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Role of "Sebi" in New Issue Market

SEBI regulates the securities market in India to protect investors and ensure orderly development. It approves public issues, registers market intermediaries like stockbrokers, and enforces regulations on disclosure, fraud, and insider trading. SEBI oversees primary and secondary markets, mutual funds, and self-regulatory organizations. It can issue directions to companies on disclosures, inspect entities, and be superseded by the central government during emergencies. SEBI also sets entry norms for public issues to regulate the types of companies accessing the primary market.

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Swati Rawat
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110 views11 pages

Role of "Sebi" in New Issue Market

SEBI regulates the securities market in India to protect investors and ensure orderly development. It approves public issues, registers market intermediaries like stockbrokers, and enforces regulations on disclosure, fraud, and insider trading. SEBI oversees primary and secondary markets, mutual funds, and self-regulatory organizations. It can issue directions to companies on disclosures, inspect entities, and be superseded by the central government during emergencies. SEBI also sets entry norms for public issues to regulate the types of companies accessing the primary market.

Uploaded by

Swati Rawat
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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ROLE OF "SEBI" IN NEW ISSUE

MARKET
INTRODUCTION
The Securities and Exchange Board of India,set up in 1988
under an administrative arrangement ,given statutory powers
with the enactment of the SEBI Act 1992.
The act provides for the establishment of the board to protect
the interest of investors in securities market.
The board consists of a chairman , two members from the
govt. of india,ministries of law and finance,one member from
the RBI and two other members
It describe the manner in which SEBI Act 1992,the SCRA
1956,the companies Act 1956 and the depository act 1996.
SEBI has been enjoined upon to develop the Indian securities
market, regulate it, and Importantly, to protect the investors.
The power given to SEBI included those to levy penalty
against corporates and individuals for violation of regulations,
manipulation of market, insider trading and unfair practices.
It can suspend the trading of any security, restrain persons
from accessing the securities market or prohibit any person
associated with the securities market from buying selling or
dealing in securities.
The trading system has become on-line, fully automated,
screen-based.
Open octucry is now out moded and discarded.
It has cut down the cost, time and risk involved.
OBJECTIVES OF “SEBI”

The three main objectives are:-

To protect the interest of the investors in securities


To promote the development of securities market
To regulate the securities market
Functions of SEBI
Regulating business in stock exchanges and any other
securities market
Registering and regulating the working of
stockbrokers,subbrokers, share transfer agents, bankers to
an issue,trustees of trust deeds,registrars to an
issue,merchant bankers,underwriters,portfolio
managers,investment advisors and other intermediaries
associated with securities markets.
Registering and regulating the working of
depositories,custodian of securities,FIIs,credit rating
agencies
Registering and regulating the working of venture capital
funds and collective investment schemes,including mutual
Promoting and regulating Self-Regulatory
Organisations(SROs)
Prohibiting fraudlent and unfair trade practices relating to
securities market
Promoting investor’s education and training intermediaries
of securities market
Prohibiting insider trading in securities
Regulating substantial acquisition of shares and takeover of
companies
Calling for information from,undertaking
inspection,conducting inquiries and audits of the stock
exchanges,mutual funds,intermediaries and self-regulatory
organizations in the securities market
Levying fees and other charges for carrying out its work.
Matters to be disclosed by companies:-
The board may specify the matters relating to the issue
of capital ,transfer of securities
Power to issue directions:-
The Board conducts an enquiry of the securities market
to protect the interests of the investors.It maintains proper
management and development of securities market.
Power of the central government to issue directions:-
SEBI is bound by the central govt..The central govt.
directs the SEBI on the policies to be adopted,which it
gives in writing form time to time.
Supervision of board:-
The Board of SEBI may be superseded by central
governmrnt if it is of the opinion that ,on account of grave
emergency,the board is unable to discharge the functions
and duties imposed on it under the provisions of the Act.
Guidelines / Regulations:-
The guidelines / regulations issued by the SEBI may
grouped under primary market and secondary
markets.Mutual funds are also regulated by SEBI.
ROLE OF SEBI IN NEW ISSUE MARKET
Any company or a listed company making a public issue or a
rights issue of value or more than Rs50 lakhs is required to
fill a draft offer document with SEBI for its observation.
The company can proceed further only after getting
observation from SEBI.
The company has to open its issue within three months from
the date of SEBI’s observation letter.

Through public issues,SEBI has laid down eligibility norms


for entities accessing the primary market.
The Entry Norms :-
Entry Norm I (EN I) :-
Net tansible assets of atleast Rs 3crore for 3 full years
Distributable profits in atleast 3 years
Net worth of atleast Rs 1crore in 3 years
If change in name , atleast 50% revenue for preceding 1 year
should be from the new activity.
The issue size does not exceed 5 times the pre-issue net
worth.

SEBI has provide two other alternatives routes to company


not satisfying any of the aboveconditions to provide sufficient
flexibility and also to ensure that genuine companies do not
suffer on account of rigidity of the parameters.
Entry Norm II (EN II):-
Issue shall be through book building route with atleast 50% to
be mandatory alloted to the qualified institutional buyers
(QIBs)
The minimum post issue face value capital shall be Rs 10 crore
or there shall be a compulsory market-making for atleast 2
years

Entry Norm III (EN III):-


The “project” is appraised and participated to the extent of 15%
by Fis / scheduled commercial banks of which at least 10%
comes from the appraisers.
The minimum post issue face value capital shall be Rs 10 crore
or there shall b e a compulsory market-making for atleasyt 2

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