SECURITIES AND EXCHANGE BOARD OF INDIA, 1992

INTRODUCTION

The Securities Exchange Board of India was constituted on April, 12th 1988 as a non-
statutory body through an Administrative Resolution of the Government for dealing with all matters
relating to the development and regulations of the of the securities market and investor protection
and to advise the Government on all these matters
SEBI was given statutory status and powers through an Ordinance promulgated on January
30, 1992. SEBI was established as a statutory body on February 21, 1992. the Ordinance was
replaced by an Act of Parliament on Apri 4th 1992.
BRIEF HISTORY
Before 1992, the three principal Acts governing the securities market were:
(a) the Capital Issues (Control) Act, 1947, which restricted issuer's access to the securities market
and controlled the pricing of issues;
(b) the Companies Act, 1956, which sets out the Code of Conduct for the corporate sector in
relation to isseu, allotment and transfer of securities, and disclosus to be made in public issues; and
(c)the Securities Contracts (Regulation) Act, 1956, which provides for regulation of transactions in
securities through control over stock exchanges.
In addition, a number of other Acts, e.g. The Public Debt Act, 1944, the Income Tax Act, the
Banking Regulation Act, etc, have substantial bearing on the working of the securities market.
The Capital Issues (Control) Act, 1947 had its origin during war in 1943 when the objective
was to channel resources to support the war effort. The Act was retained with some modifications as
a means of controlling the raising of capital by companies and to ensure that national resources
were channelled into proper lines, i.e., priorities of the Government, and to protect the interest of
investors. Under the Act any firm wishing to issue securities had to obtain approval from the
Central Government, which also determined the amount, type and price of the issue.
A major development in the Indian stock market which deserves a particular mention was
the establishment of SEBI. The stringent advance in the capital market activities and the growing
complexities of the market related problems have necessitated the emergence of the SEBI.
The Capital Issues (Control) Act, 1947 was repealed in May 1992. with this, Government's
control over issue of capital, pricing of the issues, fixing of premia and rates of interest on
debentures etc. Ceased. The office that administered the Act was abolished and the market was
allowed to allocate resources to competing uses. Indian companies were allowed access to
international capital market through issue of ADRs and GDRs.
However, to ensure effective regulation of the market, SEBI which was establiched in 1988
has been given a legal status, as a supervisory body in 1992 by enacting the SEBI,1992 with
statutory powers to regulate and promote the securities market.

Q. 1 BASIC SALIENT FEATURES OF THE SEBI ACT, 1992

1. This Act extends to the whole of India. It has come in to force on 30th Day of January, 1992.
2. The objects of the Act as per the Preamble are
(a) providing fair dealings in the issue of securities and ensuring a market place where funds
can be, raised at a relatively low cost
 (b) providing a degree of protection to the investors and safeguard their rights and ineterest
so that there is a steady flow of savings into the market;
(c) regulating and developing a Code of Conduct and fair practices by intermediaries in the
capital market like brokers and merchant banks with a view to making them competitive and
professional.
3. The scheme of the Act: The Act contained 35 sections in all, sections 3 to 6 deal with the
establishment of SEBI, Sections 15K to 15Q deal with the establishment of SAT, section 16
is related to issue directions, Section 17 is related to supersede SEBI, Section 18 fixes on
SEBI to submit certain returns and reports and Section 29 deals with rule making power of
SEBI and Section 15U deals with appellate powers of SAT.
4. Under Section 3of the SEBI Act, 1992, the Central Government has constituted a Board by
the name of SEBI with headquarters in Mumbai and offices in kolkata, New Delhi and
Chennai.
5. According to Section 4(1) of the SEBI Act, SEBI consists of a Chairman, two members
from the Ministers of Central Government, one member from the officers of the RBI and
five other members of whom at least three shall be the whole-time members.
6. Section 11(1) of the SEBI Act, provides the following main powers to the SEBI:
• registering and regulating the working of stock exchanges and any other securities markets;
• regulating the business in stock exchanges and any other securities markets;
• promoting and regulating self-regulatory organisations;
• prohibiting fraudulent and unfair trade practices;
• calling for information from, undertaking inspection, conducting inquiries and audits of the
stock exchanges, mutual funds and other persons associated with the securities market and
intermediaries and self-regulating organisations in the securities market;
• protecting the interests of investors in securities;
• promoting the development of the securities markets and;
• regulating the securities markets;
• performing such functions and exercising according to Securities Contrats Act as may
bedelegated to it by the Central Government.
• SEBI was given full authority and jurisdiction over the securities market under the SEBI
Act.
7. SEBI Act provides in section 11C, to investigate the affairs of intermediaries or persons
associated with the securities market through Investigating Authority.
8. Under Section 12 of the SEBI Act, intermediaries shall register and obtain a certificate of
registration.
9. Section 15 of the SEBI Act, deals with the finance, accounts ans audit.
10. Section 15A to 15JA of the Act deals with penalties for various offences and adjudication.
11. Sections 15K to 15Z of the Act, are concerned with the establishment, jurisdiction, authority
and procedure of Appellate Tribunal which is established by the Central Government.
12. According to 15Z of the Act, any person aggrieved by any decision or order of the SAT may
file an apeal to the Supreme Court within 60 days from the date of communication of the
decision or order.
 13. Section 16 of the Act, provides power to the Central Government to issue directions.
14. Section 17 gives the power to the Central Government to supersede the Board if need arises.
15. Section 29 provides power to the Central Government to make rules for carrying out the
purposes of the Act.
16. Section 18 of the Act provides the responsibility to the SEBI to submit the Central
Government the prescribed returns and reports.

ESTABISHMENT AND INCORPORATION OF BOARD (SECTION 3)

(a) With effect from such date as the Central Government may, by notification, appoint, there
shal be established, for the pruposes of this Act, a Board by the name of the SEBI.
(b) The Board shall be a body corporate by the name aforesaid, having perpetual succession and
a commonseal, with power to acquire, hold and dispose of property, etc.(characteristics of
company)
(c) The head office of the Board shall be at Mumbai.
(d) The Board may establish offices at other places in India.

Q. 2 CONSTITUTION & MANAGEMENT OF THE BOARD (SECTION 4)

CONSTITUTION
Section 4(1) The Board shall consist of the following members, namely:-
(a) A Chairman
(b) Two members from officials of the Ministry of the Central government dealing with Finance
and Administration of the Companies Act.
(c) One member from amongst the officials of the reserve Bank.
(d) Five other members of whom at least 3 shall be the whole time directors or members to be
appointed by the Central Government.
MANAGEMENT
Section 4(2) – The general superintendence, direction and management of the affairs of the
Board shall vest in a Board of members, which may exercise all powers and do all acts and things
which may be exercised or done by the Board.
Section 4(3)- The Chairman shall also have powers of genera superintendence and direction
of the affairs of the board and may also exercise all powers and do all acts and things which may be
exercised or done by that Board.
Section 4(4) - The Chairman and members referred to in clause (a) and (d) of section 4(1),
shall be appointed by the Central Government and the members referred in clauses (b) and (c) shall
be nominated by the Central Government and RBI respectively.
Section 4(5) - The Chairman and the other members referred to in clauses (a) and (d) shall
be persons of ability, integrity and standing who have shown capacity in dealing with problems
relating to securities market or have specia knowledge or experience of law, finance, economics,
accountancy, administration, or in any other discipline which, in the opinion of the Central
Government, shall be useful to the Board.
Term of office and conditions of service of Chairman and members of the Board (Section 5)
(1) The term of office and other conditions of service of the Chairman and the members referred
to section 4(1)(d) shall be such as may be prescribed.
(2) Not withstanding any thing contained in sub-section (1), the Central Government shall have
the right to terminate the services of the Chairman or a member appointed under section 4(1)
(d), at any time before the expiry of the period prescribed under sub-section (1), by giving
him notice of not less than three months in writing or three months salary and allowances in
lieu thereof, and the Chairman or a member, as the case may be, shall also have the right to
relinquish his office, at any time before the expiry of the period prescribed under sub-section
(1), by giving to the Central Government notice of not less than three months in writing.

Removal of member from office (Section 6)

The Central Government shall remove a mkember from office if he -
(a) is, or at any time has been, adjudicated as insolvent;
(b) is of unsound mind and stands so declared by a competent court;
(c) has been convicted of an offence which, in the opinion of the Central Government,
invoves a moral turpitude;
(d) has, in the opinion of the Central Government, so abused his position as to render his
continuation in office derimental to the public interest.
Provided that no member shall be removed under this clause unless he has been given a
reasonable opportunity of being heard in the matter.
Q. 3 POWERS AND FUNCTIONS OF SEBI
(A) FUNCTIONS
Chapter IV of SEBI Act, deals with the powers and functions of the Board. Section 11 of the
Act lays down that
(1) it shall be the duty of the Board to protect the interests of the investors in securities and to
promote the development of, and to regulate the securities markets by such measures as it
thinks fit.
(2) SEBI, in particular, has to take measures to provide for -
(a) regulating the business in stock exchanges and any other securities market;
(b) registering and regulating the working of stock brokers, sub-brokers, share transfer agents,
bankers to an issue, trustees of trust deeds, registrars to an issue, merchant bankers,
underwriters, portfoliomanagers, investment advisers and such other intermediaries who
may be associatedwith securities markets in any manner;
(c) registering and regulating the working of the depositories, participants, custodians of
securities, foreign institutional investors, credit rating agencies and such other intermediaries
as the Board may, by notification, specify in this behalf;
(d) registering and regulating the working of venture capital funds and collective investiment
schemes, including mutual funds;
(e) promoting and regulating self-regulatory organisations;
(f) prohibiting fraudulent and unfair trade practices relating to securities markets;
(g) promoting investors education and training of intermediaries of securities markets;
 (h) prohibiting insider trading in securities;
(i) regulating substantial acquisition of shares and takeover of companies;
(j) calling for information from, undertaking inspection, conducting inquiries and audits of the
stock exchanges, mutual funds, other persons associated with the securities market,
intermediaries and self-regulatory organisations in the securities market;
(k) calling for information and record from any bank or any other authority or board or
corporation estabished or constituted by or under any central, state or provicial Act in
respect of any transaction in securities which is under investigation or inquiry by the Board;
(l) performing such functions and exercising such powers under the provisions of the Securities
Contract (Regulation) Act, 1956, as may be delegated to it by the Central Government;
(m)levying fees or other charges for carrying out the purposes of this section;
(n) conducting research for the above purposes;
(o) calling from or furnishing to any such agencies, as may be specified by the Board, such
information as may be considered necessary by it for the efficient discharge of its functions.
(p) Performing such other functions as may be prescribed.
(2A) The Board may take measures to undertake inspection of any book, or register, or other
document or record any listed public company or a public company (not being intermediaries)
which intends to get its securities listed on any recognised stock exchange where the Board has
reasonable grounds to believe that such company has been indulging in insider trading or fraudulent
and unfair trade practices relating to securities market.
(3) For carrying out the duties assigned to it under the Act, SEBI has been vested with the same
powers as are available to a Civil Court under the Code of Civil Procedure, 1908 for trying a suit in
respect of the following matters;
i. the discovery and production of books of account and other documents at the place and time
indicated by SEBI;
ii. summoning and enforcing the attendance of persons and examining them on oath;
iii. inspection of any books, registers and other documents of any person listed in section 12 of
the Act, namely stock brokers, sub brokers, share transfer agents, bankers to an issue, trustee
of trust deed, registrar to an issue, merchant bankers,under writers, port folio managers,
investment adviseors and other such intermediaries associated with securities markets;
iv. inspection of any book or register or other document or record of the company i.e. Listed
public company or a public company which intends to get its securities listed or any
recognised stock exchange;
v. issuing commissions for the examination of witnesses or documents.
(4) The Board may take any of the following measures, either pending investigation or inquiry
or on completion of such investigation or inquiry, namely :-
(a) suspend the trading of any security in a recognised stock exchange;
(b) restrain persons from accessing the securities market and prohibit any person
associated with securities market to buy, sell or deal in securities;
(c) suspend any office-bearer of any stock exchange or self-reguatory organisation from
holding such position;
(d) impound and retain the proceeds or securities in respect of any transaction which is
under investigation;
 (e) attach after passing of an order on an application made for approval by the Judicial
Magistrate of the First Class having jurisdiction, for a period not exceeding one
month, one or more bank account or accounts of any intermediary or any person
associated with the securities market in any manner involved in vioation of any of
the provisions of this Act, or the rules or the reguations made thereunder.
(f) Direct any intermediary or any person associated with the securities market in any
manner not to dispose of or alienate an asset forming part of any transaction which is
under investigation.
Provided that the Board may, without prejudice to the provisions contained in Section
11(2A), in respect of any listed company, or intends to get it securities oisted on any recognised
stock exchange where the Board has reasonable grounds to believe that such company has been
indulging in insider trading or fraudulent and unfair trade practices relating to securities market.
Provided further that the Board shall, either before or after passing such orders, give an
opportunity of hearing to such intermediaries or persons concerned.

Board to regulate or prohibit issue of prospectus, offer document or advertisement soliciting

money for issue of securities
(1) The Board may, for the protection of investors, -
(a) specify, by regulations-
(i) the matters relating to issue of capital, transfer of securities and other matters
incidental thereto; and
(ii) the manner in which such matters shall be disclosed by the companies;
(b) by general or special orders-
(i) prohibit any company from issuing of prospectus, any offer document, or
advertisement soliciting money from the public for the issue of securities;
(ii) specify the conditions subject to which the prospectus, such offer without prejudice
to the provisions of section 21 of the Securities Contracts (Reguation) Act, the
document or advertisement, if not prohibited, may be issued.
(2) The Board may specify the requirements for listing transfer of securities and other
matters incidenta thereto.

POWERS
POWER TO ISSUE DIRECTIONS (Section 11B)
Section 11B of the Act provides that if SEBI is satisfied after making due enquiries, that it is
necessary:-
i. in the interest of investors, or orderly deveopment of securities market; (or)
ii. to prevent the affairs of any intermediary or other persons referred to in section 12
(registeration of intermediaries) being conducted in a manner detrimental to the interest of
investors or sec market; (or)
iii. to secure the proper management of any such intermediary or person it may issue such
directions -
(a) to any person or class of persons referred to in section 12 or associated with the
securities market.
(b) to any company in respect of matters specified in Aection 11A as may be appropriate in the
interests of investors in securities and the securities market.
POWER TO INVESTIGATE
(1) Where the Board has reasonable ground to believe that-
(a) the transactions in securities are being dealt with in a manner detrimental to the investors or the
securities market; or
(b) any intermediary or any person associated with the securities market has violated any of the
provisions of this Act or the rules or the reguations made or directions issued by the Board
thereunder,
it may, at any time by order in writing, direct any person (i.e. The Investigating Authority)
specified in the order to investigate the affairs of such intermediary or persons associated with the
securities market nand to report thereon to the Board.
POWER TO MAKE REGULATIONS
(1) The Board may, by notification, make regulations consistent with this Act and the rules
made thereunder to carry out the purposes of this Act.
(2) In particular, and without prejudice to the generality of the foregiong power, such regulaions
may provide for all or any of the following matters, namely:-
(a) the times and places of meetings of the Board and the procedure to be followed at such
meetings under Section 7(1) includeing quorum necessary for the transaction of business;
(b) the terms and other conditions of service of officers and employees of the Board uner
Section 9(2);
(c) the matters relating to issue of capital, transfer of securities and other matters incidental
thereto and the manner in which such matters shall ne disclosed by the companies under
Section 11A;
(d) the utilistion of the amount created under sub-section (5) of Section 11;
(e) the fufilment of other conditions relating to collective investment scheme under sub-section
2A if Section 11AA;
(f) the conditions subject to which certificate of registration is to be issued, the amount of fee to
be paid for cirtificate of registration and the manner of suspension or cancellation of
certificate of registration under section 12;
(g) the terms determined by the Board for settlement of proceedings under sub-section (2) and
the procedure for conducting of settlement proceedings under sub-section (3) of Section
15JB;
(h) any other matter which is required to be, or may be, specified by regulations or in respect of
which provision is to be made by regulations. (section 30)
REGISTRATION OF INTERMEDIARIES
A person in the following capacity shall buy, sell or deal in securities after obtaining a certificate of
registration from SEBI, as required by Section 12.
(1) Stock Broker; (2) sub-broker; (3) share transfer agent; (4) banker to an issue; (5) trustee of trust
deed; (6) registrar to an issue; (7) merchant banker; (8) underwriter; (9) portfoliomanager; (10)
investment adviser; (11) depository; (12) depository participant; (13) custodian of securities; (14)
foreign institutional investot; (15) credit rating agency; (16) collective invstment schemes; (17)
vendure capital funds; (18) mutual funds; (19) any other intermediary associated with the securities
market.
STOCK BROKERS AND SUB-BROKERS
A stock broker pays a very important role in the secondary market helping bothe the seller
and the buyer of the securities to enter in to a transaction. The buyer and seller may be either a
broker or a client. The transaction entred cannot be annuled except in the case of fraud, willful
mesrepresentation or upon prima-facie evidence of a material mistake in the transaction, in the
judgment of the existing authorities. If a member of the stock exchange (broker) has orders to buy
and to sell the same kind of securities, he may complete the transaction between his clients
concerned.
When executing an order the stock broker may on behalf of his client buy or sell securities
from his own account i.e., as principal or act as an agent. For each transaction he has to issue
necessary contract note indicating wherher the transaction has been entered in to by him as a
principal or as an agent for another. While buying or selling securities as a agent, the stock broder
has to obtain the consent of his client and the prices charged should be fair and justified by the
conditions of the market.
A sub-broker is one who works along with the main the main broker and is not directly
registered with the stock exchange as a member. He acts on behalf of the stock broker as an agent or
otherwise for assisting the investors in buying, selling or dealing in securities through such stock
brokers.
No stock broker or sub-broker shall buy, sell or deal in securities unless he holds a certificate
of registration granted by SEBI under the Regulations made by SEBI in relation to them.
SEBI (STOCK BROKERS AND SUB-BROKERS) REGULATIONS, 1992
Registration of Stock Brokers
SEBI (Stock Brokers ans Sub-Brokers) Regulaions , 1992 were notified by SEBI in exercise
of powers conferred by section 30 of the SEBI Act, and came into effect on 23rd October, 1992.
Chapter II of the regulations containing the regulations, 3 to 10 deal with registration of
stock Brokers. An applicaion by a stock broker for grant of a certificate of registration shall be made
through the stock exchange or stock exchanges, as the case may be, of which he is admitted as a
member. The stock exchange shall forward the application form to SEBI as early as possible but not
later than 30 days from the date of its receipt. SEBI may require the applicant to furnish such
further information or clarification regarding the dealings in securities and related matters to
consider the applicaion for granting a certificate of registration. The applicant or its principal officer
shall, if so required, appear before SEBI for personal representation.
SEBI shall take into account the following aspects before granting a certificate.
(a) Whether the applicant is eligible to be admitted as a member of a stock exchange.
(b) Whether he has the necessary infrastructure like adequate office space, equipment
and man power to effectively discharge his activities.
(c) Whether he has any past experience in the business of buying, selling or dealing in
securities.
(d) Whether he was subjected to disciplinary proceedings under the rules, regulations
and buy-laws of a stock exchange with respect to his business as a stock broker
involving either himself or any of his partners, directors or employees;
(e) Whether he is a fit and proper person.
(f) SEBI, on being satisfied that the stock broker is eligible, shall grant a certificate of
registration to him and send an intimation to that affect to the stock exchange or
stock exchanges as the case may be.
Registration of Sub-Brokers
chapter III of the Regulations containing Reguations 11 to 16 deal with registration of Sub-
Brokers. An application by a sub-broker for the grant of certificate shall be made in Form-B. Such
application from the sub-broker applicant shall be accompanied by recommendation letter in Form-
C from stock broker of a recognised stock exchangewith whom the former is to be affiliated along
with two references including one from his banker. The application form shall be submitted to the
stock exchange of which the broker with whom he is to be affiliated is a member.
The stock exchange on receipt of an application shall verify the information contained
therein and shall also certify that the applicant is eligible for registration as per criteria specified
below:
(1) In the case of an individual:
(a) the applicant is not less than 21 years of age;
(b) the applicant has not been convicted of any offence involving fraud or dishonesty;
(c) the applicant has at least passed 12th standard equivalent examination from an Institution
Recognised by the Government. However, SEBI may relax this criterion on merits having
regard to the applicant's experience;
(d) the applicant is a fit and proper person.
(2) In the case of partnership firm or a body corporate, the partners or directors as the case may be
shall comply with the requirements stated above. It is also to be assessed whether the appicant has
necessary infrastructure like adequate office space, equipment and manpower to effectively
discharge his activities. The applicant should be person recognised by the stock exchange as a sub-
broker affiliated to a member broker of the stock exchange. The stock exchange shall forward the
application form of such applicants, along with recommendation letter issued by the stock broker
with whom he is affiliated along with a recognition letter issued by a stock exchange to SEBI within
30 days from the date of its receipt.
SEBI on being satisfied that the sub-broker is eligible, shall grant certificate in Form-E to
the sub-broker and send an intimation to that affect to the stock exchange or exchanges as the case
maybe. SEBI may grant a certificate of registration to the applicant subject to the terms and
conditions as stated in SEBI (Stock Brokers and Sub-brokers) Rules, 1992.
Where an application for grant of a certificate does not fulfill the requirements mentioned in
Regulation 11A, SEBI may reject the application after giving a reasonable opportunity of being
heard. The refusal to grant the certificate shall be communicated by SEBI within 30 days of such
refusal to the concerned stock exchange and to the applicant in writing stating therein the grounds
on which the application has been rejected. An applicant being aggrieved by the decision of SEBI
may, with in a period of 30 days from the date of receipt of such intimation apply to SEBI for
reconsideration of the decition.
SEBI shall reconsider an application made and communicate its decision to the applicant in
writing and to the concerned stock exchange as soon as possible.
A person whose application for grant of a certificate has been refused by SEBI shall, on and
from the date of communication of refusal cease to carryon any activity as a sub-broker. The sub-
broker has the following general obligations:
(a) pay the fees as per schedule III;
(b) abide by the Code of Conduct specified in schedule II;
(c) enter into an agreement with the stock broker for specifying the scope of his authority and
responsibilities;
 (d) comply with the rules, regulations and bye-laws of the stock exchange;
(e) not be affiliated to more than one stock broker of one stock exchange.
The sub-broker shall keep and maintain the books and documents specified in the
regulations. No director of a stock broker can act as a sub-broker can act as a sub-broker to the same
stock broker.

Prohibition of manipulative and deceptive services, Insider Trading and Substantial

Acquisition of Securities Control (Section 12A)
According to Section 12A of the SEBI Act, no person shall directly or indirectly -
(a) use or employ, in connection with the issue, purchase or sale of any securities listed or
proposed to be listed on a recognised stock exchange, any manipuative or deceptive device
or contrivance in contravention of the provisions of this Act or the rules or the regulations
made thereunder;
(b) employ any device, scheme or artificate to defraud in connection with issue or dealing in
securities which are listed or proposed to be listed on a recognised stock exchange;
(c) engage in any act, practice, cource of business which operates or would operate as fraud or
deceit upon any person, in connection with the issue, dealing in securities which are listed or
proposed to be isted on a recognised stock exchange;
(d) engage in inside trading;
(e) deal in securities while in possession of material or non-public information or communicate
such material or non-public information to any other person, in a manner which is in
contravention of the provisions of this Act or the rules or the regulations made under
thereunder.
(f) Acquire control of any company or securities more than the percentage of equity share
capital of company whose securities are listed or proposed to be listed on a recognised stock
exchange in contravention of the regulations made under this Act.
Q. 4 Explain Powers and Functions of Central Government under SEBI
Act, 1992
POWERS OF THE CENTRA GOVERNMENT UNDER SEBI ACT, 1992
Establishment of the SEBI
i. Under Section 3(1) of the SEBI Act, with effect from such, the Central Government shall
appoint a Board by name of the SEBI.
ii. As per Section 4(3) of SEBI Act, the Central Government shall appoint, the Chairman and
five other members of whim at lest three shall be the whole-time members and two members
from amongst the officials of the Ministry of the Central Govt dealing with finance and
administration of the Companies Act, to the Management Board of the SEBI.
iii. According to Section 5(2) of the SEBI Act, the Centrl Govt shall have the right to terminate
the services of the Chairman or any member of five other members of whom at least three
shall be the whole-time members at tny time before the expiry of the period prescribed by
giving him notice of not less than three months in writing or three months salary and
allowances in lieu thereof.
iv. According to section 6 of the SEBI Act, the Central Govt shall remove a member from
office if he is adjudicated as insolvent or is of unsound mind or has been convicted of an
offence i.e., involves a moral turpitude or in public interest.
Grants by the Central Government
Under Section 13 of the SEBI Act, the Central Government may, after due appropriation made by
Parliament by law in this behalf, make to the Board grants of such sums of money as that
Government may think fit for being utilised for the purposes of this Act.
Accounts and Audit
Under Section 15(1) of the SEBI Act, the Central Govt may prescribe form to maintain proper
accounts and other relevant records and prepare an annual statement of accounts in consultation
with the Comptroller and Auditor General of India.
Establishment of SAT
1. As per Section 15K of SEBI Act, the Central Govt shall establish one or more Appellate
Tribunals to be known as the SAT. The Central Govt shall notify the matters ans places in
relation to which the SAT may exercise jurisdiction.
2. As per Section 15M of the Act, the Central Govt has to appoint a Presiding Officer in
consultation with the Chief Justice of India and two other members of the SAT.
3. According to Section 15P of the Act the Central Govt shall appoint another person to fill the
vacancy, if any vacancy accurs in the office of the Presiding Officer or any other member of
a SAT.
4. As per Section 15Q(2) of the Act, the Central Govt shall remove the Presiding Officer or
any other member of a SAT on the ground of proved misbehaviour or incapacity after an
inquiry made by a Judge of the Supreme Court.
5. According to Section 15Q(3) of the Act, the Central Govt may, by rules, regulate the
procedure or the investigation of misbehaviour or incapacity of the Presiding Officer or any
other member of the SAT.
6. As per Section 15-S of this Act, the Central Govt shall provide the SAT with such officers
and employees as that Govt may think. The Central Govt shall prescribe the salaries and
allowances and other conditions of services of the officers and employees of the SAT.
Power of Central Government to issue directions
The Central Govt may issue directives on question of policy from time to time and the decision of
the Central Govt whether a question is one of policy or not shall be final.
Power to make Rules
The Central Govt may, by notification, make rules for carrying out the purposes of this Act.
In particular, and without prejudice to the generality of the foregoing power, such rules may
provide for all or any of the following matters, namely:-
i. the term of office and other conditions of service of the Chairman and the members;
ii. the additional functions that may be performed by the Board under Section 11;
iii. the manner in which the accounts of the Board shall be maintained under Section 15;
iv. the manner of inquiry under section 15-I(1);
v. the salaries and allowances and other terms and conditions of service of the Presiding
Officers, Members and other officers and employees of the SAT;
vi. the procedure for the investigation of misbehaviour or incapacity of the Presiding Officers,
or other Members of the SAT u/s 15Q(3)
vii. the form in which an appeal may be filed before the SAT u/s 15T and the fees payable in
respect of such appeal;
 viii. the form and the manner in which returns and report to be made to the Central Govt
u/s 18;
ix. any other matter which is to be, or may be, prescribed, or in respect of which provision is to
be, or may be, made by rules(Sec 29)
x. Every rule and regulation made under the SEBI Act, shall be laid, as soon as may be after it
is made, before each House of Parliament(Sec 30).

Returns and Reports

The Central Govt may ask the Board to furnish the returns and statements in sush forms and
manner as may be prescribed in regard to any securities market, as the Central Govt may, from time
to time, require. The Central Govt shall lay such reports before each House of Parliament as soon as
may be after it is received.
Appeals
The Central Govt may admit an appeal by any person aggrieved by an order of the Board
made before the commencement of the Securities Laws (Second Amendment) Act, 1999 under this
Act or the rules and regulations made thereunder within such time as may be prescribed. No appeal
shall be admitted if it is preferred after the expiry of the period. However, if the Central Govt
satisfies, there is sufficient cause for not preferring the appeal within the prescribed period, it may
admit the appeal after the expiry of the period prescribed.
The procedure for disposing of an appeal shall be such as may be prescribed. However,
before disposing of an appeal, the Central Govt shall give the appellant a reasonable opportunity of
being heard (Sec 20)
Recovery of amounts
(1) If a person fails to pay the penalty imposed by the adjudicating officer or fails to comply
with any direction of the Board for refund of monies or fails to comply with a direction or
order issued u/s 11B or fails to pay any fees due to the Board, the Recovery Officer may
draw up under his signature a statement in the specified form specifying the amount due
from the person and shall proceed to recover from such person the amount specified in the
certificate by one or more of the following modes, namely:-
(a) attachment and sale of the person's movable property;
(b) attachment of the person's bank accounts;
(c) attachment and sale of the person's immovable property;
(d) arrest of the person and his detentions in prison;
(e) appointing a receiver for the management of the person's movable and immovable
properties.
Q. 5 Explain Constitution, Establishment, Powers and Functions of SAT.
SECURITIES APPELLATE TRIBUNAL (SAT)
Any person aggrieved, by the order or decision of the recognised Stock Exchange or the
adjudicating officer or any order made by the SEBI u/s 4B may prefer an appeal before the SAT.
Constitution of SAT
As per section 15K, the Central Government is empowered to establish by notifications one
or more Appellate Tribunals, known as SAT s to exercise the jurisdiction, power and authorities
conferred on such Tribunal by SEBI Act or under the Act or any other law for the time being in
force. The Central Government has set up a tribunal at Mumbai.
• SAT shall consists of a Preciding Officer and two other members to be appointed by the
Central Government. (Section 15L)
• Preciding Officer shall be a sitting or retired Judge of Supreme Court or sitting or a retired
Chief Justice of High Court.(Section 15M)
• Qualifications for a members: he should be a person of ability, intigrity and standing who
has shown capacity in dealing with problems relating to securities market and has
qualification and experience of corporate law, securities, etc. (Section 15M)
• Section 15N lays down that the Presiding Officer and every other member of SAT shall hold
office for a term of five years from the date he enters upon his office.
• Retirement Age: for Preciding Officer – 68 years, and other members – 65 years
Resignation and Removal:
The Presiding Officer or any other member may resign his office, by notice in writing with
his hand addressed to the Central Government. The Presiding Officer or the member would
continue to hold office until -
(a) the expiry of three months from the date if receipt of such notice, or
(b) a person duly appointed as his successor, enter upon his office, or
(c) the expiry of his term of office,
whichever is earlier.
POWERS AND FUNCTIONS OF SAT
The SAT shall have, for the purposes of discharging their functions under this Act, the same
powers as are vested in a civil court under the CPC, 1908, while trying a suit, in respect of the
following matters, namely:-
• Summoning and enforcing the attendance of any person and examining him on oath;
• Requiring the discovery and production of documents;
• Receiving evidence on affidavits;
• Issuing commissions for the examination of witness or documents;
• Reviewing its decisions;
• Dismissing on application for default or deciding it ex-parte;
• Setting aside any order of dismissal of any application for default or any order passed
by it exparte;
• Any other matter which may be prescribed.
Every proceeding before the SAT shall be deemed to be a judicial proceeding, within
the meaning of sections 193 and 228, and for the purposes of section 196 of the IPC
and SAT shall be deemed to a Civil Court for all the purposes of section 195 and
Chapter XXVI of the Cr.PC, 1973.

REQUIREMENTS FOR APPEAL TO THE TRIBUNAL

Section 15T and 15U deal with the appeal procedure and power of SAT. Section 15T lays
down that any person aggreived:
 (1) (a) by an order of SEBI made, under this Act, or the rues or reguations made thereunder; or
(b) by an order made by an adjudicating officer under this Act.
May prefer an appeal to a SAT having jurisdiction in the matter.
(2) No appeal shall lie to the SAT from an order made (a) by SEBI (b) by an adjudicating
officer, with the consent of the parties.
(3) Every appea under sub-section (1) shall be filed within a period of 45 days from the date on
which a copy of the order made by SEBI or the Adjudicating Officer, is received by him and
it shall be in such form and be accompanied by such fee as may be prescribed. These details
have been prescrubed in the Rules. Provided that the SAT may entertain an appeal after the
expiry of the said period of 45 days if it is satisfied that there was sufficient cause for not
filing it within that period.
(4) On receipt of an appeal, the SAT may, after giving the parties to the appeal, an opportunity
of being heard, pass such orders thereon as it thinks fit, confirming, modifying or setting
aside the order appealed against.
(5) The SAT shall send a copy of every order made by it to SEBI and the parties to the appeal
and to the concerned Adjudicating Officer.
(6) The appeal fied before the SAT shall be dealt with by it as expeditiously possible and
endeavor shal be made by it to dispose of the appeal finally within 6months from the date of
reciept of the appeal.
PROCEDURE FOR FILING APPEAL
Every appeal to be filed within a period of forty five days from the date on which a copy of
the order against which the appeal is filed, is received by the applellant. However, Appellate
Tribunal has been empowered to entertain an appeal after the expiry of the said period of forty five
days if it is satisfied that there was sufficient cause for not filing it within that period.
LIMITATION FOR FILING APPEAL
Where a recognised stock exchange acting in pursuance of any power given to it by its bye-
laws, refuses to list the securities or any company, the company shall be entitled to be furnished
with reasons for such refusal and may,-
(a) within 15 days from the date on which the reasons for such refusal are furnished to it, or
(b) where the stock exchange had omitted or failed to dispose of, within the time specified under
Companies Act, the application for permission for the shares or debentures to be dealt with on the
stock exchange, within 15 days from the date of expiry of the specified time or within such further
period, not exceeding one month, as the Appellate Tribunal may, on sufficient cause being shown
allow.
PENALTIES UNDER SEBI ACT
The SEBI Act, 1992 provides for two alternative types of punishments for violation of the
provisions of the Act. They are -
(i) Suspension or cancellation of certificate of registeration to be imposed by SEBI only as per
regulation framed by SEBI (u/s 12(3))
(ii) Monetary penalty to be imposed by the adjudicating officer appointed by SEBI as per rules
framed by Central Govt. (sections from 15A to 15I)
Suspension or Cancellation of Registration:-
A market intermediary, who -
(a) fails to comply with any condition of registration.
(b) Contravenes any of the provisions of the SEBI Act, or SC(R) Act or Rules and Regulations
made thereunder-
shall be liable to suspension of registration, after enquiry, for a specified period or cancellation of
registeration. No cancellation shall be made unless the person concerned has been given a
reasonable opportunity of being heared.
Monetary Penalties:-
The Act provides three types of monetary penalties-
(a) a lumpsum penalty for a specific violation of provisions in the Act;
(b) a penalty for every day during which the violation continues;
(c) a multiple of the amount involved in the violation.

Section Offender and Offence Penalty

15A(a) Any person who fails to furnish any document, return Shall not be less than 1 lakh
or report to the Board rupees but which may extend to
1 lakh rupees for each day
which, such failure continuous,
maximum 1crore rupees
15A(b) Any person fails to file any return or furnish any
information within the time specified " "
15A(c) Any person fails to maintain books of account or
records " "
15B Any person who is registered as an intermediary fails
to enter into agreement with his client as required to
enter as per rules and reguations " "
15C Any listed company or any person who is registered as
an intermediary fails to redress the grievances of
investors, after having been called upon by the board
in writing, to redress grievances with in the time
specified by the Board. " "
15D(a) Any person who is required to obtain a certificate of Shall not be less than 1lakh Rs.
registration from the Board for carrying on any But which may extend to 1 lakh
collective investment scheme, carry on the business Rs for each day during which
without obtaining such certificate of registration he sponsors or carries on any
such collective investment
scheme subject to 1 cr. Rs.
Shall not be less than 1 lakh rs.
Subject to 1 crore Ts.
15D(b) Registered with the Board as a collective scheme
which fails to comply with the terms and conditions of
certificate of registeration " "
15D(c) Any person fails to make an application for listing of
its scheme " "
15D(d) person fails to dispatch unit certificates of any scheme " "
15D(e) Any person fails to refund the application monies paid
 by the investors within the period " "
15D(f) Any person fails to invest money collected by such
collective investiment schemes " "