COMPETITION AND INVESTMENT LAW

P.S.D.A
TRINITY INSTITUTE OF PROFESSIONAL STUDIES

Sector 9, Dwarka, Dwarka Institutional Area Near Metro Pillar No.1160,

Dwarka, New Delhi, Delhi 110075

In partial fulfilment of the requirements for the award of the degree

of

Bachelor of Arts - Bachelor of Law

by

KARAN SHARMA

50120603821

TO – MR. ESHAAN BHARDWAJ SIR (FACULTY INCHARGE)

 PSDA Title: Evolution and Impact of Securities Laws in India

Introduction: Securities laws play a crucial role in regulating and ensuring the stability and
fairness of securities markets, which are integral to a country's economic health and
development. This assignment delves into the historical evolution of securities laws in India,
tracing their development from pre-independence times to the post-liberalization era. It also
explores the key reforms and challenges faced by India's securities market and the role of
regulatory bodies such as the Securities and Exchange Board of India (SEBI).

Objective: The main objective of this assignment is to analyze the evolution of securities laws
in India, including pre-independence regulations, post-independence reforms, and changes
during the post-liberalization phase. It also aims to examine the impact of these laws on the
securities market, investor protection, and regulatory frameworks.

1. Pre-Independence Era:

• Overview of early securities trading in India, including the trading of East India Company
loan securities and bank shares.

• Impact of the first Joint Stock Company Act of 1850 and subsequent developments on
securities trading.

• Establishment of key stock exchanges such as the Bombay Stock Exchange, Ahemdabad
Stock Exchange, and Calcutta Stock Exchange.

• Historical context of capital issues and regulatory challenges faced during this period.

2. Post-Independence Reforms:

• Introduction of the Securities Contracts (Regulation) Act (SCRA) in 1956 and its
significance in regulating securities trading and stock exchanges.

• Role of central government in securities regulation and the establishment of regulatory

frameworks post-independence.

• Analysis of the A.D. Gorwala Committee recommendations and their influence on

securities laws.

3. Post-Liberalization Phase:

• Impact of economic liberalization in the 1990s on India's securities market.

• Enactment of the SEBI Act, 1992, and the establishment of SEBI as the primary regulatory
authority.
• Amendments and additions to securities laws, including the Securities Law (Amendment)
Act, 1995, and the Depositaries Act, 1996.

• Overview of major scams and their impact on regulatory reforms, including the Securities
Laws (Amendment) Ordinance, 2013.

Here is the list of acts and amendments that has been proved significant in shaping the
evolution of securities act in india –

Capital Issues (Control) Act, 1947 (CICA)

- Introduction: The Capital Issues (Control) Act, 1947 was enacted to regulate the
issuance of capital by companies. It aimed to control the pricing and allotment of
securities to investors.
- Impact: CICA provided a framework for the government to oversee capital market
activities, ensuring fair practices and protecting investor interests. However, it also
restricted the freedom of companies in raising capital.

Securities Contracts (Regulation) Act, 1956 (SCRA)

- Introduction: SCRA was passed to regulate the securities market in India. It aimed to
prevent undesirable transactions in securities and promote investor confidence.
- Impact: SCRA laid the foundation for organized and regulated securities exchanges in
India. It established the Securities and Exchange Board of India (SEBI) to oversee
market operations and protect investor interests.

Repeal of Capital Issues (Control) Act, 1957

- Introduction: The repeal of CICA in 1957 marked a shift towards liberalization in

capital markets. It removed restrictions on the pricing and issuance of securities by
companies.
- Impact: The repeal allowed companies greater flexibility in raising capital, leading to
increased participation in the capital markets and fostering economic growth.

The Depositories Act, 1996

- Introduction: The Depositories Act, 1996 was enacted to facilitate the electronic
holding and transfer of securities. It aimed to eliminate the risks and inefficiencies
associated with physical securities.
- Impact: The act revolutionized the securities market by introducing dematerialization
and electronic trading. It enhanced transparency, reduced transaction costs, and
streamlined the settlement process.
The Depository Related Laws (Amendment) Act, 1997

- Introduction: This amendment act strengthened the regulatory framework for

depositories and clarified their roles and responsibilities.
- Impact: It bolstered investor confidence in the depository system, leading to increased
participation in the capital markets and improved market efficiency.

Securities Laws (Amendment) Act, 1999

- Introduction: This act introduced amendments to various securities laws, including

SCRA and SEBI Act, to enhance regulatory oversight and address emerging market
challenges.
- Impact: The amendments expanded SEBI's powers, improved market surveillance,
and promoted investor education and awareness.

The Securities Laws (Second Amendment) Act, 1999

- Introduction: This act further amended securities laws to strengthen investor

protection, market integrity, and regulatory enforcement.
- Impact: It introduced stricter penalties for market manipulation and insider trading,
reinforcing market integrity and investor confidence.

SEBI (Amendment) Act, 2002

- Introduction: The SEBI (Amendment) Act, 2002 empowered SEBI with additional
regulatory authority to monitor and regulate various segments of the securities market
more effectively.
- Impact: SEBI's enhanced regulatory powers led to improved market supervision,
faster resolution of investor grievances, and stricter enforcement of securities
regulations.

The Securities Laws (Amendment) Bill, 2003

- Introduction: The Securities Laws (Amendment) Bill, 2003 proposed further

amendments to securities laws to align them with evolving market dynamics and
international best practices.
- Impact: The bill aimed to modernize regulatory frameworks, strengthen market
infrastructure, and enhance investor protection, thus promoting sustainable growth
and stability in the securities market.
Overall, these legislative developments reflect the evolution of securities laws in India from a
restrictive and controlled regime to a more liberalized and investor-friendly environment.
They have played a crucial role in shaping the Indian capital markets, fostering transparency,
investor confidence, and market integrity.