SEBI is regulator to control Indian capital market.

Since its establishment in 1992, it is doing

hard work for protecting the interests of Indian investors. SEBI gets education from past cheating
with naive investors of India. Now, SEBI is more strict with those who commit frauds in capital
market.
The role of security exchange board of India (SEBI) in regulating Indian capital market is very
important because government of India can only open or take decision to open new stock
exchange in India after getting advice from SEBI.

If SEBI thinks that it will be against its rules and regulations, SEBI can ban on any stock
exchange to trade in shares and stocks.

Now, we explain role of SEBI in regulating Indian Capital Market more deeply with following
points:

1. Power to make rules for controlling stock exchange :

SEBI has power to make new rules for controlling stock exchange in India. For example, SEBI
fixed the time of  trading 9 AM and 5 PM in stock market.

2. To provide license to dealers and brokers :

SEBI has power to provide license to dealers and brokers of capital market. If SEBI sees that any
financial product is of capital nature, then SEBI can also control to that product and its dealers.
One of main example is ULIPs case. SEBI said, " It is just like mutual funds and all banks and
financial and insurance companies who want to issue it, must take permission from SEBI."

3. To Stop fraud in Capital Market :

SEBI has many powers for stopping fraud in capital market.

It can ban on the trading of those brokers who are involved in fraudulent and unfair trade
practices relating to stock market.
 It can impose the penalties on capital market intermediaries if they involve in insider trading.

4. To Control the Merge, Acquisition and Takeover the companies :

Many big companies in India want to create monopoly in capital market. So, these companies
buy all other companies or deal of merging. SEBI sees whether this merge or acquisition is for
development of business or to harm capital market.

5. To audit the performance of stock market :

SEBI uses his powers to audit the performance of different Indian stock exchange for bringing
transparency in the working of stock exchanges.

6. To make new rules on carry - forward transactions :

Share trading transactions carry forward can not exceed 25% of broker's total transactions.

90 day limit for carry forward.

7. To create relationship with ICAI :

ICAI is the authority for making new auditors of companies. SEBI creates good relationship with
ICAI for bringing more transparency in the auditing work of company accounts because audited
financial statements are mirror to see the real face of company and after this investors can decide
to invest or not to invest. Moreover, investors of India can easily trust on audited financial
reports. After Satyam Scam, SEBI is investigating with ICAI, whether CAs are doing their duty
by ethical way or not.

8. Introduction of derivative contracts on Volatility Index :

For reducing the risk of investors, SEBI has now been decided to permit Stock Exchanges to
introduce derivative contracts on Volatility Index, subject to the condition that;
a. The underlying Volatility Index has a track record of at least one year.

b. The Exchange has in place the appropriate risk management framework for such derivative
contracts.

2. Before introduction of such contracts, the Stock Exchanges shall submit the following:

i. Contract specifications

ii. Position and Exercise Limits

iii. Margins

iv. The economic purpose it is intended to serve

v. Likely contribution to market development

vi. The safeguards and the risk protection mechanism adopted by the exchange to ensure market
integrity, protection of investors and smooth and orderly trading.

vii. The infrastructure of the exchange and the surveillance system to effectively monitor trading
in such contracts, and

viii. Details of settlement procedures & systems

ix. Details of back testing of the margin calculation for a period of one year considering a call
and a put option on the underlying with a delta of 0.25 & -0.25 respectively and actual value of
the underlying. Link

9. To Require report of Portfolio Management Activities :

SEBI has also power to require report of portfolio management to check the capital market
performance. Recently, SEBI sent the letter to all Registered Portfolio Managers of India for
demanding report.

10.  To educate the investors :

Time to time, SEBI arranges scheduled workshops to educate the investors. On 22 may 2010
SEBI imposed workshop.
 INSURANCE
In law and economics, insurance is a form of risk management primarily used to hedge against
the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of
a loss, from one entity to another, in exchange for payment. An insurer is a company selling the
insurance; an insured or policyholder is the person or entity buying the insurance policy. The
insurance rate is a factor used to determine the amount to be charged for a certain amount of
insurance coverage, called the premium. Risk management, the practice of appraising and
controlling risk, has evolved as a discrete field of study and practice.

The transaction involves the insured assuming a guaranteed and known relatively small loss in
the form of payment to the insurer in exchange for the insurer's promise to compensate
(indemnify) the insured in the case of a large, possibly devastating loss. The insured receives a
contract called the insurance policy which details the conditions and circumstances under which
the insured will be compensated.

Insurance Principles
Main principles of Insurance:

  Utmost good faith

  Indemnity
  Subrogation
  Contribution
  Insurable Interest
  Proximate Cause

Utmost Good Faith (Uberrimae Fides)

As a client it is your duty to disclose all material facts to the risk being covered.  A material fact is a fact which would
influence the mind of a prudent underwriter in deciding whether to accept a risk for insurance and on what terms. The
duty to disclose operates at the time of inception, at renewal and at any point mid term.

Indemnity

On the happening of an event insured against, the Insured will be placed in the same monetary position that he/she
occupied immediately before the event taking place.  In the event of a claim the insured must:

  Prove that the event occurred

  Prove that a monetary loss has occurred
  Transfer any rights which he/she may have for recovery from another source to the Insurer, if he/she has
been fully indemnified.

Subrogation

The right of an insurer which has paid a claim under a policy to step into the shoes of the insured so as to exercise in
his name all rights he might have with regard to the recovery of the loss which was the subject of the relevant claim
paid under the policy up to the amount of that paid claim. The insurer’s subrogation rights may be qualified in the
policy.

In the context of insurance subrogation is a feature of the principle of indemnity and therefore only applies to contracts
of indemnity so that it does not apply to life assurance or personal accident policies. It is intended to prevent an
insured recovering more than the indemnity he receives under his insurance (where that represents the full amount of
his loss) and enables his insurer to recover or reduce its loss. 

Contribution

The right of an insurer to call on other insurers similarly, but not necessarily equally, liable to the same insured to
share the loss of an indemnity payment i.e. a travel policy may have overlapping cover with the contents section of a
household policy.  The principle of contribution allows the insured to make a claim against one insurer who then has
the right to call on any other insurers liable for the loss to share the claim payment.

Insurable Interest

If an insured wishes to enforce a contract of insurance before the Courts he must have an insurable interest in the
subject matter of the insurance, which is to say that he stands to benefit from its preservation and will suffer from its
loss.
In non-marine insurances, the insured must have insurable interest when the policy is taken out and also at the date of
loss giving rise to a claim under the policy.

Proximate Cause

An insurer will only be liable to pay a claim under an insurance contract if the loss that gives rise to the claim was
proximately caused by an insured peril. This means that the loss must be directly attributed to an insured peril without
any break in the chain of causation.

About the Basel Committee

The Basel Committee on Banking Supervision provides a forum for regular cooperation on
banking supervisory matters. Its objective is to enhance understanding of key supervisory issues
and improve the quality of banking supervision worldwide. It seeks to do so by exchanging
information on national supervisory issues, approaches and techniques, with a view to promoting
common understanding. At times, the Committee uses this common understanding to develop
guidelines and supervisory standards in areas where they are considered desirable. In this regard,
the Committee is best known for its international standards on capital adequacy; the Core
Principles for Effective Banking Supervision; and the Concordat on cross-border banking
supervision.

The Committee's members come from Argentina, Australia, Belgium, Brazil, Canada, China,
France, Germany, Hong Kong SAR, India, Indonesia, Italy, Japan, Korea, Luxembourg, Mexico,
the Netherlands, Russia, Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland,
Turkey, the United Kingdom and the United States. The present Chairman of the Committee is
Mr Nout Wellink, President of the Netherlands Bank.

The Committee encourages contacts and cooperation among its members and other banking
supervisory authorities. It circulates to supervisors throughout the world both published and
unpublished papers providing guidance on banking supervisory matters. Contacts have been
further strengthened by an International Conference of Banking Supervisors (ICBS) which takes
place every two years.

The Committee's Secretariat is located at the Bank for International Settlements in Basel,
Switzerland, and is staffed mainly by professional supervisors on temporary secondment from
member institutions. In addition to undertaking the secretarial work for the Committee and its
many expert sub-committees, it stands ready to give advice to supervisory authorities in all
countries. Mr Stefan Walter is the Secretary General of the Basel Committee.

Main Expert Sub-Committees

The Committee's work is organised under four main sub-committees (organisation chart):

 The Standards Implementation Group

 The Policy Development Group
 The Accounting Task Force
 The Basel Consultative Group

More information on each sub-committee is provided below.

  The Standards Implementation Group (SIG) was originally established to share information
and promote consistency in implementation of the Basel II Framework. In January 2009, its
mandate was broadened to concentrate on implementation of Basel Committee guidance and
standards more generally. It is chaired by Mr José María Roldán, Director General of Banking
Regulation at the Bank of Spain.

Currently the SIG has two subgroups that share information and discuss specific issues related to
Basel II implementation. The Validation Subgroup explores issues related to the validation of
systems used to generate the ratings and parameters that serve as inputs into the internal ratings-
based approaches to credit risk. The group is chaired by Mr Alvir Alberto Hoffmann, Deputy
Governor at the Central Bank of Brazil.
The Operational Risk Subgroup addresses issues related primarily to banks' implementation of
advanced measurement approaches for operational risk. Mr Mitsutoshi Adachi, Deputy Head at
the Bank of Japan, chairs the group.

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The primary objective of the Policy Development Group (PDG) is to support the Committee by
identifying and reviewing emerging supervisory issues and, where appropriate, proposing and
developing policies that promote a sound banking system and high supervisory standards. The
group is chaired by Mr Stefan Walter, Secretary General of the Basel Committee.

Seven working groups report to the PDG: the Risk Management and Modelling Group (RMMG),
the Research Task Force (RTF), the Working Group on Liquidity, the Definition of Capital
Subgroup, a Basel II Capital Monitoring Group, the Trading Book Group (TBG) and the Cross-
border Bank Resolution Group.

The Risk Management and Modelling Group serves as the Committee's point of contact with the
industry on the latest advances in risk measurement and management, and is chaired by Mr Mark
White, Assistant Superintendent at the Office of the Superintendent of Financial Institutions. It
focuses on assessing the range of industry risk management practices and the development of
supervisory guidance to promote enhanced risk management practices.

The Research Task Force serves as a forum for research economists from member institutions to
exchange information and engage in research projects on supervisory and financial stability
issues. It also acts as a mechanism for facilitating communication between economists at
member institutions and in the academic sector. It is co-chaired by Mr Peter Praet, Executive
Director at the National Bank of Belgium and member of the Management Committee of the
Banking, Finance and Insurance Commission, Belgium, and Mr Paul Kupiec, Associate Director
of the Federal Deposit Insurance Corporation's Division of Insurance and Research and Co-
Director of the FDIC Center for Financial Research.

The Trading Book Group addresses issues relating to the application of Basel II to certain
exposures arising from trading activities. A current focus of this group is the appropriate capital
treatment of event risk in the trading book. It is co-chaired by Ms Norah Barger, Associate
Director, Board of Governors of the Federal Reserve System, United States, and Mr Alan
Adkins, Manager, Financial Services Authority, United Kingdom.

The Working Group on Liquidity serves as a forum for information exchange on national
approaches to liquidity risk regulation and supervision. In September 2008, the Working Group
issued Principles for Sound Liquidity Risk Management and Supervision, the global standards for
liquidity risk management and supervision. The Working Group is also examining the scope for
additional steps to promote more robust and internationally consistent liquidity approaches for
cross-border banks. The group is co-chaired by Mr Thomas Wiedmer, Deputy Head at the Swiss
national Bank, and Mr Marc Saidenberg, Senior Vice President in the Banking Supervision
Group of the Federal Reserve Bank of New York, United States.
The Definition of Capital Subgroup explores emerging trends in eligible capital instruments in
member jurisdictions. It currently is reviewing issues related to the quality, consistency and
transparency of capital with a particular focus on Tier 1 capital. The group is co-chaired by Mr
Hirotaka Hideshima, Director, Deputy Head of the International Affairs Section at the Bank of
Japan, and Mr Richard Thorpe, Head of Capital Adequacy Policy Department and Accounting
and Audit Sector Leader at the Financial Services Authority, United Kingdom.

In the course of implementation of Basel II, national supervisors are monitoring capital
requirements to ensure that banks in their jurisdiction maintain a solid capital base throughout
the economic cycle. The Basel Committee has established a Basel II Capital Monitoring Group
that will from time to time share national experiences in monitoring capital requirements. This
group is chaired by Mr Klaus Düllmann, Head of Banking Supervision Research at the Deutsche
Bundesbank.

Cross-border Bank Resolution Group: the CBRG is comparing the national policies, legal
frameworks and the allocation of responsibilities for the resolution of banks with significant
cross-border operations. It is co-chaired by Ms Eva Hüpkes, Head of Regulation, Swiss Financial
Market Supervisory Authority (FINMA), and Mr Michael H Krimminger, Special Advisor for
Policy to the Chairman of the Federal Deposit Insurance Corporation.

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The Accounting Task Force (ATF)  works to help ensure that international accounting and
auditing standards and practices promote sound risk management at financial institutions,
support market discipline through transparency, and reinforce the safety and soundness of the
banking system. To fulfil this mission, the task force develops prudential reporting guidance and
takes an active role in the development of international accounting and auditing standards. Ms
Sylvie Mathérat, Director of Financial Stability, Bank of France, chairs the ATF.

Three working groups report to the ATF: the Conceptual Framework Issues Subgroup, the
Financial Instruments Practices Subgroup, and the Audit Subgroup. The Conceptual Framework
Issues Subgroup monitors and responds to the conceptual accounting framework project of the
International Accounting Standards Board (IASB) and the Financial Accounting Standards
Board in the United States. The Subgroup is co-chaired by Mr Jerry Edwards, Senior Adviser on
Accounting and Auditing Policy at the Financial Stability Board, and Mr Patrick Amis, Head of
Accounting Affairs, Commission Bancaire, France.

The Financial Instruments Practices Subgroup assesses implementation of international

accounting standards related to financial instruments, and the links between accounting practices
in this area and prudential supervision. The Subgroup is chaired by Mr Ian Michael, Technical
Specialist, Accounting and Auditing Policy, Financial Services Authority, United Kingdom.

The Audit Subgroup promotes reliable financial information by exploring key audit issues from a
banking supervision perspective. It focuses on responding to international audit standards-
setting proposals, other issuances of the International Auditing and Assurance Standards Board
and the International Ethics Standards Board for Accountants, and audit quality issues. The
Subgroup is chaired by Mr Marc Pickeur, Advisor for Supervisory Policy at the Banking,
Finance and Insurance Commission, Belgium.

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The Basel Consultative Group (BCG) provides a forum for deepening the Committee's
engagement with supervisors around the world on banking supervisory issues. It facilitates broad
supervisory dialogue with non-member countries on new Committee initiatives early in the
process by gathering senior representatives from various countries, international institutions and
regional groups of banking supervisors that are not members of the Committee. The BCG is
chaired by Mr Karl Cordewener, Deputy Secretary General of the Basel Committee.

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Coordination with other standard setters

Formal channels for coordinating with supervisors of non-bank financial institutions include the
Joint Forum, for which the Basel Committee Secretariat provides the secretariat function, and the
Coordination Group. The Joint Forum was established in 1996 to address issues common to the
banking, securities and insurance sectors, including the regulation of financial conglomerates.
The Coordination Group is a senior group of supervisory standard setters comprising the
Chairmen and Secretaries General of the Committee, the International Organization of Securities
Commissions (IOSCO) and the International Association of Insurance Supervisors (IAIS), as
well as the Joint Forum Chairman and Secretariat. The Coordination Group meets twice annually
to exchange views on the priorities and key issues of interest to supervisory standard setters. The
position of chairman and the secretariat function for the Coordination Group rotate among the
member representatives of the three standard setters every two years.

Basel II: Revised international capital framework

Looking for Basel III? 
 
Latest news: Higher global minimum capital standards announced on 12 September 2010

  The efforts of the Basel Committee on Banking Supervision to revise the standards governing
the capital adequacy of internationally active banks achieved a critical milestone in the
publication of an agreed text in June 2004.

In November 2005, the Committee issued an updated version of the revised Framework
incorporating the additional guidance set forth in the Committee's paper The Application of
Basel II to Trading Activities and the Treatment of Double Default Effects (July 2005).
On 4 July 2006, the Committee issued a comprehensive version of the Basel II Framework.
Solely as a matter of convenience to readers, this comprehensive document is a compilation of
the June 2004 Basel II Framework, the elements of the 1988 Accord that were not revised during
the Basel II process, the 1996 Amendment to the Capital Accord to Incorporate Market Risks,
and the 2005 paper on the Application of Basel II to Trading Activities and the Treatment of
Double Default Effects. No new elements have been introduced in this compilation.  

Basel II chronology 2006-2009

17 December 2009

The Basel Committee announced consultative proposals to strengthen the resilience of the
banking sector:

 Press Release

 Strengthening the resilience of the banking sector

 International framework for liquidity risk measurement,

standards and monitoring

The Committee welcomes comments from the public on all aspects of these consultative papers
by 16 April 2010.

13 July 2009

The Basel Committee issued a final package of measures to enhance the three pillars of the Basel
II framework and to strengthen the 1996 rules governing trading book capital. These measures
were originally published for public consultation in January 2009.

 Press Release
 Enhancements to the Basel II framework

 Revisions to the Basel II market risk framework

 Guidelines for computing capital for incremental risk in

the trading book

16 January 2009
The Basel Committee announced a series of proposals to enhance the Basel II framework. The
consultative package consists of the following:

 Press Release
 Overview of the consultative package
 Revisions to the Basel II market risk framework
 Guidelines for computing capital for incremental risk in
the trading book
 Proposed enhancements to the Basel II framework

 22 July 2008

The Basel Committee on Banking Supervision issued for public comment Guidelines for
Computing Capital for Incremental Risk in the Trading Book as well as Proposed Revisions to
the Basel II market risk framework. The proposed incremental risk charge would capture price
changes due to defaults as well as other sources of price risk, such as those reflecting credit
migrations and significant moves of credit spreads and equity prices. The Basel Committee also
proposes improvements to the Basel II Framework concerning internal value-at-risk models. It
has further aligned the language with respect to prudent valuation for positions subject to market
risk with existing accounting guidance. In addition, it has clarified that regulators will retain the
ability to require adjustments to current value beyond those required by financial reporting
standards, in particular where there is uncertainty around the current realisable value of a
position due to illiquidity. The Committee welcomes comments from the public on all aspects of
these consultative papers by 15 October 2008.

2 June 2006

The Basel Committee on Banking Supervision issued a paper on Home-host information sharing
for effective Basel II implementation, which sets forth general principles for sharing of
information between home country and host country supervisors in the implementation of the
Basel II Framework. This paper was developed jointly with the Core Principles Liaison Group,
which includes banking supervisors from sixteen non-Committee member countries, as well as
the International Monetary Fund and World Bank. The paper highlights the need for home and
host supervisors of internationally active banking organizations to develop and enhance
pragmatic communication and cooperation with regard to banks' Basel II implementation plans,
and also sets out practical examples of information that could be provided by banks, home
supervisors and host supervisors.

24 May 2006

The Basel Committee on Banking Supervision issued a press release indicating that the
calibration of the Basel II Framework (ie, 1.06 scaling factor for credit risk-weighted assets
under the internal ratings-based approaches) will be maintained. This Committee's review of the
calibration of the Framework was based on the results of the fifth Quantitative Impact Study
(QIS 5), as well as QIS 4 which was carried out in some jurisdictions. A detailed report on the
results of QIS 5 in G10 and non-G10 countries was published on 16 June 2006. National
authorities will continue to monitor capital requirements during the period of Basel II
implementation, and the Committee will monitor national experiences with the Framework.

International regulatory framework for banks (Basel III)

"Basel III" is a comprehensive set of reform measures, developed by the Basel Committee on
Banking Supervision, to strengthen the regulation, supervision and risk management of the
banking sector. These measures aim to:

 improve the banking sector's ability to absorb shocks arising from financial and economic
stress, whatever the source
 improve risk management and governance
 strengthen banks' transparency and disclosures.

The reforms target:

 bank-level, or microprudential, regulation, which will help raise the resilience of

individual banking institutions to periods of stress.
 macroprudential, system wide risks that can build up across the banking sector as well as
the procyclical amplification of these risks over time.

These two approaches to supervision are complementary as greater resilience at the individual
bank level reduces the risk of system wide shocks.

The Basel Committee's oversight body - the Group of Central Bank Governors and Heads of
Supervision (GHOS) - agreed on the broad framework of Basel III in September 2009 and the
Committee set out concrete proposals in December 2009. These consultative documents formed
the basis of the Committee's response to the financial crisis and are part of the global initiatives
to strengthen the financial regulatory system that have been endorsed by the G20 Leaders. The
GHOS subsequently agreed on key design elements of the reform package at its July 2010
meeting and on the calibration and transition to implement the measures at its September 2010
meeting.

Basel III is part of the Committee's continuous effort to enhance the banking regulatory
framework. It builds on the International Convergence of Capital Measurement and Capital
Standards document (Basel II).