FINANCIAL MARKETS AND SERVICES

Dr. Nisha Mary Thomas

nishathomas@isme.in

BBA, Semester 5
December 2021
1
REVIEW
• NBFCs: Introduction, Features, Advantages
• Investment and Financing Companies
• Merchant Banks
• Hire Purchase
• Lease Finance
• Housing Finance
• VC Funds and Factoring

OVERVIEW
• SEBI: Importance and Organization
• SEBI: Functions, Powers, Rights and Responsibilities
• Role of SEBI in marketing of Securities and Protection of Investor Interest

2
SECURITIES AND EXCHANGE BOARD OF INDIA

SEBI is a statutory body of the Indian Government that was established on the 12th
of April in 1992. It was introduced to promote transparency in the Indian investment
market. Besides its headquarters in Mumbai, the establishment has several regional
offices across the country including, New Delhi, Ahmedabad, Kolkata and Chennai.
It is entrusted with the task to regulate the functioning of the Indian capital market.
The regulatory body lays focus on monitoring and regulating the securities market in
India to safeguard the interest of investors and aims to inculcate a safe investment
environment by implementing several rules and regulations as well as by formulating
investment-related guidelines.
SEBI: ORGANIZATION
The SEBI’s hierarchical structure comprises of the following 9 designated officers
• The Chairman – Nominated by the Indian Union Government.
• Two members belonging to the Union Finance Ministry of India.
• One member belonging to the Reserve Bank of India or RBI.
• Other five members – Nominated by the Union Government of India.

The below-mentioned list highlights some of the most important departments

of SEBI –
• The Information Technology Department.
• The Foreign Portfolio Investors and Custodians.
• Office of International Affairs.
• National Institute of Securities Market.
• Investment Management Department.
• Commodity and Derivative Market Regulation Department.
• Human Resource Department.
SECURITIES AND EXCHANGE BOARD OF INDIA
To protect the interest of the investor in securities market and to promote the
development of and to regulate the securities market.
Objectives

• To ensure interest of investors and ensure safety to their investment

• To promote the development of securities market
• To regulate the securities market
• To prevent malpractices by having a balance between self regulation of business and
its statutory regulations
• To regulate and develop a code of conduct for intermediaries such as brokers,
underwriters etc
FUNCTIONS OF SEBI
The main primary three functions are-
1. Protective Function
2. Regulatory Function
3. Development Function
PROTECTIVE FUNCTIONS OF SEBI
To protect the interest of investors and other financial participants.

▪ Check for price rigging

Manipulating price of securities with the main objective of inflating or deflating the
market price of the securities.
▪ Prevent insider trading
Insiders like directors and employees have access to price sensitive information of the
company. They may use it for their own personal benefit and make profit from it. SEBI
keeps a strict check on it
▪ Promote fair practices
Issues guidelines to protect the interest of debenture holders wherein companies can
not change T&C
Empowered to investigate insider trading and have provision for strict punishment
▪ Create awareness among investors
Promotes financial literacy
▪ Prohibit fraudulent and unfair trade practices
Does not allow companies to make misleading statements which is likely to induce sale
or purchase of securities by other person
DEVELOPMENTAL FUNCTIONS OF SEBI

▪ Promote investors’ education to increase participation in capital market

▪ Training intermediaries such as brokers
▪ Conducting research and publishing market information which are useful to all
market participants
▪ Promote self regulatory mechanisms
REGULATORY FUNCTION

These functions are basically performed to keep a check on the functioning of the
business in the financial markets.
These functions include-
• Designing guidelines and code of conduct for the proper functioning of financial
intermediaries and corporate.
• Regulation of takeover of companies
• Conducting inquiries and audit of exchanges
• Registration of brokers, sub-brokers, merchant bankers etc.
• Levying of fees
• Performing and exercising powers
• Register and regulate credit rating agency
POWERS OF SEBI: Power of Civil Court
The following Civil Court power is vested with SEBI for trying a suit in respect of the
following matters:
• the discovery and production of books of account and other documents, at such place and
such time as may be specified by the Board;
• summoning and enforcing the attendance of persons and examining them on oath;
• inspection of any books, registers and other documents of any person (v) issuing commissions
for the examination of witnesses or documents.

Power to Suspend and Restrain

SEBI can take any of the following measures, either pending investigation or inquiry or
on completion of such investigation or inquiry, namely:-
• suspend the trading of any security in a recognized stock exchange;
• restrain persons from accessing the securities market and prohibit any person
associated with securities market to buy, sell or deal in securities;
• suspend any office-bearer of any stock exchange or self- regulatory organization
from holding such position;
• impound and retain the proceeds or securities in respect of any transaction which is
under investigation;
 Power to regulate and prohibit issue of prospectus
SEBI may for the protection of investors, specify, (a) by regulations –
(i) the matters relating to issue of capital, transfer of securities and other matters incidental
(ii) the manner in which such matters shall be disclosed by the companies;
(b) by general or special orders –
(i) prohibit any company from issuing prospectus, any offer document, or advertisement
soliciting money from the public for the issue of securities;
(ii)specify the conditions subject to which the prospectus, such offer document or
advertisement, if not prohibited, may be issued.

Power to issue directions

SEBI can issue directions
(i) in the interest of investors, or orderly development of securities market; or
(ii) to prevent the affairs of any intermediary or other persons referred to in section 12 being
conducted in a manner detrimental to the interest of investors or securities market; or
(iii) to secure the proper management of any such intermediary or person, it may issue such
directions,-
(a) to any person or class of persons referred to in section 12, or associated with the securities
market; or
(b) to any company in respect of matters specified in section 11A, as may be appropriate in the
interests of investors in securities and the securities market]
Power to investigate
If SEBI believes that the transactions in securities are being dealt with in a manner
detrimental to the investors or the securities market; or any intermediary or any person
associated with the securities market has violated any of the provisions or the rules or the
regulations made or directions issued by the Board
• it shall be the duty of every manager, managing director, officer and other employee of the
company and every intermediary or every person associated with the securities market to
preserve and to produce to the Investigating Authority or any person authorised by it in this
behalf, all the books, registers, other documents and record of, or relating to, the company or,
as the case may be, of or relating to, the intermediary or such person, which are in their
custody or power.
• The Investigating Authority may require any intermediary or any person associated with
securities market in any manner to furnish such information to, or produce such books, or
registers, or other documents, or record before it or any person authorized by it in this behalf
as it may consider necessary if the furnishing of such information or the production of such
books, or registers, or other documents, or record is relevant or necessary for the purposes of
its investigation.
• The Investigating Authority may keep in its custody any books, registers, other documents
and record produced
 Power to cease and desist proceedings
• If the Board finds, after causing an inquiry to be made, that any person has violated, or
is likely to violate, any provisions of this Act, or any rules or regulations made
thereunder, it may pass an order requiring such person to cease and desist from
committing or causing such violation:
• Provided that the Board shall not pass such order in respect of any listed public
company or a public company which intends to get its securities listed on any
recognized stock exchange unless the Board has reasonable grounds to believe that
such company has indulged in insider trading or market manipulation.

https://www.sebi.gov.in/sebi_data/about_us/act15ac.html#ch4
ROLE OF SEBI IN PROTECTION OF INVESTOR INTEREST
Securities and Exchange Board of India (SEBI) has been established with the prime
mandate to protect the interest of investors in securities. It is also mandated to
promote the development of, and to regulate the securities market. An investor enjoys
investing, if
• he knows how to invest;
• he has full knowledge of the market;
• the market is safe and there are no miscreants; and
• there are arrangements for redressal in case of grievances. Accordingly, SEBI's
investor protection strategy has four elements.
ROLE OF SEBI IN PROTECTION OF INVESTOR INTEREST
First, build the capacity of investors through education and awareness to enable an
investor to take informed investment decisions. SEBI endeavours to ensure that the
investor learns investing, that is, he obtains and uses information required for investing,
evaluates various investment options to suit his specific goals, ascertains his rights and
obligations in a particular investment, deals through registered intermediaries, takes
necessary precautions, seeks help in case of any grievance, etc. SEBI has been organizing
investor education and awareness workshops directly, and through investor associations
and market participants, and been encouraging market participants to organize similar
programmes.

Second, make available every detail relevant for investment in public domain. SEBI has
adopted disclosure based regulatory regime. Under this framework, issuers and
intermediaries disclose relevant details about themselves, the products, the market and the
regulations so that the investor can take informed investment decisions based on such
disclosures. SEBI has prescribed and monitors various initial and continuous disclosures.
ROLE OF SEBI IN PROTECTION OF INVESTOR INTEREST
Third, ensure that the market has systems and practices which make transactions safe.
SEBI has taken various measures such as screen based trading system, dematerialization of
securities, T+2 rolling settlement, and framed various regulations to regulate
intermediaries, issue and trading of securities, corporate restructuring, etc. to protect the
interests of investors in securities. It also ensures that only the fit and proper persons are
allowed to operate in the market, every participant has incentive to comply with the
prescribed standards, and the miscreant are awarded exemplary punishment.
Fourth, facilitate redressal of investor grievances. SEBI has a comprehensive mechanism
to facilitate redressal of investor grievances against intermediaries and listed companies. It
follows up with the companies and intermediaries who do not redress investors'
grievances, by sending reminders to them and having meetings with them. It takes
appropriate enforcement actions as provided under the law (including launch of
adjudication, prosecution proceedings, directions) where progress in redressal of investor
grievances is not satisfactory.