The Securities Contracts (Regulation) Act, was enacted in the year 1956.

It is also referred to as the

SCRA and is one of the first few rules and regulations or legislations made in the Indian capital
markets.

The SCRA regulates the contracts executed in the Indian securities markets and stock exchanges.
Therefore, all those securities that are defined by the Securities and Exchange Board of India (SEBI)
have to necessarily follow the terms and conditions specified under the securities contract or the
SCRA.

As a condition of recognition, a stock exchange complies with the requirements prescribed by the
Central Government. The stock exchange frame their own listing regulations in consonance with the
minimum listing criteria set out in Securities contracts (Regulation) Rules, 1957.

The Government promulgated the Securities Contracts (Regulation) Rules, 1957 for carrying into
effect the objects of the Securities Contracts ( Regulation) Act. These rules provide among other
things, for the procedure to be followed for recognition of Stock Exchanges; Submission of periodical
returns and annual reports by recognised stock exchanges; inquiry into the affairs of stock exchanges
and their members ; and requirements for listing of securities. The rules are statutory and they
constitute a code of standardised regulations uniformly applicable to all the recognised stock
exchanges.

SEBI also issued the Securities Contracts (Regulation) (Stock Exchanges and Cleaning Corporations)
Regulations, 2012 to regulate the recognition, ownership and governance in stock exchanges and
cleaning corporations.

SECURITIES CONTRACTS (REGULATION) ACT, 1956 (Features)

1. The Securities Contracts (Regulation) Act, 1956 was enacted by Parliament to prevent
undesirable transactions in securities by regulating the business of dealing therein, by
providing for certain other matters connected therewith.
2. The Securities Contracts (Regulation) Act, 1956 provides for direct and indirect control of all
aspects of the securities trading including the running of stock exchanges which aims to
prevent undesirable transaction in securities.
3. The Act also gives the Central Government regulatory jurisdiction over (a) Stock exchanges
through a process of recognition and continued supervision, (b) contracts in securities, and
(c) listing of securities on stock exchanges.
4. The Act extends to the whole of India and came into force on 28th February, 1957.
5. The Act defines various terms in relation to securities and provides the detailed procedure
for the stock exchanges to get recognition from Government/SEBI, procedure for listing of
securities of companies and operations of the brokers in relation to purchase and sale of
securities on behalf of investors.
6. However, the provisions of this Act shall not apply to the Government, the Reserve Bank of
India, any local authority or any corporation set up by a special law or any person who has
effected any transaction with or through the agency of any such authority.
7. The act shall also not apply to any convertible bond or share warrant or any option or right
in relation thereto, in so far as it entitles the person in whose favour any of the foregoing has
been issued to obtain at his option from the company or other body corporate, issuing the
same or from any of its shareholders’ or duly appointed agents, shares of the company or
other body corporate, whether by conversion of the bond or warrant or otherwise, on the
basis of the price agreed upon when the same was issued.
8. If the Central Government is satisfied that in the interest of trade and commerce or the
economic development of the country, it is necessary or expedient so to do, it may, by
notification in the Official Gazette, specify any class of contracts as contracts to which this
Act or any provision contained therein shall not apply, and also the conditions, limitations or
restrictions, if any, subject to which it shall not so apply.
9. The SCRA contains some important provisions which have an encouraging impact from the
perspective of raising investment for various economic activities under different sectors of
the economy.
10. The SCRA has provided for several other provisions which strengthen the control of the
Central Government and SEBI over the functioning of recognized stock exchanges which
enables the Government to take necessary actions to ensure raising of investment, protect
the interest of the trade and public interest.