1. Investment Management
UNIT-2
SECURITIES MARKETS

2. Regulatory Environment
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Ministry of Finance
SEBI
RBI
are the major regulatory bodies exercising regulatory control and supervision over the functioning of financial system in the country.
V.Prabakaran, AP/MBA - Securities Market

3. Cont…
Upto 1992, primary market was controlled by the Controller of Capital Issues(CCI).
SEBI was formed under the SEBI Act,1992, to protect the interest of investors in securities as well as for promoting and regulating the securities market.
All public issues are governed by rules, regulations and guidelines issued by SEBI.
SEBI has been instrumental in bringing greater transparency in capital issues.
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V.Prabakaran, AP/MBA - Securities Market

4. SEBI
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Securities and Exchange Board of India (SEBI) was set up as an administrative arrangement in 1988.In 1992, the SEBI Act was enacted, which gave statutory status to SEBI.
It mandates SEBI to perform a dual function: investor protection through regulation of the securities market and fostering the development of this market.
SEBI has been vested most of the functions and powers under the Securities Contract Regulation (SCR) Act, which brought stock exchanges, their members, as well as contracts in securities which could be traded under the regulations of the Ministry of Finance.
V.Prabakaran, AP/MBA - Securities Market

5. Cont…
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In addition to registering and regulating intermediaries, service providers , mutual funds, collective investment schemes, venture capital funds and takeovers, SEBI is also vested with the power to issue directives to any person(s) related to the securities market or to companies in areas of issue of capital, transfer of securities and disclosures.
It also has powers to inspect books and records, suspend registered entities and cancel registration.
V.Prabakaran, AP/MBA - Securities Market

6. Objectives of SEBI
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To protect the interest of the investors in securities.
To promote the development of securities market.
To regulate the securities market, ensuring fair practices by the issuers of securities, viz., companies.
V.Prabakaran, AP/MBA - Securities Market

7. Functions of SEBI
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Specifying rules and regulations: SEBI has the authority to specify rules and regulations to control the stock exchange. For instance, the opening (9.15 am) and closing (3.30 pm) time of the market has been determined by SEBI, and it has the right to change the timing if deemed necessary.
Providing licenses to dealers and brokers: No dealer or broker can start distributing securities to investors without getting a prior approval and license from SEBI. It also has the right to withhold or cancel the license of brokers and dealers not adhering to the specified guidelines.
V.Prabakaran, AP/MBA - Securities Market

8. Cont…
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Auditing the performance of various stock exchanges: The regulating body is also responsible for auditing the performances of various stock exchanges and bringing transparency in their functioning.
Controlling mergers, acquisitions and take- overs of the companies: Some companies try to manipulate stocks and buy a majority stake in other companies with an intention of a take-over. SEBI controls and prohibits such movements if it is not in the interest of the company.
V.Prabakaran, AP/MBA - Securities Market

9. Cont…
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Prohibiting unfair trade practices in the market: While SEBI has laid down specific guidelines that promote fair trade practices, many companies occasionally undertake activities that are not healthy for the market. SEBI has the power to prohibit such activities and take action against the parties involved in such a trade.
Apart from these important functions, SEBI has many other responsibilities, which it exercises appropriately in order to regulate the Indian stock market.
V.Prabakaran, AP/MBA - Securities Market

10. RBI
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Reserve Bank of India (RBI) has regulatory involvement in the capital market, but this has been limited to debt management through primary dealers, foreign exchange control and liquidity support to market participants.
It is RBI and not SEBI that regulates primary dealers in the Government securities market.
RBI instituted the primary dealership of Government securities in March Securities transactions that involve a foreign exchange transactions need the permission of RBI.
V.Prabakaran, AP/MBA - Securities Market

11. Capital Market
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V.Prabakaran, AP/MBA - Securities Market

12. What is primary market?
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The primary market is also known as new issues market. Here, the transaction is conducted between the issuer and the buyer.
In short, the primary market creates new securities and offers them to the public.
For instance, Initial Public Offering (IPO) is an offering of the primary market where a private company decides to sell stocks to the public for the first time. An important point to remember here is that in the primary market, securities are directly purchased from the issuer.
V.Prabakaran, AP/MBA - Securities Market

13. Cont…
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Capital or equity can be raised in primary market by any of the following four ways:
Public Issue: As the name suggests, public issue means selling securities to public at large, such as IPO. It is the most vital method to sell financial securities.
Rights Issue: Whenever a company needs to raise supplementary equity capital, the shares have to be offered to present shareholders on a pro-rata basis, which is known as the Rights Issue.
V.Prabakaran, AP/MBA - Securities Market

14. Cont…
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Private Placement: This is about selling securities to restricted number of classy investors like frequent investors, venture capital funds, mutual funds and banks comes under Private Placement.
Preferential Allotment: When a listed company issues equity shares to a selected number of investors at a price that may or may not be pertaining to the market price is known as Preferential Allotment.
V.Prabakaran, AP/MBA - Securities Market

15. Cont…
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The primary market is also known as the New Issue Market (NIM) as it is the market for issuing long-term equity capital. Since the companies issue securities directly to the investors, it is responsible to issue the security certificates too. The creation of new securities facilitates growth within the economy.
V.Prabakaran, AP/MBA - Securities Market

16. 5/14/2018
Thanks…
V.Prabakaran, AP/MBA - Securities Market