Blank Marathon Notes PDF

Contents…
LIST A
1 Securities and Exchange board of India and SAT 1
- Composition of SEBI
- Composition of SAT
- Procedure of Appeal and time limits
- Power of SEBI
- Power of SAT
2 Corporatization and Demutualization 4
3 Dematerialization and Rematerialization 5
4 Fungibility 8
5 Minimum Public shareholding (Continuous listing agreement) 8
6 Audit under SEBI (D and P) Regulation, 2018 9
- Reconciliation Audit
- Internal Audit
- Concurrent Audit
7 Grounds of Delisting by Recognized stock exchange 10
8 Eligibility for IPO and FPO 11
9 Book Building and related rules 12
- Concept of Book Building
- Alternate Book Building
- Rules regarding price and price band and its revision
10 Fast-track issue 14
11 Concept and provision regarding warrant 15
12 Manner and Procedure of allotment 16
LIST B
13 Overview of Buy back 18
14 Overview of Delisting of securities 19
15 Overview of insider trading 20
16 Overview of takeover code 21
- Trigger point of Open offer requirement
- Creeping acquisition
- Conditional offer
- Disclosures under Takeover Code
17 Overview of LODR 23
- Periodic compliance
- One time compliance
18 Overview of Collective Investment Scheme 24
LIST C
19 Margin trading 25
20 ASBA 25
21 Block Deal and Bulk Deal 26
22 Use of UPI in public issue 27
23 Green shoe option 29
24 Right issue of listed company 30
25 Bonus issue of listed company 30
26 Derivatives (Future, forward, put and call) 31
27 Numerical in Mutual Fund 33
28 Qualified institutional buyer 34
29 Anchor investor 35
30 Foreign portfolio investor 36
31 Alternative investment fund 37
32 FCCB 38
33 FCEB 38
34 IDR 39
LIST D
35 Penalties 40
- Summary of all penalties in securities Law
- Recovery of amount
- Contravention by companies
- Factors determining the amount of penalty
36 Other miscellaneous topics: 43
- Stop loss
- Short selling
- Surveillance
- Auction
- Cut off price
- Cut off yield
- Nifty and Sensex
- Value of right
- Last traded price and closing price
- Enterprise Value
- Role of CS
37 Additional Topics (self read) 48
38 Numerical 51
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1. SEBI and SAT
Shubhamm Sukhlecha (INSPIRE ACADEMY)

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Procedure:

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2. Corporatization and Demutualization
Corporatisation
“Corporatisation” means the succession of a recognised stock exchange, being a body of individuals or
a society registered under the Societies Registration Act, 1860, by another stock exchange, being a
company incorporated for the purpose of assisting, regulating or controlling the business of buying,
selling or dealing in securities carried on by such individuals or society.
Demutualisation
“Demutualisation” means the segregation of ownership and management from the trading rights of
the members of a recognised stock exchange in accordance with a scheme approved by the Securities
and Exchange Board of India.

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3. Dematerialization and Rematerialization
Understanding Depopsitory:

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Dematerialisation
1. Investor opens account

with DP Depository 8. Depository credits
Shareholder
2. Fills DRF Participant
4. DP intimates Depository
investor a/c
3. Lodges DRF and
share certificate to DP the Depository
7. Issuer confirms 5.
Depository
6. DP sends demat request to
intimates
certificates and Depository
Issuer
DRF to Issuer
Issuer
Rematerialisation
2. DP enters the
request in its system
which blocks the
client's holdings. 6. Client's account
with DP debited
Depository
Shareholder 1. Client submits Participant
3. DP intimates Depository
Rematerialisation
Request Form (RRF) to DP the Depository
3. DP sends the 5.Issuer

RRF to the electronically
4. Issuer prints
Issuer. confirms
certificates and
dispatch to the client. remat to
Depository
Issuer

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4. Fungibility
 Section 9 states that securities in depositories shall be in fungible form.
 The Act envisages that all securities held in depository shall be fungible i.e. all certificates of the
same security shall become interchangeable in the sense that investor loses the right to obtain
the exact certificate he surrenders at the time of entry into depository. It is like withdrawing
money from the bank without bothering about the distinctive numbers of the currencies.
 Immobilisation of securities in a depository mode refers to a situation where the depository

holds securities in the form of physical paper side by side with electronic evidence of ownership.
In such a case the transfers are not accompanied by physical movement of securities but
securities are in existence in the custody of the depository.
5. Minimum Public shareholding (Continuous listing agreement)
Minimum offer and allotment to public

(also known as compliance of Continuous listing agreement)
Post issue capital
(calculated at offer price) Minimum allotment to Public
Less than or equal to 1600 crore 25 %
1600 – 4000 crore 400 crore
More than 4000 crore 10 %

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6. Audit
Audit under regulation 76 of SEBI (D and P) Internal audit of operations of DP Concurrent audit of DP of NSDL
Regulation, 2018
(Reconciliation Audit)
Applicable on:
Conducted by:
Audit covers:

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7. Grounds of Delisting by Recognized stock exchange
A recognized stock exchange may, delist any securities listed thereon on any of the following
grounds :—
1. the company has incurred losses during the preceding three consecutive years and it has
negative networth;
2. trading in the securities of the company has remained suspended for a period of more
than six months;
3. the securities of the company have remained infrequently traded during the preceding
three years;
4. the company or any of its promoters or any of its director has been convicted for failure
to comply with any of the provisions of the Act or SEBI Act, 1992 or the Depositories Act,
1996 or rules, regulations, agreements made thereunder, as the case may be and
awarded a penalty of not less than rupees one crore or imprisonment of not less than
three years;
5. the addresses of the company or any of its promoter or any of its directors, are not
known or false addresses have been furnished or the company has changed its
registered office in contravention of the provisions of the Companies Act, 2013, or;
6. shareholding of the company held by the public has come below the minimum level
required.
(However, no securities shall be delisted unless the company concerned has been given a
reasonable opportunity of being heard )
Grounds of Delisting by Recognized stock exchange:

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8. Eligibility for IPO and FPO
IPO
FPO

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9. Book Building
The SEBI (ICDR) Regulations, 2018 defines book building as follows: Book building means a process
undertaken to elicit demand and to assess the price for determination of the quantum or value of
specified securities or Indian Depository Receipts, as the case may be, in accordance with the SEBI
(ICDR) Regulations, 2018.
How Book Building operates?
Step 1: Appoint Lead book runner and other required intermediaries, File Red herring prospectus with
SEBI for observations, then file it with ROC and SE as well, enter into agreement with SE, finalise
collection centers, finalise the price band/floor price, give pre issue advertisement (Pre-requisites)
Step 2:
Company Red herring Prospectus Public/Potential investors
Step 3:
Bidding
Company Public/Potential investors
Step 4: Company determines the share price (cut off price) based on the bids received.
How to determine the cut off price?

Say I want to sell 5 identical shirts, there are 10 students in the class, I asked the students to bid at the
price they are ready to buy the shirt.
The Bids have been received as follows:
A
B
C
D
E
F
G
H
I
J
Step 5: Company allots the share at the cut off price, so everyone who bids at or above the cut off price
gets the share at the cut off price, and everyone who bids below the the cut off price gets rejected.

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Offer period Min 3 days, Max 10 days.

Limit on upper band The upper band can be maximum 120% of the lower band.
FAQs over Book Building
1. Is it mandatory to give the price band during book building?

No, The company may give price band (Upper band and lower band) or just give floor price (lower
band).
2. Is it mandatory to give price band/ floor price in red herring prospectus?
No, Price band/floor price can be given in the prospectus or it can be given in newspaper. (In
newspaper it has to be given, 2 days before the opening of the offer in case of IPO, and 1 day before
opening of the offer in case of FPO)
3. Can the price band/floor price once given, be revised?
Yes, It can be revised, but maximum revision in either direction can be 20% of the floor price.
(Note: If the price band is revised, the bidding period will be extended by 3 days, subject to maximum
10 days)
4. What is alternate book building?
In alternate method of book building:
 Allotment is made on price priority basis to Qualified institutional buyers.
 Allotment is made at floor price to retail individual investors, non-institutional investors and
employees.
(refer reservation under ICDR at the end of the notes)

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10. Fast track issue
What is a fast track issue?
Which companies are allowed to go for fast track issue?

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11. Concept and provision regarding warrant
What is a warrant?
 Warrant means an instrument which gives a right to purchase a number of shares (usually
one) of its equity share capital at a given exercise price during a given period.
 The holder of a warrant has the right but not the obligation to convert them into equity
shares. Thus in the true sense, a warrant signifies optional conversion. In case the investor
benefits by conversion of warrant, then he will convert the warrants, else he may simply let
the warrant lapse.
Example if the conversion price of the warrant is Rs. 70/-and the current market price is
Rs.110/-, then the investor will convert the warrant and enjoy the capital gain of Rs.40/-. In
case the conversion is at Rs.70/- and the current market price is Rs.40/-, then the investor will
simply let the warrant lapse without conversion.
 The companies listed on the Exchange can issue warrants in accordance with SEBI (ICDR)
Regulations, 2018.
What are the provisions for issue of warrant under ICDR, Regulation 2018?
 The tenure of such warrants shall not exceed eighteen months from the date of their
allotment in the initial public offer;
 a specified security may have one or more warrants attached to it;
 the price or formula for determination of exercise price of the warrants shall be determined
upfront and disclosed in the offer document and at least 25 per cent of the consideration
amount based on the exercise price shall also be received upfront;
However, in case the exercise price of warrants is based on a formula, 25 per cent
consideration amount based on the cap price of the price band determined for the linked
equity shares or convertible securities shall be received upfront.
 In case the warrant holder does not exercise the option to take equity shares against any of
the warrants held by the warrant holder, within three months from the date of payment of
consideration, such consideration made in respect of such warrants shall be forfeited by the
issuer.

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12. Manner and Procedure of allotment
1. The issuer shall not make an allotment pursuant to a public issue if the number of prospective
allottees is less than one thousand.
2. The issuer shall not make any allotment in excess of the specified securities offered through the
offer document except in case of oversubscription for the purpose of rounding off to make
allotment, in consultation with the designated stock exchange.
3. The allotment of specified securities to applicants other than to the retail individual investors
and anchor investors shall be on a proportionate basis within the respective investor categories
and the number of securities allotted shall be rounded off to the nearest integer, subject to
minimum allotment being equal to the minimum application size as determined and disclosed in
the offer document.
However, the value of specified securities allotted to any person, except in case of employees, in
pursuance of reservation made under these regulations, shall not exceed two lakhs rupees for
retail investors or up to five lakhs rupees for eligible employees.
4. The allotment of specified securities to each retail individual investor shall not be less than the
minimum bid lot, subject to the availability of shares in retail individual investor category, and
the remaining available shares, if any, shall be allotted on a proportionate basis.
Let’s Understand with a question:
X Ltd. made a public issue and the details regarding applications is given:
 Total number of specified securities on offer@ Rs. 600 per share: 1 crore specified securities.
 Specified securities on offer for retail individual investors’ category: 35 lakh specified securities.
 The issue is over-all subscribed by 2.5 times, whereas the retail individual investors’ category is
oversubscribed 4 times.
 The issuer has fixed the minimum application/bid size as 20 specified securities (falling within
the range of ten thousand to fifteen thousand rupees) and in multiples thereof.
 A total of one lakh retail individual investors have applied in the issue, in varying number of bid
lots i.e. between 1 – 16 bid lots, based on the maximum application size of up to two lakh
rupees.
 Out of the one lakh investors, there are five retail individual investors A, B, C, D and E who have
applied as follows: A has applied for 320 specified securities. B has applied for 220 specified
securities. C has applied for 120 specified securities. D has applied for 60 specified securities and
E has applied for 20 specified securities.
As per ICDR 2018, How many shares will be allotted to A, B, C, D and E.

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Solution:
As per ICDR, 2018, The allotment of specified securities to each retail individual investor shall not be less
than the minimum bid lot, and the remaining available shares, if any, shall be allotted on a
proportionate basis.
Allotment shall be as follows:
Name Minimum Securities allotted on Pro rata basis Total securities to

securities to be be alloted
allotted (1 lot)
A
WN: Calculation of ratio for proportionate allotment:
(also refer to another question given on allotment at the end of the notes)

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13. Overview of Buy back
Basis BUY-BACK FROM EXISTING SHAREHOLDERS BUY-BACK OF SHARES THROUGH BUY-BACK THROUGH BOOK
THROUGH TENDER OFFER STOCK EXCHANGE BUILDING
Pre-conditions
Procedure
Offer Period
(Buy back Period)
Escrow
Account
Extinguishment
of securities

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NTT : Nationwide trading terminals
Small companies:
14. Delisting of securities
Voluntary Delisting Compulsory Delisting
VD from all RSE having NTT VD from few RSE, remains listed VD of small companies
on at least one RSE having NTT

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15. Overview of insider trading
Restriction COMMUNICATION OR PROCUREMENT OF

UNPUBLISHED PRICE SENSITIVE INFORMATION
Except in case of legitimate purposes, performance of duties or discharge of legal

obligations.
Penalty He shall be liable to a penalty of twenty-five crore rupees or three times the
amount of profits made out of insider trading, whichever is higher.
Disclosure INITIAL DISCLOSURE:
CONTINUAL DISCLOSURE:

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16. Overview of Takeover Code
Trigger point for Open offer requirement

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Disclosure requirement under Takeover Code

EVENT BASED DISCLOSURES
Regulation Made Trigger Time Period Made to
29(1) Acquirer Acquirer + Persons acting in 2 working days of SE where the
concert (PAC) acquiring 5% or the receipt of shares are
more shares of the target intimation of listed and the
company allotment of target
shares, or the company
acquisition of
shares or voting
rights
29(2) Acquirer The number of shares or voting 2 working days of SE where the
already holding
rights held and change in the receipt of shares are
5% or more shareholding or voting rights, if intimation of listed and the
shares in target
such change exceed 2% of total allotment of target
company along shareholding or voting rights in shares, or the company
with PAC the target company (even if such acquisition of
change results in shareholding shares or voting
falling below five percent) rights
CONTINUAL DISCLOSURES
30(1) Any Person + PAC holding more Within 7 working SE where the
than 25% shares or voting rights in days from the shares are
the target to disclose their financial year listed and
aggregate shareholding and ending 31st target
voting rights March every year company
DISCLOSURES OF PLEDGED/ENCUMBERED SHARES
31(1) Promoter Promoter + PAC pledging or Within 7 working Stock
creating encumbrance on the days from the exchange
shares of the target company creation, where the
invocation or shares are
release of pledge listed and
target
company
31(2) Acquirer Invocation or release of the Within 7 working Stock
pledge or encumbrance on the days from the exchange
shares of the target company creation, where the
invocation or shares are
release of pledge listed and
target
company

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17. Overview of LODR

Periodic compliance
One time compliance

The listed entity shall intimate the appointment of Share Transfer Agent, to the stock Within 7 days of Agreement with RTA
exchange(s)
The listed entity shall obtain In-principle approval from recognised stock exchange Prior to issuance of Security
Prior Intimations of Board Meeting for financial Result viz. quarterly, half yearly or At least 5 clear days in advance
annual, to the stock exchange(s)
Disclosure of Price Sensitive Information to the stock exchange(s) Not later than twenty four hour
The listed entity shall file draft Scheme of Arrangement to the stock exchange(s) Prior approval before filing with Cour
The listed entity shall intimate the record date or date of closure of transfer books to all At least 7 clear working days in advance
the stock exchange(s)
The listed entity shall submit to the stock exchange details regarding voting results by Within 48 Hours of conclusion of its General
Shareholders Meeting

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18. Collective Investment Scheme
Collective Investment Scheme - refers to any scheme under which,—

(i) the contributions are pooled and utilized for the purposes of the scheme or arrangement;
(ii) the contributions are made to such scheme by the investors with a view to receive profits,
income, produce or property, whether movable or immovable;
(iii) the property, contribution or investment forming part of scheme, is managed on behalf of
the investors;
(iv) the investors do not have day-to-day control over the management of the scheme.
EXCLUSIONS-
 made or offered by a co-operative society.
 being a contract of insurance.
 providing for any Scheme, Pension Scheme or the Insurance Scheme.
 under which deposits are accepted by NBFC.
 under which deposits are accepted under section 74 of the Companies Act, 2013.
 under which deposits are accepted by a company declared as a Nidhi or a mutual benefit society
 falling within the meaning of Chit business.
 under which contributions made are in the nature of subscription to a mutual fund.

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19. Margin Trading
Initial Margin Maintenance Margin
20. Application supported by blocked amount (ASBA)
__________________________________ bank SEBI
Designated Designated Designated Designated Controlling

branch branch branch branch branch

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21. Bulk Deal and Block Deal
Block Deal Bulk Deal

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22. Use of UPI in public issue
1 What is UPI?
Unified Payments Interface (UPI) is an instant payment system developed by the National Payments
Corporation of India (NPCI), an RBI regulated entity. UPI is built over the IMPS (Immediate Payment
Service) infrastructure and allows you to instantly transfer money between any two parties’ bank
accounts. UPI as a payment mechanism is available for all public issues for which Red Herring Prospectus
is filed after January 01, 2019.
2 How is public issue application using UPI different from public

issue application using ASBA submitted with intermediaries?
Public issue application using UPI is a step towards digitizing the offline processes involved in the
application process by moving the same online. This requires you to have to create a UPI ID and PIN
using any of the UPI enabled mobile application. The UPI ID can be used for blocking of funds and
making payment in the public issue process. One can accept the request to block the funds for the
amount they have bid by entering their UPI PIN in the mobile application. The money shall be blocked
and shall be automatically remitted to the Escrow Bank, in case of allotment. UPI in public issue process
shall essentially bring in comfort, ease of use and reduce the listing time for public issues.
So in simple language ASBA was not completely digitized and not completely automatic, whereas UPI is
completely digitized and automatic manner, where an applicant can even apply in a public issue through
mobile phone.
3 How does UPI actually work in public issue process?

Step 1: UPI as part of bidding
• Investor will fill in the bid details in the application form as per the existing process along with his
UPI ID.
• As per the existing process, investor may submit the application with any of the intermediary
(Syndicate Member / Registered Stock Brokers / Registrar and Transfer Agents / Depository
Participants), who, on receipt of application will upload the bid details along with UPI id in the stock
exchange bidding platform.
• The stock exchange will electronically share the bid details, along with investors UPI id, with the
Escrow/ Sponsor Bank appointed by the issuer company.

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Step 2: UPI as part of blocking

• The Escrow / Sponsor Bank will initiate a mandate request on the investor i.e. request the investor
to authorize blocking of funds equivalent to applicant amount and subsequent debit of funds in case
of allotment.
• The request raised by the Escrow/Sponsor Bank, would be electronically received by the investor as
SMS/intimation on his / her bank provided mobile no. linked to UPI ID.
• Upon validation of block request by the investor, the said information would be electronically
received by the investors’ bank, where the funds, equivalent to application amount, would get
blocked in investors account. Intimation regarding confirmation of such block of funds in investors
account would also be received by the investor.
Step 3: UPI as part of payment for shares post allocation process

• The registrar to the issue, based on information of bidding and blocking received from stock
exchange, would undertake reconciliation and prepare the basis of allotment.
• Upon approval of such basis the instructions would be sent to sponsor bank to initiate process for
credit of funds in the public issue escrow account and unblocking excess money.
• Based on authorisation given by investor using UPI PIN at the time of blocking, the funds, equivalent
to the allotment, would be debited from investors account and remaining funds, if any, would be
unblocked.
4 Whether use of UPI, as a payment mechanism in public issues,

mandatory?
The applicability of UPI as a payment mechanism has been prescribed in a Phased manner as under:
Phase I: From January 01, 2019, the UPI mechanism for retail individual investors through intermediaries
will be made effective along with the existing process and existing timeline of T+6 days. The same will
continue, for a period of 3 months or floating of 5 main board public issues, whichever is later.
Phase II: Thereafter, for applications by retail individual investors through intermediaries, the existing
process of physical movement of forms from intermediaries to Self-Certified Syndicate Banks (SCSBs) for
blocking of funds will be discontinued and only the UPI mechanism with existing timeline of T+6 days
will continue, for a period of 3 months or floating of 5 main board public issues, whichever is later.
Phase III: Subsequently, final reduced timeline will be made effective using the UPI mechanism.
5 Up to what limit one can apply for a public issue in UPI?

4 The limit for IPO application is 2 Lakhs per transaction on UPI.
6
Are all category of investors eligible to apply in public issues
using UPI for payment?
No. Only retail individual investors are allowed to use UPI for payment in public issues. Qualified
Institutional Buyers and High Net-worth Individuals shall continue to apply as per the existing process.

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23. Green shoe option

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24. Right issue of listed company
25. Bonus issue of listed company
Right Issue Bonus Issue

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26. Derivative
Any Instrument which derives its value from the value of its underlying asset.

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Options can be of two types

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27. Numerical in Mutual Fund
Entry load and Exit load
Calculation of NAV
Calculation of Return

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28. Qualified institutional Buyer
Qualified Institutional Placement

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29. Anchor investor
A QIB who makes an application for ____________________ in a book building issue.
Provision for allotment to Anchor Investor

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30. Foreign portfolio investor
Categories of FPI
Category I
Category II
Category III

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31. Alternative investment fund
Categories of AIF
Category I
Category II
Category III

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32. Foreign Currency Convertible Bond
FEATURES:
 A bond expressed in foreign currency.
 The principal and the interest in respect of which is payable in foreign currency.
 Issued by an issuing company, being an Indian company.
 Subscribed by a person resident outside India.
 Convertible into equity shares of the company.
33. Foreign Currency Exchangeable Bond
FEATURES:
 A bond expressed in foreign currency.
 The principal and the interest in respect of which is payable in foreign currency.
 Issued by an issuing company, being an Indian company.
 Subscribed by a person resident outside India.
 Exchangeable into equity shares of another company.


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34. Indian Depository Receipts
Understanding GDRs (Global Depository Receipts)
IDR

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35. Penalties
Summary of all penalties:

Penalties under SCRA, 1956
Penalty for failure to furnish periodical returns, etc 5 lakh – 25 crores
Penalty for contravention where no separate penalty has 1 lakh – 1 crores
been provided
Penalty for failure to furnish information, return etc.
Penalty for failure by any person to enter into agreement
with client 1 lakh/day (up to max. 1 crores)
Penalty for failure to address investors grievances
Penalty for failure to segregate securities or money of 1 lakh – 1 crores
clients
Penalty for failure to comply with listing conditions or 5 lakh – 25 crores
delisting conditions
Penalty for excess dematerialization or delivery of 5 lakh – 25 crores
unlisted securities
Penalties under SEBI Act, 1992
Failure to furnish information, return, etc.
Failure by any person to enter into agreement with clients
Failure to redress investors’ grievances
Default in case of Mutual Funds/ AIF / Infrastructure
investment trust/ REIT/ Investment advisor/ research 1 lakh/day (up to max. 1 crores)
analyst
Failure to observe rules and regulations by an asset
management company
Default in case of stock broker (READ FROM MODULE)
Insider Trading
Non-Disclosure of Acquisition of Shares and Takeovers
Fraudulent and unfair trade practices
Contravention where no separate penalty has been 1 lakh – 1 crores

provided

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Penalties under Depositories Act, 1996

failure to furnish information /return etc
failure to enter into agreement
failure to redress investor's Grievances
Delay in dematerialisation or issue of certificate of
securities
failure to reconcile record
failure to comply with directions issued by SEBI
contravention where no separate penalty has been provide
Factors to be taken in account by the Adjudicating officer while imposing the amount of Penalty
 the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a

result of the default;
 the amount of loss caused to an investor or group of investors as a result of the default;
 the repetitive nature of the default.
Recovery of amount by Adjudicating officer if any person fails to pay the penalty
Recover from such person the amount 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 detention in prison;
(e) appointing a receiver for the management of the person’s movable and immovable properties.
Contravention by companies:
Where an offence has been committed by a company, every person who, at the time when the
offence was committed, was in charge of, and was responsible to, the company for the
conduct of the business of the company, as well as the company, shall be deemed to be guilty of the
offence, and shall be liable to be proceeded against and punished accordingly.
However, any such person shall not be liable to any punishment provided in this Act, if he proves that
the offence was committed without his knowledge or that he exercised all due diligence to prevent
the commission of such offence.
Where an offence under this Act has been committed by a company and is proved that the offence
has been committed with the consent or connivance of, or is attributable to any gross negligence on
the part of any director, manager, secretary or other officer of the company, such director, manager,
secretary or other officer of the company shall also be deemed to be guilty of that offence and shall
be liable to be proceeded against and punished accordingly.

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36. Miscellaneous topics:
1. Stop loss
An order placed at a specified price, where the order will be automatically executed if the market
price falls up to the specified price.
Example: The current market price for Yes bank share is 75, I place a stop loss order for selling my
holding of yes bank shares at 60.
So if the market price falls to 60 the shares would be automatically sold.
2. Short selling
Short selling means selling a share which a person does not own, Stock exchanges allows short selling
to ensure that a person who expects the share price to fall, can make profit from such prediction.
3. Nifty and Sensex
These are the two popular indexes of NSE and BSE respectively.
An index is a representative of all the shares listed on a RSE.
Nifty is the index for NSE, it comprise of 50 securities.
Sensex is the index for BSE, it comprise of 30 securities.
4. Value of right
5. Last traded price and closing price
Last traded price for any day is the price at which the last transaction took place that day.
Closing price for any day is the weighted average price of all the transaction which took place in
the last 30 minutes on that day. (i.e. 3 to 3:30)
[If no transaction took place in last 30 minutes, then the Last traded price becomes the closing
price]
(refer question at the end of the notes)
6. Enterprise Value
Enterprise value Enterprise value means the value calculated as market capitalization of a company
plus debt, minority interest and preferred shares, minus total cash and cash equivalents.
[Enterprise Value= Market capitalization+ Debt+ Minority Interest and Preferred Shares- Total Cash
and Cash Equivalents]

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7. Auction
Dutch Auction French Auction
Also known as Uniform auction, Also known as multiple price based auction,
Where all the bids at or above the Where all the bids at or above the cut off
cut off price is accepted price is accepted
At the cut off price. At the bid price.
8. Surveillance
SEBI takes various measures to prevent market abuse, such measures are known as surveillance
measures, there are two types of surveillance measures:
Online surveillance
Offline surveillance
What is market abuse?

Anything which is not strictly legal, is covered under the ambit of market abuse, like
 Insider trading
 Window dressing of financial statement
 Price manipulation in share market, etc

45
9. Cut off price
STEP 1: Company specifies Tenure- 5 years and invite bids as to price investor is ready to
Rate of interest – 10% pay for the specified bond.
Price- ? (FV- 100)
STEP 2: After receiving all the bids company declares the CUT OFF PRICE
Company accepts all the bids the

cut off price
10. Cut off yield
STEP 1: Company specifies Tenure- 5 years and invite bids as to interest rate investor is
ready to accept
Price- 100 (FV- 100)
pay for the specified bond.
Rate of interest?
STEP 2: After receiving all the bids company declares the CUT OFF YIELD
Company accepts all the bids the

cut off YIELD

46
11. Role of CS (Just Read)
Under SEBI Act, 1992

 Right to Legal Representation
Any person aggrieved may either appear in person or authorise one or more chartered
accountants or company secretaries (PCS) or cost accountants or legal practitioners or any of
its officers to present his or its case before the Securities Appellate Tribunal.
Under Depositories Act, 1996

 Right to Legal Representation
Any person aggrieved may either appear in person or authorise one or more chartered
accountants or company secretaries (PCS) or cost accountants or legal practitioners or any of
its officers to present his or its case before the Securities Appellate Tribunal.
 Internal Audit of Depository Participants
The 2 (two) Depository services providers in India, viz., National Securities Depository Ltd.
(NSDL) and Central Depository Services (India) Limited (CDSL) have allowed Company
Secretaries in Whole-time Practice to undertake internal audit of the operations of Depository
Participants (DPs).
 Reconciliation of Share Capital Audit
Company Secretary is authorised to issue quarterly certificate with regard to reconciliation of
the total issued capital, listed capital and capital held by depositories in dematerialized form,
details of changes in share capital during the quarter, and inprinciple approval obtained by
the issuer from all the stock exchanges where it is listed in respect of such further issued
capital under SEBI (Depositories and Participants) Regulations, 2018.
 Concurrent Audit of Depository Participants
Practicing Company Secretary is authorized to carry out concurrent audit of Depository
Participants which covers audit of the process of demit account opening, control and
verification of Delivery Instruction Slips (DIS).
Under SEBI (LODR) Regulation, 2015

For CS in Employment
 A listed entity shall appoint a Qualified Company Secretary as the Compliance Officer.
The compliance officer of the listed entity shall be responsible for:
- ensuring conformity with the regulatory provisions applicable to the listed entity in letter
and spirit.
- co-ordination with and reporting to SEBI, recognised stock exchange(s) and depositories
with respect to compliance with rules, regulations and other directives of these authorities in
manner as specified from time to time.
- ensuring that the correct procedures have been followed that would result in the
correctness, authenticity and comprehensiveness of the information, statements and reports
filed by the listed entity under these regulations.
- monitoring email address of grievance redressal division as designated by the listed entity
for the purpose of registering complaints by investors.
 The listed entity shall submit a compliance certificate to the exchange, duly signed by both
the compliance officer of the listed entity and the authorised representative of the share
transfer agent, wherever applicable, within one month of end of each half of the financial
year, certifying that all activities in relation to both physical and electronic share transfer

47
facility are maintained either in house or by Registrar to an issue and share transfer agent
registered with SEBI.
 “Senior Management” shall mean Officers/Personnel of the listed entity who are members of
its core management team excluding Board of directors and normally this shall comprise all
members of management one level below Chief Executive Officer/ Managing Director/ Whole
Time Director/ Manager (including Chief Executive Officer/Manager, in case they are not part
of the board) and shall specifically include Company Secretary and Chief Financial Officer.
For Company Secretary in Practice
In addition to the above responsibilities, the following are the certifications to be done by Practicing
Company Secretary under the SEBI Listing Regulations, 2015 :
 Certificate regarding Transfer of Securities (Certification to the effect that all transfers have
been completed within the stipulated time.)
 Certificate Regarding Compliance of Conditions of Corporate Governance under SEBI
Listing Regulations (SEBI listing regulations authorizes Company Secretary in Practice to issue
certificate regarding compliance of conditions of Corporate Governance.)
 Certificate Regarding Maintenance of 100% Asset Cover (To issue half yearly certificate
regarding maintenance of 100% security cover in respect of listed non- convertible debt
securities.)
 Secretarial Audit Report (Every listed entity and its material unlisted subsidiaries incorporated
in India shall undertake Secretarial Audit and shall annex with its Annual Report, a Secretarial
Audit Report, given by a Company Secretary in Practice)
 Certification regarding Director’s Disqualification (A certificate from a Company Secretary in
Practice that none of the directors on the board of the company have been debarred or
disqualified from being appointed or continuing as Directors of Companies by the Board/
Ministry of Corporate Affairs or any such Statutory Authority.)
Under SEBI (Share Based Employee Benefits) Regulations, 2014

For listing of equity shares issued pursuant to exercise of options granted under ESPS/ESOS/SARS/
GEBS/RBS, A Certificate from Company Secretary for receipt of money and a quarterly certificate from
the practicing Company Secretary specifically certifying that the company has received the
application/allotment monies from the applicants of these shares.

48
Additional Topics:
1. Vigil Mechanism
• The listed entity shall formulate a vigil mechanism for directors and employees to report
genuine concerns.
• The vigil mechanism shall provide for adequate safeguards against victimization of director(s) or
employee(s) or any other person who avail the mechanism.
• The vigil mechanism shall also provide for direct access to the chairperson of the audit
committee in appropriate or exceptional cases.
2. Penalty for default of stock broker
Section 15F provides if any person registered as a stock broker under the SEBI Act
a) fails to issue contract notes in the form and in the manner specified by the stock exchange
of which such broker is a member, he shall be liable to a penalty which shall not be less than
one lakh rupees but which may extend to for which the contract note was required to be
issued by that broker;
b) fails to deliver any security or fails to make payment of the amount due to the investor in
the manner within the period specified in the regulations, he shall be 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 such failure continues subject to a maximum of one crore rupees;
c) charges an amount of brokerage which is in excess of the brokerage specified in the
regulations, he shall be liable to a penalty which shall not be less than one lakh rupees but
which may extend to five times the amount of brokerage charged in excess of the specified
brokerage, whichever is higher.
3. Reservation for issue of shares:
In case of an issue made through • not less than 35 % to retail individual investors;
the book building process as per • not less than 15 % to non-institutional investors;
regulation 6(1) • not more than 50% to qualified institutional buyers,
5 % of which shall be allocated to mutual fund
In case of an issue made through • not more than 10% to retail individual investors;
the book building process under • not more than 15% to non-institutional investors;
regulation 6(2) • not less than 75% to qualified institutional buyers,
5% of which shall be allocated to mutual fund
In an issue made other than • Minimum 50% to retail individual investors; and
through the book building process, • Remaining to:
(i) individual applicants other than RII and
(ii) other investors including corporate bodies or
institutions, irrespective of the number of specified
securities applied for;

49
4. Listed securities and Permitted securities
Listed Securities: The securities of companies, which have signed the listing agreement with a stock
exchange, are traded as “Listed Securities” in that exchange.
Permitted Securities: To facilitate the market participants to trade in securities of such companies,
which are actively traded at other stock exchanges in India but are not listed on an exchange,
trading in such securities is facilitated as “permitted securities” provided they meet the relevant
norms specified by the stock exchange.
5. Book Building process/steps

 Appoints Lead Book Runners/Co Book Runners, Lead Merchant Banker (LMB) to act as Lead
Book Runner. If more than one LBM/LBR, inter-se, allocation of responsibilities to be decided.
 Filing of draft offer document with SEBI for obtaining observation and, Exchanges for in-principle
approval for listing
 Filing of Red herring prospectus with SEBI, Exchange and Registrar of Companies (RHP)
 The company shall entered into agreement with stock exchange for online offer of securities
and make application for In-principle approval.
 Lead Book Runners (LBR) appoints Syndicate members (SM), LBR/SM to underwrite/sub
underwrite.
 LBR/SN to finalise bidding/collection centres who are either: (a) SEBI Registered stock broker (b)
Self-certified Syndicate Bank (for ASBA facility)
 Pre issue advertisement shall be made.
 Bidding and allocation for anchor investors one day before opening of issue.
 Issue opens and Investor submits forms at bidding centres.
 Electronic Bidding Process and determination of price.
 Registration of final prospectus with ROC.
 Allocation/Manner of Allotment.
 In case of Book Built Issue, the issuer in consultation with merchant banker, fixes the Price band.
 In case of Fixed Price Issue, the issuer in consultation with merchant banker, fixes the price of
the shares to be offered (Face Value + Share Premium) and makes on offer. If the investors
subscribes minimum 90% of the offer, the issue will be succeeds.
6. Salient features of SCORES (SEBI Complaints Redress System)

 SCORES is web enabled and provides online access 24 x 7;
 Complaints and reminders thereon can be lodged online at the above website at anytime from
anywhere;
 An email is generated instantaneously acknowledging the receipt of complaint and allotting a
unique complaint registration number to the complainant for future reference and tracking;
 The complaint forwarded online to the entity concerned for its redressal;
 The entity concerned uploads an Action Taken Report (ATR) on the complaint;
 SEBI peruses the ATR and closes the complaint if it is satisfied that the complaint has been
redressed adequately;

50
 The concerned investor can view the status of the complaint online from the above website by
logging in the unique complaint registration number;
 The entity concerned and the concerned investor can seek and provide clarification on his
complaint online to each other;
 Every complaint has an audit trail; and
 All the complaints are saved in a central database which generates relevant MIS reports to
enable SEBI to take appropriate policy decisions and/or remedial actions, if any.
7. Restriction on business activity of CIS:

The Collective Investment Management Company should not:
(i) undertake any activity other than that of managing the scheme;
(ii) act as a trustee of any scheme;
(iii) launch any scheme for the purpose of investing in securities;
(iv) invest in any schemes floated by it.

51
NUMERICALS
Ques 1: Complete the table:
S.no. Contract Type Premium Exercise MP on In the Out of Whether Net

Paid Price due money the the contract Profit/Loss
date money be exercised
or not?
1. Future (Buy) NA 200 210
2. Option holder (call) 5 200 220
3. Future (Sell) NA 200 230
6. Future (Buy) NA 200 260
7. Option holder (Put) 5 200 270
8 Option holder (call) 5 200 280
9 Option holder (Put) 5 200 290
10 Future (Sell) NA 200 300
15 Future(Buy) NA 200 150
25 Future (Buy) NA 200 140

52
Ques 2. Complete the table:
S.no. Contract Type Premium Exercise MP on In the Out of Whether Net

Received Price due money the the contract Profit/Loss
date money be exercised
or not?
1. Option writer (call) 5 200 210
6. Option writer (Put) 5 200 190
7. Option writer (Put) 5 200 180
8 Option writer (Put) 5 200 170
Ques 3. What we the Option contracts? You are required to compute the profit/loss for each investors
in below option contracts:
I. Mr. X writes a call option to purchase share at an exercise price of Rs.60 for a premium of Rs.12
per share. The share price rises to Rs.62 by the time the option expires.
II. Mr. Y buys a put option- at an exercise price of Rs.80 for a premium of Rs.8.50 per share. The
share price falls to Rs.60 by the time the option expires.
III. Mr. Z writes a put option at an exercise price of Rs.80 for a premium of Rs.11 per share. The
price of the share rises to Rs.96 by the time the option expires.
IV. Mr. XY writes a put option with an exercise price of Rs.70 for a premium of Rs.8 per share. The
price falls to 3 48 by the time the option expires.
Answer:
I.
II.
III.
IV.

53
Ques 4: From the following information, calculate the Enterprise Value of E Ltd
Balance Sheet of E Ltd. as on 31st March, 2018

Liabilities Amount (Rs. Lakh) Assets Amount (Rs. Lakh)
Share Capital (Face 952 Non-Current Assets 2,550
Value Rs.2)
Current Assets: Cash & 102
Reserves & Surplus 48 Cash Equivalent
Minority Interest 115 Other Current Assets 1,323
Short-term Borrowings 2,860

3,975 3,975
Current Market Price per Share is Rs.96.
Ques 5. The financial data of a listed company as on 31'1 March, 2018 are as follows
Authorised Equity Share Capital (Rs. 1 crore Rs. 10 Crore

shares of Rs. 10 each)
Paid-up equity share capital Rs. 5 Crore
General Reserve Rs. 3 Crore
Debenture Redemption Reserve Rs. 2 Crore
The Board of Directors of your Company passed resolution by circulation for buy back of Shares to the
extent of 9% of the company’s paid up share capital and free reserves. You are required to examine the
validity of the proposal with reference to the provisions of the SEBI Regulations.
Ques 6. The Board of Directors of a listed company desires to delist its equity shares from all recognized
stock exchanges. The Voting details through postal ballot are as under:
 Total Number of Voters : 7000 (Public – 5000 and Promoter – 2000)

 Voting at shareholders meeting:
a. Public shareholders :
In Favour : 3300 votes
In against : 1700 votes
b. All promoters shareholder have voted in favour of resolution.
By Referring SEBI delisting regulation, decide upon the resolution passed by the shareholders.

54
Ques 7: XYZ Ltd. is proposing to make a public issue of 400 crore equity shares through the book
building mechanism where 50% of the issue size is required to be allotted to Qualified Institutional
Buyers. Determine the following :
(i) The quantum available for allocation to anchor investors.
(ii) The quantum reserved for domestic mutual funds in the anchor investor portion, if any.
(iii) The amount, if any, required to be brought in by the anchor investors given :
(a) The price at which allocation is made to anchor investors is ` 855 per share, and
(b) The price fixed as a result of book building is ` 858 per share.
Ques 8: Global mutual fund has the following details, Calculate its NAV based on the following:
Market value of all investments 1100 crore

Assets 50 crore
Liabilities 80 crore
Number of outstanding unis 100 ore
Ques 9: Universal mutual fund has the following details, Calculate its NAV based on following:
Portfolio of mutual fund

Shares of X Ltd. 60 crore
Shares of Y Ltd. 40 crore
Debentures of M Ltd. 75 crore
Government securities 45 crore
Other details of mutual fund

Accrued income 50 crore
Bank balance 60 crore
Accrued expense 40 crore
Size of the fund (20 crore units of 10 rs each) 200 ore
Ques 10: Bestworth mutual fund has the following details, Calculate its NAV based on following:
Portfolio of mutual fund

Shares of X Ltd. 160 crore
Shares of Y Ltd. 140 crore
Debentures of M Ltd. 175 crore
Government securities 145 crore
Other details of mutual fund

Accrued income 150 crore
Bank balance 160 crore
Accrued expense 140 crore
Size of the fund (50 crore units of 10 rs each) 500 ore

55
Ques 11: Calculate the offer price and the redemption price, if the NAV of the unit is 15 rs, and the entry
load and exit load is 2% and 3% respectively.
Ques 12: A unit of Ever grow Equity Fund is redeemed at Rs.15, the exit load being 2.25%. Calculate the
NAV.
Ques 13: The redemption price of a mutual fund unit is 12 while the front-end load and back-end load
charges are 2% and 3% respectively. You are required to calculate:
a) Net asset value (NAV) per unit; and
b) Public offer-price of the unit.
Ques 14: Define ‘NAV’ and ‘offer price. If Rahul invests Rs.10, 000 in a scheme that charges 2% front end
load at NAV of Rs.10 per unit, what shall be the public offer price?
Ques 15: The redemption price of a mutual fund unit is Rs.48 while the front-end load and back-end
load charges are 2% and 3% respectively. You are required to calculate —
(i) Net asset value per unit; and
(ii) Public offer price of the unit.
Ques 16: Mr. Rajesh invested 1,00,000 rs. in shares of SRL Ltd, he received dividend of 12,000 on these
shares. At the year end the MP of the shares is 1,10,000. Calculate the return for Mr. Rajesh.
Ques 17: Rajesh invested 1,00,000 rs. in shares of SRL Ltd on 1st Jan 2019, he received dividend of 12,000
on these shares. On 30th june the MP of the shares is 1,10,000. Calculate the return for Mr. Rajesh.
Ques 18: Mr. Rajesh invested 1,00,000 rs. in shares of SRL Ltd on 1 st Jan 2019, he received dividend of
12,000 on these shares. On 31st September the MP of the shares is 1,10,000. Calculate the return for Mr.
Rajesh.
Ques 19: Rajesh invested 1,00,000 rs. in shares of SRL Ltd. After 30 days the MP of the shares is
1,05,000. Calculate the return for Mr. Rajesh.
Ques 20: Calculate the value of ‘rights’ if Number of rights shares offered (n) = 2,000 Number of shares
held (n) = 1,000 Ex-right Price (Pex) = Rs.18 Right offer price (Pof) = Rs.15 Face value of shares =Rs.10.
Ques 21: Calculate the value of rights, if— (i) Number of rights shares offered 7,500 (ii) Number of
shares held 2,500 (iii) Ex-rights price (Pex) Rs. 20 (iv) Rights offer price(Pof) Rs.12 (v) Face value of shares
Ans. Value of right Rs.10.
Ques 22: Prime Ltd. issued some warrants which allowed the holders to purchase, with one warrant,
one equity share at 18.275 per share. The equity share was quoted at 25 per share and the warrant was
selling at 9.50. In this case, you are required to compute — (i) The minimum price of warrant; and (ii)
The warrant premium.
Ques 23: Manish owns 250 preference shares of Amaze Ltd. which currently sells for 77 per share and
pays annual dividend of 13 per share—(i) What is Manish's expected return? (ii) If Manish requires 13%
return, should he sell or buy more preference shares at the current price?

56
Ques 24: Ajay purchases 8.4% Government of India Bond, 2018 of face value of Rs.20 lakh @ Rs.102.50
for every unit of security having face value of Rs.100. The settlement is due on 13th October, 2009.
What is the amount to be paid by Ajay ? (Assuming that interest is payable on 13th May and 13th
November every year.)
Ques 25: On 25th January, 2013, XY Bank purchased a 91-day treasury bill maturing on 16th March,
2013. The rate quoted by the seller is 99.25 per 100 face value. Compute the yield percentage of the
treasury bill.
Ques 26: As on 1st April, 2016, Russel Ltd. has surplus cash for six months. It has following two options
under consideration for investing the surplus cash : (i) To invest in fixed deposit at an interest rate of 8%
per annum payable quarterly; or (ii) To buy treasury bills of the face value of 100 at 98.019 maturing
after six months. Presuming that the risk involved in both the options is identical, state with reasons as
to which option should be selected by the company for investing its surplus funds.
Ques 27: Following information has been collected regarding Share–X trading at NSE on 2nd September,
2016
DATE TIME PRICE No. of shares traded
2nd September, 2016 14:42:10 265.60 550
2nd September, 2016 14:53:35 262.78 1575
2nd September, 2016 15:00:20 260.99 1514
2nd September, 2016 15:03:30 261.79 1625
2nd September, 2016 15:05:40 260.38 1025
2nd September, 2016 15:12:20 261.51 1390
2nd September, 2016 15:21:25 261.42 800
2nd September, 2016 15:22:20 264.07 600
2nd September, 2016 15:26:55 263.74 1200
You are required to determine the closing price and last traded price for Share–X for 2nd September,
2016. (3 marks)

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Contents…

Shubhamm Sukhlecha (INSPIRE ACADEMY)

Shubhamm Sukhlecha (INSPIRE ACADEMY)

Shubhamm Sukhlecha (INSPIRE ACADEMY)

2. Corporatization and Demutualization

Shubhamm Sukhlecha (INSPIRE ACADEMY)

3. Dematerialization and Rematerialization

Shubhamm Sukhlecha (INSPIRE ACADEMY)

Shubhamm Sukhlecha (INSPIRE ACADEMY)

1. Investor opens account

3. DP sends the 5.Issuer

Shubhamm Sukhlecha (INSPIRE ACADEMY)

 Section 9 states that securities in depositories shall be in fungible form.

 Immobilisation of securities in a depository mode refers to a situation where the depository

5. Minimum Public shareholding (Continuous listing agreement)

Minimum offer and allotment to public

Shubhamm Sukhlecha (INSPIRE ACADEMY)

Shubhamm Sukhlecha (INSPIRE ACADEMY)

7. Grounds of Delisting by Recognized stock exchange

Grounds of Delisting by Recognized stock exchange:

Shubhamm Sukhlecha (INSPIRE ACADEMY)

8. Eligibility for IPO and FPO

Shubhamm Sukhlecha (INSPIRE ACADEMY)

How Book Building operates?

Company Red herring Prospectus Public/Potential investors

How to determine the cut off price?

Shubhamm Sukhlecha (INSPIRE ACADEMY)

Offer period Min 3 days, Max 10 days.

FAQs over Book Building

1. Is it mandatory to give the price band during book building?

(refer reservation under ICDR at the end of the notes)

Shubhamm Sukhlecha (INSPIRE ACADEMY)

10. Fast track issue

What is a fast track issue?

Which companies are allowed to go for fast track issue?

Shubhamm Sukhlecha (INSPIRE ACADEMY)

11. Concept and provision regarding warrant

 a specified security may have one or more warrants attached to it;

Shubhamm Sukhlecha (INSPIRE ACADEMY)

12. Manner and Procedure of allotment

Let’s Understand with a question:

As per ICDR 2018, How many shares will be allotted to A, B, C, D and E.

Shubhamm Sukhlecha (INSPIRE ACADEMY)

Allotment shall be as follows:

Name Minimum Securities allotted on Pro rata basis Total securities to

WN: Calculation of ratio for proportionate allotment:

Shubhamm Sukhlecha (INSPIRE ACADEMY)

13. Overview of Buy back

Shubhamm Sukhlecha (INSPIRE ACADEMY)

14. Delisting of securities

Voluntary Delisting Compulsory Delisting

Shubhamm Sukhlecha (INSPIRE ACADEMY)

15. Overview of insider trading

Restriction COMMUNICATION OR PROCUREMENT OF

Except in case of legitimate purposes, performance of duties or discharge of legal

Disclosure INITIAL DISCLOSURE:

Shubhamm Sukhlecha (INSPIRE ACADEMY)

16. Overview of Takeover Code

Trigger point for Open offer requirement

Shubhamm Sukhlecha (INSPIRE ACADEMY)

Disclosure requirement under Takeover Code

Shubhamm Sukhlecha (INSPIRE ACADEMY)