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SEBI ACT, 1992 Flow 1. Introduction 2. Preamble 3. Composition of SEBI 4. General Functions 5. General Power 6. Section 11A – Regulation for Issue of Prospectus 7. Section 11B – Directions 8. Section 11C – Investigation 9. Section 11D – Lease and Desist Order 10. Adjudication and its procedure 11. Section 11AA – Collective Investment Scheme 12. Recovery of amount 13. Appeal to SAT 14. Insider Trading 15. SAT – Composition and other related issues Introduction Before 1992, CG used to regulate intermediaries and to offload its burden, CG has established SEBI. It is applicable to whole of India. Intermediaries include broker, sub broker, Share transfer agent, depository participants, merchant banker, foreign institutional investor, alternate investment fund, stock exchange. Preamble 1. To develop securities market. 2. To protect the interest of investor. 3. To register and regulate intermediary. 4. Anything ancillary and incidental thereto. SEBI ACT, 1922 Composition of SEBI Section 4 Chairman Representative of Ministry of Finance and Ministry of Corporate Affairs Representative of RBI 5 Members from which 3 shall be whole time. Appointed by Union Government except representative of RBI Removal of member of SEBI Grounds 1. Declared insolvent at any time. 2. Declared unsound mind at any time. 3. Convicted moral turpitude. 4. Abuse his position Can be removed after opportunity of being heard. Removal of member of SEBI on other grounds, they can be removed either by serving 3 months notice. Or 3 months salary and allowance Relinquishment of office i.e. Resignation 3 months notice to CG is required in writing. Tenure Tenure Part-time member Chairman / Whole time member - Maximum 3 years - Maximum 3 years - Reappointment any number of time - Reappointment any number of time - No maximum age limit - Maximum age – 65 years SEBI ACT, 1922 Section 11 General function Registering and regulating intermediaries. Prohibition of insider trading and market manipulation. Regulating substantial acquisition of shares or takeover. Inspection or calling for information Section 11 – General Power of SEBI Suspend recognised stock exchange. Restrain any person to access stock market Suspend any office bearer Freeze bank account Direct intermediary not to transfer securities Impound sale proceeds (confiscate sale proceeds) SEBI will have Civil Court Power Section 11A – Regulation for issue of prospectus, Offer document or any document through which money solicit from public. Without prejudice to Companies Act, SEBI may 1. SEBI may issue regulation 2. SEBI may issue specific or general order(lbs two lines) 3. SEBI may issue guidelines subject to listing or transfer of securities Or related to issue of capital, and other matter incidental thereto : Section 11B – Power to issue to Directions SEBI may issue directions for : 1. Protect interest of investor. 2. Development of Securities Market. 3. Proper management of intermediaries SEBI ACT, 1922 Section 11C – Investigation Grounds of Investigation 1. There is violation of this Act 2. Transaction is conducted in such a manner which is preducial (i.e. harmful) to the interest of investor. Duties of employees, officer, etc. Power of Investigation authority Produce books of amount Inspect books of amounts Provide explanation and information Sought explanation and information Appear personally Summon Sign note To take note To take on oath Power exercisable with prior approval of magistrate. Enter with such assistance as may be required (e.g. police assistance) Search such place as may be required (e.g. house of MD). Seize books of accounts if it is likely to be Destroyed, Mutilated, Altered, Falsify, Secreted. In case of listed company or any company doing listing, books of accounts can be seized when offence is related to insider trading or market manipulation. Books of accounts shall be returned latest by conclusion of investigation. Section 11D – Cease and Desist order Cease order means, stop and don’t repeat, when contravention is already conducted then cease order will be passed. Desist order means when contravention is likely to be conducted then desist order is passed. SEBI ACT, 1922
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