Framework of Capital Market

Constituents Of The Financial System 2 Financial Assets 2 Classification Of Financial Assets 2 Marketable Assets 2 Non-Marketable Assets 2 Cash Assets 2 Debt Asset 2 Stock Asset 2 Financial Intermediaries 3 Capital Market Intermediaries 3 Money Market Intermediaries 3 Financial Markets 3 Classification Of Financial Market 3 Unorganized Markets 3 Organized Markets 4 Capital Market 4 Industrial Securities Market 4





Topics Page No. Government Securities Market 4 Long-Term Loans Market 4 Money Market 4 Features Of Money Market 5 Capital Market 5 Primary Market 6 Secondary Market 6 What Is Transaction Cost? 7 Functions Of Capital Market 8 Role Of Capital Market In Resource Allocation 9 Capital Formation 10 Stages Of Capital Formation 10 Role Of Capital Market In Capital Formation 11

Lesson 2 Legal Framework Department of Economic Affairs (DEA) 16 Capital Market Division 17 Primary Market (PM) 17 Secondary Market (SM) 17

External Markets (EM) 17

External Commercial Borrowings (ECB) 18 National Company Law Tribunal 19 Reserve Bank of India 19 Securities and Exchange Board of India (SEBI) 19 SEBI Act, 1992: 20 Securities Contracts (Regulation) Act, 1956 20 Depositories Act, 1996 20 Companies Act, 2013 20 Grievance Redressal Mechanism 20 Grievance Redressal Mechanism At Stock Exchange 21 Investor Protection Fund 21 Grievance Redressal Mechanism at SEBI 21 Investor Protection and Education Fund 21 Securities Appellate Tribunal 22 Prevention Of Money Laundering Act, 2002 23 Objective Of PREVENTION OF MONEY LAUNDERING ACT, 2002 23 Punishment for Money-Laundering 23 Obligations of Banking Companies, Financial Institutions and Intermediaries of Securities Market

23





Topics Page No. Cash Transaction Reports 25 Suspicious Transaction Reports 25 Investigating Agencies In Case Of PMLA, 2002 27 Central Bureau of Investigation 28 Financial Intelligence Unit – India (FIU-IND) 28 Functions of FIU-IND 29 The Financial Action Task Force (FATF) 29 FATF Recommendations 2016 29

Lesson 3 Framework of Market Infrastructure Institutions

Framework Of Market Infrastructure Institutions 36 Securities Contract (Regulation) (Stock Exchanges And Clearing Corporations) Regulations, 2012

36

Recognition of Stock Exchanges and Clearing Corporations 36 Networth Requirements FOR LISTING ON STOCK EXCHANGES 36 Ownership of Stock Exchanges 37 Ownership of Clearing Corporations 37 Governance of Stock Exchanges and Clearing Corporations 38 Listing of Securities 38 Procedural Norms For Listing 38 The Depositories Act, 1996 41 Eligibility Condition For Depository Services 41 Eligible Securities Required To Be In The Depository Mode 41 Fungibility 42 Rights Of Depositories And Beneficial Owner 42 Pledge Or Hypothecation Of Securities Held In A Depository 42 Furnishing Of Information And Records By Depository And Issuer 43 Option To Opt Out In Respect Of Any Security 43 Depositories To Indemnify Loss In Certain Cases 43 Enquiry And Inspection 43 Power of SEBI 43 Power of SEBI to give directions 44 Penalty 44 Penalty for failure to furnish information/return etc. 44 Penalty for failure to enter into agreement 44 Penalty for failure to redress investors' grievances 44 Penalty for delay in dematerialisation or issue of certificate of securities 45 Penalty for failure to reconcile records 45 Penalty for failure to comply with directions issued by SEBI 45





Topics Page No. Penalty for contravention where no separate penalty has been provided 45 Power to adjudicate 45 Factors to be taken into account by Adjudicating Officer 45 Settlement of Administrative Civil Proceedings 46 Recovery of amounts 46 Crediting of penalties to consolidated fund of India 47 Offences 47 Offences by companies 47 Cognizance of offences by Courts 48 Composition of certain offences 48 Power to grant immunity 48 Special Court 48 Establishment of Special Courts 48 Offences triable by Special Courts 48 Appeal and Revision 48 Application of Code to proceedings before Special Court 48 Transitional provisions 49 Appeals 49 Appeal To Securities Appellate Tribunal 49 Procedure And Powers Of Securities Appellate Tribunal 50 Appeal To Supreme Court 50 Right To Legal Representation 50 Civil Court Not To Have Jurisdiction 50 Securities Contracts (Regulation) Act, 1956 50 Application For Recognition Of Stock Exchanges 51 Grant Of Recognition To Stock Exchanges 51 Withdrawal of recognition 52 Power of Central Government to call for periodical returns or direct inquiries to be made

52

Power of recognised stock exchange to make rules restricting voting rights, etc 53 Power of Central Government to direct rules to be made or to make rules 53 Clearing Corporation 54 Power of SEBI to make or amend bye-laws of recognised stock exchanges 54 Power of Central Government to supersede governing body of a recognised stock exchange

55

Power to suspend business of recognised stock exchanges 55

Lesson 4 Financial Intermediaries Framework Primary Market Intermediaries 60





Topics Page No. Merchant Banker 60 Sebi (Merchant Bankers) Regulations, 1992 60 Capital Adequacy For Merchant Bankers 61 General Obligations and Responsibilities of Merchant Banker 61 Code Of Conduct For Merchant Bankers 62 Responsibilities of Lead Manager 64 Merchant Banker not to Act as such for an Associate 64 Minimum Underwriting Obligation 64 Prohibition to Acquire Shares 64 Disclosure to SEBI 64 Appointment of Compliance Officer 64 Procedure for Inspection 64 Procedure For Action Against Merchant Banker In Case Of Default 65 Registrars To An Issue And Share Transfer Agents 65 Sebi (Registrars To An Issue And Share Transfer Agents) Regulations, 1993 66 Criteria For Registration Of Share Transfer Agents 66

General Obligations And Responsibilities 67 Procedure For Inspection 67 Liability For Action In Case Of Default Of RTA 68

Underwriters 68 Sebi (Underwriters) Regulations, 1993 68 Obligations And Responsibilities Of Underwriters 68 Appointment Of Compliance Officer 68 Inspection and Disciplinary Proceedings of RTA 69 Banker To An Issue 70 Sebi (Banker To An Issue) Regulation, 1994 70 Consideration Of Application To Act As Banker To An Issue 70 Procedure For Registration Banker To An Issue 70 General Obligations And Responsibilities Banker To An Issue 70 Code Of Conduct 71 Procedure for Inspection 72 Debenture Trustees 72 Sebi (Debenture Trustees) Regulations, 1993 73

Responsibilities and Obligations of Debenture Trustees 74 Duties of Debenture Trustees 74 Maintenance of Records by Debenture Trustees 75 Appointment of Compliance Officer by Debenture Trustees 75





Topics Page No. Information to SEBI by Debenture Trustees 76 Secondary Market Intermediaries 76 Stock Brokers And Sub-Broker 76 Sebi (Stock Brokers & Sub-Brokers) Regulations, 1992 77 Rejection Of Application Of Brokers 77 Registration Of Sub-Brokers 78 Registration Of Trading And Clearing Members 79 Registration Procedure for Trading and Clearing Member 80 Registration of Trading and Clearing Members of Currency Derivatives Segment 80 Registration Procedure 81 General Obligations and Responsibilities 82 Procedure for Inspection of Stock Brokers’ Offices 82 Procedure for Action in Case of Default 83 Liability for Monetary Penalty 83 Liability for Action under the Enquiry Proceeding 84 Liability for Prosecution 85 CASE STUDY ON FRAUDULENT DEALINGS - BishwanathMurlidharJhunjhunwala v. SEBI

85

Certification By Practicing Company Secretary - Sebi (Debenture Trustees) Regulations, 1993

86

Internal Audit for Stock Brokers/Trading Members/ Clearing Members 86 Portfolio Manager 86 Sebi (Portfolio Managers) Regulations, 1993 86

Norms for Registration as Portfolio Managers 87 Capital Adequacy Requirement For PORTFOLIO MANAGERS 87 Renewal Of Certificate Of PORTFOLIO MANAGERS 88 Conditions Of Registration Of PORTFOLIO MANAGERS 88 Procedure Where Registration Is Not Granted For PORTFOLIO MANAGERS 89 Contract with Clients and Disclosures 89 Responsibilities of a Portfolio Manager 91 Investment of Clients Money 91 Accounting by Portfolio Managers 91 Reports by Portfolio Manager to the Client 92 Action on Auditor’s Report and Disclosure to SEBI 93 Obligations of Portfolio Manager 93 Internal Audit Of Portfolio Manager 94 Custodian Of Securities 94 Sebi (Custodian Of Securities) Regulations, 1996 94





Topics Page No. Application For Grant Of Certificate For CUSTODIAN OF SECURITIES 95

Application To Conform To Requirements For CUSTODIAN OF SECURITIES 95 Procedure And Grant Of Certificate For CUSTODIAN OF SECURITIES 96

Renewal Of Certificate For CUSTODIAN OF SECURITIES 97

Effect Of Refusal To Grant Certificate For CUSTODIAN OF SECURITIES 97 Prohibition Of Assignment For CUSTODIAN OF SECURITIES 98 Maintenance Of Records And Documents By CUSTODIAN OF SECURITIES 98 Obligations Of Custodian 99 Investment Adviser 100 Sebi (Investment Advisers) Regulations, 2013 100 Registration of Investment Advisers 100 Exemption from registration of Investment Advisers 100 Qualification & Certification of Investment Advisers 101 General Obligations and Responsibilities of Investment Advisers 102 Sebi (Credit Rating Agencies) Regulations, 1999 103 Registration of Credit Rating Agencies 104 Promoter of Credit Rating Agency 104 Eligibility Criteria of Credit Rating Agency 104 Application to Conform to the Requirements of Credit Rating Agency 105 Conditions of Certificate of Credit Rating Agency 105 Procedure where Certificate is not granted for Credit Rating Agency 106 Code of Conduct Code of Conduct by Credit Rating Agency 106 Agreement with the Client by Credit Rating Agency 107 Monitoring of Ratings by Credit Rating Agency 107 Internal Procedures to be Framed by Credit Rating Agency 108 Disclosure of Rating Definitions by Credit Rating Agency 108 Maintenance of Books of Accounts Records by Credit Rating Agency 108 Rating Process of Credit Rating Agency 109 Restrictions on Rating of Securities Issued by Promoter and Certain Entities, Connected with A Promoter, or Rating Agency

109

Procedure for Inspection and Investigation by SEBI of Credit Rating Agency 109 Obligations of Credit Rating Agency 110 MARKET MAKER 111 GUIDELINES FOR MARKET MAKER 111

Registration of the Market Maker 111 The Obligations and Responsibilities of Market Makers 111 Number of Shares per Market Maker 111 Price Band and Spreads 112





Topics Page No. Sebi (Depositories And Participants) Regulations, 1996 112

Rights And Obligations Of Depositories And Its Constituents 113 Governance Of Depository 114 Audit Under Sebi (Depositories And Participants) Regulations, 1996 114 Internal Audit Of Operations Of Depository Participants 114 CONCURRENT AUDIT By DEPOSITORY PARTICIPANTS 115

Designated Depository Participant (DDP) 116 Eligibility Criteria For DDP 116 Sebi (Research Analyst) Regulations, 2014 116

Saral Account Opening Form For Resident Individuals 125

Investor Protection Fund Of Depositories 125

Lesson 5 Primary Market Types of Issue in Primary Market 130 Public issue 130 Initial public offer 130 Further public offer 130

Right issue 130 Bonus issue 130 Private placement 130 Preferential allotment 130 Qualified institutions placement (QIP) 130

Institutional placement programme (IPP) 130

OFFER FOR SALE (OFS) 131 OFS PROCESS 131

Difference between Offer for Sale (OFS) process and IPOs/FPOs 132

Price Band UNDER OFS 132 Sebi Guidelines On Offer For Sale (Ofs) Of Shares By Promoters Through The Stock Exchange Mechanism

132

Floor price 134 Order Placement 134 Risk Management 135 Allocation 135 Settlement 135 Handling of default in pay-in 135 Issuance of Contract Notes 135 Withdrawal of offer 136 Cancellation of offer 136 Understanding The Guideline Step Wise 136





Topics Page No. Different Form Of Prospectus 137

Offer Document 137 Draft Offer Documents 137 RHP (Red Herring Prospectus) 137 Shelf Prospectus 137 Filing of Offer Document 138 LEAD MANAGER 138

Pre-Issue Management 139 Post-issue Management 139 Co-ordination with Intermediaries 140 UNDERWRITING 140 Due Diligence in IPO / FPO 141

Pre-issue-Due Diligence Certificates 146 Post issue diligence 146 Basis Of Allotment 146 Book Building 147 Book Building Process Through A Flowchart 151 Additional Disclosures In Case Of Book Building 153 Procedure for Bidding 153 Alternate Method of Book Building 154 Green Shoe Option Facility 155

Green Shoe Option Process 158

Pre-Issue Activities 158 Rights Issue 160 Steps Involved In Issue Of Rights Shares 162 Bonus Issue 163 Advantages of Issuing Bonus Shares 163 SEBI Regulations Pertaining to Bonus Issue 164 Steps involved in Issue of Bonus Shares 165 Preferential Issue 166 SEBI ICDR Regulations, 2009 Pertaining to Preferential Issue 166 Relevant date 167 Upfront Payment on warrants 167 Lock-in-period 168 Allotment Pursuant to Shareholders Resolutions 168 Submission of Valuation Report 169 Qualified Institutional Buyer 170





Topics Page No. Conditions for making QIP 171 Intermediaries involved in QIP and their roles 171 Placement document 171 Issue of partly paid-up securities 172 Restrictions on allotment 172 Minimum numbers of allottees 173 Institutional Placement Programme 173 Conditions for Institutional Placement Programme 174 Offer DocumentUnder INSTITUTIONAL PLACEMENT PROGRAMME 174 Pricing And Allocation/Allotment Of INSTITUTIONAL PLACEMENT PROGRAMME 174 RestrictionsOf INSTITUTIONAL PLACEMENT PROGRAMME 175 Restrictions On Size Of The Offer 175 Listing Agreement 175

Benefits Of Listing 176 Laws Governing Listing 176 Event Based And Time Based Compliance Under Listing Agreement 176 Event Based Compliances 176 Time Based Compliances 179 Listing On Institutional Trading Platform 181 Listing Pursuant To Public Issue 183 Exit of entities listed without making a public issue 184 LISTING OF SECURITIES ON STOCK EXCHANGES 184 Obligation Of Stock Exchange 185 OFFER FOR SALE (OFS) PROCESS 185

Lesson 6 Secondary Market Corporate Actions 190 From Listing Agreement To Listing Regulations, 2015: A Birds’ Eye View 190 Listing Agreement: Meaning 191

SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015: An Introduction

191

SEBI (LODR) Regulation, 2015: Basic Features 192

Differences between Listing Regulation and Listing Agreement 192 SEBI (LISTING OF OBLIGATION AND DISCLOSURE REQUIREMENT) REGULATION, 2015

193

Objectives of LODR 193

Applicability OF LODR 194

Key Features OF LODR 194 Major Transformation FROM LISTING AGREEMENT TO LODR 195





Topics Page No. Material Disclosures 195 Deemed material 195 Materiality thresholds 195 Board composition and its committees UNDER LODR 196 Duties of the board 196 Related Party Transactions 197 Scope of RPTs 197 Approval of RPT 197 Corporate governance for listed start-ups 197 Common Obligations of Listed Entities – Chapter III of Listing Regulations 198 Obligations of listed entity which has listed its specified securities i.e. Equity shares and convertible securities – Chapter IV of Listing Regulations

198

Obligations of Listed Entity Which Has Listed Its Non-Convertible Debt Securities (NCD’s) Or Non-Convertible Redeemable Preference Shares (‘NCPS’) Or Both – Chapter V of Listing Regulations

201

Quarterly / Half Yearly / Annual Compliances under SEBI (LODR) Regulation 2015 203 Compliance Certificate certifying maintaining physical & electronic transfer facility - Within one month of end of each half of the financial year

203

Regulation 13 (3) - Statement of Investor complaints - Within Twenty one days from the end of each quarter

203

Regulation 27 (2) - Corporate Governance - Within 15 days from quarter end. 203

Regulation 31 - Shareholding Pattern - Within 21 days from quarter end 203 Regulation 33 - Financial Results - Within 45 days from quarter end 203 Regulation 33 - Financial Results - Within 45 days from quarter end 203 Regulation 34 –Annual Report - Within twenty one working days of it being approved and adopted in the annual general meeting.

204

Regulation 40 (9) – Certificate from Practicing Company Secretary -Within one month of the end of each half of the financial year

204

Reconciliation of Share Capital Audit - (SEBI- DP Reg.55A) - Within 30 days from quarter end.

204

Other Compliance Requirements under SEBI Listing Regulations 2015. 204 Regulation 7 – Appointment of New Share Transfer Agent. 204 Regulation 14 – Listing Fees & Other charges. 205 Regulation 29 – Notice for Board Meeting to consider the prescribed matters 205

Regulation 30 – Disclosure of Price-Sensitive Information 205 . Regulation 30 – Outcome of Board Meeting 205 Regulation 42 – Notice for Record Date \ Corporate Action 205 Regulation 43 – Declaration of Dividend 205 Regulation 43 A – Dividend Distribution Policy 205 Regulation 44 – Voting Result 206





Topics Page No. Regulation 46 - Company Website 206 Regulation 30(1) and 30(2) - SEBI Takeover Regulations 2011 206 Regulation 7(2) - SEBI (Prohibition of Insider Trading) Regulations, 2015 206 Compliance Calendar under SEBI (LODR), Regulation 2015 207 Corporate Governance 213 Regulatory Framework Of Corporate Governance In India 213

Corporate Governance and SEBI (Listing of Obligation and Disclosure Requirements) Regulation, 2015

213

Time of Reforms in Indian Capital Market in line towards better Corporate Governance 214 Key Features of Corporate Governance under SEBI (LODR) Regulation, 2015 214 SEBI’s Standard on Corporate Governance 215

Regulation 23 - Related Party Transactions 215 Regulation 25: Independent Director 216

Audit Committee 216

Regulation 27 Compliance report on Corporate Governance 216 Corporate Governance under SEBI (LODR) Regulation, 2015 216 Corporate Governance Under Companies Act, 2013 224 Stock Exchange Mechanism 231 Arbitration Mechanism at Stock exchanges 231 Maintenance of a Panel of Arbitrators 231 Code of Conduct for Arbitrators 232 Appellate Arbitration 233 Arbitration Fees 233 Place of Arbitration 234 Implementation of Arbitral Award in favour of Clients 234 Record and Disclosures 235 MARGINING 235 Initial Margin 236 Maintenance Margin 236 Types Of Margins In Cash And Derivative Segment 237 Value at Risk (VaR) margin 237 Extreme Loss Margin 237 Mark-to-Market (MTM) margin 237 Derivatives Segment 238 Initial Margin 238 Exposure Margin 238 Premium Margin 238 TRADING OF SECURITIES 239





Topics Page No. Order Placing 239 Order Execution 239 Contract Note Preparation 239

Delivery and Clearing 239 Share Transfer 239 Settlement System 240 Accounting period settlement systems 240 Rolling Settlement 240 Clearing And Settlement 240

Clearing Corporation 240

Clearing Members(CM) 240 Custodians 240

Clearing Banks 240

Depositories 241 Clearing & Settlement Process 241

Trade Guarantee Fund 242

Trading Software 242 Stock Market Indices 242 Types Of Indices 243 BSE Indices 243 NSE Indices 243 BSE INDICES 243 SENSEX - Scrip Selection Criteria 244 S & P BSE SENSEX Calculation Methodology 245 Definition of Free-float 245 Major Advantages of Free-float Methodology 246 Determining Free-float Factors of Companies 247 Index Closure Algorithm 248 Maintenance of BSE Indices 248 On - Line Computation of the Index 248

Adjustment for Bonus, Rights and Newly Issued Capital 249

Adjustments for Rights Issues 249 Adjustments for Bonus Issue 249

Base Market capitalization Adjustment 249 CNX NIFTY 249 Selection Criteria for CNX Nifty 250

Price Index Calculations Formula 250





Topics Page No. Investible Weight Factors (Iwfs) 250

Lesson 7 Capital Market Investment Institutions National Level Institutions 256

Industrial Development Bank of India (IDBI) 256

Industrial Finance Corporation of India (IFCI) 256 Industrial Investment Bank of India Ltd (IIBI) 257

Specialised Financial Institutions (SFIs) 257

IFCI Venture Capital Funds Ltd (IVCF) 257 ICICI Venture Funds Ltd 257

Tourism Finance Corporation of India Ltd. (TFCI) 257

Life Insurance Corporation of India (LIC) 257 Unit Trust of India (UTI) 257

General Insurance Corporation of India (GIC) 257

State Financial Corporations (SFCs) 258 – State Industrial Development Corporations (SIDCs) 258

Qualified Institutional Buyers 258

Anchor Investor 259 PRIVATE EQUITY 260

Types of Private Equity 260

Leveraged Buyout (LBO) 260 Venture Capital 260

Areas of Investment 261

Stages Of Investment Financing 261 Early Stage Financing 261

Later Stage Financing 262

Angel Fund 262 SEBI – Recent move in 2016 on Angel Investor 263

Types Of Angel Investors 263

Core Angels 263 High-tech Angels 264

Return On investment (ROI) Angels 264

Enthusiast Angels 264 Micromanagement Angels 264

Professional Angels 264

Pension Fund 264 Formal Sector Pensions 264

Pension Fund Management 265





Topics Page No. Foreign Portfolio Investor 265

Investment Conditions and Restrictions FPI 266 Mutual Fund 266

How a Mutual Fund is Set Up 267

Types of Mutual Fund Schemes 267 Structure Based Classification 268

Return based classification 268

Investment based classification 268 Fixed Maturity Plans 269

Exchange Traded Funds (ETFs) 270

Capital Protection Oriented Schemes 270 Gold Exchange Traded Funds (GETFs) 270

Quantitative Funds 270

Funds Investing Abroad 270 Fund of Funds (FOFs) 270

Alternative Investment Funds 270

Types of AIFs 271 Where an AIF can Invest 272

Category wise Investment Condition 272

Conditions for Category II AIFs 273 Conditions for Category III AIFs 273

Hedge Funds 273

How Hedge Funds Work 273 A Taxonomy of Hedge Fund Strategies 274

A Taxonomy of Hedge Fund Strategies 274

Lesson 8 Capital Market Instruments Characteristics Of Equity Shares 278

Shares With Differential Voting Rights 279

Prohibition Of Superor Rights - Clause 28a 280 Anand Jaiswal v. Jagatjit Industries Limited - Case Law 280

Preference Shares 281

Cumulative Preference Shares 282 Non-Cumulative Preference Shares 282

Convertible Preference Shares 282

Redeemable Preference Shares 283 Participating Preference Shares 283

Fully Convertible Cumulative Preference Share (EQUIPREF) 283





Topics Page No. Debentures 283

Features of Debentures 283 Types of Debentures 284

Naked or unsecured debentures 284

Secured debentures 284 Redeemable debentures 284

Perpetual debentures 284

Bearer debentures 284 Registered debentures 284

Classification of Debentures based upon Convertibility 284

Basic Features of Convertible Debentures 284 Advantages of Convertible Debentures 285

Fully Convertible Debentures With Interest (Optional) 286

Non Convertible Debentures With Put And Call Option 286 Put Options in NCD 286

Call Option in NCD 286

BONDS 286 Characteristics of a Bond 286

Types of Bond 287

Types of Bond 287 Corporate Bonds 287

Banks and other financial institutions bonds 287

Warrant 287 Sweat Equity Shares 287

Secured Premium Notes (SPN) 288

Equity Shares With Detachable Warrants 288 Foreign Currency Convertible Bonds (FCCBS) 289

Foreign Currency Exchangeable Bonds (FCEBS) 289

American Depository Receipts 290 Global Depository Receipts 290

Difference between American Depository Receipts (ADR) and Global Depository Receipts (GDR)

290

Indian Depository Receipts (Idrs) 291 Benefits of IDRs 291

Derivatives 291

Future 291 Options 291

Index Futures & Options 292





Topics Page No. Currency Futures 293

Interest Rate Futures 293 Stock Futures And Stock Options 294

Pricing of Stock Futures 294

Exchange Traded Funds (ETFS)Change Traded Funds (ETFS) 295

Lesson 9 Resource Mobilization Through International Markets American Depository Receipt 298

Types of ADRs 299 Unsponsored ADR 299

Sponsored ADR 299

Global Depository Receipts 299 Advantage Of Adrs And Gdrs 300

Process involved in Issue of ADR/GDR 301

Two-Way Fungibility Scheme 302 One way fungibility 302

Two way fungibility 302

Issuance Of Shares Under Adr/Gdr 302 Provisions of Companies Act, 2013 relating to issue of GDR 304

Companies (Issue of Global Depository Receipts) Rules, 2014 305

Conditions for issue of depository receipts 305 Manner and form of depository receipts 305

Voting rights 305

Voting rights 306 Non applicability of certain provisions of the Act 306

Statutory Approvals Required for issue of GDR/ADR 306

Approval of the Foreign Investment Promotion Board (FIPB) 306 Agencies involved in ADR/GDR issue 307

Agreements and related Documents 308

Custodian Agreement 309 Escrow Agreement 309

Procedural Requirements 310

Roadshows 311 Stepwise Procedure For Issue Of Adr/Gdr 312

Reporting Of Adr/Gdr Issues 313

Fccb And Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993 314 Transfer and redemption 314

Listing Of GDR 314





Topics Page No. London Stock Exchange 314

Different ways in which a company can list in London 315 Listing On The Main Market 315

FSA’s requirements for a company to receive listed status 315

Listing On The Main Market In London 315 Listing On Professional Security Market 318

Requirement of prospectus 318

Key eligibility criteria OF LONDON STOCK EXCHANGE 318 Listing On AIM Of London Stock Exchange 319

Luxembourg Stock Exchange 320

Listing Of Adr 320 Nasdaq 321

The Nasdaq Global Select Market (NGSM) 321

The Nasdaq Capital Market (NCM) 323 The Nasdaq Global Market (NGM) 325

Newyork Stock Exchange (NYSE) 327

NYSE Quantitative Listing and Maintenance Standards 327 Resource Mobilisation In International Capital Market 331

External Commercial Borrowings (Ecb) 331

Depository Receipts Scheme, 2014 342

Lesson 10 Economics Of Commodities Marketing Types Of Commodities 346

Commodity Markets 346 Marketing Of Agricultural Commodities 347

STORAGE 349

Bag storage 349 Bag storage 350

Warehousing 350

Importance of warehousing 350 Working of Warehouses 350

Private warehouses 351

Public warehouses 351 Bonded warehouses 351

Central Warehousing Corporation (CWC) 351

State Warehousing Corporations (SWCs) 352 Variance In Commodity Market 352

Weather Derivatives 353





Topics Page No. Freight Derivatives 353

Electricity Derivates 354 Catastrophe Derivatives 355

Carbon Derivatives 355

Hedging 356 Hedging Risks 356

Understanding Basis Risk 357

Lesson 11 Commodities Market Operations Role Of Commodity Exchanges 362

Evolution Of Commodity Exchanges 362

Origin Of Commodity Market In India 362 Forward Contracts (Regulation) Act, 1952 363

Three-Tier Regulatory System 364

Forward Market Commission Of India 364 Functions of Forward Market Commission of India 364

Powers of Forward Market Commission 365

Commodity Exchanges In India 365 Hedgers 366

Speculator 367

Difference between a speculator and gambler 368 Arbitrageurs 368

Commodity Producers/Consumers 368

Commodity Processors 368 Commodity Traders 369

Financial Institution/Dealers 369

Trading In Commodity Market 369 Margin money 369

Different types of margins payable on futures 370

Mark-to-Market (MTM or M2M) 370 Maintenance margin 370

Order Types 370

Electronic Spot Exchanges 371 Exchange Membership 372

Clearing 372

Clearing Mechanism 373 Clearing Banks 373

Settlement Mechanism 374





Topics Page No. Final settlement 375

Settlement Methods 375 Compulsory Delivery Contract 376

Sellers Right Contract 376

Intention Matching Contract 377 Cash settlement 377

Accredited Warehouse 377

Approved Registrar and Transfer agents (R&T agents) 378 Approved assayer 378

Forward Contract 378

Futures 379 Distinction between Futures and Forward Contracts 380

Options 381

In-the-money option 381 Out-of-the-money option 382

Intrinsic value of an option 382

Hedging 382 Short Hedge 383

Long Hedge 383

Advantages of Hedging 384 Speculation 384

Arbitrage 386

Overpriced Commodity Futures: Buy Spot, Sell Futures 386 Underpriced Commodity Futures: Buy Futures, Sell Spot 386

Lesson 12 Money Market Features Of Money Market 390 Money Market Vs. Capital Market 391

Growth Of Money Market 391

Structure And Institutional Development 392 Money Market Instruments 393

Gilt-Edged (Government) Securities 393

Call Money And Notice Money 393 Term Money 394

Bill Discounting 394

Procedure of Bill Discounting 395 Discount Rates 395

BILL REDISCOUNTING SCHEME (BRD) 396





Topics Page No. Repurchase Agreements 396

Banker’s Acceptance 397 Treasury Bills 397

Benefits of Investing in Treasury Bills 399

Features of Treasury Bills 399 Primary Market 400

Secondary Market 400

Types of Auction 400 Certificates Of Deposits 401

Issue of Duplicate Certificates 402

Inter-Corporate Deposits 403 Commercial Bills 403

Commercial Paper 403

Procedure For Issuance 405 Money Market Mutual Funds (MMFS) 406

Factoring 406

Factoring Process 406 Advantages for the Seller 408

Types Of Factoring 409

Letter Of Credit 410 Basic Forms Of Lcs 410

Revocable Letter of Credit 411

Irrevocable Letter of Credit 411 Working Mechanism 411

Bill Of Exchange 413

FIMMDA - The Fixed Income Money Market and Derivatives Association of India 414 FOREIGN EXCHANGE DEALER'S ASSOCIATION OF INDIA 414

Lesson 13 Insider Trading SEBI (Prohibition of Insider Trading) Regulations, 2015 419

Provisions Relating To Insider Trading In Companies Act, 2013 419

The Sebi (Prohibition Of Insider Trading) Regulations 2015 420 Applicability Of The Regulations 421

DEFINITIONSCompliance officer AS PER SEBI (PROHIBITION OF INSIDER TRADING) REGULATIONS 2015

421

Connected Person AS PER SEBI (PROHIBITION OF INSIDER TRADING) REGULATIONS 2015

422

“Insider” AS PER SEBI (PROHIBITION OF INSIDER TRADING) REGULATIONS 2015

423





Topics Page No. “Trading” AS PER SEBI (PROHIBITION OF INSIDER TRADING) REGULATIONS 2015

423

“Unpublished Price Sensitive Information” 424 What is Trading window? 425

What is a pre-clearance? 425

What is a contra trade? 425 What is a Trading Plan? 425

Restriction On Communication And Trading By Insiders 425

Trading when in possession of Unpublished Price Sensitive Information 426 Trading Plans 427

Disclosure Of Trading By Insiders 428

Initial Disclosure 428 Continuous Disclosure 428

Code for Fair Disclosure 429

Code of Conduct UNDER AS PER SEBI (PROHIBITION OF INSIDER TRADING) REGULATIONS 2015

429

Designation of Compliance Officer UNDER AS PER SEBI (PROHIBITION OF INSIDER TRADING) REGULATIONS 2015

430

PENALTIES FOR CONTRAVENTION UNDER AS PER SEBI (PROHIBITION OF INSIDER TRADING) REGULATIONS 2015

431

Lesson 14 Substantial Acquisition of Shares and Takeovers DEFINITIONS: Control 443

Enterprise Value 443 Manager to Open Offer 444

Offer Period 444

Persons Acting in Concert 444 "Volume weighted average market price" 445

"Volume weighted average price" 445

Substantial Acquisition Of Shares Or Voting Rights 446 Obligation to Make Open Offer 446

Trigger Point For Making An Open Offer By An Acquirer 447

25% Shares or Voting Rights 447 Creeping Acquisition Limit 447

Open Offer Under Sebi Takeover Regulations, 2011 447

Mandatory Open Offer 448 Voluntary Open Offer 448

Conditional Offer 449

Delisting Offer 449 Competing Offer 450





Topics Page No. Restrictions on Wilful Defaulter 450

OPEN OFFER PROCESS 450 Withdrawal of Open Offer 453

PUBLIC ANNOUNCEMENT 454

Submission of Public Announcement (PA) 454 Publication and Submission of Detailed Public Statement 454

Contents of Public Announcement and Detailed Public Statement 455

Procedure of Filing PA and DPS 456 Offer Price 456

Provision Of Escrow 457

Mode Of Payment Of Escrow 457 Disclosures In Sebi Takeover Regulations, 2011 458

EXEMPTIONS Regulation 10 of the SEBI Takeover Regulations, 2011 459

Regulation 10 - Automatic Exemptions 460 Regulation 11 – Exemption By Sebi 463

Procedure for filing the application under Regulation 11 464

Report Of Justice Dhanuka Committee On Securities Laws 483

CS – PROFESSIONAL – OPEN BOOK EXAM · FATF Recommendations 2016 29 Lesson 3 Framework of Market...

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