Securities & Exchange Board of India Preparad by : Sandhya keisham Devi Priya chauhan Ashish chauhan Vivek chauhan Rahul chauhan Nishant chaudhary 1

Contents  Introduction  Objectives of SEBI  Powers & Functions of SEBI  Structure of SEBI  Various Departments under SEBI  Powers of Central Government  Amendments 2

Introduction  Controller of Capital Issues was the regulatory authority before SEBI came into existence; it derived authority from the Capital Issues (Control) Act,  In April 12, 1988 the SEBI was constituted as the regulator of capital markets in India under a resolution of the Government of India (as a non-statutory body).  It was later made a statutory body on April 4,1992 and it came to be known as the SEBI Act,1992.  The mission of SEBI is to make India as one of the best securities market in the world and SEBI as one of the most respected regulator in the world.  In the year of 1995, the SEBI was given additional statutory powers by the Government of India through an amendment to the Securities and Exchange Board of India Act  It is the apex body to develop and regulate the stock market in India.  It is known as the watchdog of Indian Capital Market. 3

Objectives  To protect the interest of investors so that there is a steady flow of savings into the capital market.  To promote the development and to regulate the securities market.  Ensure fair practices by the issuers of securities so that they can raise resources at minimum cost.  To promote efficient services by brokers, merchant bankers and other intermediaries so that they become competitive and professional. 4

POWERS OF SEBI 1)Power to call periodical returns from recognized stock exchange. 2)Power to control and regulate stock exchange. 3)Power to levy fees or other charges for carrying out the purpose of regulation. 4)Power to direct enquiries to be made in relation to affairs of stock exchanges or their members. 5)Power to make or amend bye-laws of recognized stock exchanges. 6)Power to grant registration to market intermediaries. 7)Power to declare applicability of section 17 of the Securities Contract (Regulation) Act 1956 in any state or area to grant licenses to dealers. 8)Power to compel listing of securities by public companies. 5

FUNCTIONS OF SEBI Section 11 of the SEBI Act,1992 classifies the functions of SEBI under 2 heads:- 1)Regulatory Functions 2)Developmental Functions. 6

1. REGULATORY FUNCTIONS i.Regulation of stock exchanges and self regulatory organizations. ii.Registration and regulation of stock brokers, sub-brokers, registrars of all issues, merchant bankers, underwriters, portfolio managers etc. iii.Registration and regulation of the working of collective investment schemes including mutual funds. iv.Regulating substantial acquisitions of shares and take over of companies. v.Prohibition of fraudulent and unfair trade practices relating to securities market. vi.Prohibiting of insider trading. 7

2. DEVELOPMENTAL FUNCTIONS i.Promoting investors education. ii.Training of intermediaries. iii.Conducting research and publishing information useful to all market participants. iv.Promoting of fair practices. v.Promotion of self regulatory organisations. 8

STRUCTURE OF SEBI The board shall consist of the following members :-  Chairman  Two members, one from amongst the officials of the Central government dealing with finance and another from the administration of Companies Act,1956.  One member from amongst the officials of the Reserve Bank of India.  Five other members of whom at three shall be the whole time members to be appointed by the Central Government. 9

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POWERS OF CENTRAL GOVERNMENT  The Central Government has power to issue directions to SEBI Board, supersede the Board, if necessary and to call for returns and reports as and when necessary.  The Central Government has also power to give any guideline(s) or to make regulations and rules for SEBI and its operations. RELATION WITH THE CENTRAL GOVERNMENT  The activities of SEBI are financed by grants from Central Government, in addition to fees, charges etc. collected by SEBI.  The fund called SEBI General Fund is set up, to which, all fees, charges and grants are credited.  This fund is used to meet the expenses of the Board and to pay salary of staff and members of the body. 15

AMMENDMENTS SEBI Act, 1992 was amended in the years 1995, 1999 and 2002 to meet the requirements of changing needs of the securities market.  SEBI AMENDMENT BILL, 1995 :-  Mainly focussed on Foreign Institutional Investors (FII).  Given additional statutory powers.  SEBI AMENDMENT BILL, 1999 :-  Included derivates & instruments of collective investment schemes under the definition of securities.  Enable RBI to regulate the transactions in government securities & other related instruments as may be specified by the Government. 16

SEBI AMENDMENT BILL, 2002:-  Gave more teeth to SEBI to punish market offenders through Serious Fraud Office (SFO).  Power to search & seize books, registers & documents of intermediaries or any other persons associated with the securities market.  Fine of 25 crores for insider trading.  Board strength increased from six to nine. 17

SEBI AMENDMENT BILL, 2013:-  Passed by the Rajya Sabha on 5 th September.  Widen the area for eligible candidates for the post of Presiding Officer at the Securities Appellate Tribunal (SAT).  The Bill extends eligibility criteria for SAT Presiding Officer’s role & includes sitting or retired Judges of a High Court with a minimum service of 7 years. 18

REGIONAL OFFICES 1.New Delhi 2.Kolkata 3.Chennai 4.Ahmadabad 1.Jaipur 2.Bangalore 3.Guwahati 4.Bhubaneswar 5.Patna 6.Kochi 7.Chandigarh 19 SEBI Bhavan, Mumbai Headquarters (in Bandra Kurla Complex)Bandra Kurla Complex Local Offices

PACL CASE  In just over 30 years, Nirmal Singh Bhangoo, the man behind Pearls Agrotech Corporation Limited (“PACL”) who use to sell milk near Attari border in Punjab became the owner of 1.83 lakh acres of land around the country.  A charismatic business man who milked small investors to make Pearl(s) and always kept his investors satisfied. 20

 In its biggest-ever crackdown on a large-scale money pooling scheme estimated at nearly Rs. 50,000 crore (twice the amount to be recover from SAHARA group), regulator SEBI has ordered PACL to refund investors within three months and wind up operations.  SEBI had found PACL violating Collective Investment Scheme Regulations by mobilizing the money without being registered with the regulator, SEBI.  Besides, closure of PACL operations, SEBI is initiating further proceedings against PACL and its nine promoters and directors for fraudulent and unfair trade practices, as also for violation of SEBI's CIS Regulations, among others, as per a direction from the Supreme Court. 21

PACL BUSINESS ACTIVITIES  PACL offered two kinds of plans to its customers—a cash-down payment plan and an installment payment plan. Under the former, it offered to allot land to customers within 270 days of payment and under the latter within 90 days. In fact, business model of PACL isn’t very complicated. It collects money from investors and invests in cheap land which is likely to see changes in end use. Once that happens, the cheap land becomes a goldmine that PACL monetizes to pay investors 12.5% interest.   At present, it is being estimated that PACL has more than 58.5 million customers, more than twice the 22 million demat accounts in the entire country and has paid commission of Rs 7,893.8 crore up to March 2012 to more than its 8 lakh agents who works as network of chain system for collection of public deposit in return for attractive commissions on deposits brought in by them and other agents linked to them in chain. PACL is yet to allot land to 46.3 million investors where as PACL claimed it was in the business of purchasing and developing land, adding the developed land was transferred to investors.

SEBI VS PACL  SEBI clamps down the business activities of PACL categorizing the collection of public deposits under the grab of allotment of farm land to depositors without any maintenance of proper records/data and without registration of its scheme with SEBI under Collective Investment Scheme Regulations and declare the activities of PACL are in the nature of a Ponzi scheme.  SEBI will make a reference to the state governments and local police to register civil or criminal cases against PACL, its promoters, directors and managers for fraud, cheating, criminal breach of trust and misappropriation of public funds if the money is not refunded. SEBI will also initiate attachment and recovery proceedings if the money is not refunded to the public within the deadline. 23

Is PACL involved in Collective Investment Scheme?  An investment scheme wherein several individuals come together to pool their money for investing in a particular asset(s) and for sharing the returns arising from that investment as per the agreement reached between them prior to pooling in the money. 24

Cont..  Now, the most basic questions which arises, has PACL been altogether involved in Ponzi Scheme or it was failure on part of PACL to get its scheme registered with SEBI under Collective Investment Scheme Regulations? Has PACL cheated any of its investor till date?  Though at this moment we may not have all answers, however few things are very clear: i. The Collective Investment Scheme operated by PACL was not registered with SEBI; ii. There are more than million customers to whom PACL is yet to allot land 25

wayout  After the first round of battle, where SEBI has ordered PACL to refund Rs. 49,100 crore to its investors, PACL is getting ready for second round and to knock on Securities Appellate Tribunal (“SAT”) against SEBIs order. The whole battle between SEBI and PACL is on the issue that whether the business activities of PACL comes within the ambit of CIS or not? However, in middle of this battle, there are millions of small investors who had been exposed to high degree of risk, who may lose everything if PACL shrinks.  Is there any way-out to regulate their micro finance business/raising public deposits in real estate?? Though there are not many legal options available, however, PACL could have registered their public raising schemes in real estate under Collective Investment Scheme with SEBI.  In near future we can expect further crackdown on other companies engaged in similar activities like PACL. 26

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Thank you!! 28