Short Notes ABAD

[Document title]
JUNE & DECEMBER

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[Document title]
PART – I Securities law.

1. Securities contracts(regulation) Ac,1956.
2. Securities & exchange board of India Act,1992
3. Depositories Act 1996,
4. An overview of Issue of capital & disclosure requirement
regulations,2018.
5. An overview of listing obligations & disclosure
requirements regulations,2015.
6. An overview of Substantial acquisition of shares & take
overs regulation,2011.
7 SEBI ( buyback of securities ) regulations 2018.
8. SEBI delisting of equity shares regulations 2009,
9. SEBI share based employee benefits
10. SEBI issue of Sweat equity regulations 2002
11. SEBI ( prohibition of insider trading regulations) 2015.
12. Mutual funds.
13. Collective investment scheme.
14. SEBI ( OMBUDSMAN) regulations,2003
PART – II Capital market interiaries.

15. Structure of capital market.
16. Securities market intermediaries
pg. 2
CS SHUBHAM ABAD SCRA-1956
Objective
1. Regulate the working of stock exchange.
2. To prevent undesirable transaction.
3. Other connected matter.
Defination(securities)
Derivatives.
Shares, stock, scrip, bonds, debentures & other market securities.
Certificate or instrument issued by SPV>
Units issued by CIS/MF.
Securities receipt & Securities issued by government.
Benefit, right & interest in securities.
Corporatisation of stock exchange.

1. Conversion of non- corporate structure into corporate structure.
2. Conversion of mutually owned stock exchange into the stock exchange owned by shareholders.
3. Succession of RSE, being a body of individual into the company registered under companies act.
Demutualisation of stock exchange.

1. Separation of ownership & management.
2. Conversion of non profit concern into profit making company.
3. Transformation of brokers owned stock exchange into professionally run corporate stock
exchange.
4. Board consist 75% of directors represents public interest & other directors represents broker.
Shareholding.
51% of
49% holding by
shareholding by
non-trading
member.
trading members
(Brokers) 1
pg. 3
➢ Stock Exchange –
▪ Any BC / AOP constituted before corporatisation and demutualisation
▪ BC incorporated under companies act for assisting, regulating or controlling the
business of buying and selling or dealing in security
Recognition of stock exchange.
1. Application to central government along with.
• Copy of MOA, AOA, by laws & prescribe fees.
2. File particulars of governing body of stock exchange.
3. Power & duties of officers of stock exchange.
4. Procedure for the registration of partnership as a trading member.
Central government will confirm.

1. Rules & bye laws are in conformity with the condition of CG.
2. Stock exchange is willing to comply the conditions.
3. It is in the interest of trade & public interest.
CG grant recognition to stock exchange & notify in.
Newspaper Official
gazette.
English Hindi Central State.
Withdrawal of recognition.
1. Failed to comply with the condition/direction
2. Failed to comply with the laws & rules.
3. Withdrawal is in the interest of investor.
4. Failed to protect the public interest.
5. Failed to corporatized or demutualisation within specified time.
6. Serve written notice to governing body.
7. Before passing withdrawal order opportunity of being heard shall be given
8. Publish the order in newspaper & official gazette.
9. Contracts before withdrawal shall be valid.
Powers of central government.
A. Power to call periodical return

I. File periodical report with SEBI (quarterly)
II. File annual return with CG & SEBI
III. Preserve records for 5 years.
IV. The above records can be inspected by SEBI.
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B. Power to direct or amend rules or make laws.

I. CG can direct to make rules in respect of recognised stock exchange.
II. If it is necessary to make rules or amend the rules, CG pass the necessary order.
III. CG shall also give reasons for such amendments.
IV. Stock exchange should amend the rules within 2 months from the date of order.
V. If stock exchange failed to comply with the order CG shall amend the rules on its own motion.
VI. Order published in
Official Newspaper
gazette.
State. English Hindi

Central
Power to suspersede the business of stock exchange.

I. It is in the public or investor interest or stock exchange unable to discharge its function.
II. Central government serve the written notice to stock exchange.
III.Give opportunity of being heard to stock exchange.
IV. CG may supersede the stock exchange & appoints such number of persons to discharge
thefunction & duties of governing body.
V. If CG appoints more than one person then one should be chairperson & other one acts as a vice
chairperson.
VI. Order publishes in official gazette.
Effect of such order.

I. Members of governing body cease to hold the office.
II. All properties shall vest with the person appointed by CG.
III. CG shall appoint such number of persons to discharged the function of stock exchange.
Suspension of business.
I. To meet the emergency CG may suspend the business of stock exchange.
II. Notification in official gazette.
III. Max. period of suspension – 7days.
IV. CG can extend the above period.
V. Before extension opportunity of being heard shall be given to governing body.
• Issue direction.
• Grant immunity
Clearing corporation.
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I. Company or department of stock exchange which deals in recording & settlement of trading
transaction.
II. It deals with periodical settlement of contract or delivery or payment of securities.
III. Clearing corporation shall file bye-laws with the SEBI for its approval
IV. SEBI may, on being satisfied that it is in the interest of trade may grant the registration.
Power of recognised stock exchange.

To make rules restricting voting rights
I. Restriction of voting rights in respect of any matter place before the stock exchange at any
meeting.
II. Each member entitled to one vote only.[ one member one vote]
III. Restriction on the right of member to appoint any person as his proxy.
IV. Other incidental or supplementary matters.
Power to make bye laws.
I. prior approval from SEBI.
II. May make bye-laws for the control of contract.
Punishment for contravention of bye-laws.

I. Contract otherwise than in accordance with bye-laws shall be void.
II. Effect of contravention of any bye-laws
a. Fine.
b. Expulsion of members.
c. Suspension from membership.
d. Any other penalty.
Powers of SEBI
A. To make or amend bye-laws of recognise stock exchange

I. SEBI either own motion or application received from governing body amend any bye laws after
consultation with the governing body.
II. Bye laws made or amended shall be published in official gazette
III. Objection by governing body within 2 months from amendment.
IV. SEBI must give OOBH & revise the bye-laws.
B.To make regulation

I. At least 51% shares hold by non trading member.
II. Terms determined by SEBI for settlement of proceeding
C.To adjudicate
I. SEBI can appoint adjudicating officer not below the rank of division chief.
II. AO shall have power to adjudicate hold enquiry & levy penalty.
III. OOBH shall be given before imposing any penalty.
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Non-applicability of SCRA.
a) Government
b) RBI
c) Local authority
d) Corporation set up by special law
e) Convertible bond or share warrant.
Spot delivery contract.

a) Actual delivery & payment either.
Transfer of
On same day. Next day.
securities by the
depository.(T+2)
Derivatives.
I. Security derived from a debt instrument, share loan or other security &
II. Derive its value from the prices of index or underlying securities.
III. Commodity derivatives
IV. Such other instrument prescribe by CG
Public issue & listing of securities.

I. Application to one or more RSE for permission of listing
II. If RSE refuses the listing then refund all the application money within 8 days other office in
default jointly and several liable to pay @ 15% p.a
Delisting of securities
I. RSE may delist the securities after recording the reason.
II. Before delisting give OOBH.
III. Aggrieved party may file appeal to SAT within 15 days from the date of decision
Penalties.
I. Failed to furnish periodical returns.

a) If RSE failed to furnish periodical returns to SEBI or.
b) Failed to neglect or amend bye -laws, or
c) Failed to comply the direction issued by SEBI.
d) Penalty—Rs 5lac to 25 cr.
II. Failed to comply the listing conditions.

a) If any company, CIS or MF failed to comply with the listing conditions or delisting conditions.
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b) Penalty 5lac or 25 cr.
III. Penalty for excess dematerialisation or delivery of unlisted security.

a) Any company dematerialised security in excess of the issued securities or,
b) Deliver the security which are not listed on RSE.
c) Penalty Rs 5 lac to 25 cr.
Factors to be taken into account by the adjudicating officer.

a) The amount of unfair gains.
b) The amount of loss caused to an investor.
c) Repetitive nature of the default.
Right to receive income from collective investment scheme.

a) Generally dividend given to registered holder.
b) If transfer within 15 days from declaration of dividend or income may apply to company for
dividend or income.
c) The specified period may be extended in case of death of transferee loss of transfer deed or
delay due to post.
d) If company is satisfied, dividend may be given to transferee
RULE 19(2) (b).

Minimum offer & allotment to public
➢
Post issue capital Minimum public offer.
Up to 1600cr 25% of equity or convertible debenture. ➢
Above 1600cr up to 4000cr Such percentage which is equivalent to Rs ➢
400cr ➢
Above 4000cr At least 10% of each class. ➢
➢ Listing of shares –
IPO Right issue Merger or Amalgamation
FPO Bonus issue
➢ Multiple Listing –
▪ When PSC > 5 Cr
▪ Can list its securities on multiple STX out of which atleast one STX having nation wide
trading terminal.
▪ Multiple listing provide arbitrage opportunities where investor can make profit on
differences in prices prevailing in said exchange.
▪ Arbitrage mean gain without risk.
➢ Special Provision relating to commodity derivative –
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▪ No person shall organize or assist to transfer non – transferable specific delivery
contract.
▪ If CG in the interest of trade may regulate or control non – transferable delivery
contract in specific area.
NOTE- Increase in public shareholding within a period of 3 years from the date of listing.
Delisting of securities.
a) Incurred losses during the preceding 3 consecutive years & has negative net worth.
b) Trading suspended for more than 6 months.
c) Securities have remained in frequently traded during the preceding 3 years.
d) Promoters, directors, has been convicted under SEBI act or depository act & awarded penalty of
not less than Rs 1cr or imprisonment of not less than 3 years.
e) Public shareholding has come below the minimum level.
f) OOBH before delisting order.
g) If securities is delisted then CO./promotor/ director is liable to purchase the securities from
holder.
Voluntary delisting from all STX

a) Minimum listing for 3 years.
b) Approval from 2/3rd public shareholder &
c) Company, promoter, director purchase the outstanding securities from the holder who want to
sell the securities.
SELF NOTES-
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CS SHUBHAM ABAD SEBI ACT 1992
OBJECTIVE.
I – Protection of interest of investors.
D – Development of capital market.
R – Regulation of capital market.
BODY CORPORATE
SEBI
Separate legal entity.
Perpetual succession.
Common seal.
COMPOSITION.
CHAIR PERSON. 1 RBI 5 OTHER

2 MEMBERS. MEMBERS.(appointed by
OFFICIAL CG)
Appoint Ministry
MIN 3Full
by C.G. of Max 2
time
finance. Part time.
➢ Functions of SEBI.
1. Protect the interest of investors.
2. Prevent the detrimental ( oppose to public) affairs of intermediary.
3. Prohibit unfair & fraudulent trade practices.
4. Regulate stock exchange.
5. Regulate work of venture capital fund/ collective investment scheme.
6. Prohibit insider trading.
7. Regulate turnover
8. Inquiry, Investigation, Audits of Intermediaries, Stok exchange, etc.
➢ Power of SEBI.
1. Discovery & production of books of accounts.
2. Summoning & enforcing the attendance & examination them on oath.
3. Inspection of any books of account, record, document.
4. Examination of witness or document.
5. Production of further documents, records.
6. SEBI may pass following order after inquiry and investigation –
7. Suspend the trading of any security in a stock exchange
8. Restrain any person from assessing the security market
9. Suspend any office- bearers of Stock Exchange
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10. Restrain the proceeds or securities

11. Attach bank account or property for a maximum period of 90 days, however SEBI after
confirmation from special court can continue the attachment
II(A): Regulate or Prohibit issue of Prospectus.
Company shall File Regulate the issue of

prospectus with SEBI capital & transfer of
atleast 30 days prior security.
to filling with ROC
Prohibiting company
Specify the conditions. from issuing
prospectus.
II(B): Direction.
A.
➢ B. Issuer.
Reasons. Investor. Intermediary.
1. Affairs are detrimental to public interest or investor interest.
2. To protect the interest of investor.
3. To secure proper management of any intermediary
1) To protect the interest of investor
2) To prevent detrimental affairs in the market.
3) To secure proper management of any intermediary.
➢ 11( C ) INVESTIGATION.
Reasons-
1. Failed to comply with conditions.
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2. Failed to comply with directions.

3. Violated the rules & regulation.
4. Affairs are detrimental.
5. Investigating authority may keep in its custody any book register for 6 months(max).
➢ Power of Investigating Authority –
✓ To examine on oath –
▪ Directors, managers, MD, other officers may be examined on oath.
✓ To take note on examination’
✓ Seize of records
✓ Investigation Authority has reasonable ground that documents, rewards may be destroyed,
altered, falsified, in such case, investigation authority may make application to investigate
forseize order.
✓ After considering the application may by order authorize Investigation Authority –
▪ To enter the place where the documents are kept

▪ Search that place
▪ Seize the document
✓ Failed to provide or furnish any information then such person shall be liable to –
▪ Imprisonment upto 1 year

▪ Fine may extend to 1cr
▪ both
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II(D): CEASE & DESIST ORDER
Violate the SEBI laws& Likely to violate the SEBI laws

regulations. OR & regulations.
SEBI May pass cease & desist order.
Except
▪ Listed company
▪ Proposed listed company
Unless insider or market manipulation had taken place
➢ Market Manipulation
▪ Prohibition of Manipulation and Deceptive devices and Insider Trading 12 (A) –
▪ No persons shall directly or indirectly –
✓ Use of employer manipulative or deceptive devices
✓ Employ any devices to defraud in connection with issue a dealing in securities.
✓ Engage in Insider Trading
✓ Acquire conduct of any company or securities in contravention of securities law.
✓ Deal / communicate in security market or Non- public information.
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II (AA) [CIS] Collective investment scheme.
Who collects the fund Create a Pool & invest

from marginal (small) in securities or other
investors. market.
Intention of investor Investor does not

is to earn return on Fund is managed on have day to day
investment, behalf of investor. control.
Register with SEBI.
➢ 11(4)SEBI may pass following order to protect the interest of investor.
a) Suspend the trading of any security.

b) Restrain any person for accessing the capital market.
c) Suspend any office – bearer of any stock exchange.
d) Attach the bank account for max. period of 1 month with prior approval of magistrate of 1st
class.
PENALTIES OF INSIDERTRADING
SECTIONS PARTICULARS PENALTY

15(A)Accounts Any person- Rs 1,00,000 for each day
➢ Failed to maintain BOA. of default subject to
➢ Failed to file returns. max. of Rs 1 Cr.
➢ Failed to produce BOA & records within Whichever is LOWER.
specified time.
15(B) BROKER If any broker or intermediary failed to enter into Rs 1 lac for each day of
an agreement with his client. default subject to max.
of Rs 1 cr whichever is
lower.
15( C ) If any person failed to redress the complaints of Rs 1 lac for each day of
COMPLAINT investor default subject to max
.of 1 cr whichever is
lower.
15(D)MUTUAL ➢ If mutual fund failed To register or failed to Rs 1 lac for each day of
FUND comply with the regulation given by SEBI. default subject to max
➢ Failed to refund excess application money. of 1 cr whichever is
➢ Failed to dispatch unit certificate. lower.
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➢ Failed to list the units.

➢ Failed to invest money as decided.
15 ( E ) AMC ➢ Failed to register Rs 1 lac for each day of

➢ Failed to comply the rules & regulation. default subject to MAX.
➢ Failed to report. 1 cr whichever is lower.
➢
15( F ) failure ➢ Failed to deliver contract note 1 lac or 5 times of
of broker. ➢ Failed to deliver the securities excess brokerage
➢ Failed to make payment within specified time whichever is higher
➢ Charge excess brokerage.
15(G) Insider ➢ Deals in securities on the basis of UPSI Min 10 lac max 25 cr or
trading ➢ Communication of the UPSI with or without 3 times of profit
his request whichever is higher.
➢ Procure any UPSI from insider support
➢ 15(EA) Alternate Investment Fund / Infrastructure Investment Trust / Real Estate
Investment Trust –
✓ Failed to register with SEBI
✓ Failed to follow terms and conditions of SEBI
✓ Failed to comply the director
▪ Min Rs 1 lac, extend to Rs 1 lac each day Maximum 1 Cr
▪ OR Three times of amount gain made out of such failure whichever is higher
➢ 15(EB) Investment advisor and Research Analyst –

✓ Failed to comply with regulation
✓ Failed to follow the direction
▪ Min Rs 1Lac , Extend to 1Lac each day Maximum 1 Cr.
➢ UPSI – Unpublished Price Related Sensitive Information –
▪ Any communicates any UPSI to any person with or without request
▪ Counsels or Procures for any other person deal in securities on the basis of UPSI –
✓ Min 10 Lac extend to 25 Cr OR 3 times of Profit whichever is higher
Section Particulars penalty

15(H) ➢ Hostile takeover. Rs 1 lac , extend to rs 1 lac
hostile 1. Failed to disclose aggregate shareholding & per day max 1cr , whichevr is
takeover 2. Made a public announcement & paid to lower.
shareholders who sold their shares.
15(HA) ➢ Fraud or unfair trade practices. Min 5 lac or max 25cr or 3
1a fraud times of profit which ever is
hua. higher.
15( HB) ➢ No separate penalty Rs 1 lac for each day of
default max 1 cr whichever is
lower.
➢ 15(HAA) Penalty for Alternation, Destruction of records and failure to protect the
electronic data basis of SEBI –
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▪ If any person knowingly alters, destroy, mutilated, conceals or make any false entry or
influence the investigation, audit or other matter.
▪ If any person without being authorized to do so, access or denies of access to the
regulatory data in data base
▪ If any person downloads, extracts in any form without authority
▪ Knowingly introduces any virus
✓ Min 1 lac, extend to 10 Cr OR 3 times of profit whichever is higher.
➢ Inquiry / Investigation –
▪ Adjucation Officer –
✓ Appointed by SEBI
✓ Not below the rank of Division Chief
✓ To hold inquiry and investigation
✓ Powers – Same as SEBI
✓ Penalty – OOBH
▪ Factors to be considered –
✓ The amount of gain or unfair advantages as a result of default
✓ The amount of loss caused to an investor
✓ The repetition nature of delay
✓ Public interest
▪ Credited to Consolidated Fund of India.
➢ Prohibition of manipulative & deceptive devices, insider trading etc.

➢ Any person shall not directly or indirectly.
Use or employ any Employ any device to Engage in any Engage in Deal in securities on
manipulative defraud in connection fraudulent act. insider trading the basis of UPSI.
practices in with issue or dealing
connection with sale, in securities.
purchase of
securities.
➢ SAT ( securities applicant tribunal.)
1. Central government by notification in official gazette(NIOG) establish the SAT.

2. To accept the appeal against the order of SEBI / AO/RSE.
3. Composition – presiding officer & 2 other members( 1 judicial & 1 technical.
4. Presiding officer – siting or retire judge of Supreme court or
Sitting or retired chief justice of High court or
Sitting or retired judge of High court having 7 years of experience.
Appointed by CG after consultation with Chief justice of India as his
nominee.
5. Judicial member – sitting or retired judge of high court of at least 5 years
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6. Term 5 years or 70 year whichever is earlier.
7. Reappointment for another term of 5 years
8. Technical Members- person of ability, integrity , standing & having knowledge of law, finance,
economics, accounting
9. Appointed by Central Government on recommendation by Selection Committee
➢ Selection Committee –
✓ Presiding officer / Chairperson
✓ Secretary of Department of Economic Affairs
✓ Secretary of Department of Financial Affairs
✓ Secretary of Legislative Department of Legal Affairs
✓ Term – 5 years OR 70 years of age whichever is earlier
SAT
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APPEAL.
SEBI. RSE. AO.
Appeal to SAT
45 days from date of receipt of

order or decision.
45 days-appeal = extension (sufficient ground)
SAT may SAT

Modify confirm set aside the order
✓ Dispose of appeal within 6 months from receipt of the appeal.

✓ Appeal to SC against the order of SAT within 60 days from receipt of order on any question of law.
✓ Extension – 60 days ( sufficient cause )
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0
Powers of central government.
To supersede SEBI
✓ Ground of supersede
a) SEBI is unable to discharge the function & duties.
b) SEBI failed to comply the law or direction issued by CG
c) It is in the public interest/ investor interest
d) Supersede by NIOG for max period of 6 months.
✓ Effect of order.
a) All the members shall vacant the office.
b) All the Powers & Functions of SEBI shall be discharge by such person specified by CG.
c) All the properties of SEBI shall vest in CG.
➢ To grant immunity.
1. If any person Violated the rules & regulation.
2. Made full disclosure of violation.
3. Recommendation by SEBI.
4. Application to CG for grant of the immunity before proceeding for the prosecution.
5. CG may grant the immunity.
6. CG may withdraw the immunity.
➢ Special court.
1. Establish by CG.
2. Speedy trial.
3. Single judge.
4. Qualification --- session judge or additional session judge.
5. After consultation with chief justice of high court.
6. It covers all the offences.
➢ Consent order
1. Consent order is given SEBI.
2. With the consent of parties who is in default.
3. Non-appealable.
4. Without litigation.
5. Outside court settlement.
11
s
Compounding of offences.
Compoundable Non- Powers.

compoundable
Fine fine & jail SAT or

COURT
Fine or
jail
Jail
fine or jail
or both
➢ Recovery of amount.
1. Failed to pay the penalty.
2. Failed to follow the direction of board for refund of money.
3. Failed to follow the direction of settlement disgorgement order.
4. Failed to pay any fees – recovery by way of .
a) Attachment or sell of movable or immovable property.
b) Attach the bank account.
c) Arrest & detention.
d) Appoint a receiver for managing the proceeds of sale.
❖ SELF NOTES.
11
s
CS SHUBHAM ABAD. DEPOSITORIES ACT 1996
BANKING Trading in
SYSTEM. BOOK ENTRY
FORM.
DEPOSITORY ACT
OPEN DEMAT 1996
ACCOUNT. PAPERLESS
TRADING.
NSDL & CDSL.
DEPOSITORY ➢
Company as ➢
Registration
per companies
from SEBI
act.
Open demat
A/C with help
Dematerialisation Rematerialisation.
of DP.
3.1
Agent of Depositary Open

depository participant. demat acc
with
depository
Link
between
investor & One of the
Electronic market
issuer. settlement intermediary.
⁜ Dematerialisation.
1. Investor submit DRF & share certificate(sc) to depository participant .
2. Deface share certificate as surrender for dematerialization.
3. DP inform depository electronically.
4. DP sends physical SC & DRF to company.
5. Depository will inform company electronically
6. Company confirm the dematerialisation &
7. Company shall cancel the SC & approve dematerialisation.
8. Depository credit the investor A/C & intimate DP
9. DP inform investor dematerialisation.
Benefit of depository system

A) Question of bad delivery does not arise in depository system
B) Elimination of all risks associated with physical certificate.
C) Immediate transfer and registration of securities
D) Faster disbursement of non cash corporate benefits like rights, bonus, etc.
E) Reduction in brokerage for trading in dematerialized securities.
F) Elimination of problem related to selling of securities on behalf of a minor.
Note –
Investor has the option to hold securities either in physical form or electronic form however market
trades in listed securities should take place only in the demat mode.
3.2
⁜ Rematerialisation
1. Investor submit RRF (rematerialisation request form ) to DP.
2. DP intimates depository electronically.
3. DP send RRF to company/ registrar.
4. Depository inform to company.
5. Company shall print the SC and send to investor.
6. Company confirm the rematerialisation.
7. Depository debit the investor account & intimates the investor
⁜ Fungibility
1. All certificate of the same securities shall becomes interchangeable.
2. Investor loose the right to obtain same certificate.
3. It is like withdrawing money from bank without bothering the number of the currencies.
4. All securities under demat model must be in fungible mode.
➢ Modes of depository
Immobilization-
A) Depository hold securities in the form of physical paper and side by side with electronic evidence
of ownership.
B) Securities are kept in the custody of depository and transfer takes place in the form of book
entry.
C) In case of public issue the issuer issue jumbo certificate to depository and depository shall credit the
investors account.
➢ Electronic Credit in New Issue –

✓ Demat Account
✓ Application – (DP – ID and Client- ID)
✓ Registrar upload list of allotees to depository
✓ Depository credit allotees account DP
✓ Refund
➢ Eligibility Condition for Depository Services –
✓ Registered Company
✓ Net worth rs 100 cr
✓ Registered with SEBI
✓ Bye- laws shall be approved by SEBI
✓ Has one or more participants to render services on its behalf
✓ Complies all the rules and regulation of SEBI / Depository act
✓ Adequate system
3.3
➢ Trading system
▪ Separate quotes in book entry
▪ Trading member to have clearing account with DP
▪ Settlement as per settlement calendar of stock exchange
▪ It can be introduced in any stock exchange if settlement is guaranteed
➢ Corporate action
▪ Dividend, cash benefit are directly forwarded to investor by the company or its register
▪ Non-cash benefits via- bonus, right issue, etc. are electronically credited to beneficial
owner’s account through depository.
⁜ Registered owner ( depository ).
1. Register owner means a person whose name is entered in register of member (ROM).
2. In dematerialization mode depository will be the register owner.
3. No voting or corporate benefit to register owner.
4. Depository shall maintain the register of beneficial owner.
5. Depository shall furnish information about transfer of security to the company.
⁜ Beneficial owner (investor)
1. Name entered in the register of beneficial owner maintained by depository.

2. Actual owner of the securities entitled for all the corporate benefit like bonus dividend etc.
⁜ Audit of depository & DP.

Depository (NSDL,CDSL).
⁜ Following records to be maintained by depository.

a) Records of security dematerialized.
b) Name of transferor & transferee & date of transfer.
c) Register or index of beneficial owner.
d) Details of beneficial owner at the end of each day.
e) Details of participant (DP)
3.4
⁜ Depository participants.
1. Records of all transaction.
2.
3. Records of dematerialization.
4. Records of instruction given by beneficial owner.
Audit
Reconciliation of Audit
➢ Every issuer shall submit audit report of conciliation of
• Total issued capital
• Listed capital
• Capital held by depository
• Change in share capital
➢ Audit report shall also specify security are dematerialized within 21 days form request
➢ Issuer or his agent shall reconcile the record of dematerialized security on daily basis
➢ In case of govt. co. depository shall reconcile the records
Audit of DP.
Internal audit Concurrent audit.
Depository allows PCS to do internal audit of Verification of demat a/c opening process.
DP.
Done at regular interval of not more than 3 Verification of delivery instruction slip.
months.
Internal audit report submit to depository. Quarterly basis & report submit, to depository.
Power also given to qualified CA /PCA Internal auditor may conduct concurrent audit.
Non compliance mention in report.
⁜ Delivery instruction slip.

1. Instrument by which investor authorised DP to transfer the securities.
Issuance of delivery instruction slip (DIS) Verification of DIS.
Issuance of DIS to demat account holder. Stamp client ID, serial no., demat account no.
Control on DIS issued to client. Blocking of
Used / lost theft
Maintain the records of DIS issued, in the back Two way verification for a transaction
office. exceeding Rs 5lac.
Maintain records where instruction received
from dormant account ( inactive account ).
3.5
⁜ Penalty.
1. If no penalty is specified elsewhere.
2. Jail max. 10 years or fine max 25cr or both.
Fail to pay penalty or comply with SEBI
1. Jail min. 1 year max 10 years.
2. Fine 25cr or both.
➢ Power of SEBI
1. To call information and inquiry
▪ SEBI may call information and conduct inquiry against issuer, Depository,
DP, or beneficial owner
▪ Every director, manager, partner, secretary shall provide asked information
2. Power to give direction
3. To make regulations
By Notification in official gazette
▪ The form in which record is to be maintained
▪ The form in which the certificate of commencement of business is to be issued
▪ Creating a pledge or hypothecation in respect of securities.
3.6
• Cancel the point of Immobilisation of pg 3.3 and this -
Immobilisation Dematerialisation
▪ Physical shares held in the safe ▪ No physical scrip in existence.
custody of depository.
▪ Owner has right to withdraw ▪ Transaction is in the form of
his physical certificate as and book entry.
when desired.
▪ Fresh issue can be achieved by ▪ Cost effective and Simple.
issuing
Certificate in the name of
Depository.
▪ Not adopted in India. ▪ Adopted in India.
➢ Rights and Obligations of Depository, Participants, Issuer, Beneficial Owners –

▪ Agreement between Depository and Depository Participant as its agents.
▪ Any person through DP may enter into an agreement with depository for availing
services.
▪ Surrender of Certificate for Dematerialisation.
➢ Pledge or Hypothecation of Securities held in Depository –

▪ Beneficial owner with previous approval from depository can create pledge or
hypothecation in respect of securities owned by him.
▪ Depository shall require to make entries of pledge.
SELF NOTES-
3.7
CS SHUBHAM ABAD 8149221250
o Entities not eligible to make IPO /FPO [Regulations].

➢ Issuer, promoter, promoter group, selling shareholder are debarred from
accessing the capital market.
➢ Promoter, director of issuer is a promoter or director of any other company
Which is debarred from accessing the capital market.
➢ Issues / Promoter / Director are wilful defaulter.
➢ Promoter/director of issue is a fugitive offender.
➢ Outstanding convertible security is converted into equity shares before the
filling of RHP/prospectus except ESOP.
(However, if debarred period is over then company can raise the fund by
publicissue.)
o Eligibility norms for IPO

➢ Net tangible assets of at least 3cr in each of the preceding three full year and
maximum 50% can be held as a monetary asset
(However, can held more than 50% monetary assets if issuer made firm
commitment to utilize such amount for project or issue is through offer for sale)
➢
1
➢ In case of change of name of the company within the last one year, at least 50%
of the revenue for the preceding 1 full year is being earned by the company
from the activity suggested by the new name.
Eligibility norms for FPO

➢ In case of change of name of the company within the last one year, at least 50%
of the revenue for the preceding 1 full year is being earned by the company
from the activity suggested by the new name.
o Alternate eligibility norms for IPO/FPO

➢ If issue made through Book Building method.
➢ 75% of Net offer to public shall allotted to QIB.
➢ In offer for sale if holding of selling shareholder is more than 20% then max 50% of his
holding can be diluted
➢ If holding of selling shareholder is less than 20% then max 10% of total shares of co can
be diluted
o Issue of warrants
➢ Term not exceed 18 months.
➢ May attach one or more warrant shall be attached to one specified security.
➢ Price shall be disclosed in offer document & at least 25% of issued price
received Upfront advance.
➢ If holder not exercise the option within 3 months, then such warrant shall
be forfeited
o General condition for IPO/FPO
➢ Application to one or more RSE for in principle approval & choose one of them
as designated (Primary RSE) RSE.
➢ Agreement with depositary.
➢ Partly paid-up shares converted into fully paid-up shares.
➢ 75% of the total issue size shall utilize for the specific proposed (written in
prospectus) project.
➢ Maximum 25% can be utilize for general corporate purpose.
➢ maximum 35% can be used for general corporate purpose
and non identified acquisition or investments
➢ However, amount for non identified acquisition or investment
shall not exceeds 25%
this will not applied if the acquisition was identified made in
draft offer document 2
➢ Additional condition for an offer for sale.

• Shares must be fully paid
• Holding period 1year before offer of sale.
• Holding period shall be required to be complied at the time of filing of draft
offer document.
• Conversion should be completed before filing of prospectus.
✓ Non-applicable.
➢ Offer for sale of a government company & statutory authority or corporation
➢ Equity shares offered under merger & amalgamation scheme.
➢ Securities issued under bonus issue & prior holding of at least 1 year.3
o Procedure of public issue
➢ Appointment of lead MB Manager, intermeddling & compliance officer.

➢ Appoint one or more merchant banker registered with SEBI.
➢ More than One merchant banker – one should be lead manager.
➢ One lead manager (Independent) – not be an associate with the issuer
➢ Agreement with self–certified syndicate bank in case of ASBA (application
supported by blocked.
➢ Appoint register to an issue registered with SEBI.
o Filling of offer document
➢ File draft offer document or draft RHP to SEBI

➢ Lead merchant banker shall exercise due diligence about the adequacy of
disclosure.
➢ Lead MB shall ensure that information as per audited financial statement are
not more than 6 months old from issue opening date.
➢ SEBI may specify the changes as issue observation within 30 days from.
a) Receipt of draft offer document or
b) Date of satisfactory reply from the lead MB or
c) Receipt of clarification from any regulatory
d) Receipt of a copy of in-principal approval from RSE whichever is later
3
➢ The issuer or MB shall carry out such charges.

➢ Copy of draft document shall also file with RSE.
➢ Also provide soft copies.
➢ MB shall file 3 copies of draft after document with concerned regional office of
SEBI
➢ MB shall file certificate confirming an agreement has been entered between
issuer and MB and due diligence certificate
➢ In case of issue of convertible debt securities file due diligence certificate from
debenture trustee.
➢ Carry out such modification by MB and file revise draft prospectus with SEBI
o Draft offer document available to public
➢ SEBI shall made public for at least 21 days from date of filing by posting on
website of SEBI, STX, MB etc.
➢ Issuer within 2 days, from filing offer documents with SEBI, make a public
announcement in one English & Hindi national daily which invites public for
their comments
➢ Lead manager shall file with SEBI, details of the comments received by them.
➢ Lead manager shall available the copies of offer document with stock
exchange, RTI, share transfer agent.
❖ Promoter contribution
o Initial public offer
• The promoter shall hold at least 20% of the post issue capital.
• However, in the case of post issue of shareholding of the promoters is less than
20% alternate investment fund or foreign venture capital investors or
scheduled commercial banks or public financial institutes or insurance
companies registered with IRDA may contribute to a max. of 10% of the post
issue capital.
4
Minimum promoters contribution.

• Promoters shall contribute 20% either by way of equity shares or by way of
subscription to convertible securities.
• In case of any issue in convertible securities & promoters contribution is by way
of equity share then such contribution shall not be at a price lower than the
weighted average price of the equity share capital arising out of conversation
of such securities.
• IPO of convertible debt instruments without prior public issue of equity shares,
the promoter shall bring in a contribution of at least 20% of the issue size from
their own funds in the form of equity shares.
Promoter contribution to brought in before public issue opens.
• Promoter shall bring full amount at least 1 day prior to issue opening date &
deposit in Escrow account.
• If promoter contributions is more than 100cr and shares are partly paid up then
bring at least 100cr before opening of issue & remaining on a pro-rata basis
Non applicability
a) IPO – No identifiable promoter.

b) FPO – No identifiable promoter and shares frequently traded & dividend track
record in 3 immediately preceding year.
o Securities ineligible for minimum promoter contribution
a) Specified securities acquire other than cash or capitalizing of intangible assets

during preceding 3 years.
b) Acquire by way of bonus issue, by utilizing of revaluation reserve / unrealized
profit.
c) Securities acquired during proceeding one year at lower price then issue price
however if promoter is ready to pay difference amount, then those securities are
eligible.
d) Securities acquired at price less than issue price when issues formed by
conversion of firm or LLP
e) Specified securities pledged with creditors
5
• Promoter contribution in case of FPO

➢ Contribute at least 20% of proposed issue or to the extent of 20% of post issue of
capital.
➢ In case of composite issue Contribute at least 20% of proposed issue or to the extent
of 20% of post issue of capital excluding the right issue components
o Securities ineligible for minimum promoter contribution

o Specified securities acquire other than cash or capitalizing of intangible assets
during preceding 3 years.
o Acquire by way of bonus issue, by utilizing of revaluation reserve / unrealized
profit.
o Specified securities pledged with creditors

o Lock in period.
IPO FPO
Minimum PC Excess PC Minimum PC Maximum PC
18 months 6 months 18 months no lock in period
From the date of allotment
• Equity shares hold by venture capital fund or alternate investment fund or foreign venture capital
investor shall be locked in for 6 months
• Note : securities hold by person other than the promoter that is pre- issued capital shall be locked in for a
period of 6 months from the date of allotment
Exemption from PC
IPO FPO
1) Company not having identified 1) No identified

promoters 2) Shares are frequently traded in previous 3 yrs. & resolved
95% of total complaints in last quarter from reference date
3) complied LODR regulation in last 3 years
➢ Pledge of locked in shares
Specified securities (locked in) may be pledge as collateral security for a loan granted
to issuer or subsidiaries company to finance objects of the issue
Securities held by promoter may be transferred to another promoter except SR shares
however lock i n shall be continue for the remaining period.
6
o Security deposit
➢ Deposit 1% of issue size with STX
o IPO grading – optional by credit rating agency
o Opening of Issue
➢ Opened within 12 months from issuance of observation by SEBI.
➢ Shelf prospects – first issued must be opened within 3 months from issuance
of observation by SEBI.
➢ File offer document at least 3 days prior to issue opening date with ROC.
o Period of subscription
➢ Minimum 3 days maximum 10 working days .
➢ Revision of price band then extend the bidding period for minimum 3 days.
However maximum period shall not exceed 10 days.
➢ Extension of 3 days in case of banking strike, or similar circumstances.
o Minimum subscription
➢ At least received 90% of the total issue size and public shareholding shall be at
least 25% of post issue capital.
➢ Not applicable in offer for sale.
➢ In the event of receipt of minimum subscription, all application monies
received shall be refunded to the applicants forthwith, but not later than-
a. 4 days(old 15) of the closure of the issue, in case of a non-underwritten issues.
b. 70 days of closure of the issue, in case of an underwritten issue where
minimum subscription including devolvement obligations paid by the
underwriters is not received within 60 days of the closure of issue.
o Application & minimum application value
➢ Application size between 10K to 15K

➢ Minimum application value 25% of issue price
➢ In after for sale full issue price shall be payable at the time of application.
➢ Remaining call money within 12m from allotment.
7
o Monitoring agency
➢ Issue size excluding offer for sale exceed Rs.100 Crore or more then issuer shall
Appoint credi t ra ti ng a ge ncy .
➢ Monitoring agency shall file quarterly report to SEBI till 100% of Fund
availedfor Specified Project shall be utilized for the same.
➢ On receipt of report from monitoring agency max shall give comments or

clarification for the same
➢ Issuer within 45 days from end of each quarter publicly disseminate the report
of monitoring agency by uploading on the website & file with stx
➢ Variation in terms, dissented by at least 10% of shareholders and amount utilize
for the project is less than 75% of issue proceed
➢ Pass SR
➢ Result of voting shall disclose to STX
➢ Prepare list of disseminate to public within 1 working day the details of
dissenting shareholder
➢ Open ESCROW acc within 2 working days prior to tendering period & deposit
aggregate consideration
➢ Within 7 days from SR tendering period will start
➢ Tendering period will remain open for 10 working days
➢ Payment to dissenting shareholder within 10 working days from closure of
tendering period
➢ Within 2 working days from payment inform to stx, details of aggregate number
of shares tender, payment of consideration, etc.
o Reservation on competitive basis.

➢ Employee
➢ Shareholders of listed subsidiaries or promoter companies
➢ No reservation for MB, Promoter and employee for the group or associate
company
➢ FPO—reservation for RII
8
➢ Reservation for employee 5% of post issue capital and allotment to single

employee not exceeding 2 L
➢ However, in case of under subscription in employee category allotment to any
employee shall not exceed 5 L
➢ Reservation for shareholder shall not exceed 10% of the issue size.
➢ No further application in net offer to public if reservation is made except
Employee and RII
➢ Interstate adjustment is allowed
o Underwriters
➢ Underwriter by lead manager or syndicate member.
➢ If 75% of net offer is compulsory allotted to QIB such portion cannot be
underwritten.
➢ If underwriter fail to fulfil their obligation the lead manager shall fulfil the under
writing obligation.
➢ Enter into an agreement with underwriter which specify the price & no. of
securities.
➢ Underwriting obligation should at least to the extent of minimum subscription.
o Differential pricing.
➢ RII/employee—May lower than 10% of issue price .
➢ Anchor investor – shall not be lower than price offer to other applicant.
➢ Alternate book building – may issue to Employee at a price lower than 10% of the
floor price.
➢ In case of composing the price of right issue or public issue may differ.
o Restriction on further capital issue

➢ Issuer shall not make further issue except registration of offer, document with
ROC & till the listing.
9
➢ In case of other issue during the filling of draft of document & till the listing or
fund.
o Price & Price Band.

➢ Mention price or price band in draft prospectus & floor price or Price band in
RHP.
➢ Cap Price shall not exceed 120% of floor price & gap between cap price and floor price
shall not exceed 20%
➢ Provide that the cap of the price band shall be at least 105% of the floor price
➢ Floor price or final price shall be more then face value
➢ Announce floor price of price band at least 2 or 1 days before the issue opening
date(IPO & FPO) respectively in news paper
➢ Company decide cut off price & mentioned in RHP.
➢ Prospectus file with ROC
o Post listing exist opportunity for dissenting shareholders

➢ Give Exist opportunity to dissenting shareholders in case of change in object &
variation in terms of contract.
➢ Exit opportunity given by promoter or shareholder in control of an issuer.
➢ Conditions-
1. Dissented by 10% of shareholder who voted in GM.
2. Amount utilised for specified project is less than 75% of amount raised through
public issue.
➢ Right issue / Pre – exemption rights
▪ Given to existing SH
▪ Decide record date for this purpose
▪ Issue size pf Rs 50 Cr or more
▪ File draft offer document with SEBI and STX.
➢ Entities not eligible to make right issue –

▪ Promoter / director / issuer are debarred from accessing capital.
▪ Promoter or director is promoter / director of other company is debarred
▪ Promoter / Director / Issuer is fugitive economic offender
▪ General conditions-Same as IPO
10
▪ If prompter / issuer / director is a willful defaulter then promoter or

promotergroup shall not renounce their rights except within promoter group
▪ Issuer has issued SR ES then SR SH shall not renounce their rights SR shares
received in right shall remain under locking until conversion into ordinary shares.
➢ Preferential Issue –
▪ Listed issuer
▪ Selected group of persons on put placement basis
▪ Other than (SOP issue of sweat ES or issue of depository except)
▪ Shall not be made to any person who has sold or transferred ES during 90 days
preceding relevant date (for promoter or promoter group)
▪ Promoter or promoter group fails to exercise the warrants shall be ineligible for
one year from expiry of tenure of warrant or cancellation of warrant.
▪ Promoter / Director / Issuer is fugitive offender not eligible to make preferential
issue.
➢ General Conditions –
▪ Allotment of fully paid-up shares
▪ Pass SR
▪ All ES held by proposed allottee are in demat form
▪ Follow condition of continuous listing
▪ Obtain PAN from allottees
➢ Qualified Institutional Placement –

▪ Issue and securities to QIB on pvt placement or through offer for sale
▪ Conditions:
▪ Pass SR
▪ No need to pass SR in case of offer for sale by promoter to fulfil minimum public
shareholding requirement
▪ Allotment shall be completed within 365 days from resolution
▪ Equity shares listed of some class for at least one year prior to passing of SR
▪ Issuer / Promoter / Director is not fugitive economic offender
▪ QIB shall be listed on RSE
▪ No subsequent QIB until expiry of 2 weeks from prior QIB
▪ Promoter / member / promoter group may make offer for sale to achieve
minimum public share holding
➢ Restriction –
▪ Promoter/ group shall not purchase / sell any ES during 12 weeks prior to
opening of issue and 12 weeks after closure of issue
11
➢ Issue of IDR (Indian Depository Receipt)

Eligibility:
▪ Issuing company is listed in its home country for atleast 3 immediately years.
▪ Issuer is not prohibited by regulatory body
▪ Send track record of compliance in home country
▪ Not a fugitive economic offender
▪ Issue size atleast 50 crore
▪ One denominator IDR
▪ Apply to or more RSE in India for in principal approval
▪ Agreement with depository
➢ IPO by SML –
▪ SME post issue paid up value capital is upto 10 Cr
▪ Post issue face value capital more than 10 Cr but upto 25Cr may also issue
securities in accordance with provision of chapter
▪ Listing with or without public issue
▪ SEBI dose not issue any observation
▪ IPO shall be 100% underwritten by underwriters
▪ The lead manager shall underwrite atleast 15%
▪ Market making for 3 yrs.
▪ Minimum application size Rs. 1 lac
▪ Migrate to main board by passing SR with majority of minority
➢ Conditions –
▪ Adequate disclosure is made in financial statements
▪ Financial statement is duly certified by auditor
▪ Follow AS
➢ General Condition –
▪ Principal approval from SME exchange
▪ Agreement with depository for dematerialization
▪ Convert partly paid up to fully paid-up shares’
▪ Promoter holding are in demat form
▪ 75%, 25%
➢ Innovators Growth Platform –

▪ Issuer is in intensive use of technology , IT , Data analytics
▪ Atleast 25% of pre- issue capital shall be held for atleast 2 year by –
a) QIB
b) Family trust having > 500 Cr net worth
c) Accredited Investor
12
d) Investment fund of US $150 million

e) Foreign portfolio investor
f) Resident in a country who is member of financial action task force
➢ Accredited Investor –
▪ Individual with total gross income of 50L and liquid net worth 5 Cr
▪ Body corporate with net worth of 25 Cr
▪ Max holding 10% of pre- issue capital
➢ Allotment –
▪ Allottees – Mini 1000
▪ Allotment – Pro rata basis except RII and Anchor investor
▪ RII –
✓ Minimum one lot
✓ Excess application - Proportionate allotment
▪ Employee -
✓ Receive - 2L upto 5L.
o Fast track issue.
➢ No need to file Draft offer document with SEBI.

➢ No need to Make a Security Deposit.
➢ Conditions-
1. Equity shares listed for 3 preceding years.
2. Entire Promoter holding in demat mode.
3. Average market capitalizing of public shareholder is at least 1000cr in case of
public issue & 250cr in right issue
4. Annualized trading turnover during 6 months prior the month of the
referencedate has been at least 2% of weighted average number of equity
share listed during 6 months.
However, if public holding is less than 15% then 2% of free floated shares
shall be consider.
5. Delivery based trading turnover during past 6 month is at least 10 % of
annualized trading turnover.
6. Redressed at least 95% of complains till the end of quarter preceding the month.
7. No show cause notice by SEBI against the issuer / promoter/ director.
8. No violation of securities law in 3 preceding years.
13
9. No violation of securities law in 3 preceding years.

10. No trading suspension during the last 3 years
11. Auditor qualification does not excess 5% of net profit or loss after tax
12. Complied SEBI LODR reg. in preceding 3 yrs. However, if co. failed to comply
provisions relating to composition of directors and issues has complied such provisions
at the time of filling of after document, in such case SEBI may allow fast track after
o Allotment procedure
➢ Issuer shall not make an allotment if prospectus allottees is less than 1000.
➢ No excess allotment except in case of over subscription for rounding off
➢ Allotment on proportionate basis other than to retail individual investor &
anchor investor.
➢ Min. 1 lot should be allotted to RII & remaining shares shall be allotted on
proportionate basis.
o Exist opportunity to dissenting shareholders.

➢ Promoter or shareholder in control shall make the exit offer if
a. Variation in terms dissented by at least 10 % of shareholders
b. & Amount utilized for object is less than 75% of the issue proceeds.
➢ Exit price shall be highest of the following.
a. Volume weighted average price paid or payable by promoter or controlling
shareholder during 52 weeks preceding the relevant date
b. Highest price paid by promoter during 26 weeks.
c. Volume weighted average market price during preceding 60 trading days if
shares are frequently trading.
d. Price determined by promoter or merchant broker if share are not frequently
traded
14
Manner of providing exit opportunity to dessenting shareholder

1. Issue notice which contain information about exit offer
2. Pass SR & result submit to the RSE
3. Submit list of dissenting shareholders to RSE as satisfied by compliance offer.
4. Stock exchange shall disseminate to public within 1 working days.
5. Open Escrow account & deposit aggregate consideration at least 2 working days
prior to tendering period shall start within 7 days from passing or SR.
6. It remains open for 10 working days
7. Payment within 10 working days from end of tendering period.
8. Within 2 working days inform to stock exchange details of aggregate no. of
shares tendered, payment of consideration
Post issue responsibility of lead manager.

➢ Monitor the redressal of investor grievances
➢ Responsible for post issue activities till the allotment or refund & the listing
agreement is entered with RSE
➢ Any act of omission or commission of the intermediary shall be reported to SEBI
SELFNOTES-
15
CS SHUBHAM ABAD LODR
Designated securities: means non convertible debt securities, non convertible redeemable pre.
Shares, Indian depository receipt, debt instrument, units of mf, etc.
Specified securities: means equity shares and convertible securities
➢ On time compliance.
Regulation 6—appointment of CS as a compliance officer.
Regulation 7—appointment of share transfer agent (CAT-II)
Regulation 9—Presentation of documents approved by BOD.
➢ Quarterly
Regulation 13 – file a statement giving details of-
Complaints at beginning of the quarter ,received during the quarter &
remaining unresolved at the end of quarter.
File Within 21 days from end of quarter.
Regulation 27—quarterly compliances report on corporate governance within 21 days from
close of the quarter.
Regulation 31—statement showing holding of securities & shareholding pattern for each
class of securities within 21 days from end of quarter.
Regulation 32(1) — statement of deviation or variation.
Regulation 33 — submit quarterly & yearly up to date financial statement to stock exchange
within 45 days from end of each quarter except last quarter.
Regulation 47—financial reports with modified opinion within 48 hours of concusion of
meeting make advertisement in newspapers
1
➢ Half yearly
• 23(9): Disclosure of related party on consolidated basis.

Within 30 days from the date of publication of its consolidated or standalone financial
results if for the half year.
• 33(3): File statement of assets and liabilities and statement of cash flow once in
6months.
➢ Yearly compliances.
Regulation 7—submit compliance certificate signed by compliance officer and authorised
representative of STA (transfer agent) – within 30 days from end of financialyear
Regulation 14 -- pay all fees or charge as specified by SEBI within 30 days of end of financial
year.
Regulation 33 – submit annual audited financial statement with audit report & statement
on impact of audit qualification & file within 60 days from end of FY.
• 33(3) Submit annual audited stand-alone financial results consolidated
financial statement audit report statement on impact of audit qualification
with modification opinion.
Regulation 34— annual report shall be submit along with notice of AGM not later than the day
of commencement of dispatch to its shareholder.
Regulation 34(1)(b)—any change in annual report shall be sent within 48 hours after AGM
Regulation 36: Annual report to security holders 21 days before AGM.
Regulation 40—share transfer agent or in house share transfer facility shall produce a certificate from
PCS within 30 days from end of financial year
➢ Event based.
Regulation 29—) at least 5 days advance (clear days ) prior intimation of BM for financial
result/statement (quarterly/half/annual)
Regulation 29—prior intimation of BM for buy back voluntary listing, FPO, ADR, GDR
declaration of dividend at least 2 working days in advance
Regulation 29—prior intimation of BM, for alteration in nature of securities, interest,
redemption amount at least 11 clear days in advance
Regulation 30—disclosure of unpublished price sensitive information not later than 24
hours.
Regulation 31—disclosure of security & shareholding pattern separately for each class – 1
day prior to listing.
1
Regulation 31 – disclosure of securities & shareholding pattern in case of capital

restructuring of 2% of PSC or more, within 10 days from such event
Regulation 42—intimation of record date or book closure at least 7 days prior.
Regulation 42(3) – record date for dividend – at least 5 clear working days in advance.
Regulation 44—Details of voting results – within 48 hours from conclusion.
• 31A(8) Disclosure of material event that is reclassification of promoter minutes of

board meeting considering such request within 24 hours from the occurrence of the
event.
• 37(1) – company shall file draft scheme of arrangement to STX prior approval
before filling to court
• 39(2) Issue of certificates or receives of division split consolidation renewal duplicate
certificate within 30 days from the date of lodgment.
• 39(3) Submit information with respect to loss of share certificate and issue of
duplicatecertificate to stock exchange within 2 days from getting information.
• 40(3) Register transfer or issue certificates to transfer with within 15 days from such
request
• 40(2) record date and book closure
a. Right issue - 3 working days exclude date of intimation and record date.
b. Other than right issue 7 clear working days exclude date of intimation & record
date.
• 43(a) Formulate Dividend distribution policy by top 1000 companies for
dividenddistribution policy which disclose in annual report and on their
website.
• 46 maintain functional website update within 2 days of change
• 36(4) All documents made by listed company shall be in XBRL and format that allows
user to find relevant information easily.
➢ Exception
1.
a. Regulation 17 to 27 not apply if paid up share capital does not exceed RS 10 cr and net
worth does not exceed RS 25 cr
b. If exceeds the limit follow corporate governance policy within 6 months.
3. Which have listed its specified securities on SME exchange
4. Regulation 17 does not apply during insolvency resolution
5. Regulation 18 to 21 not applicable during insolvency reso;ution
➢ VIGIL MECHANISM
1. Listed entity shall formulate a vigil mechanism for director & employee to report
genuine concern.
2. It provides adequate safeguard against victimization of director or employee or any
other person.
3
3. It provides direct access to the chairperson of audit committee in appropriate cases.

❖ 28 In principle approval of RSE.
1. From all stock exchanges.
2. Stock exchanges where issuer is proposed to be listed.
3. Stock exchange having nationwide trading terminals.
4. No approval is required if entity has already obtained no objection certificate in
the case of arrangement.
❖ Role of a company secretary
1. Certificate to the effect that all transfer has been complied with specified time.
2. Certificate in practicing company secretary regarding compliances of condition of
corporate governance
3. Issue half yearly certificate by practicing company secretary regarding maintenance
of hundred percent security cover in respect of non-convertible debt securities
4. Secretarial audit report by practicing company secretary and annex with annual
report.
5. Certificate from practicing company secretary that no director has been
debarred or disqualified.
CASE 1- XYZ company is a medium size listed company. Mr. Mohan holding 28% of
ordinaryshare & is a major shareholder but he resigns the post of director. However,
Mohan continues to show considerable interest in the company recently he has been
demanding that board should consult him on issue of business strategy & dividend policy.
He also believed that 2 NED should resign because they contributed nothing of value to
the board.However majority of the board member are hostile & resend Mohan’s
continues interference
After a recent argument with the chairmen, Mohan has threatened to sue
member of the board for breach of duty.
He has also demanded the resignation of board member who is owner of the property
that has been sold to the company at a price that Mohan considers excessive. As a
company secretary prepare a report for the chairman advising him about.
a. Power of board.
b. Appropriate major for dealing with Mohan & responsibility of board towards
Mohan.
c. Provision of RTP. Considering the delegation made by Mohan.
➢ Designated Securities –
▪ Specified Member
▪ Non – Convertible debt securities
▪ Non – Convertible Preference shares
▪ Perpetual Debt Instrument
▪ Perpetual Non – Cumulative preference
4
▪ IDR
▪ Debt Instrument
▪ Security Receipt
▪ Units issued MF
▪ Other securities.
▪ NOTE-
➢ Specified Securities Listed on main board or SME exchange –
➢ SME STX dedicated for trading of SME securities
➢ SME – post issue paid up capital shall not exceed Rs 25 Cr.
➢ Non – Convertible Debenture –
▪ Financial instrument used to raise long – term capital
▪ Done through public issue
▪ Do not include PS or deb which is convertible into ES.
➢ Independent Director –
▪ Same as company law
➢ Compliance officer and his obligation –
▪ Qualified CS
▪ Obligation –
✓ Ensuring Compliance with applicable laws
✓ Co-ordination and reporting to board
✓ Ensuring correct procedures are followed
✓ Monitoring email address of grievance redressal division
➢ LODR – Listing of Non- convertible debt securities or Non – convertible redeemable

preference shares –
▪ 50 – Intimate to STX 11 days prior to due date of interest and redemption
▪ Intimation to STX at least 2 working days prior to BM at which
recommendationand declaration of issue
▪ Annual report filed with debenture trustee
▪ Copy of Annual report
▪ Copy of all Notices (Resolutions)
▪ Revision in rating, default in Amt of Interest.
▪ Maintenance of Rs 100 cr assets.
➢ Regulation 56 – document file with debenture trustee

▪ Annual report
▪ Copy of all notice, resolution circular
▪ Revision in rating
▪ Default in interest amount
▪ Maintains of assets cover
5
compliances
➢ If chairmen is
ED NED NED but not regular NED but related CO. having SR shares
To promoters& group
50% should be ID 1/3rd ID 50% ID 50% ID 50% ID
➢ Age of NED – max 75 yrs., above 75 years pass SR

➢ 1.04.2022 – top 500 listed co.
Chairman= NED or person not related to MD/ CEO of the company
➢ Top 2000 co. – minimum 6 directors on the board

- quorum of every BM shall be 1/3 of total strength or 3 director ; higher
including 1 ID
➢ Meeting = four BM, gap shall not exceed 120 days
➢ Quorum of top 2000 listed co.
= 1/3rd of total directors or 3 directors, whichever is higher
(Min 1 ID)
➢ NO. of ID – max 7 IDship
➢ If ID is MD / Manager in other co, max 3 IDship
➢ Top 1000 co. shall have at least 1 id women director
SELFNOTES-
6
2011
• Takeover.
➢ Acquiring the control over the target company by purchasing all or majority of shares or voting
power or control.
• Control.
➢ Control means right to appoint majority of directors.
➢ Control over the management
➢ Control over decision making policy .
➢ By any person along with person acting in concert(PAC).
➢ By way/ virtue of.
• Shareholding.
• Management or voting rights or
• Shareholders agreement
❖ Acquirer.
➢ Acquire means any person (natural/ artificial).
➢ Directly or indirectly.
➢ Acquiring or agreed to acquire shares, voting rights or control.
➢ Over a target company.
❖ Target company.
➢ Target company means a body corporate whose share are listed on stock exchange.
❖ Person Acting in concert.

➢ Common objective.
➢ Agreement or understanding.
1
➢ Formal or informal directly or indirectly.

➢ Exercising control over the target company by way of
• Acquisition of shares OR voting rights OR control over target company.
❖ Deemed PAC
➢ Holding company, subsidiary company or other companies under the same management.
➢ Company, its directors & entrusted person with the management.
➢ Directors of the companies mentioned in clause 1 & 2 (points above).
➢ Promoters & promoters’ group.
➢ Immediate relative.
➢ Mutual fund/ sponsor/ trustee/ AMC.
➢ CIS, CIMC.
➢ Venture capital fund, its sponsor, trustee, AMC.
➢ Alternate investment fund/sponsor/ trustee/manager
➢ Foreign institutional investor.
➢ Merchant banker & its client who is of acquirer (of acquirer)
➢ Portfolio manager. (of acquirer).
➢ Bank/ financial advisor/ stock broker of holding or subsidiary company of the acquirer.
Immediate relative in case of individual.
➢ Except normal banking services.
➢ Investment company in which acquires hold 10% of paid up capital or unit of the fund except
units of mutual fund.
➢ Immediate Relative –
▪ Includes –
✓ Spouse of person
✓ Parents
✓ Brother
✓ Sister or
➢ Children of such persons or spouse
❖ Initial Acquisition.
➢ 25% ko chune ke liye 26% ka open offer dena hoga.
➢ Any person along with PAC intends to Acquire such no. of shares.
➢ His total shareholding exceeds or equal to 25%.
➢ To acquire such no. of shares, give open offer of 26%
❖ Creeping Acquisition
➢ Acquirer holds 25% or more voting power but less than 75%(between 25% - 75%)
➢ Can Acquire 5% of voting rights in any financial year without making an open offer.
➢ Acquisition in excess of 5% would trigger an open offer.
22
From exceeding 25% to 75% Only 5%

Within 25%, no need
In a financial year can be acquired
to make open offer
without making open offer
Initial threshold of 25% of

75% of listed company
listed company
Open offer:
❖ Mandatory open offer.

➢ Acquirer aggress to Acquire such percentage of shares so that his holding exceeds or equals to
25% in such situation acquirer will give mandatory open offer of 26%.
➢ Acquirer holds25% to 75% along with the PAC, wants to acquire more than 5% of shares in such
situation Acquire will give mandatory open offer of minimum 26%
➢ No netting off is allowed ( without considering the disposal).
➢ In case of fresh issue by target company the difference between pre-allotment and post
allotment shall be regarded as quantum of additional acquisition
❖ Voluntary open offers

➢ Open offer without triggering the mandatary open offer
➢ Prior holding at least 25%
➢ Conditions –
33
1. No acquisition of shares in preceding 52 weeks except open offer

2. No acquisition of shares during the offer period other than open offer .
3. cannot acquire further share for a period of 6 months after completion of open offer .
4. voluntary open offers size minimum 10 % but post shareholdings cannot exceed 75% .
❖ Proceeds of takeover
➢ Short Public announcement is to be given in newspaper .
➢ File with SEBI and target company within one working day.
➢ Within 5 days from short public announcement file detail public announcement [DPA] [FROM SPA]
DPA ----- NEWSPAPER
➢ One in English daily

➢ One in Hindi daily
➢ One in regional newspaper where RO is situated
➢ regional language where stock exchange is situated.
❖ Copy of DPA file with SEBI, stock exchange & target company
❖ Pricing as specified in code.
❖ Dispatch letter of offer to existing shareholder within 7 days from receipt of comments from SEBI
or expiry of 15 days from filing with SEBI if no observation is received.
❖ Letter of offer in electronic form.
❖ If requested then send physical copy of LOO
❖ Within 12 working days from comments by SEBI.
❖ Offer period will be open for maximum 10 days.
❖ Within 10 days from closing of tendering period complete all the formalities including payment.
Appointment of Merchant Banker prior to Public Announcement (PA)
Public Announcement depending on transaction
Opening of escrow account- 2 WD prior to the date of the DPS
SHAPE \* MERGEFO
44
Detailed Public Statement – within 5 working days from the date of public announcement
Filing of Draft Letter of Offer with SEBI and send a copy to Target Company and Stock
Exchanges within 5 working days from detailed public statement
Dispatch letter of offer- within 7 WD of receiving comments from SEBI or in case of

Comments are received within 7 WD from expiry of 15 days from filing of draft LOF
Upward revision of offer price, if any by acquirer- prior to the commencement of last 1
working day before the commencement of the tendering period.
Recommendation of committee of ID to published at least 2 working

days before the commencement of the tendering period
Tendering period : commencement – shall start not later than 12 WD from date of
receipt of comments from the Board and to remain open for 10 working days
Tendering Period to be closed after 10 working days
Payment of consideration- within 10 working days from the late date of the tendering period
Post Offer Advertisement – within 5 working days from closure of offer period
▪ Restriction on acquisition.
➢ Acquisition within 26 weeks from closing of tendering period at higher price than the offer price in
such situation pays the difference amount within 60 days except in case open offer, delisting
ofshares or open market.
▪ Escrow Account.
➢ Ordinary bank A/C with special objective to make or receive payment.
➢ 2days prior to DPA escrow account.
➢ Deposit in Escrow account
• First 500crs—deposit 25% of total consideration.
• Above 500cr—deposit 10% of balance amount.
➢ Open escrow A/C with schedule commercial bank
55
▪ Conditional offer.
➢ Deposit 100% of minimum level of acceptance or 50% of total consideration whichever is higher.
▪ Deposit in the form of

➢ Cash deposit with schedule commercial bank.
➢ Bank guarantee in favors of manager.
➢ Deposit of frequently traded freely transferable equity shares.
▪ Mode of payment.
➢ Cash.
➢ Issue of shares.
➢ Exchange of shares.
➢ Transfer of shares or convertible debentures.
❖ Amount deposited in Escrow A/C shall be released.

a) Withdrawal of offer
b) Transfer to special A/C max 90%.
c) Balance 10%transfer on expiry of 30 days after the completion of offer.
d) In case of exchange of shares entire amount transfer to acquirer on expiry of 30 days from
completion of all the formalities.
e) In case of forfeiture transfer 1/3rd amount to target company 1/3rd amount transfer to investor
education protection fund remaining amt 1/3rd transfer to shareholder who tender shares in offer
period.
• Disclosure.
❖ Event based disclosure
Event To whom Days

Acquisition of 5% or more Target company stock Within 2 days from allotment
shares or voting rights exchange or acquisition.
Already hold 5% or more Target company & stock With 2 days from acquisition.
shares. exchange.
Acquisition (+)
Disposal (-) of 2 % or more
shares.
❖ Continual disclosure.
1.holding 25% or more shares Target company &STX Within 7 days from closing
each F.Y
2. disclose their aggregate STX and target co.’s registered within 7 w. days from closing if
holding office F.Y
66
❖ Pledge.
Pledge by promoter or PAC Target co. & STX Within 7 days from creation
of pledge.
Creating/Release of such pledge Target company stock Within 7 days from release of
exchange such pledge.
❖ Pricing (offer price) public shareholder.

➢ Highest of the following-
a) If shares are frequently traded.
i. Share purchase price under share purchase agreement (with promoter).
ii. Volume weighted average market price in past 52 weeks.
iii. Highest price paid in last 26 week by acquire (6M)
iv. Volume weighted average market price in past 60 days.
b) If shares are not frequently traded.

i. Share purchase price under share purchase agreement
ii. Volume weighted average market price in past 52 weeks
iii. Highest price paid in last 26 week by acquirer
iv. Valuation by expert ( generally CA,CFA)
• In case of convertible instruments into shares of target co. then price at which instrument are
to be converted
• Minimum level of acceptance –if offer does not receive the minimum acceptance the acceptance
falling short of the MLA
• Indirect acquisition- if difference between PA & DPA > 5% then offer price increases by 10%
c) Automatic Exemption
A. Inter se transfer between.

1) Immediate relative.
2) Promoter.
3) PAC.
4) Holding company, subsidiary company, other subsidiary of such holding company person holding
more than 50 % of equity shares & other companies in which such person hold not less than 50%
& their subsidiaries.
B. Pricing
1) Shares are frequently traded – price not higher than 25% of volume weighted average market
price for previous 60 days.
2) Shares are not frequently traded— max.125% of price determined by an expert.
7
c. Acquisition in ordinary course of business

1) By underwriter, market maker, stock broker schedule commercial bank, merchant banker,
portfolio manager etc.
d. Increase in voting rights pursuant to buy back
❖ Withdrawal of open offer.

➢ Once made shall not withdraw except
a) Refusal by statutory authority .
b) Acquirer being a natural person has died.
c) Condition of open offer is not satisfied.
d) Just & equitable reasons.
➢ Indirect Acquisitions of Shares –

▪ Acquisition of shares, voting rights or control over any other company which would be
enable the acquire of shares, voting rights or control to exercise such percentage of voting
rights which would otherwise triggered open offer.
➢ Deemed Direct Acquisitions –

▪ NAV of target company = >80%
Consolidated net assets of entity.
Or
▪ Turnover of target company = >80%
Consolidated turnover of entity
▪ Market Capitalisation of target company = >80%
Consolidated Market Capitalisation of entity

▪ Follow the same procedure of mandatory open offer
➢ Acquisition of shares, voting rights, controlled over any other company
which would enable the acquire or shares, rights or control to exercise such
% of rights which would otherwise triggered & open offer process.
➢ Following acquisition treated as deemed direct acquisition.
➢ Propionate or net asset value or sales turnover or market capitalization of
the target company as a% of consolidated net assets or consolidated
turnover or enterprise value of the entity or business being acquired exceed
80%
➢ Disclosure of encumbered shares
➢ Promoter, PAC of every target company shall declare that no encumbrance
has being made during financial year with 7 days from end of financial year
to stop exchange & audit committee of target company.
➢ Submission of draft letter of offer along with the fees
➢ Submit draft L00 to sebi within 5 working days from detailed public
announcement along with the fees.
8
➢ Consideration payable. Fees
• Upto 10 cr. Rs 5 lakhs.

• More than 10cr. But upto1000cr. 0.5% of offer size.
• More than 1000cr. 5cr to 125% in excess of 100cr
➢ General exemption- if conversion of equity shares with superior rights into ordinary
shares shall be exempted from open offer process.
❖ Competing offer
➢ Upon PA being made, any person other than the acquirer can made PA within 15
days from DPS
➢ Shares held by him shall be at least equal to holding of acquirer including shares posted
in offer
➢ Acquirer can revise the offer price at any time up to 1 WD prior to commencement of tendering
period
9
SELF NOTES-
10
❖ Objective of buy back

A) To improve earning per shares
B) To improve return on capital, net worth and to enhance the shareholder value.
C) To provide additional exit route
D) To prevent unwelcome takeover bid.
E) To return surplus cash to shareholder.
❖ Condition
➢ BM-BR- 10% of paid up equity capital and free reserve.
➢ Maximum limit 25% of paid up equity capital & free reserve(approval by postal ballot)
➢ Debt equity ratio = 2:1 after buy back fully paid up shares.
❖ Additional condition.
a) No buy back through negotiated deal (on or off market).
❖ No further buy back for next one year from expiry of preceding buy back.
❖ Reduction of shares capital shall be affected.
➢ Methods.
a) Existing shareholder on a proportionate basis.
1
b) Open market- through book building process or stock exchanges (max 15% of PSC+ FR.)
c) Odd lot holders.
➢ Source of buy back.

❖ Proceeds of fresh issue of different kind of securities.
❖ FR/SP.
➢ No buy back through.

a) Subsidiary co./ investment company.
b) No default in payment of deposit /debenture/ declared dividend/ redemption of PF/term loan &
interest on it.
❖ Buy back from existing security holder through tender offer

process
a) Existing shareholder on a proportionate basis.
b) 15% of securities proposed to buyback or No. of securities entitled as per their holding reserve
for small shareholder
c) Disclosure in explanatory statement
❖ Max price of buy back &

❖ Disclosure of promoter holding for last 6 month prior to SR if they intends to offer his shares.
d) Pass SR
e) Within 2 days from SR make a public announcement in one English & oneHindi & one
regional newspaper.
f) Copy of PA along with soft copy filed with SEBI through MB.
File with SEBI- with 5 days from filling of PA
Draft LOO through Declaration of

Fees.
MB. solvency.
i. Comment – SEBI may give its comment within 7 days from filling LOO or from the date of receipt
of satisfactory reply. (SEBI may also sought additional information.)
ii. MB shall carry out such changes before dispatched to the shareholder.
iii. Record date- company Announce record date to determine eligible participants.
iv. Dispatch of LOO- dispatch LOO along with tender form within 5 days from receipt of comment
from SEBI.
v. Opening date – opened within 5 days (working) from dispatch of LOO & remain open for 10
working days.
vi. The shares proposed to buy back is divided into reserve category for small shareholder and
general category.
(Unregistered shareholder may tender his share after submitting transfer deed).
vii. Escrow account – on or before opening of offer deposit in an escrow account.
2
viii. Up to 100 CR – 25% of consideration payable

Exceeding 100cr – 25% upto 100cr & 10% there after.
❖ Deposit by way of-
a) Cash deposited with SEBI

b) Bank guarantee in favour of MB ( valid for 30 days after expiry of buyback period)
c) Deposit of specified securities.
d) Combination of above.
Closure & payment – open special account &deposit 90% of the amount lying in escrow account.
➢ Complete the verification process & make payment within 7 days from closure.
➢ Extinguish & physically destroy the securities in presence of RTI/MB & SA within 15 days of the
date of acceptance
➢ Certificate to SEBI within 7th day of the month succeeding the month in which securities bought
back which is verified by RTI or Two director – one shall be MD and statutory auditor.
➢ Maintain register in SH – 10.
❖ Buy back from Open market
➢ Through Stock exchange.

➢ Book building.
❖ Buy back through the stock exchange.
• Pre- condition.
a. Buy back only on STX having nationwide trading terminals
b. No buy back through promoter.
c. Order matching mechanism (except all or none)
d. Appoint MB & make PA within 2 working days from passing BR or SR (postal ballot)
e. No need to file draft LOO with SEBI in case of open market.
• Buy back offer period – open not later than 7 working days from filling ofPA & shall be closed
within 6 month from opening of the offer.
➢ Inform STX on a daily basis about the shares bought back.
❖ Physical shares –
A) separate window for physical shares
B) Broker shall verify the identity proof and address proof.
C) Price should be volume weighted average price of the shares traded other than physical
form during the calendar week.
3
❖ Escrow Account-
➢ Before opening of offer, open escrow account & deposit in cash at least 25% total amount
➢ Amount in Escrow account can be utilise for buy back payment subject to 2.5% remaining in
Escrow account.
➢ After utilisation 50% of the buyback amount the fund in escrow acc may be released to the
company.
➢ In case of non- compliance SEBI may forfeit the Escrow amount (max-2.5%) except
I. Sell order was in adequate.
II. Circumstances beyond the control of the company.
III. Merit consideration.
➢ Forfeited amount deposited in IEPF
❖ Complete the verification process within 15 days of payout.
➢ Extinguish within 7 days from completion of buy back

➢ Extinguish & destroy on or before 15th day of succeeding month.
❖ Buy back through book building
➢ Pass SR/BR.
➢ Appoint MB.
➢ Make PA at least 7 days prior to commencement of buy back.
➢ PA contain information about BB.
➢ Filing with SEBI – copy of PA file within 2 days to SEBI
Escrow –
as applicable in tender offer from such announcement.

➢ Offer procedure- at least 30 bidding center& one electronically linked Computer terminal.
➢ Offer period – 15 days & max 30 days.
➢ MB & company determine the buyback price.
➢ Extinguishment- same as tender offer.
4
❖ - OBLIGATION.
COMPANY.
I. Loo/PA shall contain true & material

information.
MB.
II. No further issue of securities till
expiry of buyback. I. Due diligence.
III. Consideration by way of cash only II. Provision of Escrow are duly
IV. Cannot withdraw the offer once LOO complied.
is filed with SEBI or PA is made. III. Report to SEBI with in 15 days from
V. Cannot raise further capital for a expiry of buy back offer.
period of one year from expiry of buy
back.
VI. PA within 2 days from expiry of
buyback disclosing.
• No. of securities bought back.
• Price
• Total amount invested.
• Change in capital structure.
SELFNOTES-
5
5
Delisting
Removal of securities from stock exchange
Voluntary Compulsory
From all STX Delisting to firm few stock Small compny

Exchange but continue to
List on the STX having nation
Wide trading termined.
Exit opportunity No exit opportunity give exit opportunity
❖ Non applicability
• Security listed on innovative growth platform & shares listed in purchase to private offer
• Delisting plan as per IBC code provide exit opportunity
❖ Condition for delisting
• Company shall not delist its shares

a) Pursuant to buy back or preferential allotment ( after 6 months from completion of buy
back or preferential allotment can do delisting )
b) Unless a period of 3 years has elapsed since the listing
c) Convertible securities which are convertible into equity shares are outstanding
d) Acquirer shall use the fund
e) If acquires had sold eq. shares during 6 months prior to date of initial public announcement
1
❖ Voluntary delisting where exit opportunity is not required

➢ BM – BR
➢ Application to RSE for delisting
➢ Issue public notice in English , Hindi , regional paper where relevant stock exchange is
located
➢ Disclose the fact of delisting in annual report post delisting
➢ Disposed off of the delisting application within 30 days from such application
➢ Disclosure in public notice -
2
Name of RSE from where reason of delisting fact of continuity of listing
The equity shares are of equity shares on RSE having
Intended to be delisted nationwide trading terminal
❖ Voluntary delisting where exit opportunity is required
➢ Initial public announcement to all stock exchange on which shares are listed
➢ STX shall disseminate the same to the public
➢ Copy of initial public announcement shall also send to the RO of the company not later than 1
working day from public announcement
➢ Copy of public announcement shall contain -
Reason of delisting undertaking that compliance PA shall not omit any

With regulations relevant information
➢ Appoint a MB ( merchant bank) registered with SEBI as a manager of offer
➢ Obligation of MB
Before detailed public announcement the manager shall ensure
the acquirer is able to from arrangement for content of PA are

implement the delisting fund have been made complete, true, & fair
offer
manager shall not

market intermediary directly or indirectly
engaged in delisting are deal in its own account
registerd in the shares of
company
2
➢ Approval by BOD
• Obtain approval from BOD within 21 days from IPA
• BOD shall certify that company is in compliance with securities law & delisting in
their opinion is in the interest of shareholder
➢ Appointment of CS to carry out due diligence

• BOD shall provide following info to CS
Details of buying & details of off market additional info.

Selling & dealing in the of acquirer & top 25 if demanded by CS
Eq. shares during the 2 shareholder for a period
Years prior the BM & of 2 years
Details of top 25 sh.holder
• CS shall carry out due diligence & submit the report to BOD certifying that dealing by
acquirer or top 25 shareholders is in compliance with regulations.
➢ Approval by shareholders
• Approval within 45 days from board approval
• SR – Postal ballot/ e-voting
• Obtain approval from public shareholder- twice the votes casted in favor as compare
vote casted against it.
➢ In principal approval from STX

• Company shall make application to RSE for in-principal approval within 15 days from
SR or receipt of statutory approval whichever is later.
• STX shall disposed off the application within 15 days from receipt of application.
➢ ESCROW account
• Open ESCROW account with SCB not later than 7 days from SR.
• Deposit 25% of total consideration
❖ Total consideration = public shareholding floor price or indicative price
( whichever is higher)
• Acquirer shall deposit remaining 75% before making DPA
➢ Detailed public announcement ( DPA)

• Within one working day from in approval from stock exchange give DPA
• It shall specify – specified date of later than 1 working day from DPA.
➢ LOO ( Letter of offer )

• Acquirer within 2 working days from DPA dispatch to all shareholder the letter
of offer
• LOO shall be available @ website of co. & manager
3
➢ Opening of delisting offer

• Bidding period shall start within 7 working days from DPA &
remain open for 5 working days.
➢ Reversed book building method

• Public shareholder can participate in reverse book building method however holder
of DR cannot participate
➢ Discovered price
• Discovered price shall be determined through reverse book building method
• Acquirer shall have option to give indicative price which is higher than floor price
• Indicative price can be reversed upward before the start of bidding price
• Acquirer shall bound to buy shares at discovered piece if such price is equal to floor
price or indicative price
• If discovered price is higher than floor price but lower than indicative price then
accept the indicative price
Offer
Successful failure
- post promoter holding - if the minimum number

reaches to 90% of total of shares are not offered.
shares excluding the Or
shares held by custodian - price discovered through
against DR or shares book building method is
held by trust for rejected by acquired.
implementing employee
benefit.
➢ Payment of consideration
• Payment within 10 working days from closing of off or counter offer.
➢ Final application to STX after delisting

• Within 5 working days, give final application to STX
➢ Remaining public shareholder can tender their shares for a minimum period of 1 yr.
from listing
4
Small Company:
• PSC – not excedding10 CR and

• Net worth –not exceeding 25 CR
• Trading in past 12 months is less than 10% of total shares.
• Company has not been suspended by any STX in preceding one year.
• Procedure:
▪ BR.
▪ Appoint MB.
▪ Determine exit price (not less than floor price)
▪ Approval from 90% of public share holding
▪ Acquirer shall complete the process of approval within 75 working days
▪ Payment within 15 working days after the expiry of 75 days.
• Compulsory delisting
Permanent removal of securities as a penalizing measure for not making submission or
comply the laws
➢ Constitution of penal
• Decision of delisting shall be taken by panel consisting of
✓ 2 directors of RSE
✓ One representative of investor association recognized by SEBI
✓ One representative of MCA or ROC
✓ ED or secretary of RSE
➢ Public notice before delisting
• RES shall give notice in one English, hindi, one vernacular
➢ Representation within 15 days from notice by aggrieved party
➢ RSE consider the representation & pass the final order
➢ Guidelines for compulsory delisting

• RSE shall take reasonable steps to trace the promoter
• RSE shall consider the non compliance & number and percentage of public share
holders who may be affected by such non compliance
• Name of such company & promoters shall be displayed on the website of STX
➢ Public notice after delisting order

• RSE shall publish a notice in one English newspaper, hindi & one vernacular
newspaper
• Details of public notice
✓ Facts of delisting
✓ Name& address of the company
✓ Fair value of delisting equity shares
✓ Details of promoters
• Such notice shall also gives to all other STX where shares are listed
5
➢ Rights of public shareholders

• RSE shall appoint independent valuer who shall determine the fair value
• Promoter shall acquire the shares from public shareholders by paying fair value
within 3 months from delisting order.
• Co/ WTD/ Officer in default / promoters cannot access the securities market not
seek for a listed of 10 years
• Delisting from innovators growth plateform after making the IPO
• BM – BR
• GM –SR - Postal ballot /e- voting
✓ SR shall be acted only if vote cast by Majority public shareholders in favor
• Delisting price is based on a floor price determined as per takeover resolution

• Post offer promoter or acquirer’s shareholding shall reaches to 75% of total shares
& at least 50% of public shareholders.
6
SHARES BASED EMPLOYEE BENEFIT AND SWEET

EQUITY REGULATION 2021.
• Employee benefit
➢ Any scheme by listed co. which provides directly or indirectly benefit to the employees
➢ To deal, purchase, subscribe the securities of the co.
➢ Scheme is set up or funded by or controlled by company or group of the companies
Companies Act:-
➢ Employee- Permanent employee in India and Outside India.

Director (WTD or not).
Employee of Subsidiary in India and Outside India or Holding.
• Exclude- 1. Employee cum Promoter or person belonging to promoter group

2. Director who himself or through relative holds more than 10% of the outstanding
employeestock.
Note: Does not apply for start up company for first 10 years.
Employee stock option scheme [ESOP]
• It contains the details of manner in which the scheme will be implemented

• Disclosure as per SEBI regulations to prospective option grantee
• Co. shall be free to determine the exercise price
• Vesting period – min 1 yr.
• Co. shall free to determine look in period
• Employee shall not entitle for any voting rights, dividend & other benefits till exercise
• If employee failed to exercise the option, then amount paid by employee can be forfeited
However, if co. failed to fulfill any condition, then amount paid by employee may be
refunded
1
• In case of merger and amalgamation the vesting period is adjusted

• Status of ESOP
Death permanent incapable resignation
Vesting to legal vesting on the same date forfeiture of amt

Heirs on vesting date
❖ ESPS
• This scheme shall contain the details of the manner in which the scheme will be
implemented
• Co. may determine the price of shares but follow accounting polices
• Shares shall be lock in for 1 yr. from allotment
• If shares are issued to employees at the same price as in the public issue then shares shall not
be subject to lock in
• Death / permanent incapability – requirement of lock in shall not apply
❖ SAR – stock appreciation scheme
• Co. can implement cash settled or equity settled

• Adequate disclosure as per SEBI regulations to SAR grantee
• Vesting period of one yr.
• No vesting rights or dividend right till exercise
• Death/ incapability – vesting period shall not apply
❖ General employee benefit scheme

• It contains the details of scheme in which the scheme shall be implemented
• Shares of the co. / listed holding co. shall not exceeds 10% of
✓ Book value
✓ Market value
✓ Fair value
Of the total assets of scheme
• Secretarial auditor shall certify that scheme is as per point 2
❖ Retirement benefit scheme

• The scheme shall contain details of the benefit provided to employee
• Value of scheme – shall not exceed 10% of
✓ Book value
✓ Market value
✓ Fair value
Of total assets of scheme
2
❖ Implementation of scheme
➢ Trust – irrevocable
➢ Route – decided at the beginning of the scheme
➢ In case change in made- obtain SR but change is not prejudicial to the int of employee
➢ In case of secondary acquisition or gift – compulsory trust mode
➢ Company may implement several schemes through single trust
However, maintain separate book of account
➢ File trust deed with RSE where the shares are listed
➢ Trustee
• Director, KMP, promoter & their relatives of co, or H/A/S
• Who beneficially holds 10% or more of paid up capital or voting rights
Cannot appoint as trustee.
➢ No. of trustee
• Individual or OPC is trustee – min 2
• Body corporate – min 1
➢ Trustee cannot vote in respect of shares held by such trust

➢ Obtain shareholder approval to undertake secondary acquisition
➢ Trust cannot deal in derivatives
➢ Shall undertake only equity-based trading
➢ Trust holding shall be considered nonpromoted holding
➢ Secondary acquisition in FY shall not exceed 2% of paid-up equity capital
➢ Total shareholding under secondary acquisition

• For scheme in part A, B, C & OTHER = 5%
• Scheme part D & E = 2%
➢ Trust shall require to hold such shares acquired through secondary acquisition for
min 6 months
➢ Trust shall be permitted to undertake off market transfer of shares

• To the employee pursuant to scheme
• Participant in takeover
• Buy back & delisting
➢ The trust shall not sell the shares in secondary market except
• To fulfill tax obligations & other related expenses of grantee
• On vesting or exercise of SAR [ cash settled]
• In case of emergency
• For repayment of loan
• Buy back
• Winding up of scheme
3
❖ Compensation committee
• Administration and superintendence of scheme
• Where scheme is implemented through trust the CC shall delegate the administration
to the scheme
• NRC committee shall be designated as CC
• CC shall frame suitable policy to ensure that there is no violation of securities
❖ Shareholder’s approval
• Scheme shall be approved by passing SR
• Secondary acquisition
• Secondary acquisition by trust due to expansion to capital by company including pref.
allotment [QIP] to maintain 5% of capital
• Grant to option, SAR shares to employee of sub/ holding co.
• Grant of options, shares or benefit to identified employee during one year equal to or
exceeding 1%
❖ Variation of term
• SR
• Variation must be favorable to the int of the employee
• Send notice to employee which disclose the variation
❖ Winding up
In case of winding up, excess monies utilize for repayment of loan
❖ Non – transferability
• Option/ SAR/ other benefits shall not be transferred
• Can not be pledge, hypothecated, mortgage otherwise
➢ Resignation – option expired

Death – option, benefit to legal heir on actual date
Permanent incapable – allotment on the same date
➢ Issue shall be listed on RSE

➢ CERTIFICATE OF AUDITOR
- Obtain certificate from secretarial audit that scheme has been implemented as per
the law
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• Sweat equity shares by listed company

[section 54 companies act, 2013]
➢ Employees [ India as well as outside India] & directors

➢ Pass SR
➢ Maximum limit
A] Financial year aggregate limit
15 % of paid up equity 25% of total paid up equity

Share capital share capital
B] Innovation growth platform [ for 10 yrs.]

Financial year aggregate limit
15% of paid up eq. 50% of paid up eq.

Share capital capital
➢ Validity of SR – 12 months
➢ Pricing of sweat equity shares
– pricing shall be determine in accordance with the pricing requirements
➢ Valuation of sweat equity shares

✓ Valuation shall be carried by MB.
✓ MB may consult valuation expert.
✓ MB obtain certificate from independent CA that valuation as per relevant AS accounting
standard.
➢ Accounting treatment
Balance sheet p/L account
Consideration takes the form of book as in expense

Depreciation or amortization
➢ Managerial remuneration.
✓ Treated as MR if-
a) Issued to director or manager and
b) Issued for consideration other than cash.
➢ Place , auditors certificate ( secretarial auditor ) before AGM that issue of sweat eq. shares has been
made in accordance with the regulations
➢ Lock in period
- for a period specified in relation to preferential issue under ICDR regulation
5
❖ Issue of sweat Equity share to promoter

✓ Pass OR.
✓ Promoter shall not participate on such resolution.
✓ Resolution shall be valid for 12 months from passing of resolution.
➢ Intimation to stock exchange
• Within 7 days from issue of sweat eq. shares disclosing

✓ No. of sweat eq. shares issued
✓ Price at which shares are issued
✓ Total amount received
✓ To whom shares have been issued
✓ Change in shareholding pattern
6
CS SHUBHAM ABAD PROHIBITION OF INSIDER TRADING
❖ Insider trading.
✓ Trading by insider on the basis of UPSI in securities of BC.
❖ Insider.
✓ Any person who is a connected person or having possession of UPSI or having access of UPSI.
❖ Connected person –
✓ Any person during 6 months prior to concerned Act (Insider trading) has been associated with
the company.
✓
Bolke. Kar ke
Frequent communication Contractual capacity or

with its officer of the fiduciary or employment
company. relationship
Ban ke. Pakadke

D - DIRECTOR Holding any position
including professional or
E - EMPLOYEE
business relation that
O – OFFICER. allow such person access
to UPSI
❖ Deemed connected person.

✓ H – holding / subsidiary / associate.
✓ M – member of board of trustee of mutual fund / AMC / Employee.
✓ M -member of board of public financial institution.
1
✓ O – OFFICER OF STX & clearing corporation

✓ O – officer of self-regulatory organization
✓ B – banker.
✓ F- Firm / BC/ AOP / HUF / LLP in which more than 10% held by director/ relative of director/
banker of company.
✓ I – immediate relative of connected person.
✓ I – intermediary.
✓ I – investment company.
❖ UPSI (unpublished price sensitive information.)

✓ Any information related with the company or its security.
✓ Which is not available to public.
✓ But which upon generally available to public.
✓ Materially affect the price of the company.
✓ Which includes but not restricted to –

1) F – financial report/ result.
2) D – dividend.
3) M – merger/ Amalgamation/ acquisition/ delisting/ takeover/ listing/ demerger/ reconstruction.
4) C – change in capital structure of the company.
5) C- change in KMP.
❖ INFORMANT.
1) Individual (s) who voluntary submit a voluntary information disclosure relating to violation of
insider trading has occurred is occurring or has likely to occur to SEBI in a provided manner.
❖ Irrelevant vexatious frivolous Information.

❖ Information which-
1) Does not constitute a violation of insider trading.
2) Is rendered solely for the purpose of malicious prosecution.
3) Is rendered to waste the time and resources of the SEBI.
❖ Monetary sanctions.
1. Any non monetary settlement terms or any direction of SEBI in the nature of disgorgement
under Securities Law aggregating to at least 10 CR rising from the same operative facts.
❖ Original information.
❖ Relevant information pertaining to violation of insider trading and.
A. Derived from the independent knowledge
B. Not known to SEBI from any other source.
C. It is sufficient specific credible and timely to commence an enquiry or audit or asset in ongoing
examination or investigation.
D. Not derived from an allegation made in judicial or administrative hearing.
E. Not irrelevant or frivolous or vexatious.
2
❖ Reward. A. Gratuitous
Monetary amount for which an informant is declared eligible as per the provision.
❖ Submission of origin information to the Board.
❖ Informant shall submit origin information by furnishing the voluntary information disclosure
from the office of information protection of the SEBI.
❖ information submitted through a legal representative
❖ SEBI may not disclose the identity of the informant
❖ However, if disclosure is necessary SEBI shall revile the identity
❖ Informant award.
1) Upon collection or recovery of monetary sanction by SEBI.
2) SEBI may its sole Discretion declare and reward and intimate to informant.
3) Reward shall be 10% of total monetary sanction collected or max 10 cr.
4) If award is upto 1cr then award will be granted after final order
5) If amount is above 1cr then SEBI Mein Grant interim reward not exceeding 1cr.
6) And excess amt – upon the collection of recovery of sanction amt to at least twice the balance reward
7) In case joint information the reward shall be divided equally and paid from the investor
protection and education fund.
❖ Rejection of claim for reward 7(4)

❖ No report shall be made to an informant who does not submit original information.
❖ Who has acquired information from member officer or an employee of -
a.Any regulatory agency.
b.Self-regulatory organisation.
c.Surveillance and investigation wing of any RSC Or clearing corporation.
d.Law enforcement organisation.
❖ Knowing make false fictious statement.
❖ Failed to furnish complete information.
➢ Immediate Relatives –
▪ Spouse of a person
▪ Parents
▪ Siblings
▪ child
▪ Any of whom is either dependent financial on such person consults such person in taking
investment decision
▪ If spouse is not financial dependent on then not immediate relative.
3
❖ Regulation – 3
Communication & procurement of UPSI
✓ Any person shall not –

A. communicate, provide or allow access to UPSI.
A. Procure from or cause the communication by an insider of UPSI except for the legitimate
business purpose HOWEVER,
C.
May communicate/ provide/ allow access to UPSI in connection with the following
transaction-
Board of director thinks that

the proposed transaction is
Obligation to make an open in the best interest of the
Not attract the open offer
offer company
but disclosure is necessary
Such info is disseminated at least 2 days prior to concerned transactions
➢ Regulation no. 4
• Trading when in possession of UPSI
▪ Off – market inter se transfer between insider trading having same UPSI
▪ Block Deal between person having same UPSI –
✓ Provided –
I. No breach of regulation 3
II. Conscious and informed trade decision
III. Having possession of UPSI
▪ Off market trade shall be reported to company within 2 working days.
▪ Off market transaction transfer between promoter who are aware of UPSI & made conscious
decision.
▪ Trading as per trading plan.
▪ In case of non- individual insider
✓ The person who were in possession of UPSI is different from the individual taking trading
decision.
✓ Appropriate arrangement were in place to ensure that regulations are not violated.
Note- in case of connected person the burden of proof shall be on such connected person.
4
❖ Regulation 5
Trading Plan.
✓ Insider submit trading plan to compliance officer for his approval when he wanted to trade even
after possession of UPSI.
✓ Compliance officer may demand additional information or undertaking from the insider.
✓ Submit to STX for his approval (co. will give to STX)
✓ Minimum 12 months (Trading plan)
✓ No overlapping & it is irrevocable.
✓ Plan includes value of trade, no. of shares & securities to be traded.
✓ It commences after six months from public disclosure.
✓ No trading between – 20th day prior to closure of financial year & 2nd trading day after disclosure
of financial result.
✓ Creation of pledge is allowed when trading window is closed.
✓ No pre clearance is required if trading plan is approved
✓ Commence after 6 months from public disclosure
✓ Trading window closed at time of
• Declaration of financial result
• Declaration of dividend
• Issue of securities
• Execution of new project
• Amalgamation/merger/takeover/buyback
• Chance in policy, plan
❖ Regulation 6
Disclosure of trading by insider to company.
✓ By insider/ immediate relative/ any person for whom such person takes trade decision.
✓ Disclose the trading in securities which includes derivative also.
✓ Such disclosure shall be preserved for 5 years ( keep the info)
❖ Initial disclosure.
✓ Promoter/director/ KMP – shall disclose his holding within 30 days from this regulation taking
effect.
✓ Appointed as KMP/Director/ Promoter—within 7 days from such appointment disclose their
holding.
• Continue disclosure.
Promoter/director/employee-
Notify co. within 2 TD if transaction
or series of trans. Exceeds 10 L in
any quarter. Company to STX –
Notify within 2 TD from receipt of
intimation.
5
❖ Code of fair disclosure.(compliance officer)

1) Prompt public disclosure of UPSI by company
2) Uniform & universal disclosure.
3) Designation of a senior officer as a chief investor relationship officer to disclose the UPSI.
4) Verification of market rumors.
5) Information – financial analysts & research person shall not be UPSI.
6) Handing of UPSI on a need-to-know basis.
❖ Institutional mechanism for prevention of insider trading

❖ CEO, MD shall insure compliances with the requirement given in this regulation to prevent
insider trading.
❖ Internal control includes
a. All employees who have access to UPSI are identified as designated person
b. UPSI shall be identified and its confidentiality shall be maintained as per regulations
c. All Employees with UPSI is share shall be maintained and confidently agreement shall be signed.
d. Periodic process review to evaluate effectiveness of such internal control.
e. Audit committee shall review the compliances at least once in financial year and verify the
internal control are adequate.
f. Listed company shall have a whistle blower policy and make employees aware of such policy.
❖ Code of conduct.
Listed company Market intermediary Any other person

who access to UPSI
✓ Designate compliance officer who administer code of conduct(COC).

✓ If COC is not followed – compliance officer report to BOD & chairperson of Audit committee
✓ Norms for appropriate “Chinese wall” policy or for person who cross the wall.
✓ Trading shall be closed when the person have UPSI.
Penalties-
✓ Not to deal in securities.
✓ Prohibiting the insider from disposing off the securities.
✓ Insider should not insist any person to deal in securities.
✓ Declaring the transaction null & void.
✓ Money transfer to IEPF if earn from insider trading.
6
SELF NOTES-
7
CS SHUBHAM ABAD MUTUAL FUND
Introduction
• Established in the form of Trust that raise money through sale of units
• Investor get access to professional management
• Mutual fund invests the fund in capital market or other market.
• It plays active role in building wealth and generating income for investor.
• Started with the introduction of Unit trust of India in 1963(total 45 mutual fund in India)
• Parties involved in mutual Fund
I.Sponsor
• Influential investor who establish the Mutual Fund.
• Promotor of Mutual fund
• Contribute at least 40% of Net worth in Asset Management Company.
• Bank, financial institution, Body corporate may act as a sponsor
• Also appoint Trustee for the mutual fund.
II. Mutual Fund
• In the form of Trust establish under Indian Trust Act to raise money through the sale of units.
• Registered under SEBI
• Established by Sponsor
• Issue units to Marginal Investor
III Trustee
• Trustees are the owner of trust property who holds the property for the benefit of a third party.
• Also known as Board of trustee or trustee company
• Independent person
• Unit holder can remove the trustee
• Person or firm that holds or administer property or asset for the benefit ofunit holder .
• Eligibility :
1
a. Person of ability integrity & standing.

b. Not found guilty of moral turpitude
c. Not convicted under any economic offence or violation of securities law.
d. AMC director officer or employee of AMC cannot appoint as a trustee of
mutual fund.
e. Trustee of mutual fund cannot be appointed as a trustee in any at the
mutual fund.
f. Two third of trustee shall be independent and not associated with
sponsors.
In case a company is appointed as a trustee then its director can act as a
Trustee of any other trust.
IV Assent Management Company

• Company registered under Co. Act
• Having certificate of registration obtained from SEBI
• Also known as fund manager/ Investment manager
• Responsible for investment decision
• 40% of Net worth is contributed by sponsor in AMC.
• AMC invests clients pooled fund into securities that match declared financial objective.
• It provides investors with more diversification and investing options.
• Appointment of asset management company.
V Custodian
• Hold Securities & other assets of Mutual Fund and provide incidental services such as
maintaining the accounts, collecting the benefits etc.
• It is also registered with SEBI
• Custodian open a separate custody account and deposit in the name of each clients.
• Generally appointed by trustee / sponsor
VI Transfer Agent
• Deals with issue, redemption & transfer of securities

• Maintain updated records of unit holder.
• Registered with SEBI.
VII Depository
2
• Securities hold in Demat form

• It ensure free flow of Mutual Fund
VIII Unit holder

• Investor who hold units of M.F
Scheme
Open ended Close ended

MF MF
1. Variable corpus (capital) 1.Fixed corpus
2. Not listed on RSE 2.Listed on RSE
3. Highly liquid 3.Mostly liquid
4. Free entry & exit 4.Restricted entry
5. Only one value (NAV) 5.Two value – NAV & Market Price
6. Can be redeemed on any 6.can be redeemed on maturity.
Transaction day
Mutual Fund plan

Regular plan Direct plan
Sold through distributor Directly from MF or AMC
High expenses Ratio low expenses Ratio
Lower Return Higher Return
Brokerage No Brokerage
TYPES OF MUTUAL FUND

1) Income oriented mutual fund
• Fixed Income to investor
• Investment in Debt Securities like debentures bonds
• Low risk, low return
• No Default risk
• Passive investor
3
2) Growth oriented mutual fund

• Growth by way of Dividend and Capital appreciation
• Investment in good quality script
• No guaranteed return
• Less risk but high return
3) High growth Mutual Fund Scheme

• High risk high return
• Investment in securities having volatility
• Income through Rapid capital appreciation
• Active investor
• High default risk
4) Hybrid Mutual Fund

• Also known as balance fund
• Mixture of debt & equity
• Investment mix depends upon the investor
• Features of Income oriented MF & growth oriented Mutual fund
5) Capital protection oriented scheme

• Intention is to protect the original capital invested by mutual funds
• Close ended mutual funds.
• Generally listed on stock exchange
• Mixture of equity & debt
• More towards debt investment.
6) Tax saving scheme

• Rebate to investor Under tax law.
• Government offer tax incentives.
• Lock in period- 3years.
• Equity linked saving scheme (ELSS).
7) Special scheme
• Investment in specified sector.

• Replicate the performance of particular index such as SENSEX 30.
• Known as index fund.
• Return is equivalent to return generated by such sector or index.
• Ideal for the investor who has already decided to invest in specific sector.
8) Real estate mutual fund.

• Investment in real estate sector directly or indirectly.
• Close ended scheme
• Listed on RSE.
4
9) Off shore mutual fund

• International fund
• Investment in foreign company.
• Obtain permission from RBI
• Follow FEMA regulation.
10) Leverage fund.

• Also known as borrowed fund.
• Fund collected from unit holder as well as borrow loan from the market.
• Excess gain shall be given to unit holder.
• Investment in risky project.
11) Hedge fund.

• Hedge means mitigation of risk.
• Fund employed in speculative trading.
• Fund use to hedge market risk.
• Use complex strategies for hedging.
12) Fund of fund

• Investment in units of other mutual fund
• Double diversification
• First introduce by ICICI.
• Currently not operating in India
• High cost involve in such mutual fund.
13) New diversion fund.

• Investment in technology & scientific research company such as birth control, pollution control
etc.
14) Exchange traded fund;-

• Investment in index or basket of securities.
• Describe as mere tax efficient than traditional equity mutual fund.
• Introduced in 1993.
• Tax efficient & low cost.
15) Money market mutual fund.

• Investment in money market instrument such as Treasury bill/ government securities etc.
• Short term investment having higher yield.
• No default risk.
• Safe investment.
16) Infrastructure debt mutual fund.
5
• Investment in infrastructure project or infrastructure sector.

• Investment in debt security.
• Investment in company engaged in energy, railways, transportation etc.
NAV-
➢ The market value of one unit of a mutual fund scheme on a given date
➢ Declared by fund houses on every business day on AMC website.
➢ It has to be published on 2 national newspapers
➢ NAV= net asset of the scheme / no. of outstanding units
➢ Net assets = market value of investment + receivables + other accrued income + other income –
accrued expenses – other payables – other liability
• Practical question
➢ Mutual fund provides the following information.

a) Size of the scheme = 2000cr.
b) Face value of the units = Rs 10.
c) No. of units = 200cr.
d) M.V. of fund portfolio = 4200cr.
e) Receivable = 100cr.
f) Accrued income = 100cr.
g) Liability = 150cr.
h) Accrued expenses = 275cr.
Calculate NAV of the scheme.
Calculate rate of return if until holders purchase units at the NAV of Rs 15& received a dividend
of Rs 2 unit during the period.
ANS-1. Net asset value is the value of the units at a given date.
2.NAV is declared by asset management company daily on the website of AMC & mutual fund.
3.NAV is also published into national news paper.
4.NAV = market value of investment + receivable + other outstanding income + other asset – . ..
(payable + outstanding expenses + other liability)
NO. of units.
Hence,
4200cr+100cr+100cr-(150+275cr)
200cr
NAV = 19.875
➢ Rate of return = income + end value of the units(RV)- original value of the units X 100.
Original value.
=2+19.875-15 X100 = ROR= 45.83%
15
❖ Offer document.
a) Issued when mutual fund raised fund through new fund offer.
b) It includes opening & closing date, scheme objective, nature of the scheme
c) File with SEBI
6
It is divided into two parts.
➢ Scheme info. Document

(SID). ➢ Statement of additional
➢ It contains details of info. (SAI)
scheme. ➢ Contain statutory info.
➢ Name of the certificate ➢ Update quarterly
should be on the cover ➢ Info. About sponsor MF,
page. trustee, custodian,
➢ Highlight of the scheme. AMC.
➢ Due diligence certificate. ➢ Right of units holder.
➢ Risk factor.
➢ Updated every year.
Key information memorandum.

a) Summary of SID & SAI
b) Issued along with application form.
c) Updated at least once in a year.
Fact sheets.
a) Provided by AMC to MF on a monthly basis
b) It contain NAV, expenses ratio, past performance maturity. Etc.
Net asset value.

a) Market value of the unit on the particular given date
b) Declared NAV daily on the website by AMC.
c) Publish in 2 national newspaper.
NAV = market value of investment + receivable + outstanding income + other income –
(payable + outstanding expenses + other expenses)
NO. of units.
❖ Asset under management.
a) Total market value of the assets on a particular date.
b) Periodically disclosed—monthly or quarterly.
c) Disclose by AMC in fact sheet.
7
❖ Know your client

a) One time Mandatory process to invest in M.F
b) Requirement –pan card, address proof, contract details, income details.
❖ Foreign account tax compliances act (FATCA)

a) All financial institution need to report the financial transaction of US resident & entities.
b) Object is to prevent tax evasion.
c) For non- individual investors give details of beneficial owners.
❖ Nomination-
a) Up to 3 nominees can be registered.
b) In case of death investment shall be transferred in the favor of nominee
c) If nominee is not registered then transfer to legal heir, after he produces the document such
as will.
❖ Expenses ratio.
a) Fees charge to manage the fund.
b) Expenses like fees paid to trustee, AMC, custodian, AMC’S expenses, commission to distributors
& other selling expenses.
c) It is known as cost of running & managing a mutual fund.
d) It is calculated as a percentage of the scheme’s average net asset value.
e) Decided expenses ratio .
First 100cr – 2.5%
Next 300cr—2.25%
Next 300cr—2%
Balance amount –1.75%.
❖ Holding period return (HPR)

a) Total return received from holding an asset
b) HPR= income +[ end value of investment – original value.]
Original value.
❖ SEBI (MF) regulation 1996.
a) All the scheme approved by board of trustee
b) Offer document file with the SEBI
c) Offer document contain all the Material Info.
d) Listing is optional in following cases.
I. If Scheme provides monthly income or scheme is for senior citizen, children, women
II. Capital Protection oriented Scheme
III. Option of repurchase is mentioned
IV. Re-purchase within 6 months
e) In case of conversion of close ended into open ended scheme then obtain consent from majority
unit holder
f) Close ended scheme may be rolled over with the consent of majority unit holder
8
g) Close ended scheme can be open for maximum 15 days except ELSS ( equity linked saving
scheme)
h) Application received upto 5000 units then full allotment
i) If application received for more than 5000 units then apply pro-rata allotment
❖ NAV in case of Purchase & sell of units

❖ Equity & Debt oriented fund
❖ Purchase value less than Rs 2 lakhs.—before 3 pm – same day NAV.
After 3 pm – next day NAV.
❖ Value exceeding Rs 2 lakh. Before 3 pm or after 3pm – NAV of the business day on .which funds
are available for utilization.
❖ Redemption –Before 3pm—same day NAV.
After 3pm—next day NAV.
Liquid fund.
❖ Purchase – before 2 pm- previous day NAV if funds are realised

After 2pm –NAV of the day previous to the fund realised
❖ Redemption- before 3 pm NAV of the day immediately preceding day
After 3pm – NAV of the day preceding the second business day from submission.
❖ Association of mutual fund in India.

❖ All 44 funds are members of the association
a) To Promote & develop best practises & code of conduct
b) Carries out research on MF Industry.
c) Disseminates information and carries out research on mutual fund industry.
Systematic investment plan.

A. It allow an investor to invest a fixed amount regularly in a mutual fund scheme.
B. Investment in equity mutual fund schemes over a period.
C. Periodical investment in mutual fund
D. Generally advisors do not recommend lumpsum in INVESTMENT equity mutual fund.
Eligibility criteria of registration of Mutual Fund

➢ Sponsor
▪ 5 years of experience in financial service sector
▪ Positive net worth in last 5 years
▪ Last year’s net worth shall exceed contribution in AMC
▪ Profit after tax, interest and depreciation in 3 yrs out of last 5 yrs and profit in immediate
Preceding yr
▪ Fit and proper person
▪ Contribution in AMC atleast 40%
➢ Sponsor, associates, group company, AMC shall not hold 10% or5 more shareholding or voting
power in AMC or trustee of other MF and cannot represent on board of AMC and trustee of
any other MF
➢ Any shareholder holding 10% or more voting power in AMC/ trustee cannot hold 10% or more
holding in any other AMC or trustee company and cannot represent on board of AMC or trustee
9
Constitution of AMC
➢ Appointed by sponsor or trustee, if authorized.
➢ Removal majority of trustee or 75% of unit holder
➢ Change in AMC prior approval of SEBI and unit holder
➢ Atleast 50% of directors shall not be associate with sponsor or any of its subsidiary or the trustee
Appointment of custodian
➢ Appointed by trustee if authorized
➢ Intimate to SEBI within 15 days from appointment
➢ In gold exchange fund, the gold must be in custody of custodian
➢ In real estate mutual fund , the title deed must be in custody of custodian
➢ Enter into custodian agreement
Mutual fund regulation

Procedure for launching of scheme
➢ Approved by trustee
➢ Offer document filed with SEBI
➢ Sponsor and AMC shall invest 1% or Rs. 50L , Whichever is less , in option specified by SEBI & cannot
redeemed unless the scheme is wound up.
➢ Obtain in principle approval from SIX & enter into agreement
➢ Close ended scheme may be converted with the approval of unit holder
➢ Rolled over – consent of unit holder & redeem the unit holder who do not opt for roll over
➢ Subscription period – max 15 days except ELSS
➢ Application upto 5000 unit holder – full allotment
➢ Wound up-
▪ 75% of approval of unit holder
▪ Rolled over
▪ Approval of trustee
▪ By SEBI
Code of conduct
➢ Scheme should not be operated in the interest of sponsor ,AMC, or special class of unit holder
➢ Adequate, fair, accurate, & timely disclosure
➢ Scheme wise segregation of bank a/c & securities account
➢ Not use any unethical means to sell the units
➢ No advertisement shall discredit other mutual fund or make unfair comparison
➢ Standard warning – mutual fund investment are subject to market risk, read all scheme related
documents carefully
➢ For 14 words running, atleast 5 second considered as clear
Restriction on investment by mutual fund
➢ Max 10% investment in debt securities of single issue however can invest upto 12% with the approval
of board of trustee and director of AMC
➢ Not invest in unlisted debt instrument except govt. securities & money market instrument
➢ May invest upto 10% non-convertible debenture
➢ Shall not own more than 10% of company’s paid up capital carrying voting rightd
➢ Transfer of investment at prevailing market price
➢ Investment in other mutual fund – max 5%
➢ Cannot invest in unlisted securities of associate co., group co., of sponsor
➢ Can invest in listed securities of sponsor’s associate co., group co., max 25% of NAV
10
Investment in abroad
▪ ADR/ GDR
▪ Equity of overseas company
▪ Foreign debt securities
▪ Money market securities
▪ Govt. securities
▪ Derivatives
▪ Short term deposit
▪ Units issued by overseas MF
NOTES:
✓ MF shall ensure that the repurchase price shall not be lower than 95% of NAV
Audit committee of AMC
▪ AMC shall constitute audit committee

▪ Audit committee is at the level of trustees of MF
▪ Membership:
✓ Min 3 directors as member
✓ 2/3 of member shall be ID
✓ Member will be appointed by BOD
✓ All members shall have ability to read & understand the financial statement & at least 1 member
shall be experience
✓ Chairperson shall be ID
▪ Shall call 4 meeting in a financial year and gap shall not more than 120 days
▪ Quorum : 2 member or 1/3rd member; whichever is greater
SELF NOTES
11
CS SHUBHAM ABAD C.I.S
❖ CIS means.
a) Contribution made by the investor.
b) Which pooled & utilized for the purpose for scheme.
c) With a view to earn return, profit, dividend, property.
d) Contribution managed by the CIS on behalf of investor.
e) Where investor do not have any day to day control over the management of the fund.
f) Pooling of fund under any scheme which is not registered & having corpus (capital) of Rs 100cr
or more is deemed CIS.
❖ CIS EXCLUDES {3C,3D,3F}

a) C--- Co-operative society.
b) C--- Contract of insurance.
c) C--- CG Specified scheme
d) D--- deposit accepted by NBFC (non banking financial company)
e) D--- Deposit accepted by the company.
f) D--- Deposit by Nidhi Company.
g) F--- Mutual fund
h) F---Pension fund.
i) F--- Chit fund
❖ Collective investment management company ( CIMC )

a) Company incorporated under co-act
b) Certificate of registration from SEBI.
c) Object is to organize, operate & manage the CIS.
❖ CIS Property.
a) Subscription of money or money’s worth.
b) Property acquired with such money
1
c) Income arising out of subscription money.
❖ Restriction on business activities of CIS

a) Cannot acts as a trustee of any scheme.
b) Cannot launch any other scheme.
c) Cannot undertake any activity other then managing of the scheme.
d) Cannot invest in any CIS floated by it except otherwise stated in prospectus.
❖ Obligations of CIMC(Collective investment managers company)

a) Responsible for managing fund & property.
b) Exercise due diligence & care in managing assets.
c) Responsible for act of commission & omission by its employee.
d) Appointment registrar & transfer agent.
e) Give monthly report to SEBI about receipt & payments made.
f) Obtain adequate insurance.
g) Cannot enter into any transaction with or through its associates or the relative relating to CIS.
However if entered then report to trustee or SEBI
h) Hold twice BM in 3 months.
❖ Trustee
a) Hold the trust property in the benefit of unit holder

b) Eligibility – person registered with SEBI as debenture trustee
c) Shall not found guilty of an offence under violation of securities law enter into agreement with CIMC
➢ RIGHTS AND OBLIGATIONS

a) Trustee can obtain info from CIMC
b) Inspect books of accounts
c) Insure that to be rated by CRA
d) Trustee shall ensure that
▪ CIMC has necessary infrastructure
▪ Appointed all KMP including manager shall has adequate experience
▪ Appointed auditors from the list of auditors approved by SEBI
▪ Appointed register & share transfer agent
▪ Take adequate insurance for the assets of CIS
➢ Trustee shall convene a meeting of unit holder
If required to Requisition by 1/10th change in fundamental

Do so by SEBI of unit holder attributes i.e. change in
Investment objective
Required approval from

3/4th unit holder
2
Trustee
shall
review
Quarterly
reports of
CIMC about
the
activities
carried by
it.
Investor All contracts

complaints with registrar
received & &share
registered. transfer
agent are fair
& in interest
of unit
➢ Termination of trusteeship
a) trustee under debenture trustee regulation 1993
b) If the trustee is in course of wound up
c) 3/4th unit holder pass the resolution to remove the trustee & approval by SEBI
d) Removal by SEBI, If it is in the interest of unit holder
e) Resignation after giving of 3 months notice
f) Appointment of new trustee within 3 months from termination , if CIMC failed to appoint
then SEBI can appoint new trustee
❖ Procedure for launching CIS

a) Scheme must be registered with SEBI
b) Obtain credit rating agency
c) Appraised by a appraising agency
d) Duration of closing ended CIS – 3 years
e) Obtain adequate insurance policy for protection of CIS property
f) No assured return, however indicative return may be indicated
g) File copy of offer documents of SEBI, SEBI may suggest modification within 21 days
h) In case modification are suggested by SEBI within 21 days ,CIMC may issue offer document to public
i) Advertisement shall be in conformity with code of conduct
j) Appraised report shall form part of offer document& appraising agency has given a written consent
for inclusion the report
k) Offer period – not more than 90 days
l) Refund application money within 6 weeks from closure of subscription , if failed to refund than
liable to pay int @15%
m) Unit certificate within 6 weeks from closure of subscription list
n) Application money kept in separate bank a/c & utilized for adjustment against allotment after the
trustee has received letter confirming min. subscription has been achieved
o) Fund of CIS for the purpose of scheme
3
❖ Investment & segragation of fund
Invest in the object of

CIS
Segregate the assets of
different CIS
Cannot invest in another

CIS
Cannot invest in other

scheme except permitted
by SEBI & trustee.
❖ Winding up of the scheme

• Happening of the event which, in the opinion of THE trustee, requires wound up with prior
approval of SEBI
• 3/4TH unit holder with the approval of SEBI
• SEBI may order wound up in the interest of unit holder
• The purpose of CIS cannot be accomplished with approval of trustee, 3/4th unit holder & SEBI approval.
❖ Dispatch of warrant & proceeds
▪ Within 42 days from declaration, if interim return

▪ Redemption proceeds within 30 days from winding up or redemption
❖ Periodic & continual disclosure

• Report to SEBI
1. Copy of audited financial statement including balance sheet& p/L
2. File unaudited quarterly report
3. Quarterly statement of change in net assets
➢❖ Liability for action in case of default
• Contravene any provision of act

• Furnish false or misleading information
• Does not corporate in any inspection
• Failed to follow direction
• Does not corporate in any inspection
• Failed to follow direction
• Failed to resolve investor complaints
• Failed to pay fees
• Failed to make an application of listing
• SEBI may conceal or suspend the registration
4
❖ Penal provision under CIS
a) SEBI may suspend or cancel the certificate.

b) May initiate criminal prosecution.
c) Give necessary direction (SEBI to CIS).
i. Prohibition on collecting of money by CIS.
ii. Prohibition on disposal of assets.
iii. Disposal of assets
iv. Refund of money
v. Prohibiting any person from operating in capital market.
❖ Closure of subscription list

• Min subscription of rs. 20cr
• Min 20 investor
• No person shall hold more than 25% 0f assests of scheme
If failed to comply above conditions refund the application money
Offer period: max 15 days

By public notice – additional 15 days
SELFNOTES
5
SEBI (OMBUDSMAN) REGULATION,

2003
❖ Introduction
A) Ensure the market operation are more efficient.

B) To protect the investor from the various unfair trade practices
❖ Scores
✓ Web based centralized grievances redress system.
✓ Lodge & follow up complaints & track the status of redress.
✓ It enables the market intermediary or co. to receive complaints online.
✓ Can also lodge the complaints physically at any offices of SEBI.
❖ Features.
✓ 24 x 7 online access.
✓ Complaints can be lodge at the website at anytime& anywhere.
✓ Allotment of unique complaints registration.
✓ No. for future references & tracking of the complaint.
✓ Complaints forwarded to concerned entities.
✓ Entity can upload action taken report.
✓ SEBI closes the complaints if redressed adequately.
✓ Investor can view the status of the complaints online.
✓ Investor & entity can provide clarification on his complaint.
✓ Complaint has an audit trail.
✓ All complains are saved in central database.
❖ How to lodge the complaints.

❖ When can SEBI take action for non-resolution of the complaints.
✓ SEBI can initiate action against the entity on the ground of their unsatisfactory redressal of large
number complaints.
✓ Matters that are not considered by SEBI.
a. Incomplete complains.
b. Offering suggestion/ guidance.
c. Allegation without supporting document.
d. Not satisfied with trading price.
e. Non- listing of shares of private offer.
f. Dispute arising out of private agreement.
❖ 1. Complaints against which types of companies cannot be dealt on scores.
1. Complaint against.
• Unlisted and Delisted companies.
• Sick company.
• Name struck off from our ROC or vanishing company.
• Sub judice company (cases under consideration by court or causes of judicial proceedings).
• Companies falling under the preview of other regulatory bodies like Reserve Bank of India IRDA.
❖ Informant incentives & Reward

A. Voluntary information disclosure relating to any alleged valuation of insider trading loss that has
occurred or occurring or has a reasonable believe that it is about to occur.
B. It provides manner of submitting information of various forms and procedures for determination
of reward and confidentiality of informant.
❖ Ombudsman
✓ Independent person appointed to hear & act upon citizens complaints about government
services.
✓ It includes stipendiary ombudsman.
✓ Stipendiary ombudsman means a person appointed for the purpose of acting as ombudsman in
respect of a specified matter for which he may be paid such expenses or sitting fees as may be
determined by SEBI.
❖ Power & function.

✓ Receive complaints against intermediary or listed co.
✓ Consider such complaint & facilitate resolution through amicable settlement ( friendly
settlement) ( enquiry, investigation)
✓ Adjudicate such complaints if failure of settlement through friendly or amicable settlement.
✓ Ombudsman is required to draw an annual budget for his office in consultation with SEBI.
✓ Submit annual report to SEBI within 3 months from closing of each F.Y.
❖ Procedure for filling complaints.

✓ Complaints against a listed company or an intermediary within whose jurisdiction the registered
office is situation.
✓ If ombudsman is not notified then complaints file to the head office of SEBI.
✓ Complaint shall be signed by complainant or his representative.

✓ Ombudsman may dismiss a complaint on any ground.
❖ No complaint to the ombudsman shall lie.

✓ Unless complainant made written representation to concerned entity & complainant had not
received any reply within one month or rejection of the complaint.
✓ Complaint is made within 6 months from the rejection or 7 months from the filling of
complaints.
✓ No complain shall lie
a) Unless representation shall made to concerned entity.
b) Concerned entity reject the complaint or has not received any reply within 1 month
c) Complaints within 6 months from rejection.
✓ Complaints pertains to same subject matter for which any proceeding before SEBI or court is
pending or a final order has already been passed.
Complaints within.
In case no reply from

6 month from concerned entity.
rejection
OR 7 months from filling
of complaints.
❖ Award & adjudication.

✓ Matter is not resolved by mutual agreement within 1 month or within extended time as
specified by SEBI.
✓ Ombudsman after giving OOBH give his award.
✓ Award within 3 months from filling of complaint.
✓ Award shall be final & binding on both the parties.
✓ Aggrieved party may file petition within 1 moth from receipt of award to SEBI.
✓ Deposit with SEBI 75% of amount mentioned in award
✓ SEBI may pass the order within 45 days from petition.
✓ Implement the order within 30 days from receipt of the order.
❖ Implementation of the award.

✓ Implementation of award with one month of receipt of award.
✓ If any person failed to implement the award then he shall be deemed to failed to redress the
complaint.
✓ Liable for-
a) Suspension or delisting of securities.

b) Debarred from accessing the securities market.
c) Debarred from dealing in securities.
d) Action for suspension or cancellation of certificate or registration.
❖ SEBI ( informal guidance ) scheme 2003

✓ Request for informal guidance.
a) Registered intermediary listed company which intends to get listed.
b) Mutual funds/ trustee co. or AMC.
c) Acquires or prospective acquirer.
❖ Informal guidance may be sought for

✓ No action letter.
✓ Interpretive letter.
❖ No action letter.
✓ SEBI indicates that the department would not recommend any action if proposed transaction is
as per SEBI regulation.
❖ Interpretive letter.
✓ SEBI provides interpretation of a specific provision of any Act.
✓ Request sealing informal guidance should be accompanied with prescribe fees.
✓ SEBI dispose of the application within 60 days after receipt of the request.
❖ SEBI may not respond to the following types of request.

✓ General request & do not completely & sufficiently describe the situation.
✓ Hypothetical situation.
✓ Matter in which requestor has no direct interest.
✓ Matter in which No-action or interpretive letter has already been issued.
✓ Issues are pending before any tribunal or court.
➢ Additions –
• Add this after chapter –
➢ Confidentiality of Request –
▪ Request for confidential treatment
▪ 90 days from department response
▪ Letter of communication will remain with SEBI but will not be made available to
public.
➢ SEBI Mobile Application –

▪ To improve the ease of doing business.
▪ Launch - 5th March 2020
▪ Available – IOS and Android
▪ Has all the features of website
▪ Total 357000 compliant has been resolved using SCORES.

▪ Avg. 40,000 complaints every year.
➢ When can a case be referred for arbitration –
▪ If complaint is not resolved by Stock exchange, depository the investor can file
arbitration subject to bye-law.
▪ Differences between investor and stock exchange can be solved through arbitration.
▪ Less costly and Save time
SELFNOTES-
A] Capital Market Investment Institution:

All India Development Bank:
1. Industrial Development Bank of India. (IDBI):

• July 1964.
• Apex financial institution for industrial development in country.
• Funding to large and medium scale industry.
• Facilitates project financing, underwriter, soft loan etc.
2. Industrial Finance Corporation of India (IFCI):

• Set up under IFCI act 1948.
• Long term funding to large and medium scale industry.
• It provides rupee and foreign currency loans.
• Can act as an underwriter, merchant banker, assignments relating to merger
and amalgamation.
3. Small Industrial Development Bank of India (SIDBI):

• Set up by Government of India in April 1990.
• Wholly owned subsidiary of IDBI.
• Promotion and development of small scale Industry.
1
• Aims to empower micro, small and medium enterprises.

• With a view to contributing in economic growth and development.
4. Industrial Investment Bank of India (IIBI):

• Set up under IIBI Act, 1984.
• Set up in 1985.
• Full- fledged development financial institution.
• Assist medium and large-scale industry.
• Can act as an underwriter, project financer etc.
• Short term loans to companies to fulfil their fund requirement.
Specialised Financial Institution:
1. IFCI venture capital fund:

• Formerly known as Risk capital and technology finance Corporation of India.
• Subsidiary of IFCI.
• Funding to ventures involving innovative product process and technology.
• Initially provides soft loans to promoter under its risk capital scheme.
• Also provides finance under technology finance and development scheme.
2. ICICI venture capital fund:

• Formerly known as technology development and Information Company of
India Ltd.
• Founded in 1988.
• Joint venture of ICICI and UTI.
• Now wholly owned subsidiary of ICICI.
• Project finance in new technology venture.
• Investment in the field of computer, drug etc.
3. Tourism Finance Corporation of India Ltd:

• Set up by Government of India.
• Promotion and development of tourism Industry.
• Provides assistance to conventional tourism like amusement park, rope way
etc.
Investment Institutions:
2
1. Life Insurance Corporation of India Ltd.

• Wholly owned Corporation of govt of India.
• Established under LIC Act 1956.
• Life insurance in particular to rural area.
• Assistance for development of infrastructure facility like housing, rural,
electrification, water supply etc.
• Support to financial institution through subscription to their shares, bonds etc.
2.Unit Trust of India:

• BC established under UTI Act 1963.
• Encourage saving and investment.
• Mobilize savings of small investor through sale of unit and channelize them
into corporate investment.
• UTI Act 1963 was replaced by UTI act 2002.
• Bifurcation into 2 entities.
• UTI 1 and UTI 2 from Feb 2003.
3. General Insurance corporation of India:

• Formed under GIC Act 1972.
• Carrying on and controlling the business of general insurance or non-life
insurance.
• Four subsidiary company.
a) National insurance corporation ltd.
b) New India Assurance Company Ltd.
c) Oriental Insurance Company Ltd.
d) United India Insurance Ltd.
These branches were delinked from GIC in 2000 to form an association

(GIPSA). General Insurance public sector assurance.
State level Institution:
1. State Financial Corporation:

• Development of small & medium enterprise in concerned state.
• Financial assistance in the form of term loan, direct subscription to equity,
debenture or discounting of bill.
• Objective is to generate greater employment and increasing the ownership
base of industry.
• Also provide assistance to floriculture, commercial complex etc.
3
• 18 state financial corporation is the country.
2.State Industrial Development Corporation:

• Established under Companies Act 1956.
• Wholly owned subsidiary of State government.
• Promotion of Industrial development in respective state and financial
assistance to small entrepreneurs.
• Also involves in setting up of medicine and large industrial project.
• Undertake promotional activities such as preparation of feasibility report,
industrial survey, trading and development programmes.
Qualified Institutional Buyers:

• Other than individual investors, who buys the shares on a large scale.
• 75% allotted to QIB in case of Alternate book building method.
• In case of normal book building method max 50% can be allotted to QIB.
❖ It Includes:
▪ Mutual fund, venture capital fund, alternate investment fund, foreign venture
capital investor.
▪ Foreign portfolio investor other than category 3.

▪ Public financial institution.
▪ Schedule commercial bank.
▪ Multilateral & bilateral development financial institution.
▪ State industrial development corporation.
▪ Insurance company.
▪ Provident fund corpus 25 cr.
▪ Pension fund corpus 25 cr.
▪ National investment fund.
▪ Insurance fund managed by army, navy, air force.
▪ Insurance fund set up by department of post.
▪ NBFC.
Alternate Investment Fund:

• Privately pooled investment (1,000 Persons)
• Collect investment from India or outside India.
• In the form of trust, company, BC, LLP.
• Not covered under mutual fund, CIS regulation.
4
• Minimum investment size – 1 CR (Employee 25 Lakhs)
❖ It Excludes:
1. Family trust for the benefit of relative.
2. ESOP trust.
3. Employee welfare trust.
4. Holding Company.
5. Fund managed by securitisation and reconstruction Company.
6. Other fund regulated by any other regulation.
7. Special purposes vehicle.
✓ AIF divided into 3 Categories:
I. Category I:
• Invest in startup/ early-stage venture/ SMEs/infrastructure
• Venture capital fund.
• Small and medium enterprises.
• Social venture fund.
• Special situation fund
II. Category II:

• Equity fund.
• Debt fund.
• Which is not covered in category 1 & 3.
III. Category III:

• Hedge fund (Angel Fund)
• Employs diverse or complex trading strategies
• Listed or unlisted derivatives
Foreign portfolio investor:

• Investment in Indian securities by foreign investors (individual or institutional
investor)
o Category 1:
▪ Foreign govt, foreign agencies, central bank, international or multilateral
organisation or agencies in which 75% owned by such govt.
▪ Pension fund and University fund.
▪ Regulated entities such as insurance co., asset management company,
investment manager, portfolio manager, stock broker, etc.
▪ Entities from financial action task force members countries-
5
▪ Appropriately regulated fund

▪ Unregulated fund but investment manager is regulated.
▪ University related fund which have been in existence for more than 5 years
▪ Entities whose investment manager is from financial action task force
members
o Category 2:
o Appropriately regulated fund not eligible in category – 1, foreign portfolio inverstors
o Charitable organisation
o Endowments and foundation
o Corporate bodies
o Family office
o Individual
o Regulated entities investing in behalf of their clients
o Unregulated fund
o Category 3:
• Not registered under Category 1&2 like charitable society trust foundation
individual trust, family offices.
Private Equity:
• Types of equity or debt finance in operating companies.
• Investment in securities not publicly traded on stock exchange or investment
in publicly traded asset with an intention of taking it private.
• Investment in companies, firm which can lead to very high return.
• Capital of private equity is raised from retail and institutional investor to invest
in new technology expansion or to fulfil the working capital requirement.
• Fund raised from angel investor, institutional investor like pension fund,
insurance company or bank.
❖ Types of Private equity:
1. Leverage buyout:
• Equity investment in company, business unit is acquired from the current
shareholder by using financial leverage.
• Investment in matured and operating equity.
2. Venture Capital:
• One of the innovative financing resources for a company.
• Promoter has to give some level of ownership & control of business in
exchange of capital.
6
• Equity investment made typically in less matured company for expansion or

launch of new product, etc.
• Investment by venture capital fund into the venture capital undertaking.
• Resources for supporting innovation knowledge, technology etc.
• High risk investment which may give high returns or heavy loss.
3. Growth Capital –
▪ Equity investment, minority investment in the company that are
looking for expansion or restrictive its operation
➢ Atal Pension Yojana –
▪ Announced in 2015-16 budget.
▪ Focuses on Old age income security in unorganized sector.
▪ It encourages the worker in Unorganized sector to voluntarily save for
their retirement.
▪ Scheme administered by Pension Fund Regulatory and Development
Authority.
▪ Monthly Pension in range of 1000to 5000 p.m.
Derivatives:
▪ Derives its value from an underlying asset.

▪ Underlying asset can be stock, bonds, currency, commodities.
▪ Different types like future, option, swaps.
Currency Derivative –
▪ Contract to exchange currencies at different stipulated rate, at future date
▪ Similar to future and option trading.
▪ Underlying Assets is currency.
▪ Major participants are bank, corporations, exports, etc.
▪ Offer diversification to investors.
Benefits of currency derivatives:
• Diversification of investments
• Easy investment in currency
• Hedging opportunity to importer & exporter
• Trading opportunity due to volatility
• Exchange- traded & hence systematically regulated
7
• Provides transparent rate

➢ Commodity Derivative –
▪ Financial instrument which derives its value based on
underlying commodities – oil, gas, metals, agriculture products,
etc.
▪ Goods and Service of critical information and indicator of instruments.
➢ Real estate Investment Trust –
it is collective investment scheme that owns, operates, or finances income producing
real estate
▪ Less capital expensive
▪ Suitable for small investors.
▪ Transparency – Listed
▪ Comparatively Assumed return.
▪ Easy to buy.
▪ Tax free
▪ Fast capital appreciation
Notes :
REITs are similar to mutual fund and shares & they provide income by way of
• Dividend
• Capital appreciation
➢ Infrastructure Investment Trust –

▪ Objective is to promote infra. Sector in India.
▪ Create a pool and invest in infra. Sector directly/ indirectly.
▪ Trustee –
✓ Who is reg. as debenture trustee.
✓ Invest atleast 80% in infra. Asset that generates steady return.
▪ Sponsor –
✓ BC / LLP or promoter or Company having N/W Rs 100cr.
✓ Holds minimum 15% of total units with minimum locking of 3
years.
▪ Investment Manager –
✓ BC / LLP which supervise all the operational activity.
8
▪ Project Manager –
✓ Authority in responsible for executing project.
➢ Municipal Bond –
▪ Also known as Muni Bonds.
▪ Fund raised by Urban local govt and agencies for project such as infra.
Project, roads, aircrafts, etc.
▪ First time such bond was issued by Bangalore Municipal Corporation.
▪ Conditions –
a) Positive Net worth in previous 3 years.
b) No default in repayment of debt securities avail from bank or
NBFC in last years.
c) Not listed in the willful defaulter list.
➢ Offer to Public –
✓ Book Building Method –
1. QIB – Max 50%
2. NII – Mini 15%
3. RII – Min 35%
✓ Alternate BM –
1. QIB – Mini 75%
2. NII – Max 15%
3. RII – Max 10%
✓ Other than BB
1. RII – Min 50%
2. Others.
• In case of BB issue under 6(1) & 6(2), addition of 5% allocation available to MF shall be
eligible for allocation under balance available for QIB
• The issuer may allocate up to 60% of portion available for QIB to an anchor investor
• Retail individual investor category is entitle to more than 50% on proportion basis, the RII
shall be allocated that higher %
• Allocation in the non-institutional investor (NII) –
✓ 10cr1/3rd of portion available to NII shall be reserved for applicant with application
size >2cr upto 10 cr
✓ 2/3rd of portion available to NII shall be reserved for applicant of application size > 10cr
9
Angel Fund:
• Also known as business angel, informal investor, private investor.
• Individual who provides capital to start up in exchange of debt and equity.
• Angel investor organise themselves and pool their investment.
• Former entrepreneurs themselves and typically enjoy working with the
company at the earliest stage.
• Category of alternate investment fund [AIF]
• Helps entrepreneurs to shape business model create business plan.
• Successfully build company and have spent time coaching young
entrepreneurs.
High net worth Individual:

• Retail investor with high net worth.
• Minimum application size in public issue is more than 2 lac.
• Individuals over 2 CR investible fund surplus considered as HNI.
• Investible wealth in the range of 25 Lakhs to 2 CR is known as emerging HNI.
• Alternate book building method max 15%.
• Normal book building method min 15%.
Pension fund:
• Fund established by employer to organise the investment of employee.
• Retirement fund contributed by employer and employee.
• It is introduced to generate stable growth over the long term and give pension
after the retirement.
• Fund managed by Intermediary.
• Active role in the Indian equity market.
Divided into:
a) Formal sector:
Divide into 3 categories viz, pension under act or statute, govt pension & voluntary pension
b) Informal sector:
Cover unorganized workers
❖ Government pension fund:

❖ Referred under directive principle of state policy hence, not covered under any
other law.
❖ It includes employees of the central as well as state government.
❖ Central government pension fund like defense fund, railway fund etc.
❖ State government pension like bank pension NABARD fund.
10
Bonds:
Characteristics of a bonds
• Has fixed face value & amount to be return to investors on maturity
• fixed maturity date (20 – 30 years)
• Repay the principal amount after maturity
• regular payment of interest
• Interest calculated on coupon payment
• Less risky compare to equity
• helps to diversify and grow investors’ money
1. Government Bonds:
• Issued by GOI.
• Issued by RBI on behalf of GOI.
• Secured as guaranteed by GOI.
• Safe investment.
• Low rate of interest.
2. Corporate Bonds:
• Issued by private corporates.
• Secured or unsecured.
• Research before the investment.
• Risk associated.
3. Bank or financial institution bonds:

• Issued by bank financial institution.
• Majority of bond is issued by bank or financial institution.
4. Tax saving bonds:

• Issued by GOI.
• For providing tax benefit.
• Listed on BSE/NSE.
• Can be sold in open market.
• Liquid investment.
11
Foreign currency convertible bond:
• Issued by Indian entities.

• To person resident outside India.
• Represented in foreign currency.
• Payment of interest & principle – Foreign currency.
• Conversion into equity shares of Indian company.
• FEMA (ECB) external commercial borrowings.
• Unsecured instrument which carries fixed rate of interest.
Foreign currency exchangeable bonds:
• Issued by Indian entities.

• To person resident outside India.
• Represented in foreign currency.
• Payment of interest & principle – Foreign currency.
• Exchangeable into equity shares of another company having same promoter
group.
• FEMA (ECB).
• Unsecured instrument which carries fixed rate of interest.
• Offeror Company is to be listed and eligible to receive foreign investment.
Indian Depository Receipt:

• Depository receipt created by domestic depository in India against the equity
shares issued by company incorporated outside India.
• Instrument represented in Indian currency.
• Follow ICDR regulation.
• Shares held by overseas custodian who shall authorize domestic depository to
issue IDR.
• Subscribed by Indian investor.
• Future
• Exchange traded forward contracts.
• To buy or sell pre-determined quantity at pre-determined price.
• Standard contracts.
• Long position, short position.
▪ Long position:
➢ Future contract is purchase and buyer is ready to receive delivery of
underlying asset.
▪ Short position: 12
➢ Future contract is sold and seller agrees to make delivery.
▪ Currency future
• also known as FX future
• Future contract to exchange one currency for another
• At specified date on future
• At a price fixed on purchase date
• Price of future contracts is is terms of INR per unit of other currency
• TRADING MEMBER & INSTITUTIONAL INVESTOR & ELIGIBLE FOREING INVESTOR : gross open
position across all contracts not exceed 15% of total open interest or USD 1 billion
equivalent; Whichever is higher
• OTHER CLIENTS: gross open position across all contracts not exceed 6% of total open interest
or USD 100 million equivalent; higher
Options:
• Gives right to the holder but not the obligation.

• To take or make delivery on or before specified date at a stated price.
• Option is given to one party while other party has an obligation to take or
make delivery.
• Option holder gives option premium.
• Call Option: Option is with buyer and gives the holder a right to take deliveries.
• Put Option: Option is with seller and gives the holder a right to make
deliveries.
❖. Types of Option
European option American Option
• Option exercised only on • Option can be exercised on or
expiry date. before expiration date.
• Traded on stock exchange.
Warrants:
• Option issued by company.
• Right to purchase a number of equity shares at a given price during a given
period.
• Warrant signifies optional conversion one warrant one share.
Anchor Investor:
• QIB.
• Minimum application size 10 CR in book building method.
• Individual allotment min 1 CR.
• Bidding – Same day allocation.
13
• Lock-in 30 days from trading.

• QIB – 60% allotted to Anchor investor.
• 1/3rd of total anchor portion shall be reserved for domestic mutual fund.
• Allotment up to 10 CR – Max 2 anchor investor.
• Allotment above 2 cr and upto 25 CR- Min 2 and Max 15.[individual allotment min 1cr]
• Allotment above 25 CR min 5 – Max 15 (up to 25 CR).
• For every additional 10 investor for every 25 cr or part thereof
• In case of issue on SME exchange, max 2 investor for allocation up to 2 cr
Application supported by blocked Amount [ASBA]:

• Application containing authorization to block the application money in a bank
account.
• Under ASBA application money do not transfer to company till allotment.
• Investor will continue to receive the interest for blocked amount until
allotment.
• In case of rejection the block is removed hence, no concern regarding non-
payment or delay in refund.
• It is mandatory in all public issue through book building route.
Self-certified syndicate bank:

• Bank which offer ASBA facility.
• Bank shall submit a certificate to SEBI of inclusion of its name in SEBI’s list of
self-certified syndicate bank (SCSB).
• SCSB shall identify its designated branches as well as controlling branches.
• SCSB also communicate the following details to STX:
a) Name and address of SCSB.
b) Address of designated branch & controlling branch.
c) Name and contact of nodal officer.
ASBA Process.
• Submit an ASBA electronically or physically to SCSB.
• SCSB block the application money.
• It remains block till allotment / withdrawal of offer / rejection of application.
• Application data uploaded by SCSB in electronic bidding system provided by
the stock exchange.
• Registrar to an issue after finalisation of allotment give instruction to SCSB for
unblocking the amount.
• SCSB transfer the requisite amount to company.
• Advantages:
✓ No need to pay through cheque
✓ Does not have to bother about refund
✓ Continues to earn interest on application money as they remain in bank acc
14
• Unified payments interface (UPI) with ASBA .
1. UPI is an Instant payment system developed by national payments corporation

of India.
2. It allows instant transfer money between any 2 parties
3. In public issue UPI ID – can be used for blocking of fund & making payment
4. In case of allotment the money shall automatically remitted to Escrow
5. From 1st jan 2019 UPI mechanism for RII will be effective
6. The limit for IPO application is 2lakh per transaction on UPI.
7. Only RII are allow to use UPI for payment in public issue
Green shoe option:
• First introduced by Green shoe Company.
• Also known as post listing price stabilising mechanism.
• Allocation of shares in excess of the shares included in public issue & operating
a post listing price stabilising mechanism.
• Pass OR.
• Appointment of stabilising agent.
• Agreement with stabilising agent (SA).
• Agreement with promoter for borrowing.
• Open GSO bank account & GSO D’mat A/C.
• Allotment of shares to SA, (up to 15% of issue size).
Drop in Price
Yes No
• Process shares from open • Issuer allots new shares to SA.
market (Purchase) • SA return shares to promoter.
• Shares return to promoter • Separate listing of new shares
excess amount transfer to issued.
IEPF.
✓ Stabilising period – 30 days from commencement of trading.

✓ Close GSO bank account & GSO D mat Account.
Types of securities:
• Listed securities:
Securities of company which have sign the listing agreement with the stock
exchange.
• Permitted securities:
Actively traded in other STX in India and securities are not listed on such a STX.
15
Margin:
• Advance payment of a portion of the value of stock transaction.
Initial Margin Maintenance Margin

• Min amount calculated as a • Min amount calculated as a
percentage of the transaction percentage of market value of
value placed by client with the the securities calculated with
broker before the actual respect to last trading day’s
purchase. closing price to be maintained
with broker.
• If deposit falls below
maintenance margin the broker
shall immediately make margin
call.
• Broker may liquidate the
securities if the client fails to
meet margin call.
Block deal:
• Stock exchange allow separate trading window to execute large scale.
• New block window for block deal.
• Session timing – Morning 8:45 to 9:00am
Afternoon – 2:05 to 2:20pm
• Minimum order shall be RS 10 CR.
• Order placed shall be within +/- 1% of the applicable reference price.
• Stock exchange disclose the details about block deals on the same day after
the market hours.
Bulk Deal:
• Total quantity bought or sold is more than 0.5% of the total no of equity
shares of a listed company.
• Trading in the normal trading window.
• Stock broker inform to stock exchange about the bulk deal on daily basis.
• Visible to everyone.
• If bulk deal through single trade notify to STX immediately after the execution.
• If bulk deal through multiple transaction intimate STX within 1 hour from
closure of the trading.
16
Basis of Sensex:
• Sensex is the indicator of BSE.
• First publish in 1986.
• It is based on the market weighted stock index of 30 companies.
• The level of index is indication of the performance of stock market.
❖ Steps to calculate Sensex:

1) Market capitalisation is taken into account. [Total no of shares multiplied by
MP]
2) BSE determine free float factor. [Difference between market capitalization]
3) Ratio & proportion are used based om the base index of 100
Nifty:
• Nifty 50 is the indicator of NSE.
• Collection of 50 stock (shares).
• Owned and managed by India Index services and product ltd.
Market Surveillance:
A. Preventive Surveillance [Online Surveillance]

• Strict norms for trading members.
• Circuit filters – Halt in trading.
• Trading execution range – Orders are matched if price is within reference
range.
• Order value limitation – Maximum value per order.
• Cancel on log out – All outstanding order shall be cancelled if user log out.
• Kill switch – All outstanding orders are cancelled if trading member execute kill
switch.
• Compulsory close out – Incoming order results in crossing the margin such
order will be partially or fully cancelled.
• Verification of false news – Un-announced news about the listed company is
traced and give clarification.
B. Post trade Surveillance:
1) End of day alert:

Highlight the stock which behave abnormally from its past behaviour.
16
2) Pattern model:
It identifies suspect involving in unfair trading practices.
3) Transaction alert for members:

Trading members, brokers.
Impact of various policies on STX:
1) Fed Policy:
• Federal Reserve is the central bank of USA.
• Federal Reserve promotes stability of financial system.
• It promotes the safety & soundness of individual institution.
i. Fed fund rate:
• Interest rate charged by Federal Reserve when US bank borrow money.
• US fed fund rate matters a lot to global capital flow.
• Increase in FFD rate will be negative in general for US market.
ii. Rupee VS Dollar:

• If the exchange rate of dollar is increasing, it results into decrease in value of
rupee.
• Increase in value of dollar is harmful for import & beneficial in case of export.
2) Inflation Index:
• Tool used to measure the rate of inflation in an economy.
• It helps to compare where we are now, to where we have been in the past.
• 2 index to measure inflation.
a) Wholesale Price Index:

• Computed by the ministry of commerce & industry.
• Earlier release on weekly basis however since 2012 WPI is released monthly.
• Base year 2004 – 05 = 100
• Total 676 items divided into 3 category.
i. Primary articles.
ii. Fuel & power.
iii. Manufacture product
18
• It does not consider retail price.

b) Consumer Price Index:
i. CPI for industrial worker.
ii. CPI for agricultural laborers.
iii. CPI for rural & urban.
• First 2 released by ministry of labour & employment.
• 3rd released by CSO [Central statistic organisation] under ministry of statistics.
• RBI uses [combine for inflation purpose].
• Base year 2012= 100.
• 448 items in rural and 460 in urban.
Wholesale price index. Consumer price index.

• It measures inflationary trend • It is used to adjust the income
in the economy as a whole. and expenditure for changes in
• It consider wholesale price for cost of living.
primary product controlled • It consider retail price which
price, example factory price includes distribution cost and
for manufacturing product. taxes.
• WPI are controlled on • CPI data is collected after
voluntary basis. investigation.
❖ Credit policy of RBI

• Aim at increasing finance for agriculture & industrial activities
• Objective:
✓ Rapid economic growth
✓ Exchange rate stability
✓ Price stability
✓ Balance of payment equilibrium
✓ neutrality
➢ Bank rate:
• Rate at which RBI discount bill for commercial banks
• Increase in bank rate increase the cost of borrowing by commercial banks
➢ Repo rate:
• rate at which the commercial banks borrow money from RBI
• reduction in repo rate helps banks to get money at cheaper rate
• increase in repo rate discourage the public to borrow money & encourage deposit
➢ cash Reserve ratio (CRR)

• the amount which the commercial bank has to maintain
• as cash deposit with RBI
19
20
➢ statutory liquidity ratio (SLR)

• the amount which commercial bank have to keep it with itself
• increase in SLR is used as an inflation control measure to control price rise
➢ Reverse Ratio Rate

• Rate at which the RBI borrow money from the commercial banks
• Increase in RRR will decrease the money supply and vise-versa
❖ Book closure and record date

• Book closure is the period closure pf the register of member & transfer book of company
• To take record of shareholder to determine their entitlement to dividend
• Record date is date on which the records are closed
• Max 45 days in a yr., not more than 30 days at any one time
• 7 working days advance notice to stock exchange
❖ Exchange Traded Fund ( ETF)

• ETF is a security that tracks an index, commodity, bonds or basket of assets and is traded
in security market
• Funds that track indexes
• ETF just reflect the performance of the index they track
• Unlike regular mutual fund, ETF trade like common stock on STX
• Price changes as per the trading in market takes place
• Value is depended on the net asset value of underlying stock
❖ DVR.
❖ Limit 74% of total post voting power
❖ Removed- dividend track record of distributable profit for last 3 years.
❖ Foreign currency convertible bond.
SELF NOTES-
20
CS SHUBHAM ABAD CAPITAL MARKET INTERMEDIARIES.
❖ Introduction.
a) Link between issuer & investor& regulator.
b) Provide service to investor or issuer or both.
c) Registered with SEBI.
d) Expert in various fields of capital market.
e) Charge professional fees.
➢ Definition of Intermediary –
▪ Intermediary –
a) Asset Management Company
b) Clearing member of a clearing corporations.
c) Trading Members.
▪ But Excludes –
a) Foreign Institutional Investor
b) Foreign Venture Capital Investor
c) Mutual Fund
d) Collective Investment Scheme
➢ Registration of Intermediaries –
▪ Application has to be made in FORM A along with the relevant information and
fees to board.
▪ Such Form has to be examined by the stock exchange, clearing corporation, and
forward to SEBI within 30 days along with its recommendations.
1
▪ Board may demand additional information.

▪ Board if so desires, verify the information by physical verification of documents,
infrastructure, technical support.
▪ Rejection of Application –
✓ Application is not complete in all aspects - OOBH
✓ False or misleading information - NO OOBH and applicant cannot make
application for 1 year.
▪ If SEBI satisfied, granting of Certificate of Registration.
▪ SEBI may grant Conditional Registration.
▪ Separate Certificate to carry out other activities.
▪ Prior approval for change in control of intermediary - 30 days before change.
▪ Surrender / Cancellation –
✓ Prior approval from SEBI – At least 30 days before cancellation.
❖ Merchant banker.
❖ Managing public issue, private issue.
❖ Stock brokering
❖ Underwriter
❖ Managing of International offering like ADR / GDR issue
❖ Primary or Satellite dealership of government activities.
❖ Oher advisory services relating to Takeover, Merger and Demerger.
❖ Syndication of rupee term loan.
❖ Net Worth – 5 Cr
❖ Body Corporate- always Merchant Banker.
❖ Role & responsibility.

a) Managing public or private issue.
b) Can act as an underwriter.
c) Primary & satellite dealership of government securities.
d) Corporate advisory services.
e) Stock broking.
f) International financial services.
❖ Registrar & transfer agent.
I. Register to an Issue –
▪ Primary Market Intermediary.
▪ Appointed by body corporate for –
a) Collecting application from investor.
b) Keeping proper record of application and application money received.
2
c) Assisting Body corporate –

1. Determining of basis of Allotment.
2. Finalise list of allottee.
3. Processing and dispatching of letter of allotment or refund order.
II. Share Transfer Agent –
▪ Person who maintains the records of securities hold and deals with redemption,
transfer of securities.
▪ Secondary Market Intermediary.
▪ Attending post issue investor queries.
▪ Web based investor enquiry.
▪ If total security holder exceeds 1 lakh company shall dedicate a separate
department who performs the duties of transfer agent.
▪ Net Worth –
✓ Rs 50 lac – (RTI + STA)
✓ Rs 25 lac – (RTI or STA)
➢ Role and Responsibilities of Register of an issue –

1. Pre - Issue Activities –
▪ Sending instruction to bank for reporting of collecting figure.
▪ Input to merchant banker and printers regarding the design of Bid Form.
▪ Liaison with Regulatory authorities such as SEBI, stock exchange.
2. During the Issue –
▪ Collection and reporting of daily collection figure.
▪ Collection of Data and application form from bank.
▪ Liaising with client and intermediaries.
3. Post Issue Activities –
▪ Data capturing and validation.
▪ Dispatch of letter of allotment or refund order.
▪ Periodic report to regulatory authorities.
▪ Determines basic of allotment.
➢ Roles and Responsibilities of Share Transfer Agent –

▪ Same points
➢ General Obligations –
▪ Abide by code of conduct.
▪ RTA can’t provide such facility to associate company.
▪ Maintain books of A/c’s for minimum 8 years.
▪ Appoint compliance Office who shall responsible for maintaining of compliance.
3
❖ Underwriters
a) Underwriters are the person who subscribed the unsubscribed portion of public issue.
b) Who by an agreement agrees to subscribe in case of under subscription.
c) Appointment of underwriters is compulsory for public issue.
d) Net worth Rs 20 lac.
e) Generally they are banks, stock brokers, Financial institution etc.
• Obligation & responsibilities of underwriters.

1. Abide by code of conduct.
2. Enter into agreement with client
3. No other benefit from underwriting except commission on underwriting
4. Total underwriting obligation not exceeding 20 times of net worth.
5. Subscribe the securities within 45 days of the receipt of such intimation.
6. Maintain books of accounts & preserve for 5 years.
7. Appoint compliance Officer.
❖ Banker to an issue.
I.Schedule commercial bank (the bank whose name is mentioned in 2nd schedule of RBI act 1934
& they are generally nationalised banks)
❖ Obligations and responsibility of banker
❖ Abide by code of conduct
❖ Appoint compliance officer.
❖ Enter into agreement with the company
❖ Maintain books of A/C’s
❖ Inform SEBI about the disciplinary action taken by RBI
❖ Functions.
I. Collection of application form & application money.
II. Collection of call money.
III. Refund of application money.
IV. Payment of dividend & interest.
❖ Debenture trustee.
a) They are the trustee of a ‘Trust deed’.
b) Appointed for securing any of debenture issue.
c) Generally, banks, financial institution, insurance company, body corporate act as a
debenturetrustee.
d) Debenture Trustee –
e) Means a trustee of a trust deed for securing any issue of debenture
❖ Function.
a) They call for periodical report from company.
b) Take possession of trust property.
c) Enforce security in the interest of debenture holder.
4
d) Protect the interest of debenture holder.

e) Ensure redemption & conversion of debenture.
f) Ensure timely payment of interest.
g) Net worth – 10 CR
h) Abide by code of conduct
i) Maintain books of Account.
❖ Stock broker & sub broker.

a) Stock brokers are the members of stock exchange.
b) They are the trading members.
c) Allowed to trade in securities.
d) Buying & selling of securities on their own behalf or on behalf of investor.
e) Sub brokers are the agent of stock broker.
f) Acting on behalf of stock broker.
g) Not listed as a member with stock exchange.
h) May be individual.
• Stock broker obligation.

1. Keep proper books of account.
2. Preserve for 5 years.
3. Appointment Complaints Officer.
❖ Functions.
a) Helps the buyer & seller to enter into transaction.
b) Trade or their own behalf or on behalf of investor.
c) May trade on behalf of his client from his own account
d) They can act as a principal(buy on their own behalf) as well as agent ( deal on behalf of investor)
e) In case of acting as an agent obtain consent from his client.
❖ Portfolio manager.
a) Any person who by agreement with his client manage the fund of the client.
b) Two types of portfolio manager.
I. Discretionary portfolio manger.

a) Exercise any degree of discretion.
b) Manage fund by applying own strategies.
II. Non discretionary portfolio manager.

a) Act as per the direction or advice given by the client.
b) Net worth –5 cr.
• Portfolio obligation.
1. Code of conduct.
5
2. Enter into an agreement with his client.

3. Not accept from the clients for a security is worth less than 50 lakh rupees.
4. Act in the fiduciary capacity.
5. Keep fund in a separate account.
6. Not lend securities held on behalf of clients.
Net worth of 5 crore.
❖ Role & responsibility.

❖ Observe high standard of integrity and farness,
❖ Money received from client should be invested as soon as possible
❖ Provide high standards of services and avoid conflict of interest
❖ Shall not execute any trade against the interest of client
❖ Open separate account for each client
❖ Follow rules and regulations
❖ A portfolio manager shall not disclose confidential information of client
❖ Ensure that investors are provided with true and adequate information
❖ Shall not create false market in securities
❖ Shall not manipulate the prices of securities
❖ Portfolio manager, his directors, partners, relatives shall not involve in insider trading.
❖ Custodian of securities.
a) Carries on the business of providing custodian services.
b) Keep the custody of the securities & provides incidental services such as maintaining the
accounts of securities and collection of benefits etc
c) Net worth 50 crore.
• Custodian.
2. Not assign or delegate its function unless such person is custodian.
3. Open separate custody account for each client.
4. Enter into an agreement.
5. Appoint compliance officer.
6. Adequate mechanism for reviewing monitoring evaluating and inspection the.Custodian control
system and safeguard.
7. Protect the assets of the clients
❖ Role.
a) Protect the asset of the client.
b) Open a custody account & deposit in the name of each client.
c) Conduct registration of securities.
6
➢ General obligations –
1. Abide by code of conduct
2. If he carries activities besides activities of custodians then those activities shall be separate
3. Shall have adequate mechanism
4. Shall not delegate his function
5. Open separate custody account for each client
6. Enter into agreement
7. Maintain proper books and records
8. Appoint a compliance officer
9. Shall inform SEBI
❖ Investment advisors.
a) Person who for consideration is engaged in the business of providing investment services or
person holds out himself as an investment advisor.
b) Advice relating to investing in purchasing or selling of investment portfolio.
c) Provides investment advice for consideration.
d) Or includes person who hold himself as a investment advisor.
e) Net worth—Individual— tangible assets of value not less than 5 lakh.
Firm – not less than 50 lakhs
• Investment Advisors.
1. Act in the fiduciary capacity.
2. Maintain an arm's length relationships.
3. Information of client shall be kept confidential.
4. Follow KYC norms.
❖ Role.
a) Guide about the financial dealing & investment.
b) Investment advisor shall do the risk portfolio for client to assess their risk.
c) Act in a fiduciary capacity towards its client.
d) Investment advisor shall maintain an arm’s length relationship between its activities asan
investment advisor and other.
e) If investment advisor also engages in other activities then, he should clearly separate those activities
f) Shall not enter into transaction on its own account which is contrary to its advice for 15 days from
such advice
• Research analysts
A) Responsible for preparation or publication of the content of the research report
B) Provide research report and making buy/sell/hold recommendation or giving price target
C) Offering an opinion concerning public issue whether or not such person has the job title of
research analyst.
D) Net worth- body corporate or LLP- 25Lakh or individual and partnership – net tangible asset of
Rs 1lakh
• Research analysts.
1. Maintain an arm's length relationship.
7
3. Furnish to the SEBI information and report as may be specified

maintain and preserved the record for 5 years.
4. Annual audit by CA or CS.
Role
A) They study companies and industries, analyses raw data and forecast or recommend about the
buy, hold, or sell securities.
• Credit Ratings Agencies

A) Body corporate engage in the business of rating of securities offered by way of public or right
issue
B) Minimum net worth of RS 25 crore.
• Credit rating agencies.

2. Enter into agreement.
3. Disseminate information regarding newly assigned rating and change in rating.
4. Define rating definition.
5. Comply SEBI rules and regulations.
6. Appoint compliance officer.
7. Maintain records of 5 years.
8. Net worth rupees 25 crore.
ROLE
A) Link between investor and issuer
B) Plays important role in investor protection and also benefits industry as a whole.
C) It provides a marketing tool to the company.
D) CRA gives rating to instrument
• Depository Participants
A) DP is an agent of the depository which interfaces with the investor and provides depository
services
B) As specified in regulation 35
ROLE
A) Intermediaries between the depository and the investor.
B) They execute pledge request and off market transfer.
C) They also provide dematerialization and rematerialisation services.
8
❖ Foreign portfolio investor
• Abide by the code of conduct

• Comply with the provision
• Forthwith inform the SEBI and designated depository in writing
• Submit any information, record as record by SEBI or other govt agency
• 0btain PAN form IT department
• Undertake necessary KYC of clints
• Ensure that securities held by FPI are free from all encumbrances.
SELF NOTES-
9

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[Document title]

JUNE & DECEMBER

PART – I Securities law.

PART – II Capital market interiaries.

Corporatisation of stock exchange.

Demutualisation of stock exchange.

Central government will confirm.

English Hindi Central State.

Powers of central government.

A. Power to call periodical return

B. Power to direct or amend rules or make laws.

VI. Order published in

State. English Hindi

Power to suspersede the business of stock exchange.

Effect of such order.

Power of recognised stock exchange.

Punishment for contravention of bye-laws.

A. To make or amend bye-laws of recognise stock exchange

B.To make regulation

Spot delivery contract.

Public issue & listing of securities.

I. Failed to furnish periodical returns.

II. Failed to comply the listing conditions.

b) Penalty 5lac or 25 cr.

III. Penalty for excess dematerialisation or delivery of unlisted security.

Factors to be taken into account by the adjudicating officer.

Right to receive income from collective investment scheme.

RULE 19(2) (b).

➢ Special Provision relating to commodity derivative –

Voluntary delisting from all STX

I – Protection of interest of investors.

D – Development of capital market.

R – Regulation of capital market.

Separate legal entity.

CHAIR PERSON. 1 RBI 5 OTHER

10. Restrain the proceeds or securities

II(A): Regulate or Prohibit issue of Prospectus.

Company shall File Regulate the issue of

2. Failed to comply with directions.

▪ To enter the place where the documents are kept

▪ Imprisonment upto 1 year

II(D): CEASE & DESIST ORDER

Violate the SEBI laws& Likely to violate the SEBI laws

SEBI May pass cease & desist order.

II (AA) [CIS] Collective investment scheme.

Who collects the fund Create a Pool & invest

Intention of investor Investor does not

Register with SEBI.

➢ 11(4)SEBI may pass following order to protect the interest of investor.

a) Suspend the trading of any security.

SECTIONS PARTICULARS PENALTY

➢ Failed to list the units.

15 ( E ) AMC ➢ Failed to register Rs 1 lac for each day of

➢ 15(EB) Investment advisor and Research Analyst –

Section Particulars penalty

➢ Prohibition of manipulative & deceptive devices, insider trading etc.

➢ SAT ( securities applicant tribunal.)

1. Central government by notification in official gazette(NIOG) establish the SAT.

SEBI. RSE. AO.

45 days from date of receipt of

45 days-appeal = extension (sufficient ground)

SAT may SAT