SEBI Act 1992

In order to meet the changing needs of the securities market and the need to respond to the development in securities markets, the Securities and Exchange Board of India Act 1992 (Securities and Exchange Board of India Act 1992 / SEBI Act) was revised.

This Act was amended to fulfill some shortcomings in the provisions of SEBI Act on 2 December 2002 on the basis of the report of the Joint Parliamentary Committee (JPC). SEBI's goal is to make India one of the world's best security markets and SEBI to be the world's most respected regulator. SEBI also tries to achieve IOSCO / FSAP standards.

In this background, the internal group formed by the SEBI formed by the senior officials had proposed some amendments in the SEBI Act. SEBI Board constituted an expert group under the chairmanship of Justice M.H. Kania (Former Chief Justice of India) to consider these proposals. It has been introduced to get public comment on the suggestions given in this expert group report. It should be noted that this report does not necessarily reflect the views of SEBI on various proposals and suggestions. Before making any final decision on those suggestions, Sebi will consider the comments received from various sources.

Origin of SEBI

The World Bank and the International Monetary Fund (IMF) set a benchmark called the Financial Services Assessment Program (FSAP) to strengthen the financial system monitoring system in respect of the IMF's bilateral surveillance and development work of the financial sector of the World Bank. Have done The creation of FSAP has been done to help countries accelerate their defenses with crisis and cross-border effects and to accelerate growth by promoting the financial system and promoting the diversity of the financial sector. SEBI's goal is to make India one of the world's best security markets and SEBI to be the world's most respected regulator. Sebi is working to achieve the standards of IOSCO / FSAP. There will be a need to amend the Securities Act and in particular the SEBI Act, which will facilitate India and SEBI to achieve the above objectives. Formation of the group

It is in this background that the SEBI Board has, from time to time, suggesting the suggestions of the JPC as well as other expert groups formed by SEBI to identify the deficiencies / discrepancies in the existing provisions of SEBI Act and to identify SEBI To make the act more effective and investor-friendly, it is also recommended that an expert group be able to include new provisions that can be included in this Act. Had decided not to.

At its meeting held on August 5, 2004, the SEBI Board constituted a specialist group with the following members: Discussion and examination done by expert group

A research paper was prepared with some suggestions to amend the SEBI Act as a basis material for discussions made by the group. Remarks on the alleged letter to the representatives of all stakeholders and market participants and for getting additional suggestions related to the amendments to the SEBI Act, the letter was sent to those representatives.

The stakeholders, whose stakeholders were asked to give their comments on this, have been given their attachment 'A'. The group received detailed comment of some stakeholders on the provisions of whose names it was given in Annexure B Group received comments from stakeholders on suggestions related to the amendment of the SEBI Act in various meetings held on October 27, 2004, 20 December 2004, 4 February 2005, 10 March 2005, 11 April 2005, 3 May 2005, 14 June 2005 and 15 June 2005. In view of this, the discussions related to the amendment of this Act were discussed. Following the discussions on stakeholders' alleged proposals and comments, suggestions of the group presented are related to the following proposals: -

i) Proposal for amendment to include new provisions in the SEBI Act. II) Proposal for amendment to change existing provisions. III) Proposal to make resultant and related amendments in other Acts.

'' पहला भाग '

Proposed amendment to include new provisions in SEBI Act 1.1 Investor Protection Fund

SEBI has been created along with other subjects for the purpose of protecting the interests of investors investing in securities. Investor education is more relevant in terms of complexities related to various options and instruments of investments available in the securities market. Retail investors are not in a position to identify and / or appreciate risk factors associated with certain stocks or schemes. As a result they are not able to make known investment decisions. Since the development of the securities market largely depends on the proper education of the investors, SEBI is committed to spread awareness among them.

On the 2001 Securities Scam, the Joint Parliamentary Committee (JPC) had suggested that in order to enable SEBI to run investor education and awareness campaign smoothly, investor Education and Protection Fund established under Section 205C of the Companies Act and The investor education resources of the RBI should be provided to SEBI and a joint campaign for investor education and awareness under the leadership of SEBI has started. Should be given.

The group said that most stakeholders agree to set up a separate investor protection fund under the SEBI Act. It has also been suggested from the stakeholders that the alleged fund should be used specifically for the purpose of investor education, organizing an awareness program and protecting the interests of investors.

The group also said that the proposed investor protection fund is for the purpose of investor education and awareness.

In connection with non-payment of dividend in the case of companies who wish to list their securities in the distribution of securities, transfer of securities and listed companies and stock exchanges in terms of Section 55A of the Companies Act, Section 55A The provisions of the specified sections need to be effected. In addition, SEBI needs to implement the measures to protect the interests of investors and to resolve the complaints of investors by the listed companies.

Keeping in view the above provisions, the group also discussed the proposal related to the payment of compensation for investors for the purpose of investor protection. In this regard, the group also discussed the suggestion of establishing a fund like Fair Fund, established under the Sarbanes Oxley Act 2002, to compensate investors for the amount received as a penalty.

There was another thought during the discussions that investors of equity markets invest in risk capital and under the law, no assured returns or compensation for non-fulfillment of every expectation can be given. However compensation related to fraud or misrepresentation or false statements made by companies or middlemen can be considered. Apart from this, the group said that under the Pension Fund Regulatory and Development Authority Ordinance 2004, the Pension Fund Regulatory and Development Authority (PFRDA), in order to protect the interests of the pension fund schemes, set up the Subscriber Education and Protection Fund to PFRDA. Permission has been granted. Under the said ordinance, the money has also been specified which should be deposited in the said Subscriber Education and Protection Fund. According to the provision of the said ordinance, all the amounts collected by PFRDA as per the ordinance will be deposited in the Subscriber Education and Protection Fund.

The group realized that under the PFRDA Ordinance 2004, to set up a separate fund under the Sebi Act like the Subscriber Education and Protection Fund to operate by SEBI to achieve the goal of investor protection by investor education and investor awareness. It can be done and it can be operated by SEBI for investor education and awareness. Apart from this, compensation for small investors in relation to fraud or misrepresentation or false statements made by companies or intermediaries may be considered as a subject of investor protection outside the alleged investor protection fund. It may be desirable in this regard that SEBI can specify guidelines and norms for the operation of investor protection funds for the payment of compensation to investors and investor education and awareness. In this regard, the guidelines issued by SEBI in relation to the investor protection fund of the stock exchange can be adopted with necessary changes.

Regarding the money deposited in the alleged investor protection fund, the group noted the representation of the National Stock Exchange that large stock exchanges are using the money properly in order to fulfill the stated purpose. The group also said that the money lying in the IPF of small stock exchanges is not being used with full satisfaction. It is believed that the unutilized money in the Investor Protection Fund of the stock exchanges should be transferred to the proposed Investor Protection Fund for a long time.

For more than 7 years, unclaimed dividends and interest lying in mutual funds and collective investment schemes or venture capital funds and unclaimed money or securities of the customers lying with middlemen should be used in a purposeful manner. p>

In addition, all the amounts, collected through the penalty imposed by the decision making officer under Chapter VIA of the SEBI Act, should be deposited in the proposed Investor Protection Fund. 1.2 Recommendation of the group

According to the group's suggestion, for the purpose of investors education and awareness and to compensate small investors in connection with fraud or misrepresentation or false statements by companies or middlemen, like the Consumer Education and Protection Fund under the PFRDA Ordinance 2004 Under the SEBI Act a separate investor protection fund can be established.

In order to safeguard the funds, the Securities and Exchange Board of India (SEBI) should be guided by SEBI guidelines or guidelines set by the SEBI, as per guidelines related to stock exchanges, to ensure investor education and awareness and compensation for small investors.

The amounts to be deposited in the said fund are: - (a) Unclaimed dividend or interest in mutual fund and group investment plans (CIS) or venture capital fund scheme for more than 7 years; b) Any unclaimed money or security of a customer lying with a middleman in the securities market for more than 7 years; c) Money unutilized in the investor protection funds of the stock exchanges; d) All the amounts made in the form of monetary penalty under Chapter VIA of SEBI Act.

=== 1.3 Nomination facility The concept of nomination has been recognized under section 109 of the Companies Act, 1956, Section 45 of the Banking Regulation Act, 1949 and Section 39A of the UTI Act, 1963 (subsequently neglected). Under the aforesaid provisions, the shareholder or the debenture holder, the depositor or the candidate of the unit holder, is entitled to the securities or money of the deceased, except for all other persons, despite being included in any other law, including the law of will. However there is no provision of such nomination facility for the holders of mutual funds and group investment schemes in SEBI Act.

The Group said that there is a provision of nomination facility for Unit holders in SEBI (Mutual Funds) Regulations, 1996. The group felt that the provision of nomination facility is suitable for the investors, but such provision should be in the original act and not in the regulations.

However, the group is not in favor of providing any overriding effect as provided under section 109 of the Companies Act, 1956, where the right of the candidate can overcome the claims of legal heirs. 1.4 Recommendation of the group

In keeping with the above facts, the group recommends making appropriate amendments in the SEBI Act to include a provision to provide nomination facility to the unit holders of mutual funds and group investment schemes. 1.5 advance ruling

The Group was informed that there are countless requests received from various market participants for advance guidance on SEBI's interpretation of the provisions of SEBI Act and Regulations. Since special provisions like income 245B to 245 N of the Income Tax Act 1961 are not included in the SEBI Act, to give right to the advance ruling SEBI, SEBI has given an explanatory letter / 'no action under the provisions of SEBI (Informal Guidelines) scheme 2003' No 'letter has developed a system to provide. However, the guidelines given under this scheme are not similar to the advance ruling given under the Income Tax Act because it is not mandatory for SEBI Board.

With advance ruling for the securities market, the market participant will actually get the benefit of obtaining the mandatory ruling on the applicability of special provision of securities law before the proposed transaction.

The group felt that the advance ruling system is definitely better than the informal guidance provided under the said scheme as the advance ruling provided by SEBI is binding on its board. The binding effect does not only provide more comfort to the market participants, but also provides a better legal status to the entire mechanism.

However, in view of the smooth and satisfactory activity of the prevailing informal guidance scheme, the group felt that SEBI should analyze this option very carefully because as per the income tax act like the scheme for the move towards transfer of advance ruling from the scheme A separate department and infrastructure will have to be established. 1.6 Recommendation of the Group

The group recommends that since the legality of the advance ruling is better, its acceptance can be considered and the informal guidance plan can also be continued. 1.7 Self Regulatory Organization (SRO)

The Group said that Section 11 (2) (D) of SEBI Act provides for the promotion and regulation of SRO. However, there is no specific provision for empowerment of SROs to create statutory power by-laws for entry of members in SEBI Act. Apart from this, even after joining the Companies Act, 1956, there is no provision in the SEBI Act regarding the supersession of the Governing Board of SROs or the framing of franchisees of SRO members. Such modifications have been proposed to provide such power to SEBI.

The Group said that SEBI has already prepared Regulations, i.e. SEBI (Self Regulatory Organization) Regulations, 2004 under section 30 with Section 11 (2) (D) of SEBI Act for regulation of SRO, whose For all other units, SRO also needs to get SEBI approval. These regulations also provide the power to create rules and by-laws with the approval of SEBI with SRO. Regulation of regulating the SRO, Regulation 23, provides the power to regulate the withdrawal of SEBI approval. In view of the perceived power, the group felt that SEBI already had the requisite strength to force SRO to regulate its activities according to the regulations. As a result, there is no need to modify the SEBI Act possibly for this. 1.8 Group Recommendation

According to the group's recommendation, there is no need to amend the proposed amendment in the SEBI Act. Regulations made by SEBI should be enough to overcome the concern of SEBI as a regulator of SRO. Improvement of errors contained in 1.9 orders

The Group said that there is no provision in SEBI Act which gives SEBI the right to improve clear clerical or typographical errors in its own orders. This idea was also disclosed that SEBI has no right to review its own orders even in those cases when those orders have been issued unilaterally.

The group saw that "review of orders" appears to provide fundamental powers that generally do not have authority with original jurisdiction. However, the group felt that SEBI should be given the ability to fix clerical or typographical errors related to its order, like Section 26 (2) of the Second Amendment to the Bank and Financial Institutions Act, 1993. 1.10 Group recommendation

Sebi should be amended to provide the ability to fix clerical or typographical errors related to its order, like Section 26 (2) of the Bank and Financial Institutions rest of the Loan Amount Recovery Act 1993. 1.11 retrospective effect

The Group said that in the existing provisions of SEBI Act, SEBI has no right to create regulatory regulatory regulations with limited purpose of providing relief to market participants.

The Group realized that with the limited purpose of providing relief to SEBI, instead of reducing the burden of new liabilities and responsibilities like the Income Tax Act, the regulating effect of regulatory impact in relation to matters related to procedural matters or charges. The power to do can be provided. According to the group, such generous provision can in some cases remove the inappropriate hassle of market participants and therefore should be given positive attention. 1.12 Recommendation of the Group

According to the group's recommendation, to make limited regulations for providing limited relief and benefits to SEBI, not to deal with the burden of new liabilities and responsibilities, in connection with matters related to procedural matters or charges, To provide the right, the SEBI Act can be amended according to Section 295 (4) of the Income Tax Act, 1961. 1.13 Overriding Effect

The group discussed the suggestion to improve the SEBI Act to give overriding effect to the SEBI Act on other laws in the case of securities. In order to evaluate the need for such modification, the group tried to identify the fundamental provisions of the SEBI Act which is worthy of receiving an overriding effect. After considering proper thinking, the group realized that there is no fundamental provision in the SEBI Act that is worth getting an overwhelming effect. The group also said that where SEBI Act has already done this by non-indigenous clause, where the fundamental provisions were worth achieving the overriding effect. 1.14 Recommendation of the Group

According to the group's recommendation, SEBI Act can not be amended to provide overriding effect to SEBI Act on other laws. 1.15 Right to issue circular

The group examined the proposal to improve the provisions of the SEBI Act to provide statutory rights to SEBI for issuing circulars and guidelines.

The group said that SEBI has been issuing circulars and guidelines under section 11 of the Act. The group felt that there is no legal problem in releasing circulars or guidelines under current provisions of Section 11 of the inherent rights of SEBI. 1.16 Recommendation of the Group

According to the group's recommendation, for issuing circulars and guidelines, it can not be modified to include a specific provision in the SEBI Act, because SEBI is already inclined to do so under Section 11 of the SEBI Act. Rights is obtained. 1.17 Exposure / transactions of securities deemed to be zero in certain circumstances

In the case of fraudulent exchanges of securities and the excessive excess of securities etc., SEBI should be given the right to declare such transactions as zero. In the event of a breach of a specific regulation, appropriate provisions should be made in the SEBI Act like Section 9 (3) and Section 14 of SCRA to declare such transactions to be zero.

The group felt that such power should be used by any independent body, especially civil courts. Administrative bodies can not be given such rights. 1.18 Recommendation of the group

The SEBI Act should not be modified under the given proposal. Such power or authority should be specifically left to the civil court. 1.19 Closing of middlemen

The group was informed that according to the specifications of IOSCO / FSAP, one principle of securities regulations is that the process of dealing with the failure of a market intermediary to reduce the loss and loss of investors and to include systematic risk Arrangements should be arranged. The group said that in order to take steps for the closure of such intermediaries as the bankruptcy of a middleman, or the continuation of such intermediaries, it is considered harmful to the interests of the investors or such intermediaries, the SEBI Act No special rights have been provided to you.

The group said that the Reserve Bank of India (Reserve Bank of India / RBI) has the right to file a winding up petition against the non-banking finance company under section 45 MC of the RBI Act. The group felt that SEBI should have the right to file a winding up petition under the SEBI Act.

In addition to this, the group noticed that in case of the closure of such an intermediary company, the claims of customers of such intermediaries should be given p on other claims or loans ie safe creditors and sovereign authorities such as income tax. In this regard, the group said that under Section 43 A of the Banking Regulation Act, 1949, there is a provision to prioritize the preferential payment of depositors in all other loans from the assets of the banking company. The group felt that SEBI had the right to file a winding up petition against such intermediaries as the bankruptcy of a middleman or the continuation of such intermediary was considered harmful to the interests of the investors or such intermediaries of the customers. Similar provisions should also be made regarding the claims of customers of time-mediated companies. 1.20 Recommendation of Group

According to the group's recommendation, a suitable provision can be made in the SEBI Act to enable SEBI to file closing petition in respect of the intermediary companies on the lines of Section 45 MC of the Reserve Bank of India Act and Section 43A of the Banking Regulation Act. . 1.21 Non attachment of client's assets with intermediaries

The group said that an IOSCO principle for securities market regulations is that through the regulatory system, investors' funds should be kept away from the assets of other institutions. Apart from this, investors should be protected from misleading activities, manipulation or fraud including insider trading, front running or trading in front of customers and misuse of client's assets.

The Group was informed that the Securities Law (Amendment) Bill, 2003, a Section 27B was proposed to be included in the Securities Contract (Regulation) Act, under which an investor could hand over their money or securities to such an arbitrator Who will have such money or securities and who will use them according to the instructions of the investors. Such money or securities will not be part of the assets of the arbitrator companies and such assets of investors will not be confiscated by any authority or any authority will have no relation with such assets. However this provision was not included in the Securities Laws (Amendment) Act 2005.

The group said that the money or securities handed down by an investor to an arbitrator company should be held by such investor's trusted intermediary company Such money or securities of the investors should not be made part of the assets of the arbitrator company and these assets of the investors shall not be confiscated by any authority or they will have nothing to do with the authority which will protect the protection of such an intermediary company or Be Occupied. 1.22 Recommendation of the Group

According to the group's recommendation, there should be a special provision in the SEBI Act under which the money or securities of the customers should be taken as a trust by the arbitrator companies and the assets of investors holding the intermediary company, There will be no occupation or any transaction. In order to fulfill this objective, the proposed provision can be introduced in the Securities Laws (Amendment) Bill, 2003.

wiki