SEBI Full Form – Securities and Exchange Board of India Act, 1992

SEBI Full Form

SEBI Full Form – What is SEBI?

The SEBI Act, 1992 was enacted to empower SEBI with statutory powers for

(a) protecting the interests of investors in securities,

(b) promoting the development of the securities market, and

(c) regulating the securities market.

Its regulatory jurisdiction extends over corporates in the issuance of capital and transfer of securities, in addition to all intermediaries and persons associated with securities market.

The SEBI – can specify the matters to be disclosed and the standards of disclosure required for the protection of investors in respect of issues; –

can issue directions to all intermediaries and other persons associated with the securities market in the interest of investors or of orderly development for securities market; and –

can conduct enquiries, audits and inspection of all concerned and adjudicate offences under the Act.

In short, it has been given necessary autonomy and authority to regulate and develop an orderly securities market.

The first statutory regulatory body that the
Government of India set up post the reforms of 1991 was the Securities and Exchange Board of India (SEBI).

The SEBI has been established with
two objectives of protecting the interest of investors and promoting
the development of and regulating the Securities Market.

Since its establishment in 1992, a lot of initiatives have been taken to protect
the interests of the investors. SEBI under the SEBI Act, 1992 has been empowered to frame subordinate legislation and to investigate wrong doing, impose relevant penalties and to conduct search and seizure operations.

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OBJECTIVE OF SEBI

• To protect the interests of investors in securities; and

• To promote the development of; and

• To regulate, the securities market and for matters connected therewith or incidental thereto.

In terms of section 3 of the Act, the SEBI is a body corporate having perpetual succession and
a common seal with power to acquire, hold and dispose off property, both movable and immovable and

to contract, and shall sue and be sued in its own name.

The SEBI has its Head Office at Mumbai and has powers to establish its offices at other places in India.

:::—Power to Issue Directions and Levy Penalty____

Section 11B of the Act provides that if the SEBI is satisfied after making or causing to be made an enquiry due enquiries, that it is necessary:

(i) in the interest of investors, or orderly development of securities market; or

(ii) to prevent the affairs of any intermediary or other persons referred to in section 12 being conducted in a manner detrimental to the interests of investors or securities market; or

(iii) to secure the proper management of any such intermediary or person, the SEBI may issue such directions, –

(a) to any person or class of persons referred to in section 12, or associated with the securities market; or

(b) to any company in respect of matters relating to issue of capital, transfer of securities and other matter incidental thereto, as may be appropriate in the interests of investors in securities and the
securities market.

The power to issue directions under this section shall include and always be deemed to have been included the power to direct any person, who made profit or averted loss by indulging in any transaction or activity in
contravention of the provisions of this Act or regulations made thereunder, to disgorge an amount equivalent to the wrongful gain made or loss averted by such contravention.

Without prejudice to the provisions contained in sub-section (1), sub-section (4A) of section 11 and section 15-I,
the SEBI may, by an order, for reasons to be recorded in writing, levy penalty under sections 15A, 15B, 15C, 15D, 15E, 15EA, 15EB, 15F, 15G, 15H, 15HA and 15HB after holding an inquiry in the prescribed manner.

SEBI Full Form

Investigations

(1) Grounds for Investigation–

Section 11C of the Act provides that where the SEBI has reasonable ground to believe that:

 the transactions in securities are being dealt with in a manner detrimental to the investors or the securities market; or

 any intermediary or any person associated with the securities market has violated any of the provisions of this Act or the rules or the regulations made or directions issued by SEBI thereunder;

it may, at any time by order in writing, direct any person specified in the order to investigate the affairs of such intermediary or persons associated with the securities market and to report thereon to the SEBI.

(2) Duty of officers to produce Accounts and Records–

It is the duty of every manager, managing director, officer and other employee of the company and every intermediary or every person associated with the securities market to preserve and to produce to the Investigating Authority or any person authorised by it in this behalf, all the books, registers, other documents and record of, or relating to, the company or, as the case may be, of or relating to, the intermediary or such person, which are in their custody or power.

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(3) Powers of Investigating Authority–

The Investigating Authority may require any intermediary or any person associated with securities market in any manner to furnish such information to, or produce such books, or registers, or other documents, or record before it or any person authorized by it in this behalf as it may consider necessary if the furnishing of such information or the production of such books, or registers, or other documents, or record is relevant or necessary for the purposes of its investigation.

– The Investigating Authority may keep in its custody any books, registers, other documents and record produced for six months and thereafter shall return the same to any intermediary or any person associated with securities market by whom or on whose behalf the books, registers, other documents and record are produced.

However, the investigating officer may call for buy back, register, other document and record if they are needed again.

Further, if the person on whose behalf the books, registers, other documents and record are produced requires certified copies of the books, registers, other documents and record produced before the Investigating Authority, it shall give certified copies of such books, registers, other documents and record to such person or on whose behalf the books, registers, other documents and record were produced.

(4) To take notes on examination–

Notes of any examination shall be taken down in writing and shall be read over to, or by, and signed by, the person examined, and may thereafter be used in evidence against him.

(5) Seizure of Records–

Where in the course of an investigation, the Investigating Authority has reasonable ground to believe that the books, registers, other documents and record of, or relating to any, any intermediary or any person associated with securities market in any manner may be destroyed, mutilated, altered, falsified or secreted, the Investigating Authority may make an application to the Magistrate or Judge of such designated Court in Mumbai, as may be notified by the Central Government for an order for the seizure of such books, registers, other documents and records.

– The authorised officer may requisition the services of any police officer or any office of the Central Government, or of both, to assist him for all or any of the purposes specified above and it shall be the duty of every such officer to comply with such requisition.

– After considering the application and hearing the Investigating Authority, if necessary, the Magistrate or Judge of the Designed Court may, by order, authorize the investigating authority –

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SEE ALSO:SPECIAL ECONOMIC ZONES ACT, 2005

(a) to enter, with such assistance, as may be required, the place or places where such books, registers, other documents and record are kept.

(b) to search that place or those places in the manner specified in the order and.

(c) to seize books, registers and other documents and records, it consider necessary for the purpose of the investigation.

However, the Magistrate or Judge of the Designated Court shall not authorize seizure of books, registers, other documents and record of any listed public company or a public company (not being the intermediary specified under section 12) which intends to get its securities listed on any recognized
stock exchange unless such company indulges in insider trading or market manipulation.

– The Investigating Authority shall keep in its custody the books, registers, other documents and record seized under this section for such period not later than the conclusion of the investigation as it considers necessary and thereafter shall return the same to the company or the other body corporate, or, as the case may be, to the managing director or the manager or any other person, from whose custody or
power they were seized and inform the Magistrate or Judge of the Designated Court of such return.

– The Investigating Authority may, before returning such books, registers, other documents and record as aforesaid, place identification marks on them or any part thereof.

– Every search or seizure made under this section shall be carried out in accordance with the provisions of the Code of Criminal Procedure, 1973 relating to searches or seizures made under that Code.

NOTE :-

Section 11D deals with the cease and desist powers of the SEBI.
If the SEBI finds, after causing an inquiry to be made, that any person has violated, or is likely to violate any provisions of this Act, or any rules or regulations made thereunder, it may pass an order requiring such person to cease and desist from committing or causing such violation.

However, the SEBI shall not pass such order in respect of any listed public company or a public company which intends to get its securities listed on any recognized stock
exchange unless SEBI has reasonable grounds to believe that such company has indulged in insider trading or market manipulation.

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REGISTRATION OF INTERMEDIARIES

Chapter V of the Act provides for registration of various intermediaries such as stock broker,
sub-broker,
share transfer agents etc.

Section 12(1) of the Act provides that the following intermediaries are required to obtain a registration certificate from the SEBI to buy, sell or deal in securities :

– Stock-Broker
– Sub-Broker
– Share Transfer Agent
– Banker to an issue
– Trustee of Trust Deed
– Registrar to an Issue
– Merchant Banker
– Underwriter
– Portfolio Manager
– Investment Adviser
– Depository Participant
– Custodian of Securities
– Foreign Institutional Investor
– Credit Rating Agency
– Such other intermediary

A person shall not sponsor or cause to be sponsored or carry on or cause to be carried on any venture capital funds or collective investment schemes including mutual funds, unless he obtains a certificate of registration from the SEBI in accordance with the regulations.

Every application for registration would in such manner and on payment of such fees as may be determined by the SEBI Regulations.

The SEBI may, by order, suspend or cancel a certificate of registration in such manner
as may be determined by the SEBI Regulations.

However, no such order shall be made unless the person concerned has been given a reasonable opportunity of being heard.

SEBI Full Form

PENALTIES FOR FAILURES

Section 11(2)(i) empowers SEBI to call for information and conduct enquiries and audits of the stock exchanges, mutual funds, other persons associated with securities markets, intermediaries and self-regulatory organisations in the security market.

Also Section 11(ia) of the Act requires calling for information and record from any bank or any other authority or SEBI or corporation established or constituted by or under any central, state or provincial Act in respect of any transaction in securities which is under investigation or inquiry by the SEBI.

SEBI Full Form

PENALTIES AND ADJUDICATION

  1. Section 15A —

Failure to furnish information, return, etc.

  1. Section 15B– Failure by any person to enter into agreement with clients
  2. Section 15C— Failure to redress investors’ grievances
  3. Section 15D—Default in case of Mutual Funds
  4. Section 15E —Failure to observe rules and regulations by an asset management company
  5. Section 15F —Default in case of stock brokers
  6. Section 15G — Insider Trading
  7. Section 15H —Non-Disclosure of Acquisition of Shares and Takeovers
  8. Section 15HA—Fraudulent and unfair trade practices
  9. Section 15HB— Contravention where no separate penalty has been provided
  10. Section 15I —-Adjudications
  11. Section15J-15JA —–Factors to be taken into account by the adjudicating officer
  12. Section 15JB—-Settlement of administrative and civil proceedings.

SEBI Full Form

Penalty for failure to furnish information, return, etc.

• Section 15A lays down that if any person who is required under the SEBI Act or any rules or

• regulations made thereunder:

(a) to furnish any document, return or report to the SEBI, fails to furnish the same or who furnishes or files false, incorrect or incomplete information, return, report, books or other documents;

(b) to file any return or furnish any information, books or other documents within the time specified therefor in the regulations, fails to file return or furnish the same within the time specified therefor in the regulations or who furnishes or files false, incorrect or incomplete information, return, report, books or other documents;

(c) to maintain books of accounts or records, fails to maintain the same.
shall be liable to pay a penalty which shall not be less than one lakh rupees but which may extend to one lakh rupees for each day during which such failure continues subject to a maximum of one crore rupees.

Penalty :- 1,00,000 rupees —- 1,000,00,00

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Penalty for failure by any person to enter into an agreement with clients

• Section 15B lays down that if any person who is registered as an Intermediary and is required to enter into an agreement with his client, fails to enter into such agreement, he shall be liable to pay a penalty which shall not be less than one lakh rupees but which may extend to one lakh rupees for each day during which such failure continues subject to a maximum of one crore rupees.

Penalty :- 1,00,000 rupees —- 1,000,00,00

Penalty for failure to redress investors’ grievances

• Section 15C lays down that if any listed company or any person who is registered as an Intermediary, after having been called upon by the SEBI in writing to redress the grievances of investor, fails to redress such grievances within the time specified by the SEBI, such company or intermediary shall be liable to pay a penalty which shall not be less than one lakh rupees but which may extend to one lakh rupees for each day during which such failure continues subject to a maximum one crore rupees.

Penalty :- 1,00,000 rupees —- 1,000,00,00

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Penalties for default in case of mutual funds

• Section 15D lays down that in case of mutual funds, if any person who is:

(a) required to obtain a certificate of registration the from the SEBI for sponsoring or carrying on any collective investment scheme, including mutual funds, sponsors or carries on any collective investment scheme, including mutual funds, without obtaining such certificate of registration, he shall liable to a penalty, which shall not be less than one lakh rupees but which may extend to one lakh rupees for each day during which he sponsors or carries on any such collective
investment scheme including mutual fund subject to a maximum of one crore rupees;

(b) registered with the SEBI as a collective investment scheme, including mutual funds, for sponsoring or carrying on any investment scheme, fails to comply with the terms and conditions of certificate of registration;

(c) registered with the SEBI as a collective investment scheme, including mutual funds, fails to make an application for listing of its schemes as provided for in the regulations governing such listing;

(d) registered as a collective investment scheme, including mutual funds, fails to dispatch unit certificates of any scheme in the manner provided in the regulation governing such despatch;

(e) registered as a collective investment scheme, including mutual funds, fails to refund the application monies paid by the investors within the period specified in the regulations;

(f) registered as a collective investment scheme, including mutual funds, fails to invest money collected by such collective investment schemes in the manner or within the period specified in the regulations,
he shall be liable to a penalty which shall not be less than 1 lakh rupees and which may extend to one lakh rupees for each day during which such failure continues subject to a maximum of one crore rupees.

Penalty :- 1,00,000 rupees —- 1,000,00,00

SEBI Full Form

Penalty for failure to observe rules and regulations by an asset management company

• Section 15E lays down that where any asset management company of a mutual fund registered under the SEBI Act fails to comply with any of the regulation providing for restrictions on the activities of such company, it shall be liable to a penalty which shall not be less than one lakh rupees but which may extend one lakh rupees for each day during which such failure continues
subject to a maximum of one crore rupees.

Penalty :- 1,00,000 rupees —- 1,000,00,00

Penalty for default in case of alternative investment funds, infrastructure investment

trusts and real estate investment trusts____

Section 15EA of the Act lays down that where any person fails to comply with the regulations made by the SEBI in respect of alternative investment funds, infrastructure investment trusts and real estate investment trusts or fails to comply with the directions issued by the SEBI, such person shall be liable to penalty which shall not be less than one lakh rupees but which may extend to one lakh rupees for each day during which such failure continues subject to a maximum of one crore rupees or three times the amount of gains made out of such failure, whichever is higher.

SEBI Full Form

Penalty for default in case of investment adviser and research analyst

Section 15EB of the Act lays down that where an investment adviser or a research analyst fails to comply with the regulations made by the SEBI or directions issued by the SEBI, such investment adviser or research analyst shall be liable to penalty which shall not be less than one lakh rupees but which may extend to one lakh rupees for each day during which such failure continues subject to a maximum of one crore rupees.

SEBI Full Form

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