SEBI Presentation FINAL

8/6/2019 SEBI Presentation FINAL

1/31

1

Presented by:PUSHKAR (34)

RABINDRA KUMAR (35)

RAJESH KUMAR (36)EXPGP 2005-08

XLRI JAMSHEDPUR

Financial MarketsFinancial Markets

SEBI GuidelinesSEBI Guidelines


2/31

2

The Securities and Exchange Board of India (SEBI) was constitutedon 12 April 1988 as a non-statutory body through anAdministrative Resolution of the Government for dealing with allmatters relating to development and regulation of the securitiesmarket and investor protection and to advise the government on all

these matters. SEBI was given statutory status and powersthrough an Ordinance promulgated on January 30 1992. SEBI wasestablished as a statutory body on 21 February 1992. TheOrdinance was replaced by an Act of Parliament on 4 April 1992.The preamble of the SEBI Act, 1992 enshrines the objectives ofSEBI to protect the interest of investors in securities market and

to promote the development of and to regulate the securitiesmarket

HistoryHistory

17 Broad Guidelines and 30 Schedules for Reference


3/31

3

The basic objectives of the Board were identified as:

to protect the interests of investors in securities;to promote the development of Securities Market;to regulate the securities market and for matters connected therewith orincidental thereto

SEBI appointed the L. C. Gupta Committee in 1998 to recommendthe regulatory framework for derivatives trading and suggest bye-laws forRegulation and Control of Trading and Settlement of Derivatives ContractsSEBI then appointed the J. R. Verma Committee to recommend RiskContainment Measures (RCM) in the Indian Stock Index Futures Market.The report was submitted in november 1998.

Thereafter SEBI formulated the necessary regulations/bye-laws and intimatedthe Stock Exchanges in the year 2000. The derivative trading started in India atNSE in 2000 and BSE started trading in the year 2001

OBJECTIVEOBJECTIVE


4/31

4

The SEBI board consists of one Chairman and five members.

One each from the department of Finance and Law of the Central Government,one from the Reserve Bank of India and two other persons and having its headoffice in Bombay and regional offices in Delhi, Calcutta and Madras.

The Central Government reserves the right to terminate the services ofthe Chairman or any member of the Board. The Board decides questions in themeeting by majority vote with the Chairman having a second or casting vote. Allthe stock brokers, sub-brokers, share transfer agents, bankers to an issue,trustees of trust deed, registrars to an issue, merchant bankers, underwriters,portfolio managers, investment advisers and such other intermediary who may be

associated with the Securities Markets are to register with the Board under theprovisions of the Act, under Section 12 of the Sebi Act. The Board has the powerto suspend or cancel such registration.

FUNCTIONSFUNCTIONS


5/31

5

GUIDELINES ON INITIAL PUBLIC OFFERS THROUGHTHE STOCK

EXCHANGE ON-LINE SYSTEM (e-IPO )

A company proposing to issue capital to public through the on-linesystem of the stock exchange for offer of securities shall comply withthe requirements as contained in this Chapter in addition to otherrequirements for public issues as given in these Guidelines, whereverapplicable.

Agreement with the Stock exchangeThe company shall enter into an agreement with the StockExchange(s) which have the requisite system of on-line offer ofsecurities.Appointment of Brokers

The stock exchange, shall appoint brokers of the exchange, who are

registered with SEBI, for the purpose of accepting applications andplacing orders with the company.Appointment of Registrar to the Issue

The company shall appoint a Registrar to the Issue having electronicconnectivity with the Stock Exchange/s through which the securitiesare offered under the system.

Ch XIA: p 191Ch XIA: p 191--196196


6/31

6

Listing

The company may apply for listing of its securities on an exchange

other than the exchange through which it offers its securities to publicthrough the on-line system.)

Responsibility of the Lead Manager

The Lead Manger shall be responsible for co-ordination of all theactivities amongst various intermediaries connected in the issue /

system.The names of brokers appointed for the issue alongwith the names ofthe other intermediaries, namely, Lead managers to the issue andRegistrars to the Issue shall be disclosed in the prospectus andapplication form.

Mode of operationThe company shall, after filing the offer document with ROC and beforeopening of the issue, make an issue advertisement in one English andone Hindi daily with nation wide circulation, and one regional daily withwide circulation at the place where the registered office of the issuercompany is situated.


7/31

7

GUIDELINES FOR PREFERENTIAL ISSUES

The preferential issue of equity shares/ Fully Convertible Debentures(FCDs)/ Partly Convertible Debentures (PCDs) or any other financialinstruments which would be converted into or exchanged with equityshares at a later date, by listed companies whose equity share capital islisted on any stock exchange, to any select group of persons under

Section 81(1A) of the Companies Act 1956 on private placement basisshall be governed by these guidelines

Pricing of the issue

The issue of shares on a preferential basis can be made at a price notless than the higher of the following:

i) The average of the weekly high and low of the closing prices of therelated shares quoted on the stock exchange during the six monthspreceding the relevant date;ORii) The average of the weekly high and low of the closing prices of therelated shares quoted on a stock exchange during the two weeks

preceding the relevant date.

Ch XIII: p 207Ch XIII: p 207--213213


8/31

8

Non-transferability of financial instrumentsThe instruments allotted on a preferential basis to the promoter /promoter group shall be subject to lock-in of 3years from the date of their allotment.

Currency of shareholders resolutionsAllotment pursuant to any resolution passed at a meeting ofShareholders of a company granting consent for preferential issuesof any financial instrument, shall be completed within a period offifteen days from the date of passing of the resolution.


9/31

9

GUIDELINES FOR MUTUAL FUNDSGUIDELINES FOR MUTUAL FUNDS

SEBI approved Asset Management Company (AMC) manages the funds bymaking investments in various types of securities. Custodian, registered withSEBI, holds the securities of various schemes of the fund in its custody

The general power of superintendence and direction over AMC is vested with thetrustees. According to SEBI Regulations, two thirds of the directors of trustee

company or board of trustees must be independent . They should not beassociated with the sponsors

50% of the directors of AMC must be independent

All mutual funds are required to be registered with SEBI before they launch any

scheme

Increase of load more than the level mentioned in the offer document is applicableonly to prospective investments by the MFs. For original investments, the offerdocuments has to be amended to make investors aware of loads at the time ofinvestments


10/31

10

Procedure for registering a mutual fund with SEBI

An applicant proposing to sponsor a mutual fund in India must apply in Form Awith a fee of Rs.25,000. The application is examined and once the sponsorsatisfies certain conditions such as being in the financial services business andpossessing positive net worth for the last five years, having net profit in three outof the last five years and possessing the general reputation of fairness andintegrity in all business transactions, it is required to complete the remainingformalities for setting up a mutual fund. These include inter alia, executing the trustdeed and investment management agreement, setting up a trustee

company/board of trustees comprising two- thirds independent trustees,incorporating the asset management company (AMC), contributing to at least 40%of the net worth of the AMC and appointing a custodian. Upon satisfying theseconditions, the registration certificate is issued subject to the payment ofregistration fees of Rs.25.00 lacs (Ref SEBI (Mutual Funds) Regulations, 1996.)

Transfer of units in case of close-ended schemestransfer of units is required to be done within thirty days from the date of lodgmentof certificates with the mutual fund.


11/31

11

Listed company require to disclose information in timely, complete andaccurate manner to the exchange and the public on regular basis such as :

Corporate conditionsDividendsMergers & JV

Management of change etc..BSE & NSE Bye Laws, a broker cannot charge more than 2.5% brokeragefrom his clients.As per SEBI guidelines a sub broker 1.5% brokerage of the value mentioned inthe purchase or sale noteIts mandatory to disclose transaction price and brokerage issued to the client.

On engaging a broker to trade on your behalf - Member - Client agreement.If through a sub-broker then you have to sign a Broker - Sub broker - ClientTripartite Agreement.

GUIDELINES FOR SECONDARY MARKETSGUIDELINES FOR SECONDARY MARKETS


12/31

12

The Central Listing Authority (CLA) is set up to address the issue ofmultiple listing of the same security and to bring about uniformity inthe due diligence exercise in scrutinizing all listing applications onany stock exchanges. The functions of CLA as enumerated in SEBI

(Central Listing Authority) Regulations, 2003 include:

a) processing the application made by any body corporate, mutual fund orcollective investment scheme for the letter of recommendation to get listedat the stock exchange,

b) making recommendations as to listing conditions, and

c) any other functions that may be specified by the SEBI Board from timeto time.

Continued

GUIDELINES FOR SECONDARY MARKETSGUIDELINES FOR SECONDARY MARKETS


13/31

13

An application for registration has to be made in Form A, the format ofwhich is provided in the SEBI(FII) Regulations, 1995 and submitted withunder mentioned documents in duplicate addressed to SEBI as well as toReserve Bank of India (RBI) and sent to the following address within 10 to12 days of receipt of application

Supporting documents required are:Application in Form A duly signed by the authorised signatory of theapplicant.Certified copy of the relevant clauses or articles of the Memorandum andArticles of Association or the agreement authorizingthe applicant to invest on behalf of its clientsAudited financial statements and annual reports for the last one year ,provided that the period covered shall not be less than twelve months.A declaration by the applicant with registration number and other particulars insupport of its registration or regulation by a Securities Commission or Self RegulatoryOrganisation or any other appropriate regulatory authority with whom the applicant isregistered in its home country

FOREIGN INSTITUTIONAL INVESTORSFOREIGN INSTITUTIONAL INVESTORS


14/31

14

A declaration by the applicant that it has entered into a custodian agreementwith a domestic custodian together with particulars of the domestic custodian.A signed declaration statement that appears at the end of the Form.

The eligibility criteria for applicant seeking FII registration

As per Regulation 6 of SEBI (FII) Regulations,1995, Foreign InstitutionalInvestors are required to fulfill the following conditions to qualify for grantof registration:

Applicant should have track record, professional competence, financial soundness,experience, general reputation of fairness and integrity;The applicant should be regulated by an appropriate foreign regulatory authorityin the same capacity/category where registration is sought from SEBI.Registration with authorities, which are responsible for incorporation,is not adequate to qualify as Foreign Institutional Investor.

The applicant is required to have the permission under the provisions of theForeign Exchange Management Act, 1999 from the Reserve Bank of India.The applicant has to appoint a local custodian and enter into an agreementwith the custodian. Besides it also has to appoint a designated bank to routeits transactions.Payment of registration fee of US $ 5,000.00

FIIcontinued


15/31

15

Procedure for registration of sub-account

Annexure B of the Regulations duly filled and signed by the FII and

Sub-Account has to be submitted by FII on behalf of the proposedsub-account. With if DD of US$ 1000 favouring"Securities and Exchange Board of India" as fees is to be submittedpayable at New York.

Duration required to register sub-accounts

For registered Foreign Institutional Investor, it takes 3 working daysfrom the date of receipt of complete application and fees.

Foreign Institutional Investor/ sub account name change procedure

For registered Foreign Institutional Investor, it has to inform SEBIpromptly with the relevant documents supporting the name change.

In case of merger or takeover

SEBI FII Registration is not transferable. The surviving entity has to obtainfresh registration as an FII from SEBI.

FIIcontinued


16/31

16

Investment limits for FII/ sub-accounts

The sub-account which is not a foreign individual/ corporate can

individually invest upto 10%. The limit for each foreign corporate/ individualis 5%. These limits are within the overall limit of 24% / 49% or thesectoral caps as the case may be.

Validity period of sub-account registration

The registration of the sub-account is concurrent with its registered FII and

the registration of the sub-account expires with the expiry of registration ofthe FII. Moreover, if the registration of the FII is suspended/cancelled, theregistration of its sub-account is also suspended/ cancelled as the case may be.

Can an FII/sub-account trade after its registration has expired?

No. if it is not interested in renewal but has certain residual assets, it should

apply for disinvestment in terms of Circular No. FITTC/CUST/12/2001 datedJune 04, 2001 and abide by the guidelines specified in this regard.

Procedure for renewal of FII/sub-account registration

They has to apply before 3 months of the expiry of registration in Form A.Circular No FITTC/CUST/09/2000 dated September 21, 2000 may be referred.

FIIcontinued


17/31


18/31

18

Issue of Debt Instruments

10.4: Distribution of Dividends

In case of a default in the payment of interest on Debentures , any distributionshall require approval of debenture trustees & Lead banks

Prior permission of lead banks for declaration of dividends in excess of 20% forexisting companies not complying with Interest and DSCR norms

10.5: Redemption

Redemption of debt instruments is to be done as laid out in the offer doc

10.6: Disclosure and creation of Charge

Offer document must state the assets on which securities shall be created Offer document must contain the security: asset cover to be maintained

Issue proceeds to be kept in an Escrow Account till completion ofdocumentation

Ch X: p 159Ch X: p 159--168168


19/31

19

Issue of Debt Instruments

10.7: Requirement of Letter of Option

The letter of option shall contain disclosures with regard to option forconversion, justification for conversion price and such other terms which SEBImay specify: This is required if the Co. wants to roll-over its debentures

The non-convertible portions of PCDs or the NCDs issued by a listed company,the value of which exceeds Rs.50 lacs, can be rolled over without change inthe interest rate for companies in default or not in default

10.8: Other Requirements

Maximum conversion period of FCDs = 36 months

Exception: Optional conversion with put and call option

10.9: Additional Disclosures in respect of Debentures

Offer document must contain premium amount on conversion, time ofconversion, redemption amount, interest payment due date etc

Ch X: p 159Ch X: p 159--168168


20/31

20

Qualified Institutional Placement

13A.1: Applicability

Any issue of equity shares, FCDs, PCDs or specified securities (convertiblewith equity shares at a later date except warrants)

Pension funds and Provident Funds with minimum corpus of Rs 25 crore

Public financial institutions, scheduled commercial banks, MFs, FII,

development banks, VCC, SIDC, Insurance Cos.13.A.2: Investors

Minimum 10% of Specified Securities shall be allotted to MFs

13.A.3: Pricing of Issues

Issue pricing of specified securities to be not less than6

months weeklyaverage (preceding the issue date) or 2 weeks average preceding the relevantdate (whichever is lower)

Relevant date- Date 30 days prior to the AGM of shareholders

Ch XIIIA: p 214Ch XIIIA: p 214--219219


21/31

21


13.A.4: Adjustments in Price

The issue price is subject to appropriate adjustments by the concerned stockexchange e.g due to a stock split or issuance of a rights issue etc..

13.A.5: Currency of the Security

Convertible securities can be converted (with equity shares) not later than 60

months from the date of allotment

13.A.6: Shareholders Resolution

Allotment of specified securities to be completed within 12 months of passing

of resolution by the shareholders

13.A.7: Placement Document

It is a private document provided to a select group of investors

Contains all material information like market price information, use of proceeds,Risk factors, Financial statements of the company etc..



22/31

22


13.A.8: Number of Allottees Minimum 2 for issue size Rs 250 crores Above subject to no single allottee or same group allotted more than 50%

issue size13.A.9: Restrictions on amount raised

The aggregate of the proposed placement and all previous placements madein the same financial year shall not exceed five times the net worth of theissuer

13.A.10: Transferability of specified securities

QIBs can not sell the allotted securities outside a recognised stock exchangebefore one year

13.A.11: Obligation of Merchant Bankers

Any issue and allotment of specified securities shall be managed by MerchantBanker(s) registered with SEBI.



23/31

23


13.A.12: Issuer Certification The issuer shall furnish a copy of the placement document to each stock

exchange on which the same class of shares or other securities are listed

13.A.13: Non applicability of chapter XIII

Nothing contained in Chapter XIII (guidelines for Preferential Issues) shallapply to an issue of specified securities made pursuant to this Chapter (XIIIA)



24/31

24

OTCEI IssuesOTCEI Issues

14.1: Eligibility Norms Any IPO of equity shares for listing on OTCEI is exempted from eligibility

norms clause 2.2 subject to:

It is a member of the OTCEI

Has appointed at least two market makers

Clause 2.2: IPOs by Unlisted Companies

Net tangible assets of Rs 3 Crores in each of the preceding 3 years (< 50% in monetaryassets)

Track record of distributable profits in at least 3 of the preceding 5 years Net Worth of at least Rs 1 crore in each of the preceding 3 years At least 50% of revenue (last 1 year) by the new name, if name has been changed To follow the book building route if above not satisfied

Ch XIVA: p 220Ch XIVA: p 220--222222


25/31


26/31

26

GUIDELINES FOR BONUS ISSUESGUIDELINES FOR BONUS ISSUES

Bonus Issue:An issue of shares to existing holders, usually in some setproportion to the holding, but requiring no payment. This has the effect ofincreasing the company's issued capital and is normally made possible by thecapitalization of reserves. Sometimes known as a scrip or capitalization issue

Scrip: It is any substitute for currency recognized by the payer and payee; Can

be used with one company or a group of companies e.g 1-for-3 stock dividendA listed company proposing to issue bonus shares shall comply with the following:

No company shall, pending conversion of FCDs/PCDs, issue any sharesby way of bonus unless similar benefit is extended to the holders of suchFCDs/PCDs.

The bonus issue shall be made out of free reserves built out of the genuineprofits or share premium collected in cash only

Reserves created by revaluation of fixed assets are not capitalised.

The declaration of bonus issue, in lieu of dividend, is not made

Provision for capitalisation of reserves in AOA of the company

Ch XV: p 222Ch XV: p 222--223223


27/31

27

MISCELLANEOUSMISCELLANEOUS

In case of violation of these Guidelines:

The Board may in the interest of the securities market and in the interest of theinvestors may pass the following directions

Directing the persons concerned to refund any money collected under

an issue to the investors with or without requisite interest. Directing the persons concerned not to access the capital market for aparticular period.

Directing the stock exchange concerned not to list or permit trading inthe securities.

Directing the stock exchange concerned to forfeit the security deposit

deposited by the issuer company.


28/31

28


Action against intermediaries

The Board may initiate action including for suspension orcancellation of certificate of registration of any intermediarywho fails to exercise due diligence (verification of

information and its documentation) or who fails to complywith the obligations entrusted under the guidelines or whois alleged to have violated any of these Guidelines


29/31

29


Repeal and Saving

The Securities and Exchange Board of India (Disclosureand Investor Protection) Guidelines, 1992 and theclarifications issued from time to time are hereby repealed.

Anything done or any action taken or purported to havebeen done or taken including observation made in respectof any draft offer document, any enquiry or investigationcommenced or show cause notice issued in respect of thesaid guidelines shall be deemed to have been done ortaken under the corresponding provisions of theseguidelines.


30/31

30

Anti Money Laundering MeasuresAnti Money Laundering Measures

Prevention of Money Laundering Act 2002 (Amended till 18.01.2006)

Every Banking company, Financial Institution and Intermediary have tomaintain a record of all transactions as follows:

All cash transactions of the value of more than Rs 10 lacs or its equivalentin foreign currency

All series of cash transactions integrally connected to each other whichhave been valued below Rs 10 lakhs or its equivalent in foreign currencywhere such series of transactions take place within one calendar month

All suspicious transactions whether or not made in cash and including ,inter-alia, credits or debits into from any non monetary account such asdemat account, security account maintained by the registered intermediary.


31/31

31

SEBI Presentation FINAL

Documents

Transcript of SEBI Presentation FINAL